##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-13783
 
 Integrated Electrical Services, Inc.
  Delaware
    
    76-0542208(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1800 West Loop South, Suite 500, Houston, Texas 77027
 Registrants telephone number, including area code:
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes o No þ
 Yes þ No o




---



##### 



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2010 and September 30, 2009
    
    
    5Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended June 30, 2010 and 2009
    
    
    6Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    34PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    35Signatures
    
    
    36Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




---



##### Table of Contents



DEFINITIONS
 
 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    fluctuations in operating activity due to downturns in levels of construction, seasonality
and differing regional economic conditions;
 
    
    competition in the construction industry, both from third parties and former employees,
which could result in the loss of one or more customers or lead to lower margins on new
contracts;
 
    
    a general reduction in the demand for our services;
 
    
    a change in the mix of our customers, contracts and business;
 
    
    our ability to successfully manage construction projects;
 
    
    possibility of errors when estimating revenue and progress to date on
percentage-of-completion contracts;
 
    
    inaccurate estimates used when entering into fixed-priced contracts;
 
    
    challenges integrating new types of work or new processes into our divisions;
 
    
    the cost and availability of qualified labor, especially electricians and construction
supervisors;
 
    
    accidents resulting from the physical hazards associated with our work and the potential
for vehicle accidents;
 
    
    success in transferring, renewing and obtaining electrical and construction licenses;
 
    
    our ability to pass along increases in the cost of commodities used in our business, in
particular, copper, aluminum, steel, fuel and certain plastics;
 
    
    potential supply chain disruptions due to credit or liquidity problems faced by our
suppliers;
 
    
    loss of key personnel and effective transition of new management;
 
    
    warranty losses or other latent defect claims in excess of our existing reserves and
accruals;
 
    
    warranty losses or other unexpected liabilities stemming from former divisions which we
have sold or closed;
 
    
    growth in latent defect litigation in states where we provide residential electrical work
for home builders not otherwise covered by insurance;
 
    
    limitations on the availability of sufficient credit or cash flow to fund our working
capital needs;
 
    
    difficulty in fulfilling the covenant terms of our credit facilities;
 
    
    increased cost of surety bonds affecting margins on work and the potential for our surety
providers to refuse bonding at their discretion;
  3




---



##### Table of Contents




    
    increases in bad debt expense and days sales outstanding due to liquidity problems faced by
our customers;
 
    
    changes in the assumptions made regarding future events used to value our stock options and
performance-based stock awards;
 
    
    the recognition of potential goodwill, fixed asset and other investment impairments;
 
    
    uncertainties inherent in estimating future operating results, including revenues,
operating income or cash flow;
 
    
    disagreements with taxing authorities with regard to tax positions we have adopted;
 
    
    the recognition of tax benefits related to uncertain tax positions;
 
    
    complications associated with the incorporation of new accounting, control and operating
procedures;
 
    
    the financial impact of new or proposed accounting regulations;
 
    
    the ability of our controlling shareholder to take action not aligned with other
shareholders;
 
    
    the possibility that certain of our net operating losses may be restricted or reduced in a
change in ownership;
 
    
    credit and capital market conditions, including changes in interest rates that affect the
cost of construction financing and mortgages, and the inability for some of our customers to
retain sufficient financing which could lead to project delays or cancellations; and
 
    
    the sale or disposition of the shares of our common stock held by our majority shareholder,
which, under certain circumstances, would trigger change of control provisions in contracts
such as employment agreements, supply agreements, and financing and surety arrangements.
  www.ies-co.com
  4




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (IN THOUSANDS, EXCEPT SHARE INFORMATION)
 June 30,
    
    
    September 30,2010
    
    
    2009(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    30,725
    
    
    $
    64,174Accounts receivable:Trade, net of allowance of $3,549 and $3,296, respectively
    
    
    85,963
    
    
    
    100,753Retainage
    
    
    17,608
    
    
    
    26,516Inventories
    
    
    9,831
    
    
    
    10,155Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    12,588
    
    
    
    13,554Prepaid expenses and other current assets
    
    
    5,903
    
    
    
    6,118Total current assets
    
    
    162,618
    
    
    
    221,270LONG-TERM RECEIVABLE, net of allowance of $3,992 and $278, respectively
    
    
    312
    
    
    
    3,714PROPERTY AND EQUIPMENT, net
    
    
    20,808
    
    
    
    24,367GOODWILL
    
    
    3,981
    
    
    
    3,981OTHER NON-CURRENT ASSETS, net
    
    
    13,507
    
    
    
    15,093Total assets
    
    $
    201,226
    
    
    $
    268,425LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    1,266
    
    
    $
    2,086Accounts payable and accrued expenses
    
    
    56,410
    
    
    
    76,478Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    11,402
    
    
    
    21,142Total current liabilities
    
    
    69,078
    
    
    
    99,706LONG-TERM DEBT, net of current maturities
    
    
    10,632
    
    
    
    26,601LONG-TERM DEFERRED TAX LIABILITY
    
    
    2,290
    
    
    
    2,290OTHER NON-CURRENT LIABILITIES
    
    
    6,385
    
    
    
    7,280Total liabilities
    
    
    88,385
    
    
    
    135,877STOCKHOLDERS EQUITY:Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued and
outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 100,000,000 shares authorized; 15,407,802
shares issued and 14,565,005 and 14,617,741 outstanding, respectively
    
    
    154
    
    
    
    154Treasury stock, at cost, 842,797 and 790,061 shares, respectively
    
    
    (14,411
    )
    
    
    (14,097
    )Additional paid-in capital
    
    
    171,944
    
    
    
    170,732Accumulated other comprehensive income
    
    
    (82
    )
    
    
    (70
    )Retained deficit
    
    
    (44,764
    )
    
    
    (24,171
    )Total stockholders equity
    
    
    112,841
    
    
    
    132,548Total liabilities and stockholders equity
    
    $
    201,226
    
    
    $
    268,425
   5




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
 Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009(Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    121,405
    
    
    $
    172,185Cost of services
    
    
    106,328
    
    
    
    140,563Gross profit
    
    
    15,077
    
    
    
    31,622Selling, general and administrative expenses
    
    
    21,098
    
    
    
    26,838Gain on sale of assets
    
    
    (113
    )
    
    
    (221
    )Restructuring charges
    
    
    
    
    
    
    633Income (loss) from operations
    
    
    (5,908
    )
    
    
    4,372Interest and other (income) expense:Interest expense
    
    
    784
    
    
    
    1,325Interest income
    
    
    (92
    )
    
    
    (67
    )Other (income) expense, net
    
    
    55
    
    
    
    276Interest and other expense, net
    
    
    747
    
    
    
    1,534Income (loss) from operations before income taxes
    
    
    (6,655
    )
    
    
    2,838Provision (benefit) for income taxes
    
    
    (98
    )
    
    
    1,541Net income (loss)
    
    $
    (6,557
    )
    
    $
    1,297Income (loss) per shareBasic
    
    $
    (0.45
    )
    
    $
    0.09Diluted
    
    $
    (0.45
    )
    
    $
    0.09Shares used in the computation of loss per share (Note 4):Basic
    
    
    14,425,119
    
    
    
    14,339,066Diluted
    
    
    14,425,119
    
    
    
    14,403,139
   6




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
 Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009(Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    349,272
    
    
    $
    512,618Cost of services
    
    
    300,675
    
    
    
    423,095Gross profit
    
    
    48,597
    
    
    
    89,523Selling, general and administrative expenses
    
    
    66,075
    
    
    
    82,668Gain on sale of assets
    
    
    (165
    )
    
    
    (399
    )Restructuring charges
    
    
    763
    
    
    
    3,774Income (loss) from operations
    
    
    (18,076
    )
    
    
    3,480Interest and other (income) expense:Interest expense
    
    
    2,869
    
    
    
    3,415Interest income
    
    
    (208
    )
    
    
    (340
    )Other income, net
    
    
    (172
    )
    
    
    (197
    )Interest and other expense, net
    
    
    2,489
    
    
    
    2,878Income (loss) from operations before income taxes
    
    
    (20,565
    )
    
    
    602Provision (benefit) for income taxes
    
    
    28
    
    
    
    613Net loss
    
    $
    (20,593
    )
    
    $
    (11
    )Loss per shareBasic
    
    $
    (1.43
    )
    
    $
    (0.00
    )Diluted
    
    $
    (1.43
    )
    
    $
    (0.00
    )Shares used in the computation of loss per share (Note 4):Basic
    
    
    14,403,925
    
    
    
    14,326,747Diluted
    
    
    14,403,925
    
    
    
    14,326,747
   7




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (IN THOUSANDS)
 Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009(Unaudited)
    
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (20,593
    )
    
    $
    (11
    )Adjustments to reconcile net loss to net cash provided by operating activities:Net loss from discontinued operations
    
    
    
    
    
    
    (61
    )Bad debt expense
    
    
    6,686
    
    
    
    1,295Deferred financing cost amortization
    
    
    223
    
    
    
    191Depreciation and amortization
    
    
    4,014
    
    
    
    6,237Gain on sale of assets
    
    
    (165
    )
    
    
    (399
    )Non-cash compensation expense
    
    
    1,071
    
    
    
    1,745Paid in kind interest
    
    
    
    
    
    
    678Equity in (gains) losses of investment
    
    
    
    
    
    
    33Goodwill adjustment  utilization of deferred tax assets
    
    
    
    
    
    
    65Changes in operating assets and liabilitiesAccounts receivable
    
    
    20,726
    
    
    
    6,325Inventories
    
    
    324
    
    
    
    2,782Costs and estimated earnings in excess of billings
    
    
    966
    
    
    
    (1,007
    )Prepaid expenses and other current assets
    
    
    1,044
    
    
    
    (123
    )Other non-current assets
    
    
    41
    
    
    
    5,535Accounts payable and accrued expenses
    
    
    (20,068
    )
    
    
    (19,945
    )Billings in excess of costs and estimated earnings
    
    
    (9,740
    )
    
    
    695Other non-current liabilities
    
    
    (895
    )
    
    
    1,538Net cash provided by (used in) continuing operations
    
    
    (16,366
    )
    
    
    5,573Net cash provided by discontinued operations
    
    
    
    
    
    
    1,327Net cash provided by (used in) operating activities
    
    
    (16,366
    )
    
    
    6,900CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (536
    )
    
    
    (4,054
    )Proceeds from sales of property and equipment
    
    
    246
    
    
    
    226Investment in unconsolidated affiliates
    
    
    
    
    
    
    (2,150
    )Distribution from unconsolidated affiliates
    
    
    393
    
    
    
    Net cash provided by (used in) investing activities
    
    
    103
    
    
    
    (5,978
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings of debt
    
    
    753
    
    
    
    1,055Repayments of debt
    
    
    (17,542
    )
    
    
    (1,841
    )Purchase of treasury stock
    
    
    (172
    )
    
    
    (4,301
    )Payments for debt issuance costs
    
    
    (225
    )
    
    
    Net cash used in financing activities
    
    
    (17,186
    )
    
    
    (5,087
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (33,449
    )
    
    
    (4,165
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    64,174
    
    
    
    64,709CASH AND CASH EQUIVALENTS, end of period
    
    $
    30,725
    
    
    $
    60,544SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    3,334
    
    
    $
    2,370Cash paid for income taxes
    
    $
    284
    
    
    $
    779
   8




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2010
 (UNAUDITED)
 1. BUSINESS
   CONTROLLING SHAREHOLDER
  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Notes to Consolidated Financial Statements
    9




---



##### Table of Contents



RECLASSIFICATIONS
   LONG-TERM RECEIVABLE
  Legal Matters
 FAIR VALUE OF FINANCIAL INSTRUMENTS
   The Tontine Capital Partners Term
Loan
 USE OF ESTIMATES AND ASSUMPTIONS
  SEASONALITY AND QUARTERLY FLUCTUATIONS
   10




---



##### Table of Contents



2. STRATEGIC ACTIONS
      Severance
    
    
    Consulting/Charges
    
    
    Other Charges
    
    
    TotalRestructuring liability at September 30, 2009
    
    $
    2,097
    
    
    $
    81
    
    
    $
    2,178Restructuring charges incurred
    
    
    763
    
    
    
    
    
    
    
    763Cash payments made
    
    
    (2,723
    )
    
    
    (81
    )
    
    
    (2,804
    )Restructuring liability at June 30, 2010
    
    $
    137
    
    
    $
    
    
    
    $
    137
 3. DEBT AND LIQUIDITY
  June 30,
    
    
    September 30,2010
    
    
    2009Tontine Term Loan, due May 15, 2013, bearing interest at 11.00%
    
    $
    10,000
    
    
    $
    25,000Insurance Financing Agreements
    
    
    1,233
    
    
    
    2,912Capital leases and other
    
    
    665
    
    
    
    775Total debt
    
    
    11,898
    
    
    
    28,687Less  Short-term debt and current maturities of long-term debt
    
    
    (1,266
    )
    
    
    (2,086
    )Total long-term debt
    
    $
    10,632
    
    
    $
    26,601
  11




---



##### Table of Contents



Capital Leases
    
    
    Term Debt
    
    
    Total2010
    
    $
    93
    
    
    $
    417
    
    
    $
    5102011
    
    
    306
    
    
    
    816
    
    
    
    1,1222012
    
    
    297
    
    
    
    
    
    
    
    2972013
    
    
    287
    
    
    
    10,000
    
    
    
    10,2872014
    
    
    24
    
    
    
    
    
    
    
    24Thereafter
    
    
    
    
    
    
    
    
    
    
    Less: Imputed Interest
    
    
    (342
    )
    
    
    
    
    
    
    (342
    )Total
    
    $
    665
    
    
    $
    11,233
    
    
    $
    11,898
  The Tontine Term Loan
  Insurance Financing Agreements
   June 30,
    
    
    September 30,2010
    
    
    2009Insurance Note Payable, due September 1, 2010, bearing interest at 4.99%
    
    $
    147
    
    
    $
    Insurance Note Payable, due June 1, 2010, bearing interest at 4.59%
    
    
    
    
    
    
    719Insurance Note Payable, due August 1, 2011, bearing interest at 4.99%
    
    
    977
    
    
    
    1,986Insurance Note Payable, due November 1, 2010, bearing interest at 4.99%
    
    
    109
    
    
    
    Insurance Note Payable, due January 1, 2010, bearing interest at 5.99%
    
    
    
    
    
    
    207Total Insurance Financing Agreements
    
    $
    1,233
    
    
    $
    2,912
     12




---



##### Table of Contents



The Revolving Credit Facility
     Annual Interest Rate forTotal Liquidity
    
    Annual Interest Rate for Loans
    
    Letters of CreditGreater than or equal to $60 million
    
    LIBOR plus 3.00% or Base Rate plus 1.00%
    
    3.00% plus 0.25% fronting feeGreater than $40 million and less than $60 million
    
    LIBOR plus 3.25% or Base Rate plus 1.25%
    
    3.25% plus 0.25% fronting feeLess than or equal to $40 million
    
    LIBOR plus 3.50% or Base Rate plus 1.50%
    
    3.50% plus 0.25% fronting fee
      4. EARNINGS PER SHARE
   13




---



##### Table of Contents



Three Months EndedJune 30,2010
    
    
    2009Numerator:Net income (loss) attributable to common shareholders
    
    $
    (6,557
    )
    
    $
    1,272Net income attributable to restricted shareholders
    
    
    
    
    
    
    25Net income (loss)
    
    $
    (6,557
    )
    
    $
    1,297Denominator:Weighted average common shares outstanding  basic
    
    
    14,425,119
    
    
    
    14,339,066Effect of dilutive stock options and non-vested restricted stock
    
    
    
    
    
    
    64,073Weighted average common and common equivalent shares outstanding  diluted
    
    
    14,425,119
    
    
    
    14,403,139Earnings (loss) per shareBasic
    
    $
    (0.45
    )
    
    $
    0.09Diluted
    
    $
    (0.45
    )
    
    $
    0.09
 Nine Months EndedJune 30,2010
    
    
    2009Numerator:Net loss attributable to common shareholders
    
    $
    (20,593
    )
    
    $
    (11
    )Net income attributable to restricted shareholders
    
    
    
    
    
    
    Net loss
    
    $
    (20,593
    )
    
    $
    (11
    )Denominator:Weighted average common shares outstanding  basic
    
    
    14,403,925
    
    
    
    14,326,747Effect of dilutive stock options and non-vested restricted stock
    
    
    
    
    
    
    Weighted average common and common equivalent shares outstanding  diluted
    
    
    14,403,925
    
    
    
    14,326,747Loss per shareBasic
    
    $
    (1.43
    )
    
    $
    (0.00
    )Diluted
    
    $
    (1.43
    )
    
    $
    (0.00
    )
 5. OPERATING SEGMENTS
   14




---



##### Table of Contents



Three Months Ended June 30, 2010 (Unaudited)Commercial&Industrial
    
    
    Residential
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    89,916
    
    
    $
    31,489
    
    
    $
    
    
    
    $
    121,405Cost of services
    
    
    81,176
    
    
    
    25,152
    
    
    
    
    
    
    
    106,328Gross profit
    
    
    8,740
    
    
    
    6,337
    
    
    
    
    
    
    
    15,077Selling, general and administrative
    
    
    11,475
    
    
    
    6,086
    
    
    
    3,537
    
    
    
    21,098Loss (gain) on sale of assets
    
    
    (68
    )
    
    
    29
    
    
    
    (74
    )
    
    
    (113
    )Restructuring charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from operations
    
    $
    (2,667
    )
    
    $
    222
    
    
    $
    (3,463
    )
    
    $
    (5,908
    )Other data:Depreciation and amortization expense
    
    $
    319
    
    
    $
    144
    
    
    $
    756
    
    
    $
    1,219Capital expenditures
    
    $
    29
    
    
    $
    5
    
    
    $
    
    
    
    $
    34Total assets
    
    $
    101,389
    
    
    $
    31,368
    
    
    $
    68,469
    
    
    $
    201,226
 Three Months Ended June 30, 2009 (Unaudited)Commercial&Industrial
    
    
    Residential
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    134,451
    
    
    $
    37,734
    
    
    $
    
    
    
    $
    172,185Cost of services
    
    
    112,263
    
    
    
    28,300
    
    
    
    
    
    
    
    140,563Gross profit
    
    
    22,188
    
    
    
    9,434
    
    
    
    
    
    
    
    31,622Selling, general and administrative
    
    
    14,443
    
    
    
    8,042
    
    
    
    4,353
    
    
    
    26,838Loss (gain) on sale of assets
    
    
    (239
    )
    
    
    15
    
    
    
    3
    
    
    
    (221
    )Restructuring charge
    
    
    438
    
    
    
    260
    
    
    
    (65
    )
    
    
    633Income (loss) from operations
    
    $
    7,546
    
    
    $
    1,117
    
    
    $
    (4,291
    )
    
    $
    4,372
  15




---



##### Table of Contents



Three Months Ended June 30, 2009 (Unaudited)Commercial&Industrial
    
    
    Residential
    
    
    Corporate
    
    
    TotalOther data:Depreciation and amortization expense
    
    $
    632
    
    
    $
    432
    
    
    $
    475
    
    
    $
    1,539Capital expenditures
    
    $
    1,225
    
    
    $
    73
    
    
    $
    1,453
    
    
    $
    2,751Total assets
    
    $
    153,279
    
    
    $
    39,299
    
    
    $
    107,307
    
    
    $
    299,885
 Nine Months Ended June 30, 2010 (Unaudited)Commercial&Industrial
    
    
    Residential
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    260,723
    
    
    $
    88,549
    
    
    $
    
    
    
    $
    349,272Cost of services
    
    
    231,567
    
    
    
    69,108
    
    
    
    
    
    
    
    300,675Gross profit
    
    
    29,156
    
    
    
    19,441
    
    
    
    
    
    
    
    48,597Selling, general and administrative
    
    
    36,001
    
    
    
    18,635
    
    
    
    11,439
    
    
    
    66,075Loss (gain) on sale of assets
    
    
    (117
    )
    
    
    26
    
    
    
    (74
    )
    
    
    (165
    )Restructuring charge
    
    
    714
    
    
    
    
    
    
    
    49
    
    
    
    763Income (loss) from operations
    
    $
    (7,442
    )
    
    $
    780
    
    
    $
    (11,414
    )
    
    $
    (18,076
    )Other data:Depreciation and amortization expense
    
    $
    1,173
    
    
    $
    541
    
    
    $
    2,300
    
    
    $
    4,014Capital expenditures
    
    $
    245
    
    
    $
    83
    
    
    $
    208
    
    
    $
    536
 Nine Months Ended June 30, 2009 (Unaudited)Commercial&Industrial
    
    
    Residential
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    395,636
    
    
    $
    116,982
    
    
    $
    
    
    
    $
    512,618Cost of services
    
    
    333,563
    
    
    
    89,532
    
    
    
    
    
    
    
    423,095Gross profit
    
    
    62,073
    
    
    
    27,450
    
    
    
    
    
    
    
    89,523Selling, general and administrative
    
    
    44,121
    
    
    
    25,703
    
    
    
    12,844
    
    
    
    82,668Loss (gain) on sale of assets
    
    
    (430
    )
    
    
    29
    
    
    
    2
    
    
    
    (399
    )Restructuring charge
    
    
    1,125
    
    
    
    1,981
    
    
    
    668
    
    
    
    3,774Income (loss) from operations
    
    $
    17,257
    
    
    $
    (263
    )
    
    $
    (13,514
    )
    
    $
    3,480Other data:Depreciation and amortization expense
    
    $
    1,473
    
    
    $
    1,885
    
    
    $
    2,635
    
    
    $
    5,993Capital expenditures
    
    $
    1,621
    
    
    $
    338
    
    
    $
    2,095
    
    
    $
    4,054
 
 6. STOCKHOLDERS EQUITY
  Treasury Stock
    16




---



##### Table of Contents



Restricted Stock
     Phantom Stock Units
  Stock Options
     Weighted AverageShares
    
    
    Exercise PriceOutstanding, September 30, 2009
    
    
    158,500
    
    
    $
    18.66Options granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding, June 30, 2010
    
    
    158,500
    
    
    $
    18.66Exercisable, June 30, 2010
    
    
    155,167
    
    
    $
    18.62
  17




---



##### Table of Contents



RemainingOutstanding as of
    
    
    Contractual Life
    
    
    Weighted-Average
    
    
    Exercisable as of
    
    
    Weighted-AverageRange of Exercise Prices
    
    June 30, 2010
    
    
    in Years
    
    
    Exercise Price
    
    
    June 30, 2010
    
    
    Exercise Price$12.31  $18.79
    
    
    123,500
    
    
    
    6.37
    
    
    $
    17.02
    
    
    
    123,500
    
    
    $
    17.02$20.75
 $25.08
    
    
    35,000
    
    
    
    6.98
    
    
    
    24.46
    
    
    
    31,667
    
    
    
    24.85158,500
    
    
    
    6.50
    
    
    $
    18.66
    
    
    
    155,167
    
    
    $
    18.62
 
 7. SECURITIES AND EQUITY INVESTMENTS
 Investment in EPV Solar
  June 30,
    
    
    September 30,2010
    
    
    2009Common stock (25.2 million shares)
    
    $
    
    
    
    $
    Convertible note receivable
    
    
    100
    
    
    
    150Stock warrants (0.5 million warrants / strike at $1.25)
    
    
    
    
    
    
    Stock warrants (1.2 million warrants / strike at $0.54)
    
    
    
    
    
    
    Total investment, net of impairment
    
    $
    100
    
    
    $
    150
    Investment in EnerTech Capital Partners II L.P.
     18




---



##### Table of Contents



June 30,
    
    
    September 30,2010
    
    
    2009Carrying value
    
    $
    2,013
    
    
    $
    2,491Unrealized gains (losses)
    
    
    107
    
    
    
    276Fair value
    
    $
    2,120
    
    
    $
    2,767
  Arbinet Corporation
   
 8. EMPLOYEE BENEFIT PLANS
 Executive Savings Plan
   9. FAIR VALUE MEASUREMENTS
     19




---



##### Table of Contents



Significant
    
    
    SignificantOther Observable
    
    
    UnobservableTotal
    
    
    Quoted Prices
    
    
    Inputs
    
    
    InputsFair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Equity securities
    
    $
    65
    
    
    $
    65
    
    
    $
    
    
    
    $
    Debt securities
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Executive Savings Plan assets
    
    
    807
    
    
    
    807
    
    
    
    
    
    
    
    Executive Savings Plan liabilities
    
    
    (820
    )
    
    
    (820
    )
    
    
    
    
    
    
    Total
    
    $
    152
    
    
    $
    52
    
    
    $
    
    
    
    $
    100
  Level 1
 Level 2
 Level 3
 Investment in EPV Solar.
 10. COMMITMENTS AND CONTINGENCIES
 Legal Matters
   Centerpoint Project
    20




---



##### Table of Contents



Ward Transformer Site
    Self-Insurance
  Surety
   21




---



##### Table of Contents



Other Commitments and Contingencies
    11. CONTROLLING SHAREHOLDER
    22




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   SEASONALITY AND QUARTERLY FLUCTUATIONS
  RESTRUCTURING PROGRAM
    FINANCING
 The Tontine Term Loan
   23




---



##### Table of Contents



Insurance Financing Agreements
     The Revolving Credit Facility
      SURETY
 Surety
   24




---



##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE 
MONTHS ENDED
JUNE 30, 2009
  Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Revenues
    
    $
    121.4
    
    
    
    100.0
    %
    
    $
    172.2
    
    
    
    100.0
    %Cost of services
    
    
    106.3
    
    
    
    87.6
    %
    
    
    140.6
    
    
    
    81.6
    %Gross profit
    
    
    15.1
    
    
    
    12.4
    %
    
    
    31.6
    
    
    
    18.4
    %Selling, general and administrative expenses
    
    
    21.1
    
    
    
    17.4
    %
    
    
    26.9
    
    
    
    15.6
    %Gain on sale of assets
    
    
    (0.1
    )
    
    
    (0.1
    )%
    
    
    (0.2
    )
    
    
    (0.1
    )%Restructuring charges
    
    
    
    
    
    
    
    %
    
    
    0.6
    
    
    
    0.4
    %Income (loss) from operations
    
    
    (5.9
    )
    
    
    (4.9
    )%
    
    
    4.3
    
    
    
    2.5
    %Interest and other expense, net
    
    
    0.8
    
    
    
    0.6
    %
    
    
    1.5
    
    
    
    0.9
    %Loss before income taxes
    
    
    (6.7
    )
    
    
    (5.5
    )%
    
    
    2.8
    
    
    
    1.6
    %Provision for income taxes
    
    
    (0.1
    )
    
    
    (0.1
    )%
    
    
    1.5
    
    
    
    0.9
    %Net loss
    
    $
    (6.6
    )
    
    
    (5.4
    )%
    
    $
    1.3
    
    
    
    0.7
    %
 Revenues
 Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    89.9
    
    
    
    74.1
    %
    
    $
    134.5
    
    
    
    78.1
    %Residential
    
    
    31.5
    
    
    
    25.9
    %
    
    
    37.7
    
    
    
    21.9
    %Total Consolidated
    
    $
    121.4
    
    
    
    100.0
    %
    
    $
    172.2
    
    
    
    100.0
    %
    25




---



##### Table of Contents



Gross Profit
 Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    8.8
    
    
    
    9.7
    %
    
    $
    22.2
    
    
    
    16.5
    %Residential
    
    
    6.3
    
    
    
    20.1
    %
    
    
    9.4
    
    
    
    25.0
    %Total Consolidated
    
    $
    15.1
    
    
    
    12.4
    %
    
    $
    31.6
    
    
    
    18.4
    %
    Selling, General and Administrative Expenses
 Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    11.5
    
    
    
    12.8
    %
    
    $
    14.4
    
    
    
    10.7
    %Residential
    
    
    6.1
    
    
    
    19.3
    %
    
    
    8.1
    
    
    
    21.3
    %Corporate
    
    
    3.5
    
    
    
    
    
    
    
    4.4
    
    
    
    Total Consolidated
    
    $
    21.1
    
    
    
    17.4
    %
    
    $
    26.9
    
    
    
    15.6
    %
  Legal
Matters
  26




---



##### Table of Contents



Restructuring Charges
   Three Months EndedJune 30,2010
    
    
    2009(Dollars in thousands)Severance compensation
    
    $
    
    
    
    $
    217Consulting and other charges
    
    
    
    
    
    
    14Non-cash asset amortization and write-offs
    
    
    
    
    
    
    402Total restructuring charges
    
    $
    
    
    
    $
    633
 Interest and Other Expense, Net
 Three Months EndedJune 30,2010
    
    
    2009(Dollars in thousands)Interest expense
    
    $
    708
    
    
    $
    1,262Debt prepayment penalty and deferred cost amortization
    
    
    76
    
    
    
    63Total interest expense
    
    
    784
    
    
    
    1,325Interest income
    
    
    (92
    )
    
    
    (67
    )Other income (expense)
    
    
    55
    
    
    
    276Total interest and other expense, net
    
    $
    747
    
    
    $
    1,534
    27




---



##### Table of Contents



Provision for Income Taxes
  
 RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2009
  Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Revenues
    
    $
    349.3
    
    
    
    100.0
    %
    
    $
    512.6
    
    
    
    100.0
    %Cost of services
    
    
    300.7
    
    
    
    86.1
    %
    
    
    423.1
    
    
    
    82.5
    %Gross profit
    
    
    48.6
    
    
    
    13.9
    %
    
    
    89.5
    
    
    
    17.5
    %Selling, general and administrative expenses
    
    
    66.1
    
    
    
    18.9
    %
    
    
    82.7
    
    
    
    16.1
    %Gain on sale of assets
    
    
    (0.2
    )
    
    
    
    %
    
    
    (0.4
    )
    
    
    (0.1
    )%Restructuring charges
    
    
    0.8
    
    
    
    0.2
    %
    
    
    3.7
    
    
    
    0.7
    %Loss from operations
    
    
    (18.1
    )
    
    
    (5.2
    )%
    
    
    3.5
    
    
    
    0.8
    %Interest and other expense, net
    
    
    2.5
    
    
    
    0.7
    %
    
    
    2.9
    
    
    
    0.6
    %Loss before income taxes
    
    
    (20.6
    )
    
    
    (5.9
    )%
    
    
    0.6
    
    
    
    0.2
    %Benefit (provision) for income taxes
    
    
    
    
    
    
    
    %
    
    
    0.6
    
    
    
    0.1
    %Net loss
    
    $
    (20.6
    )
    
    
    (5.9
    )%
    
    $
    
    
    
    
    0.1
    %
 Revenues
 Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    260.7
    
    
    
    74.6
    %
    
    $
    395.6
    
    
    
    77.2
    %Residential
    
    
    88.6
    
    
    
    25.4
    %
    
    
    117.0
    
    
    
    22.8
    %Total Consolidated
    
    $
    349.3
    
    
    
    100.0
    %
    
    $
    512.6
    
    
    
    100.0
    %
   28




---



##### Table of Contents



Gross Profit
 Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    29.2
    
    
    
    11.2
    %
    
    $
    62.1
    
    
    
    15.7
    %Residential
    
    
    19.4
    
    
    
    22.0
    %
    
    
    27.4
    
    
    
    23.5
    %Total Consolidated
    
    $
    48.6
    
    
    
    13.9
    %
    
    $
    89.5
    
    
    
    17.5
    %
    Selling, General and Administrative Expenses
 Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    36.0
    
    
    
    13.8
    %
    
    $
    44.1
    
    
    
    11.2
    %Residential
    
    
    18.6
    
    
    
    21.0
    %
    
    
    25.7
    
    
    
    22.0
    %Corporate
    
    
    11.5
    
    
    
    
    
    
    
    12.9
    
    
    
    Total Consolidated
    
    $
    66.1
    
    
    
    18.9
    %
    
    $
    82.7
    
    
    
    16.1
    %
    29




---



##### Table of Contents



Legal Matters
   Restructuring Charges
   Nine Months EndedJune 30,2010
    
    
    2009(Dollars in thousands)Severance compensation
    
    $
    763
    
    
    $
    1,894Consulting and other charges
    
    
    
    
    
    
    674Non-cash asset amortization and write-offs
    
    
    
    
    
    
    1,206Total restructuring charges
    
    $
    763
    
    
    $
    3,774
 Interest and Other Expense, Net
 Nine Months EndedJune 30,2010
    
    
    2009(Dollars in thousands)Interest expense
    
    $
    2,646
    
    
    $
    3,224Debt prepayment penalty and deferred cost amortization
    
    
    223
    
    
    
    191Total interest expense
    
    
    2,869
    
    
    
    3,415Interest income
    
    
    (208
    )
    
    
    (340
    )Other income (expense)
    
    
    (172
    )
    
    
    (197
    )Total interest and other expense, net
    
    $
    2,489
    
    
    $
    2,878
    30




---



##### Table of Contents



Provision for Income Taxes
  
 Working Capital
 June 30,
    
    
    September 30,2010
    
    
    2009(Dollars in millions)CURRENT ASSETS:Cash and cash equivalents
    
    $
    30.7
    
    
    $
    64.2Accounts receivableTrade, net of allowance of $3.5 and $3.3 respectively
    
    
    86.0
    
    
    
    100.8Retainage
    
    
    17.6
    
    
    
    26.5Inventories
    
    
    9.8
    
    
    
    10.1Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    12.6
    
    
    
    13.6Prepaid expenses and other current assets
    
    
    5.9
    
    
    
    6.1Total current assets
    
    $
    162.6
    
    
    $
    221.3CURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    1.3
    
    
    $
    2.1Accounts payable and accrued expenses
    
    
    56.4
    
    
    
    76.5Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    11.4
    
    
    
    21.1Total current liabilities
    
    $
    69.1
    
    
    $
    99.7Working capital
    
    $
    93.5
    
    
    $
    121.6
    31




---



##### Table of Contents



Liquidity and Capital Resources
   Operating Activities
  Investing Activities
  Financing Activities
  Bonding Capacity
 Surety
  32




---



##### Table of Contents



Controlling Shareholder
  
 Off-Balance Sheet Arrangements and Contractual Obligations
         33




---



##### Table of Contents



2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    TotalLong-term debt obligations
    
    $
    416
    
    
    $
    817
    
    
    $
    
    
    
    $
    10,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,233Operating lease obligations
    
    $
    1,529
    
    
    $
    6,121
    
    
    $
    4,246
    
    
    $
    1,960
    
    
    $
    1,016
    
    
    $
    234
    
    
    $
    22
    
    
    $
    15,128Capital lease obligations
    
    $
    93
    
    
    $
    306
    
    
    $
    297
    
    
    $
    287
    
    
    $
    24
    
    
    $
    
    
    
    $
    
    
    
    $
    1,007Total
    
    $
    2,038
    
    
    $
    7,244
    
    
    $
    4,543
    
    
    $
    12,247
    
    
    $
    1,040
    
    
    $
    234
    
    
    $
    22
    
    
    $
    27,368
 
 (1)
    
    The tabular amounts exclude the interest obligations that will be created
if the debt and capital lease obligations are outstanding for the periods
presented. Outlook
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure controls and procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Legal Matters
 
 ITEM 1A. RISK FACTORS
 Risk Factors
  34




---



##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. REMOVED AND RESERVED
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 3.1
    
    
    Second Amended and Restated Certificate of Incorporation of Integrated Electrical
Services, Inc. (Incorporated by reference to Exhibit 4.1 to the Companys Registration
Statement on Form S-8 filed on May 12, 2006)3.2
    
    
    Bylaws of Integrated Electrical Services, Inc. (Incorporated by reference to Exhibit
4.2 to the Companys Registration Statement on Form S-8, filed on May 12, 2006)10.1
    
    
    Amendment, dated as of April 30, 2010, to Loan and Security Agreement, dated May 12,
2006, by and among Integrated Electrical Services, Inc. and its subsidiaries, Bank of
America, N.A. and Wells Fargo Capital Finance LLC. (Incorporated by reference to
Exhibit 10.1 to the Companys
Current Report on Form 8-K filed on May 6, 2010)31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Michael J. Caliel, Chief Executive Officer (1)31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Terry L. Freeman, Chief Financial Officer (1)32.1
    
    
    Section 1350 Certification of Michael J. Caliel, Chief Executive Officer (1)32.2
    
    
    Section 1350 Certification of Terry L. Freeman, Chief Financial Officer (1)
 (1)
    
    Filed herewith.  35




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 SIGNATURES
  INTEGRATED ELECTRICAL SERVICES, INC.Date: August 9, 2010
    By:
    /s/ Terry L. FreemanTerry L. FreemanSenior Vice President and Chief Financial Officer  36




---



##### Table of Contents



EXHIBIT INDEX
 3.1
    
    
    Second Amended and Restated Certificate of Incorporation of Integrated Electrical
Services, Inc. (Incorporated by reference to Exhibit 4.1 to the Companys Registration
Statement on Form S-8 filed on May 12, 2006)3.2
    
    
    Bylaws of Integrated Electrical Services, Inc. (Incorporated by reference to Exhibit
4.2 to the Companys Registration Statement on Form S-8, filed on May 12, 2006)10.1
    
    
    Amendment, dated as of April 30, 2010, to Loan and Security Agreement, dated May 12,
2006, by and among Integrated Electrical Services, Inc. and its subsidiaries, Bank of
America, N.A. and Wells Fargo Capital Finance LLC. (Incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on May 6, 2010)31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Michael J. Caliel, Chief Executive Officer (1)31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Terry L. Freeman, Chief Financial Officer (1)32.1
    
    
    Section 1350 Certification of Michael J. Caliel, Chief Executive Officer (1)32.2
    
    
    Section 1350 Certification of Terry L. Freeman, Chief Financial Officer (1)
 (1)
    
    Filed herewith.