##### 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 December 31, 2009
 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 December 31, 2009 and September 30, 2009
    
    
    5Condensed Consolidated Statements of Operations for the Three Months ended December 31, 2009 and 2008
    
    
    6Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2009 and 2008
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 1B. Unresolved Staff Comments
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33Signatures
    
    
    34Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   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 potential for vehicle
accidents;
    
    success in transferring, renewing and obtaining electrical and construction licenses after the
recent consolidation of our divisions;
    
    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;
  3




---



##### Table of Contents




    
    increased cost of surety bonds affecting margins on work and the potential for our surety providers
to refuse bonding at their discretion;
    
    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 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)
 December 31,
    
    
    September 30,2009
    
    
    2009(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    55,795
    
    
    $
    64,174Accounts receivable:Trade, net of allowance of $2,849 and $3,296, respectively
    
    
    92,870
    
    
    
    100,753Retainage
    
    
    24,224
    
    
    
    26,516Inventories
    
    
    9,280
    
    
    
    10,155Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    12,118
    
    
    
    13,554Prepaid expenses and other current assets
    
    
    6,582
    
    
    
    6,118Total current assets
    
    
    200,869
    
    
    
    221,270LONG-TERM RECEIVABLE, net of allowance of $278
    
    
    3,732
    
    
    
    3,732PROPERTY AND EQUIPMENT, net
    
    
    23,023
    
    
    
    24,367GOODWILL
    
    
    3,981
    
    
    
    3,981OTHER NON-CURRENT ASSETS, net
    
    
    14,726
    
    
    
    15,075Total assets
    
    $
    246,331
    
    
    $
    268,425LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    2,227
    
    
    $
    2,086Accounts payable and accrued expenses
    
    
    60,129
    
    
    
    76,432Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    16,418
    
    
    
    21,142Liabilities from discontinued operations
    
    
    
    
    
    
    46Total current liabilities
    
    
    78,774
    
    
    
    99,706LONG-TERM DEBT, net of current maturities
    
    
    26,407
    
    
    
    26,601LONG-TERM DEFERRED TAX LIABILITY
    
    
    2,291
    
    
    
    2,290OTHER NON-CURRENT LIABILITIES
    
    
    6,891
    
    
    
    7,280Total liabilities
    
    
    114,363
    
    
    
    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 and 15,407,802
shares issued and 14,585,949 and 14,617,741 outstanding, respectively
    
    
    154
    
    
    
    154Treasury stock, at cost, 821,853 and 790,061 shares, respectively
    
    
    (14,301
    )
    
    
    (14,097
    )Additional paid-in capital
    
    
    171,156
    
    
    
    170,732Accumulated other comprehensive income
    
    
    (66
    )
    
    
    (70
    )Retained deficit
    
    
    (24,975
    )
    
    
    (24,171
    )Total stockholders equity
    
    
    131,968
    
    
    
    132,548Total liabilities and stockholders equity
    
    $
    246,331
    
    
    $
    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 EndedDecember 31, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    120,248
    
    
    $
    173,107Cost of services
    
    
    100,327
    
    
    
    145,130Gross profit
    
    
    19,921
    
    
    
    27,977Selling, general and administrative expenses
    
    
    19,267
    
    
    
    28,869Gain on sale of assets
    
    
    (65
    )
    
    
    (103
    )Restructuring charges
    
    
    698
    
    
    
    483Income (Loss) from operations
    
    
    21
    
    
    
    (1,272
    )Interest and other (income) expense:Interest expense
    
    
    1,068
    
    
    
    985Interest income
    
    
    (57
    )
    
    
    (160
    )Other (income) expense, net
    
    
    (119
    )
    
    
    (61
    )Interest and other expense, net
    
    
    892
    
    
    
    764Loss from continuing operations before income taxes
    
    
    (871
    )
    
    
    (2,036
    )Provision (benefit) for income taxes
    
    
    (56
    )
    
    
    (885
    )Loss from continuing operations
    
    
    (815
    )
    
    
    (1,151
    )Discontinued operations (Note 2)Income (loss) from discontinued operations
    
    
    11
    
    
    
    (29
    )Provision (benefit) for income taxes
    
    
    1
    
    
    
    (14
    )Net income (loss) from discontinued operations
    
    
    10
    
    
    
    (15
    )Net loss
    
    $
    (805
    )
    
    $
    (1,166
    )Basic earnings (loss) per share:Continuing operations
    
    $
    (0.06
    )
    
    $
    (0.08
    )Discontinued operations
    
    $
    0.00
    
    
    $
    (0.00
    )Total
    
    $
    (0.06
    )
    
    $
    (0.08
    )Diluted earnings (loss) per share:Continuing operations
    
    $
    (0.06
    )
    
    $
    (0.08
    )Discontinued operations
    
    $
    0.00
    
    
    $
    (0.00
    )Total
    
    $
    (0.06
    )
    
    $
    (0.08
    )Shares used in the computation of earnings
(loss) per share (Note 4):Basic
    
    
    14,396,017
    
    
    
    14,318,776Diluted
    
    
    14,396,017
    
    
    
    14,318,776
   6




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (IN THOUSANDS)
 Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (805
    )
    
    $
    (1,166
    )Adjustments to reconcile net loss to net cash provided
by operating activities:Net (income) loss from discontinued operations
    
    
    (10
    )
    
    
    15Bad debt expense
    
    
    305
    
    
    
    291Deferred financing cost amortization
    
    
    75
    
    
    
    65Depreciation and amortization
    
    
    1,376
    
    
    
    1,992Gain on sale of assets
    
    
    (65
    )
    
    
    (103
    )Non-cash compensation expense
    
    
    318
    
    
    
    608Equity in (gains) losses of investment
    
    
    (5
    )
    
    
    41Goodwill adjustment  utilization of deferred tax assets
    
    
    
    
    
    
    12Changes in operating assets and liabilitiesAccounts receivable
    
    
    9,869
    
    
    
    9,045Inventories
    
    
    875
    
    
    
    540Costs and estimated earnings in excess of billings
    
    
    1,436
    
    
    
    2,154Prepaid expenses and other current assets
    
    
    (186
    )
    
    
    667Other non-current assets
    
    
    7
    
    
    
    5,065Accounts payable and accrued expenses
    
    
    (16,339
    )
    
    
    (32,192
    )Billings in excess of costs and estimated earnings
    
    
    (4,723
    )
    
    
    3,772Other non-current liabilities
    
    
    (389
    )
    
    
    925Net cash used by continuing operations
    
    
    (8,261
    )
    
    
    (8,269
    )Net cash (used in) provided by discontinued operations
    
    
    (1
    )
    
    
    32Net cash used by operating activities
    
    
    (8,262
    )
    
    
    (8,237
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (76
    )
    
    
    (565
    )Proceeds from sales of property and equipment
    
    
    109
    
    
    
    131Investment in unconsolidated affiliate
    
    
    
    
    
    
    (2,000
    )Net cash provided by (used in) investing activities
    
    
    33
    
    
    
    (2,434
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings of debt
    
    
    744
    
    
    
    Repayments of debt
    
    
    (796
    )
    
    
    (712
    )Purchase of treasury stock
    
    
    (98
    )
    
    
    (4,032
    )Net cash used in financing activities
    
    
    (150
    )
    
    
    (4,744
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (8,379
    )
    
    
    (15,415
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    64,174
    
    
    
    64,709CASH AND CASH EQUIVALENTS, end of period
    
    $
    55,795
    
    
    $
    49,294SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    1,676
    
    
    $
    902Cash paid for income taxes
    
    $
    33
    
    
    $
    164
   7




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2009
 (UNAUDITED)
 1. BUSINESS
   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 to Consolidated Financial Statements
   8




---



##### Table of Contents



RECLASSIFICATIONS
  LONG-TERM RECEIVABLE
  USE OF ESTIMATES AND ASSUMPTIONS
  SEASONALITY AND QUARTERLY FLUCTUATIONS
  2. STRATEGIC ACTIONS
 The 2007 Restructuring Plan
   The 2009 Restructuring Plan
   9




---



##### Table of Contents



Severance
    
    
    Consulting/Charges
    
    
    Other Charges
    
    
    TotalRestructuring liability at September 30, 2009
    
    $
    2,097
    
    
    $
    81
    
    
    $
    2,178Restructuring charges incurred
    
    
    698
    
    
    
    
    
    
    
    698Lesscash payments
    
    
    (1,123
    )
    
    
    
    
    
    
    (1,123
    )Lessstock based compensation
    
    
    
    
    
    
    
    
    
    
    Lessnon-cash expenses / write-offs
    
    
    
    
    
    
    
    
    
    
    Restructuring liability at December 31, 2009
    
    $
    1,672
    
    
    $
    81
    
    
    $
    1,753
 Exit or Disposal Activities
      Three Months EndedDecember 31,2009
    
    
    2008Revenues
    
    $
    
    
    
    $
    21Gross profit (loss)
    
    $
    11
    
    
    $
    19Pre-tax income (loss)
    
    $
    11
    
    
    $
    (29
    )
  10




---



##### Table of Contents



3. DEBT AND LIQUIDITY
  December 31,
    
    
    September 30,2009
    
    
    2009Tontine Term Loan, due May 15, 2013, bearing interest at 11.00%
    
    $
    25,000
    
    
    $
    25,000Camden Notes Payable
    
    
    2,804
    
    
    
    2,912Capital leases and other
    
    
    830
    
    
    
    775Total debt
    
    
    28,634
    
    
    
    28,687Less  Short-term debt and current maturities of long-term debt
    
    
    (2,227
    )
    
    
    (2,086
    )Total long-term debt
    
    $
    26,407
    
    
    $
    26,601
  Capital Leases
    
    
    Term Debt
    
    
    Total2010
    
    
    277
    
    
    
    1,745
    
    
    $
    2,0222011
    
    
    306
    
    
    
    1,059
    
    
    
    1,3652012
    
    
    297
    
    
    
    
    
    
    
    2972013
    
    
    287
    
    
    
    25,000
    
    
    
    25,2872014
    
    
    24
    
    
    
    
    
    
    
    24Thereafter
    
    
    
    
    
    
    
    
    
    
    Less: Imputed Interest
    
    
    (361
    )
    
    
    
    
    
    
    (361
    )Total
    
    $
    830
    
    
    $
    27,804
    
    
    $
    28,634
  The Tontine Capital Partners Term Loan
  The Camden Notes
  December 31,
    
    
    September 30,2009
    
    
    2009Insurance Note
Payable, due
September 1, 2010,
bearing interest at
4.99%
    
    $
    387
    
    
    $
    Insurance Note
Payable, due June 1,
2010, bearing interest
at 4.59%
    
    
    453
    
    
    
    719Insurance Note
Payable, due August 1,
2011, bearing interest
at 4.99%
    
    
    1,725
    
    
    
    1,986Insurance Note
Payable, due
November 1, 2010,
bearing interest at
4.99%
    
    
    239
    
    
    
    Insurance Note
Payable, due
January 1, 2010,
bearing interest at
5.99%
    
    
    
    
    
    
    207Total Camden Notes
    
    $
    2,804
    
    
    $
    2,912
  11




---



##### 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 2.75% or Base Rate
plus 0.75%
    
    2.75% plus .25% fronting feeGreater than $40 million and less
than $60 million
    
    LIBOR plus 3.00% or Base Rate
plus 1.00%
    
    3.00% plus .25% fronting feeLess than or equal to $40 million
    
    LIBOR plus 3.25% or Base Rate
plus 1.25%
    
    3.25% plus .25% fronting fee
   12




---



##### Table of Contents



Financial Covenants
  Covenant
    
    Requirement
    
    ActualShutdown Subsidiaries Earnings Before Interest and Taxes
    
    Cumulative loss not
to exceed $2.0
million
    
    Loss of $0.9 million
   4. EARNINGS PER SHARE
   Three Months EndedDecember 31,2009
    
    
    2008Numerator:Net loss from continuing operations attributable to common shareholders
    
    $
    (815
    )
    
    $
    (1,151
    )Net income from continuing operations attributable to restricted shareholders
    
    
    
    
    
    
    Net loss from continuing operations
    
    $
    (815
    )
    
    $
    (1,151
    )Net income (loss) from discontinued operations attributable to common
shareholders
    
    $
    10
    
    
    $
    (15
    )Net income from discontinued operations attributable to restricted shareholders
    
    
    
    
    
    
    Net income (loss) from discontinued operations
    
    $
    10
    
    
    $
    (15
    )Net loss attributable to common shareholders
    
    $
    (805
    )
    
    $
    (1,166
    )Net income attributable to restricted shareholders
    
    
    
    
    
    
    Net loss
    
    $
    (805
    )
    
    $
    (1,166
    )
  13




---



##### Table of Contents



Three Months EndedDecember 31,2009
    
    
    2008Denominator:Weighted average common shares outstanding  basic
    
    
    14,396,017
    
    
    
    14,318,776Effect of dilutive stock options and non-vested restricted stock
    
    
    
    
    
    
    Weighted average common and common equivalent shares
outstanding  diluted
    
    
    14,396,017
    
    
    
    14,318,776Basic income (loss) per share:Basic loss per share from continuing operations
    
    $
    (0.06
    )
    
    $
    (0.08
    )Basic earnings (loss) per share from discontinued operations
    
    $
    0.00
    
    
    $
    (0.00
    )Basic loss per share
    
    $
    (0.06
    )
    
    $
    (0.08
    )Diluted income (loss) per share:Diluted loss per share from continuing operations
    
    $
    (0.06
    )
    
    $
    (0.08
    )Diluted earnings (loss) per share from discontinued operations
    
    $
    0.00
    
    
    $
    (0.00
    )Diluted loss per share
    
    $
    (0.06
    )
    
    $
    (0.08
    )
 5. OPERATING SEGMENTS
       14




---



##### Table of Contents



Three Months Ended December 31, 2009 (Unaudited)Commercial &Industrial
    
    
    Residential
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    91,256
    
    
    $
    28,992
    
    
    $
    
    
    
    $
    120,248Cost of services
    
    
    78,179
    
    
    
    22,148
    
    
    
    
    
    
    
    100,327Gross profit
    
    
    13,077
    
    
    
    6,844
    
    
    
    
    
    
    
    19,921Selling, general and
administrative
    
    
    9,843
    
    
    
    6,023
    
    
    
    3,401
    
    
    
    19,267Loss (gain) on sale of
assets
    
    
    (63
    )
    
    
    (2
    )
    
    
    
    
    
    
    (65
    )Restructuring charge
    
    
    716
    
    
    
    
    
    
    
    (18
    )
    
    
    698Income (loss) from
operations
    
    $
    2,581
    
    
    $
    823
    
    
    $
    (3,383
    )
    
    $
    21Other data:Depreciation and
amortization
expense
    
    $
    359
    
    
    $
    142
    
    
    $
    875
    
    
    $
    1,376Capital expenditures
    
    $
    32
    
    
    $
    12
    
    
    $
    32
    
    
    $
    76Total assets
    
    $
    118,125
    
    
    $
    32,817
    
    
    $
    95,389
    
    
    $
    246,331
 Three Months Ended December 31, 2008 (Unaudited)Commercial &Industrial
    
    
    Residential
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    127,741
    
    
    $
    45,366
    
    
    $
    
    
    
    $
    173,107Cost of services
    
    
    109,990
    
    
    
    35,140
    
    
    
    
    
    
    
    145,130Gross profit
    
    
    17,751
    
    
    
    10,226
    
    
    
    
    
    
    
    27,977Selling, general and
administrative
    
    
    15,060
    
    
    
    9,677
    
    
    
    4,132
    
    
    
    28,869Loss (gain) on sale of
assets
    
    
    (117
    )
    
    
    14
    
    
    
    
    
    
    
    (103
    )Restructuring charge
    
    
    419
    
    
    
    64
    
    
    
    
    
    
    
    483Income (loss) from
operations
    
    $
    2,389
    
    
    $
    471
    
    
    $
    (4,132
    )
    
    $
    (1,272
    )Other data:Depreciation and
amortization
expense
    
    $
    535
    
    
    $
    708
    
    
    $
    749
    
    
    $
    1,992Capital expenditures
    
    $
    86
    
    
    $
    16
    
    
    $
    463
    
    
    $
    565Total assets
    
    $
    142,818
    
    
    $
    41,360
    
    
    $
    101,642
    
    
    $
    285,820
    15




---



##### Table of Contents



6. STOCKHOLDERS EQUITY
   Treasury Stock
   Restricted Stock
    Stock Options
  Three Months EndedDecember 31,2009
    
    
    2008Weighted average value per option granted during the period (1)
    
    $
    
    
    
    $
    8.56Assumptions:Stock price volatility
    
    
    
    %
    
    
    86.4
    %Risk free rate of return
    
    
    
    %
    
    
    1.3
    %Future forfeiture rate
    
    
    
    %
    
    
    (2) 0.0
    %Expected term
    
    0.0 years
    
    
    6.0 years
 (1)
    
    We do not currently pay dividends on our common stock.(2)
    
    The forfeiture rate is assumed to be zero based on the limited number of employees who have been awarded stock options.  16




---



##### Table of Contents



Weighted AverageShares
    
    
    Exercise PriceOutstanding, September 30, 2009
    
    
    158,500
    
    
    $
    18.66Options granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding, December 31, 2009
    
    
    158,500
    
    
    $
    18.66Exercisable, December 31, 2009
    
    
    141,833
    
    
    $
    18.29
  RemainingOutstanding as of
    
    
    Contractual Life
    
    
    Weighted-Average
    
    
    Exercisable as of
    
    
    Weighted-AverageRange of Exercise Prices
    
    December 31, 2009
    
    
    in Years
    
    
    Exercise Price
    
    
    December 31, 2009
    
    
    Exercise Price$12.31 - $18.79
    
    
    123,500
    
    
    
    6.9
    
    
    $
    17.02
    
    
    $
    120,167
    
    
    $
    17.12$20.75 - $33.55
    
    
    35,000
    
    
    
    7.5
    
    
    
    24.46
    
    
    
    21,666
    
    
    
    24.75158,500
    
    
    
    7.0
    
    
    $
    18.66
    
    
    $
    141,833
    
    
    $
    18.29
  7. SECURITIES AND EQUITY INVESTMENTS
 Investment in EPV Solar
  December 31,
    
    
    September 30,2009
    
    
    2009Common stock (25.2 million shares)
    
    $
    
    
    
    $
    Convertible note receivable
    
    
    150
    
    
    
    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
    
    $
    150
    
    
    $
    150
  17




---



##### Table of Contents



Investment in EnerTech Capital Partners II L.P.
   December 31,
    
    
    September 30,2009
    
    
    2009Carrying value
    
    $
    2,491
    
    
    $
    2,491Unrealized gains (losses)
    
    
    (118
    )
    
    
    276Fair value
    
    $
    2,373
    
    
    $
    2,767
  Arbinet Corporation
  8. EMPLOYEE BENEFIT PLANS
 Executive Savings Plan
   18




---



##### Table of Contents



9. FAIR VALUE MEASUREMENTS
    Significant
    
    
    SignificantOther Observable
    
    
    UnobservableTotal
    
    
    Quoted Prices
    
    
    Inputs
    
    
    InputsFair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Equity securities
    
    $
    82
    
    
    $
    82
    
    
    $
    
    
    
    $
    Debt securities
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150Executive Savings
Plan assets
    
    
    1,264
    
    
    
    1,264
    
    
    
    
    
    
    
    Executive Savings
Plan liabilities
    
    
    (1,264
    )
    
    
    (1,264
    )
    
    
    
    
    
    
    Total
    
    $
    232
    
    
    $
    82
    
    
    $
    
    
    
    $
    150
  Level 1
 Level 2
 Level 3
  10. COMMITMENTS AND CONTINGENCIES
 Legal Matters
   19




---



##### Table of Contents



Ward Transformer Site
    Self-insurance
  Surety
   20




---



##### Table of Contents



Other Commitments and Contingencies
    11. SUBSEQUENT EVENTS
  
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   21




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Notes to
Consolidated Financial Statements
 RESTRUCTURING PROGRAMS
 The 2007 Restructuring Plan
  Condensed
Consolidated Financial Statements Strategic Actions
 The 2009 Restructuring Plan
   Condensed
Consolidated Financial Statements Strategic Actions
 EXIT OR DISPOSAL ACTIVITIES
    22




---



##### Table of Contents



FINANCING
 The Tontine Capital Partners Term Loan
  The Camden Notes
     The Revolving Credit Facility
   Condensed Consolidated Financial Statements Debt
and Liquidity
  23




---



##### Table of Contents



SURETY
 Surety
     RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 COMPARED TO THE THREE MONTHS
ENDED DECEMBER 31, 2008
  Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Revenues
    
    $
    120.2
    
    
    
    100.0
    %
    
    $
    173.1
    
    
    
    100.0
    %Cost of services
    
    
    100.3
    
    
    
    83.4
    %
    
    
    145.1
    
    
    
    83.9
    %Gross profit
    
    
    19.9
    
    
    
    16.6
    %
    
    
    28.0
    
    
    
    16.2
    %Selling, general and administrative expenses
    
    
    19.3
    
    
    
    16.0
    %
    
    
    28.9
    
    
    
    16.7
    %Gain on sale of assets
    
    
    (0.1
    )
    
    
    (0.1
    )%
    
    
    (0.1
    )
    
    
    (0.0
    )%Restructuring charges
    
    
    0.7
    
    
    
    0.6
    %
    
    
    0.5
    
    
    
    0.2
    %Income from operations
    
    
    0.0
    
    
    
    0.0
    %
    
    
    (1.3
    )
    
    
    (0.7
    )%Interest and other expense, net
    
    
    0.9
    
    
    
    0.7
    %
    
    
    0.8
    
    
    
    0.4
    %Income before income taxes
    
    
    (0.9
    )
    
    
    (0.7
    )%
    
    
    (2.1
    )
    
    
    (1.3
    )%Benefit (provision) for income taxes
    
    
    0.1
    
    
    
    (0.0
    )%
    
    
    (0.9
    )
    
    
    (0.6
    )%Income from continuing operations
    
    
    (0.8
    )
    
    
    (0.7
    )%
    
    
    (1.2
    )
    
    
    (0.7
    )%Income (loss) from discontinued operations
    
    
    0.0
    
    
    
    0.0
    %
    
    
    (0.0
    )
    
    
    (0.0
    )%Net income
    
    $
    (0.8
    )
    
    
    (0.7
    )%
    
    $
    (1.2
    )
    
    
    (0.7
    )%
  24




---



##### Table of Contents



Revenues
 Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    91.2
    
    
    
    75.9
    %
    
    $
    127.7
    
    
    
    73.8
    %Residential
    
    
    29.0
    
    
    
    24.1
    %
    
    
    45.4
    
    
    
    26.2
    %Total Consolidated
    
    $
    120.2
    
    
    
    100.0
    %
    
    $
    173.1
    
    
    
    100.0
    %
    Gross Profit
 Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    13.1
    
    
    
    14.3
    %
    
    $
    17.8
    
    
    
    13.9
    %Residential
    
    
    6.8
    
    
    
    23.6
    %
    
    
    10.2
    
    
    
    22.5
    %Total Consolidated
    
    $
    19.9
    
    
    
    16.6
    %
    
    $
    28.0
    
    
    
    16.2
    %
   25




---



##### Table of Contents



Selling, General and Administrative Expenses
 Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008$
    
    
    %
    
    
    $
    
    
    %(Dollars in millions, Percentage of revenues)Commercial & Industrial
    
    $
    9.9
    
    
    
    10.8
    %
    
    $
    15.0
    
    
    
    11.7
    %Residential
    
    
    6.0
    
    
    
    20.8
    %
    
    
    9.7
    
    
    
    21.4
    %Corporate
    
    
    3.4
    
    
    
    
    
    
    
    4.2
    
    
    
    Total Consolidated
    
    $
    19.3
    
    
    
    16.0
    %
    
    $
    28.9
    
    
    
    16.7
    %
   
    
    a $5.8 million decrease in employment expenses as a result of our ongoing
restructuring efforts;
    
    lower information technology and office expenses of $0.9 million;
    
    a $0.8 million decrease in legal fees;
    
    lower accounting and other professional fees of $0.5 million; and
    
    a $0.5 million decrease in occupancy costs.
   Restructuring Charges
   26




---



##### Table of Contents



Three Months EndedDecember 31,2009
    
    
    2008(Dollars in thousands)Severance compensation
    
    $
    644
    
    
    $
    483Consulting and other charges
    
    
    54
    
    
    
    Non-cash asset amortization and write-offs
    
    
    
    
    
    
    Total restructuring charges
    
    $
    698
    
    
    $
    483
 Interest and Other Expense, Net
 Three Months EndedDecember 31,2009
    
    
    2008(Dollars in thousands)Interest expense
    
    $
    993
    
    
    $
    921Debt prepayment penalty and deferred cost amortization
    
    
    75
    
    
    
    64Total interest expense
    
    
    1,068
    
    
    
    985Interest income
    
    
    57
    
    
    
    160Other income (expense)
    
    
    119
    
    
    
    61Total interest and other expense, net
    
    $
    892
    
    
    $
    764
   Provision for Income Taxes
  Condensed Consolidated Financial Statements Summary of Significant Accounting Policies
  27




---



##### Table of Contents



Income (Loss) from Discontinued Operations
   Working Capital
 December 31,
    
    
    September 30,2009
    
    
    2009(Dollars in millions)CURRENT ASSETS:Cash and cash equivalents
    
    $
    55.8
    
    
    
    64.2Accounts receivableTrade, net of allowance of $2.7 and $3.6 respectively
    
    
    92.9
    
    
    
    100.8Retainage
    
    
    24.2
    
    
    
    26.5Inventories
    
    
    9.3
    
    
    
    10.1Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    12.1
    
    
    
    13.6Prepaid expenses and other current assets
    
    
    6.5
    
    
    
    6.1Assets from discontinued operations
    
    
    
    
    
    
    Total current assets
    
    $
    200.8
    
    
    $
    221.3CURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    2.2
    
    
    $
    2.1Accounts payable and accrued expenses
    
    
    60.1
    
    
    
    76.4Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    16.4
    
    
    
    21.1Liabilities from discontinued operations
    
    
    
    
    
    
    0.1Total current liabilities
    
    $
    78.7
    
    
    $
    99.7Working capital
    
    $
    122.1
    
    
    $
    121.6
    28




---



##### Table of Contents



Liquidity and Capital Resources
   Operating Activities
  Investing Activities
   29




---



##### Table of Contents



Financing Activities
  Bonding Capacity
 Surety.
 Off-Balance Sheet Arrangements and Contractual Obligations
        30




---



##### Table of Contents



2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    TotalLong-term debt
obligations
    
    $
    1,745
    
    
    $
    1,059
    
    
    $
    
    
    
    $
    25,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    27,804Operating lease
obligations
    
    $
    4,804
    
    
    $
    5,898
    
    
    $
    4,194
    
    
    $
    1,689
    
    
    $
    691
    
    
    $
    133
    
    
    $
    21
    
    
    $
    17,430Capital lease obligations
    
    $
    277
    
    
    $
    306
    
    
    $
    297
    
    
    $
    287
    
    
    $
    24
    
    
    $
    
    
    
    $
    
    
    
    $
    1,191Total
    
    $
    6,826
    
    
    $
    7,263
    
    
    $
    4,491
    
    
    $
    26,976
    
    
    $
    715
    
    
    $
    133
    
    
    $
    21
    
    
    $
    46,425
 
 (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
  Inflation
  
 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
   31




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
 Commitments and Contingencies  Legal Matters
 
 ITEM 1A.
    
    RISK FACTORS
 Risk Factors
 
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Purchases of Equity Securities by the Issuer and Affiliated Purchases
 Total number of
    
    
    Maximum ofshares purchased as
    
    
    shares that mayTotal number
    
    
    
    
    
    
    part of publically
    
    
    yet be purchasedof shares
    
    
    Average price
    
    
    announced plans or
    
    
    under the plans orPeriod
    
    purchased
    
    
    paid per share
    
    
    programs (1)
    
    
    programsOctober 1, 2009 to October 31, 2009
    
    
    
    
    
    $
    
    
    
    
    886,360
    
    
    
    November 1, 2009 to November 31, 2009
    
    
    
    
    
    $
    
    
    
    
    886,360
    
    
    
    December 1, 2009 to December 31, 2009
    
    
    
    
    
    $
    
    
    
    
    886,360
    
    
    
    Total for period
    
    
    
    
    
    $
    
 
 (1)
    
    On December 12, 2007, we announced that our Board of Directors
authorized the repurchase of up to one million shares of our
common stock. This stock repurchase program was authorized
through and expired on December 31, 2009. The share repurchase
table does not include 14,492 shares of common stock withheld to
satisfy tax withholding requirements related to restricted stock
issued under the Amended and Restated 2006 Equity Incentive
Plan. The average cost of those shares was $6.78 per share. 
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   32




---



##### Table of Contents



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)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 Raymond K. Guba, Chief Financial Officer (1)32.1
    
    
    Section 1350 Certification of Michael J. Caliel, Chief Executive Officer (1)32.2
    
    
    Section 1350 Certification of Raymond K. Guba, Chief Financial Officer (1)
 
 (1)
    
    Filed herewith.  33




---



##### Table of Contents



INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
 
 SIGNATURES
  INTEGRATED ELECTRICAL SERVICES, INC.Date: February 9, 2010
    By:
    /s/ RAYMOND K. GUBARaymond K. GubaExecutive Vice President and
Chief Financial and Administrative Officer  34




---



##### 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)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 Raymond K. Guba, Chief Financial Officer (1)32.1
    
    
    Section 1350 Certification of Michael J. Caliel, Chief Executive Officer (1)32.2
    
    
    Section 1350 Certification of Raymond K. Guba, Chief Financial Officer (1)
 
 (1)
    
    Filed herewith.  35