<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 15, 1999
Commission File No. 001-13783
INTEGRATED ELECTRICAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0542208
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
515 Post Oak Boulevard
Suite 450
Houston, Texas 77027-9408
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (713) 860-1500
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 18, 1999, Integrated Electrical Services, Inc. (the "Company")
consummated the acquisition of all of the issued and outstanding capital stock
of Britt Rice Electric, Inc. and Britt Rice Company and certain assets held by
Britt Rice individually, (collectively, "BRE"). BRE performs electrical
contracting services primarily in Bryan, College Station and Dallas, Texas.
The consideration paid by the Company for BRE was determined through
negotiations between representatives of the Company and BRE and consisted of an
aggregate of 577,386 shares of common stock of the Company and approximately
$9.0 million in cash. The cash portion of the consideration paid for BRE was
funded through borrowings under the Company's existing $175.0 million line of
credit facility. The Company intends to continue using the assets of BRE in the
electrical contracting business.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
Britt Rice Electric, Inc. and
Britt Rice Company
College Station, Texas
We have audited the accompanying balance sheet of Britt Rice Electric, Inc. (a
corporation) and Britt Rice Company (a proprietorship) as of December 31, 1998,
and the related statements of income and retained earnings and capital and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Britt Rice Electric, Inc. and
Britt Rice Company as of December 31, 1998, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information on pages 13-29 is
presented for the purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
DULOCK & COMPANY, P.C.
February 26, 1999
<PAGE> 5
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BRITT RICE BRITT RICE
ELECTRIC, INC. COMPANY ELIMINATIONS COMBINED
-------------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash $ 559,914 $ 151,158 $ -- $ 711,072
Certificates of deposit - money market 2,363,212 270,074 -- 2,633,286
Contracts receivable
Completed contracts 1,122,187 314,651 -- 1,436,838
Earned estimates 2,022,989 65,838 -- 2,088,827
Retainage 817,892 12,314 -- 830,206
Accounts receivable
Britt Rice Electric, Inc. -- 710,379 (710,379) --
Other 57,599 -- 57,599
Inventory - materials & supplies 456,666 -- -- 456,666
Costs and estimated earnings in excess of
billings on uncompleted contracts 106,962 -- -- 106,962
Prepaid expense 42,775 -- -- 42,775
-------------- ---------- ------------ -----------
Total Current Assets 7,550,196 1,524,414 (710,379) 8,364,231
Property and Equipment - at Cost
Machinery and equipment 244,729 83,696 -- 328,425
Trucks and vehicles 989,576 239,274 -- 1,228,850
Office equipment 322,807 96,625 -- 419,432
-------------- ---------- ------------ -----------
1,557,112 419,595 -- 1,976,707
Less - accumulated depreciation 1,026,409 414,171 -- 1,440,580
-------------- ---------- ------------ -----------
530,703 5,424 -- 536,127
-------------- ---------- ------------ -----------
Other Assets
Organization cost - net of amortization -- -- -- --
-------------- ---------- ------------ -----------
-- -- -- --
-------------- ---------- ------------ -----------
Total Assets $ 8,080,899 $ 1,529,838 $ (710,379) $ 8,900,358
============== ========== ============ ===========
</TABLE>
The accompanying notes are a part of the financial statements.
<PAGE> 6
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
BALANCE SHEET (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BRITT RICE BRITT RICE
ELECTRIC, INC. COMPANY ELIMINATIONS COMBINED
-------------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
LIABILITIES
Current Liabilities
Notes payable - amount due in one year $ 23,352 $ -- $ -- $ 23,352
Accounts payable
Trade 1,121,159 181,950 -- 1,303,109
Britt Rice Company 710,379 -- (710,379) --
Unbilled amounts due subcontractors and
overbilling on contracts 781,925 799 -- 782,724
Accrued liabilities
Payroll tax 2,742 51 -- 2,793
Sales tax 10,594 4,091 -- 14,685
Vacation 78,925 7,513 -- 86,438
Federal income tax payable (1,637) -- -- (1,637)
-------------- ---------- ------------ -----------
Total Current Liabilities 2,727,439 194,404 (710,379) 2,211,464
Long-Term Debt
Notes payable -- -- -- --
Deferred federal income tax -- -- -- --
-------------- ---------- ------------ -----------
Total Liabilities 2,727,439 194,404 (710,379) 2,211,464
STOCKHOLDER'S EQUITY AND CAPITAL
Common stock - no par - 1,000,000 shares
authorized - 10,000 shares issued and outstanding 1,000 -- -- 1,000
Retained earnings 5,352,460 -- -- 5,352,460
Capital - Britt Rice -- 1,335,434 -- 1,335,434
-------------- ---------- ------------ -----------
5,353,460 1,335,434 -- 6,688,894
-------------- ---------- ------------ -----------
Total Liabilities and Stockholders' Equity and Capital $ 8,080,899 $1,529,838 $ (710,379) $ 8,900,358
============== ========== ============ ===========
</TABLE>
The accompanying notes are a part of the financial statements.
<PAGE> 7
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
STATEMENT OF RETAINED EARNINGS AND CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BRITT RICE BRITT RICE
ELECTRIC, INC. COMPANY COMBINED
-------------- ----------- -----------
<S> <C> <C> <C>
Balance - January 1 $ 3,510,268 $ 1,384,913 $ 4,895,181
Net income 2,732,837 208,486 2,941,323
Distributions - Withdrawals (890,645) (257,965) (1,148,610)
-------------- ----------- -----------
Balance - December 31 $ 5,352,460 $ 1,335,434 $ 6,687,894
============== =========== ===========
</TABLE>
The accompanying notes are a part of the financial statements.
<PAGE> 8
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BRITT RICE BRITT RICE
ELECTRIC, INC. COMPANY COMBINED
-------------- ------------ ------------
<S> <C> <C> <C>
Earned Revenues $ 23,182,240 $ 2,704,766 $ 25,887,006
Cost of Earned Revenues 19,716,429 2,423,251 22,139,680
-------------- ------------ ------------
Gross Profit on Contracts 3,465,811 281,515 3,747,326
Operating Expenses 902,384 90,715 993,099
-------------- ------------ ------------
Income from Operations 2,563,427 190,800 2,754,227
Other Income
Interest 74,228 14,300 88,528
Other 95,182 3,386 98,568
-------------- ------------ ------------
169,410 17,686 187,096
-------------- ------------ ------------
Net Income Before Federal Income Tax 2,732,837 208,486 2,941,323
Federal Income Tax Current -- -- --
-------------- ------------ ------------
Net Income $ 2,732,837 $ 208,486 $ 2,941,323
============== ============ ============
</TABLE>
The accompanying notes are a part of the financial statements.
<PAGE> 9
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
SCHEDULE OF COST OF EARNED REVENUES
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BRITT RICE BRITT RICE
ELECTRIC, INC. COMPANY COMBINED
-------------- ------------ ------------
<S> <C> <C> <C>
Cost of Earned Revenues
Materials $ 8,980,336 $ 548,016 $ 9,528,352
Salaries 6,270,213 549,058 6,819,271
Sub-contracts 2,343,421 1,130,291 3,473,712
Insurance - bonds - liability -
workmen's compensation -
general - group 323,358 58,449 381,807
Tax - payroll 506,691 43,299 549,990
Truck and equipment expense 171,426 19,924 191,350
Rent 106,852 6,240 113,092
Supplies 183,596 26,151 209,747
Depreciation 148,428 7,455 155,883
Equipment rental 452,702 15,620 468,322
Contract labor 158,578 -- 158,578
Permits and fees 4,599 16,023 20,622
Employee benefits 853 1,128 1,981
Travel 56,669 -- 56,669
Other 8,707 1,597 10,304
-------------- ------------ ------------
Total $ 19,716,429 $ 2,423,251 $ 22,139,680
============== ============ ============
</TABLE>
The accompanying notes are a part of the financial statements.
<PAGE> 10
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
SCHEDULE OF OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BRITT RICE BRITT RICE
ELECTRIC, INC. COMPANY COMBINED
-------------- ------------ ------------
<S> <C> <C> <C>
Operating Expenses
Salaries - office - general $ 269,894 $ 43,890 $ 313,784
Insurance - group - general 19,200 4,800 24,000
Legal and accounting 23,000 6,570 29,570
Office supplies - printing - postage 41,299 2,420 43,719
Advertising 52,998 585 53,583
Dues and subscriptions 7,063 -- 7,063
Business promotion & entertainment 19,636 3,048 22,684
Tax
Payroll 22,094 3,509 25,603
Franchise 82,775 -- 82,775
Ad valorem and other 22,054 822 22,876
Contributions 1,600 -- 1,600
Interest 3,328 -- 3,328
Depreciation 31,444 10,695 42,139
Rent 26,713 1,560 28,273
Repairs - maintenance - general 8,280 2,020 10,300
Maintenance agreements 4,414 -- 4,414
Telephone 57,348 4,897 62,245
Utilities 27,712 -- 27,712
Freight 3,589 72 3,661
Bad debts 57,378 4,110 61,488
Travel expense -- -- --
Radio & communications 27,849 176 28,025
Employee benefits 396 -- 396
Profit sharing - 401 K 22,038 1,422 23,460
Apprenticeship school -- -- --
Computer support & data processing 67,986 -- 67,986
Other 2,296 119 2,415
-------------- ------------ ------------
Total $ 902,384 $ 90,715 $ 993,099
============== ============ ============
</TABLE>
The accompanying notes are a part of the financial statements.
<PAGE> 11
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BRITT RICE BRITT RICE
ELECTRIC, INC. COMPANY ELIMINATIONS COMBINED
-------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 2,732,837 $ 208,486 $ -- $ 2,941,323
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 179,872 18,150 -- 198,022
Contracts receivable - (increase) decrease (1,528,175) (55,523) -- (1,583,698)
Accounts receivable - payable
Intercompany (increase) decrease 100,000 (100,000) -- --
Other - (increase) decrease (57,599) -- -- (57,599)
Inventory - (increase) decrease (456,666) -- -- (456,666)
Costs and estimated earnings in excess of
billings on uncompleted contracts -
(increase) decrease (99,479) -- -- (99,479)
Prepaid expense - (increase) decrease (42,275) -- -- (42,275)
Accounts payable - trade - increase (decrease) 269,678 87,276 -- 356,954
Unbilled amounts due subcontractors and
overbilling on contracts - increase (decrease) 129,125 799 -- 129,924
Accrued liabilities - increase (decrease) 75,867 8,146 -- 84,013
Federal income tax payable - (decrease) (1,637) -- -- (1,637)
-------------- ---------- ------------ ------------
Net Cash Provided by Operating Activities 1,301,548 167,334 -- 1,468,882
-------------- ---------- ------------ ------------
Cash Flows From Investing Activities
Purchase of machinery and equipment (18,583) (1,086) -- (19,669)
Purchase of trucks and vehicles (177,308) (1,939) -- (179,247)
Purchase of office equipment (7,854) (10,695) -- (18,549)
Book value of trucks & machinery & equipment
sold or traded -- -- -- --
Britt Rice - distributions - withdrawals (890,645) (257,965) -- (1,148,610)
-------------- ---------- ------------ ------------
Net Cash Used By Investing Activities (1,094,390) (271,685) -- (1,366,075)
-------------- ---------- ------------ ------------
Cash Flows From Financing Activities
New borrowings
Short-term 50,688 -- -- 50,688
Long-term 12,664 -- -- 12,664
Debt reduction
Short-term (75,330) -- -- (75,330)
Long-term (12,664) -- -- (12,664)
-------------- ---------- ------------ ------------
Net Cash Used by Financing Activities (24,642) -- -- (24,642)
-------------- ---------- ------------ ------------
Net Increase (decrease) in cash -
Certificates of Deposit - Money Market 182,516 (104,351) -- 78,165
Cash - January 1 2,740,610 525,583 -- 3,266,193
-------------- ---------- ------------ ------------
Cash - December 31 $ 2,923,126 $ 421,232 $ -- $ 3,344,358
============== ========== ============ ============
Supplemental Disclosures
Interest paid $ 3,328 $ -- $ -- $ 3,328
============== ========== ============ ============
Federal income tax paid $ -- $ -- $ -- $ --
============== ========== ============ ============
</TABLE>
The accompanying notes are a part of the financial statements.
<PAGE> 12
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Summary of Significant Accounting Policies
The following is a summary of certain significant accounting policies
followed in the preparation of these financial statements. The policies
conform to generally accepted accounting principles and have been
consistently applied.
Basis for Recording Income
Profits on long term contracts are recorded on the basis of the
company's estimates of the percentage of completion of individual
contracts, commencing when progress reaches a point where experience is
sufficient to estimate final results with reasonable accuracy. That
portion of the total contract price is accrued which is allocable, on
the basis of the company's estimates of the percentage of completion,
to contract expenditures incurred and work performed.
As these long term contracts extend over one or more years revisions in
cost and profit estimates during the course of the work are reflected
in the accounting period in which the facts which require the revision
become known.
Profits on short term contracts are recorded on the substantial
completion of each contract.
At the time a loss on a contract becomes known, the entire amount of
the estimated ultimate loss on both short term and long term contract
is recorded.
Property and Equipment
Property and equipment is recorded at cost and depreciated over their
estimated useful lives using the accelerated methods of depreciation
for both financial reporting purposes and for federal income tax
purposes. Upon sale or retirement, the cost and related accumulated
depreciation are eliminated from the respective accounts and the
resulting gain or loss is included in current income.
Repairs and maintenance charges which do not increase the useful lives
of the assets are charged to income as incurred.
2. Notes Payable
The following is a summary of note payable at December 31, 1998:
<PAGE> 13
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT DUE
-------------------------
IN ONE IN MORE THAN
YEAR ONE YEAR TOTAL
-------- ------------ --------
<S> <C> <C> <C>
Norwest Bank - Texas, N.A. -
Bryan, Texas - original amount
$165,000 line of credit -
dated March 27, 1998 - fifteen -
month note - due July 9, 1999 -
interest rate 7.0 percent -
unsecured $ 23,352 $ -- $ 23,352
-------- ------------ --------
Total $ 23,352 $ -- $ 23,352
======== ============ ========
</TABLE>
3. Federal Income Tax
The stockholders of Britt Rice Electric, Inc. have elected under
Section 1372 (a) of the Internal Revenue Code to be taxed as a small
business corporation. This election permits the undistributed taxable
income of a "small business corporation" to be taxed to the
stockholders rather than the corporation. Therefore, Britt Rice
Electric Inc. does not owe any federal income tax at December 31, 1998.
Britt Rice Company is a proprietorship and Britt Rice includes the
income of the company with his other income and expense on his federal
income tax return form 1040. The federal income tax for the company has
been paid and all additional federal income tax is recorded on Britt
Rice's personal financial statement.
The following is a reconciliation of income for financial statement and
taxable income for the year ended December 31, 1998.
<TABLE>
<CAPTION>
FINANCIAL TAX
---------- ----------
<S> <C> <C>
Income before federal income tax $2,941,323 $2,941,323
Depreciation -- --
Meals and entertainment - 50%
non-deductible 11,342 11,342
---------- ----------
Taxable Income $2,952,665 $2,952,665
========== ==========
</TABLE>
<PAGE> 14
BRITT RICE ELECTRIC, INC. AND
BRITT RICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Depreciation
Depreciation is deducted in the statement of income as follows:
<TABLE>
<CAPTION>
METHOD LIFE AMOUNT
------ --------- --------
<S> <C> <C> <C>
Machinery and equipment MACRS 7 years $ 32,673
Trucks and vehicles MACRS 5 years 123,210
Office equipment MACRS 5-7 years 42,139
--------
Total $198,022
========
</TABLE>
5. Contingent Liabilities
The company is contingently liable on the following lease agreements at
December 31, 1998:
<TABLE>
<CAPTION>
DATE OF NUMBER OF ANNUAL
LEASE MONTHS AMOUNT
------- --------- --------
<S> <C> <C> <C>
Office and warehouse
College Station 3-1-98 36 $ 90,795
College Station 3-1-98 36 7,800
Dallas 9-1-92 120 42,770
--------
Total $141,365
========
</TABLE>
<PAGE> 15
ITEM 7. (B) PRO FORMA FINANCIAL INFORMATION
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The unaudited pro forma balance sheet reflects the acquisition by
Integrated Electrical Services, Inc. ("IES"), of BRE as if it had occurred on
September 30, 1999. The unaudited pro forma statements of operations for the
year ended September 30, 1998, presents the statement of operations data to give
effect to the 78 electrical and cabling contracting and maintenance companies
and related entities (including the 16 companies acquired concurrent with IES'
initial public offering) acquired through September 30, 1999 (the "Previously
Closed Acquisitions"), BRE and the related pro forma adjustments as if they had
occurred on October 1, 1997. The unaudited pro forma statement of operations for
the year ended September 30, 1999, presents the statement of operations data to
give effect to the Previously Closed Acquisitions, BRE and the related pro forma
adjustments as if they had occurred on October 1, 1998.
IES has analyzed the savings that it expects to realize from reductions
in salaries, bonuses and certain benefits to the owners. To the extent the
owners of the Acquisitions have contractually agreed to changes in salary,
bonuses, benefits and lease payments, these changes have been reflected in the
unaudited pro forma combined statement of operations.
Certain pro forma adjustments are based on preliminary estimates,
available information and certain assumptions that Company management deems
appropriate and may be revised as additional information becomes available. The
pro forma financial data do not purport to represent what IES's combined
financial position or results of operations would actually have been if such
transactions in fact had occurred on these dates and are not necessarily
representative of IES's combined financial position or results of operations for
any future period. Since the acquired entities were not under common control or
management prior to their acquisitions by IES, historical combined results may
not be comparable to, or indicative of, future performance. The unaudited pro
forma combined financial statements should be read in conjunction with the
historical consolidated financial statements and notes thereto included in the
company's Annual Report for the year ended September 30, 1998 filed on Form
10-K. See also "Risk Factors" included elsewhere therein.
<PAGE> 16
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
IES AND PRO FORMA PRO FORMA
SUBSIDIARIES BRE ADJUSTMENTS TOTAL
------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................. $ 2,931 $ 1,400 $ -- $ 4,331
Receivables, net................................. 270,726 6,162 -- 276,888
Inventories, net................................. 12,793 378 -- 13,171
Cost and estimated earnings in excess of
billings on uncompleted contracts............ 40,592 -- -- 40,592
Prepaid expenses and other current assets....... 7,640 46 -- 7,686
------------- --------- ------- ------------
Total current assets.......................... 334,682 7,986 -- 342,668
RECEIVABLES FROM RELATED PARTIES.................... -- -- -- --
GOODWILL, NET....................................... 467,385 -- 10,270 477,655
PROPERTY AND EQUIPMENT, NET......................... 47,368 477 -- 47,845
OTHER NONCURRENT ASSETS............................. 9,057 -- -- 9,057
------------- --------- ------- ------------
Total assets.................................. $ 858,492 $ 8,463 $10,270 $ 877,225
============= ========= ======= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current
maturities of long-term debt................. $ 1,444 $ -- $ -- $ 1,444
Accounts payable and accrued expense............. 116,121 2,369 -- 118,490
Billings in excess of costs and estimated
earnings on uncompleted contracts............ 37,507 755 -- 38,262
Income taxes payable............................. 3,971 -- -- 3,971
Other current liabilities........................ 67 (2) -- 65
------------- --------- ------- ------------
Total current liabilities..................... 159,110 3,122 -- 162,232
------------- --------- ------- ------------
LONG-TERM BANK DEBT................................. 76,980 -- -- 76,980
OTHER LONG-TERM DEBT, net of current
maturities 1,120 -- 9,100 10,220
SENIOR SUBORDINATED NOTES,
net of $1,170 discount.......................... 148,849 -- -- 148,849
OTHER NON-CURRENT LIABILITIES....................... 5,267 -- -- 5,267
------------- --------- ------- ------------
Total liabilities............................. 391,326 3,122 9,100 403,548
STOCKHOLDERS' EQUITY:
Preferred stock.................................. -- -- -- --
Common stock..................................... 360 1 5 366
Restricted common stock.......................... 27 -- -- 27
Treasury stock................................... -- -- -- --
Additional paid-in capital....................... 407,926 -- 6,505 414,431
Retained earnings................................ 58,853 5,340 (5,340) 58,853
------------- --------- ------- ------------
Total stockholders' equity.................... 467,166 5,341 1,170 473,677
------------- --------- ------- ------------
Total liabilities and stockholders' equity..... $ 858,492 $ 8,463 $10,270 $ 877,225
============= ========= ======= ============
</TABLE>
<PAGE> 17
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PREVIOUSLY
IES AND CLOSED PRO FORMA PRO FORMA
SUBSIDIARIES ACQUISITIONS BRE ADJUSTMENTS TOTAL
------------- --------------- --------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES.................................. $ 386,721 $ 771,373 $ 24,510 $ -- $1,182,604
COST OF SERVICES.......................... 306,052 617,831 19,741 -- 943,624
------------ ------------- --------------- -------------- ----------
GROSS PROFIT........................... 80,669 153,542 4,769 -- 238,980
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES............... 47,390 119,657 1,059 (41,762)a 126,344
NON-CASH, NON-RECURRING
COMPENSATION CHARGE.................. 17,036 -- -- (17,036)b --
GOODWILL AMORTIZATION..................... 3,212 -- -- 9,040 c 12,252
------------ ------------- --------------- -------------- ----------
INCOME FROM OPERATIONS................. 13,031 33,885 3,710 49,758 100,384
OTHER INCOME (EXPENSE):
Interest expense....................... (1,161) (1,602) -- (2,166)d (4,929)
Interest income........................ 433 1,517 67 (2,326)d (309)
Other, net............................. 335 939 49 (462)c 861
------------ ------------- --------------- -------------- ----------
OTHER INCOME (EXPENSE), NET............... (393) 854 116 (4,954) (4,377)
INCOME BEFORE INCOME TAXES................ 12,638 34,739 3,826 44,804 96,007
PROVISION FOR INCOME TAXES................ 12,690 14,080 -- 14,546 e 41,316
------------ ------------- --------------- -------------- ----------
NET INCOME (LOSS)......................... $ (52) $ 20,659 $ 3,826 $ 30,258 $ 54,691
============ ============= =============== ============== ==========
EARNING (LOSS) PER SHARE -
BASIC - $ 0.00 $ 1.39
============ ==========
DILUTED - $ 0.00 $ 1.38
============ ==========
SHARES USED IN THE COMPUTATION OF
EARNINGS (LOSS) PER SHARE
BASIC - 19,753,060 39,218,933
============ ==========
DILUTED - 19,753,060 39,618,766
============ ==========
</TABLE>
<PAGE> 18
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PREVIOUSLY
IES AND CLOSED BRITT RICE PRO FORMA PRO FORMA
SUBSIDIARIES ACQUISITIONS ELECTRIC, INC. ADJUSTMENTS TOTAL
------------- --------------- --------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES.................................. $ 1,035,888 $ 233,195 $ 28,551 $ -- $1,297,634
COST OF SERVICES.......................... 816,715 186,846 22,883 (402)a 1,026,042
------------ --------------- --------------- -------------- ----------
GROSS PROFIT........................... 219,173 46,349 5,668 402 271,592
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES............... 113,871 38,823 2,040 (8,231)a 146,503
GOODWILL AMORTIZATION..................... 9,305 -- -- 2,947 c 12,252
------------ --------------- --------------- -------------- ----------
INCOME FROM OPERATIONS................. 95,997 7,526 3,628 5,686 112,837
OTHER INCOME (EXPENSE):
Interest expense....................... (14,089) (999) -- 362 d (14,726)
Interest income........................ 944 388 104 (492)d 944
Other, net............................. 603 648 (51) -- 1,200
------------ --------------- --------------- -------------- ----------
OTHER INCOME (EXPENSE), NET............... (12,542) 37 53 (130) (12,582)
INCOME BEFORE INCOME TAXES................ 83,455 7,563 3,681 5,556 100,255
PROVISION FOR INCOME TAXES................ 35,348 2,976 -- 4,627 e 42,951
------------ --------------- --------------- -------------- ----------
NET INCOME (LOSS)......................... $ 48,107 $ 4,587 $ 3,681 $ 929 $ 57,304
============ =============== =============== ============== ==========
EARNING (LOSS) PER SHARE -
BASIC - $ 1.41 $ 1.46
============ ==========
DILUTED - $ 1.39 $ 1.45
============ ==========
SHARES USED IN THE COMPUTATION OF
EARNINGS (LOSS) PER SHARE
BASIC - 34,200,532 39,218,933
============ ==========
DILUTED - 34,632,506 39,650,907
============ ==========
</TABLE>
<PAGE> 19
INTEGRATED ELECTRICAL SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. UNAUDITED PRO FORMA BALANCE SHEET:
The Unaudited Pro Forma Balance Sheet gives effect to the acquisition
of BRE which was acquired for total consideration of $15.5 million, including
$9.0 million in cash and 0.6 million shares of common stock.
2. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS:
The Unaudited Pro Forma Statement of Operations for the year ended
September 30, 1998 for IES and Subsidiaries reflects the historical results of
Houston-Stafford Electric, Inc. ("Houston-Stafford") as the accounting acquirer
(restated for the effect of an acquisition accounted for as a
pooling-of-interest combined) the other Founding Companies beginning February 1,
1998, and the Acquired Companies beginning on their respective dates of
acquisition.
Pro Forma Adjustments consist of the following:
(a) Reflects the reduction in salaries, bonuses and benefits and lease
payments to the owners of the Acquisitions. These reductions in
salaries, bonuses and benefits and lease payments have been agreed to
in accordance with the terms of employment agreements executed as part
of the acquisitions. Such employment agreements are for five years,
contain restrictions related to competition and provide severance for
termination of employment in certain circumstances.
(b) Includes the reversal of the $17.0 million non-cash, non-recurring
compensation charge in connection with the acquisition of the Founding
Companies.
(c) Reflects the amortization of goodwill recorded as a result of these
acquisitions over a 40-year estimated life, as well as a reduction in
historical minority interest expense attributable to minority interests
that were acquired as part of the related acquisitions.
(d) Reflects the reduction of additional interest expense and income on
borrowings which will be repaid and collected, respectively, subsequent
to the acquisition and the reduction of certain non-recurring other
income.
(e) Reflects the incremental provision for federal and state income taxes
at a 38.5% overall tax rate, before non-deductible goodwill and other
permanent items, related to the other statements of operations
adjustments and for income taxes on the pretax income of acquired
companies that have historically elected S Corporation tax status.
<PAGE> 20
ITEM 7. (C) EXHIBITS
23.1 Consent of Dulock and Company, P.C.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
INTEGRATED ELECTRICAL SERVICES, INC.
By: /s/ STANLEY H. FLORANCE
------------------------------
STANLEY H. FLORANCE
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Dated: December 15, 1999
<PAGE> 22
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C>
23.1 Consent of Dulock and Company, P.C.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report, dated February 26, 1999, on the financial statements of Britt Rice
Electric, Inc. included in this Form 8-K, into Integrated Electrical Services,
Inc.'s previously filed Registration Statements on Form S-8 (File Nos.
333-67113, 333-45447, 333-45449 and 333-91041) and previously filed Post
Effective Amendment No. 5 to Form S-1 on Form S-4 (File No. 333-50031).
DULOCK AND COMPANY, P.C.
WACO, Texas
December 14, 1999
