<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 17, 1999
(Amending Form 8-K dated February 4, 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 5. OTHER EVENTS
In order to comply with the disclosure requirements of the Securities and
Exchange Commission regarding the financial statements of businesses acquired,
the Company is filing this Amendment to its Current Report on Form 8-K dated
February 4, 1999 containing the audited financial statements of Kayton Electric,
Inc.
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INDEX TO FINANCIAL STATEMENTS
PAGE
----
KAYTON ELECTRIC, INC. - FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1997 AND NINE MONTHS ENDED SEPTEMBER 30,
1998 AND 1997 (UNAUDITED)
Independent Auditors' Report .............................................. 1
Balance Sheets ............................................................ 2
Statements of Earnings and Retained Earnings .............................. 3
Statements of Cash Flows .................................................. 4
Notes to Financial Statements ............................................. 5
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Kayton Electric, Inc.:
We have audited the accompanying balance sheet of Kayton Electric, Inc. as
of December 31, 1997 and the related statements of earnings and retained
earnings 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 audits.
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 Kayton Electric, Inc.
as of December 31, 1997 and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Lincoln, Nebraska
January 28, 1998
(November 19, 1998 as to Note 8)
1
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KAYTON ELECTRIC, INC.
Balance Sheets
September 30, 1998 (unaudited) and December 31, 1997
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash $ 601,667 $ 830,628
Accounts receivable, including retainages of $621,799 (unaudited)
and $707,935 at September 30, 1998 and December 31, 1997, respectively 1,587,585 2,407,479
Materials for projects in progress 440,000 600,000
Costs and estimated earnings in excess of billings on uncompleted
contracts 625,529 428,756
Other current assets 191,000 179,000
----------- ---------
Total current assets 3,445,781 4,445,863
----------- ---------
Property and equipment, at cost 2,385,300 2,315,929
Less accumulated depreciation 1,482,115 1,417,895
----------- ---------
Net property, plant and equipment 903,185 898,034
----------- ---------
Other assets 26,881 7,997
----------- ---------
$ 4,375,847 $ 5,351,894
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 452,940 $ 627,762
Current installments of long-term debt 6,000 66,000
Billings in excess of costs and estimated earnings on uncompleted
contracts 614,697 1,030,465
Accrued expenses 473,740 461,938
Other current liabilities 243,937 235,683
----------- ---------
Total current liabilities 1,791,314 2,421,848
Long-term debt -- 546,000
----------- ---------
Total liabilities 1,791,314 2,967,848
----------- ---------
Stockholders' equity:
Common stock of $1 par value. Authorized 75,000 shares,
issued 60,000 shares 60,000 60,000
Paid-in capital in excess of par value 84,989 84,989
Retained earnings 2,439,544 2,239,057
----------- ---------
Total stockholders' equity 2,584,533 2,384,046
Commitments
----------- -----------
$ 4,375,847 $ 5,351,894
=========== ===========
</TABLE>
2
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KAYTON ELECTRIC, INC
Statements of Earnings and Retained Earnings
Nine-month periods ended September 30, 1998 and 1997 (unaudited)
and year ended December 31, 1997
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997 1997
------------ ---------- ----------
(unaudited)
<S> <C> <C> <C>
Contract revenues $ 10,193,439 $10,650,913 $14,991,171
------------ ----------- -----------
Cost of construction
Direct 8,082,121 8,706,306 12,368,485
Indirect 573,222 576,920 775,260
------------ ----------- -----------
Total cost of construction 8,655,343 9,283,226 13,143,745
------------ ----------- -----------
Gross profit 1,538,096 1,367,687 1,847,426
General and administrative expenses 711,438 738,029 1,016,369
------------ ----------- -----------
Operating income 826,658 629,658 831,057
------------ ----------- -----------
Other income (deductions):
Interest and dividend income 25,943 1,083 5,640
Interest expense (390) (11,594) (12,166)
Miscellaneous 17,276 22,458 27,624
------------ ----------- -----------
Total other income (deductions), net 42,829 11,947 21,098
------------ ----------- -----------
Net earnings 869,487 641,605 852,155
Retained earnings, beginning of year 2,239,057 2,009,652 2,009,652
Dividends paid (669,000) (622,750) (622,750)
------------ ----------- -----------
Retained earnings, end of year $ 2,439,544 $ 2,028,507 $ 2,239,057
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 7
KAYTON ELECTRIC, INC.
Statements of Cash Flows
Nine-month periods ended September 30, 1998 and 1997 (unaudited)
and year ended December 31, 1997
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1997
------------ ------------ ------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 869,487 $ 641,605 $ 852,155
------------ ------------ ------------
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 180,646 190,825 258,310
Gain from sale of equipment 2,574 4,941 4,941
Changes in assets and liabilities:
Accounts receivable 819,894 273,699 (334,935)
Materials for projects in progress 160,000 (80,000) 100,000
Costs and estimated earnings in excess of billings on (196,773) (77,198) 84,853
uncompleted contracts
Other current assets (12,000) (12,000) (16,000)
Other assets (18,884) 3,000 2,403
Accounts payable (174,822) (17,186) 40,312
Billings in excess of costs and estimated earnings on (415,768) 421,341 402,754
uncompleted contracts
Accrued expenses 11,801 19,004 55,302
Other current liabilities 8,254 14,801 28,180
------------ ------------ ------------
Total adjustments 364,922 741,227 626,120
------------ ------------ ------------
Net cash provided by operating activities 1,234,409 1,382,832 1,478,275
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (201,745) (185,957) (247,379)
Proceeds from sale of equipment 13,375 5,250 5,250
------------ ------------ ------------
Net cash used by investing activities (188,370) (180,707) (242,129)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (606,000) (1,235,250) (765,250)
Proceeds from long-term debt -- 600,000 730,000
Dividends paid (669,000) (622,750) (622,750)
------------ ------------ ------------
Net cash used by financing activities (1,275,000) (1,258,000) (658,000)
------------ ------------ ------------
Net increase (decrease) in cash (228,961) (55,875) 578,146
Cash, beginning of year/period 830,628 252,482 252,482
------------ ------------ ------------
Cash, end of year/period $ 601,667 $ 196,607 $ 830,628
============ ============ ============
</TABLE>
4
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KAYTON ELECTRIC, INC.
Notes to Financial Statements
September 30, 1998 and 1997 and December 31, 1997
(Data as of and for the nine-months periods ended
September 30, 1998 and 1997 is unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Kayton Electric, Inc. (the Company) is engaged in electrical contracting
in Nebraska and neighboring states. The length of the Company's
contracts is typically less than two years.
METHOD OF ACCOUNTING FOR CONTRACTS
The Company uses the percentage-of-completion method of accounting for
financial reporting and tax purposes. Revenues on 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. Provision for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in
estimated profitability are recognized in the period the revisions are
determined.
MATERIALS FOR PROJECTS IN PROGRESS
Materials are stated at the lower of cost or market and are charged to
job costs as they are utilized.
DEPRECIATION
Depreciation is provided by the use of the straight-line depreciation
method over the estimated useful lives of the respective assets.
INCOME TAXES
The Company has elected, under the S Corporation provisions of the
Internal Revenue Code, not to pay any income tax on its income and
instead, to have its stockholders pay taxes on such income, whether
distributed or not. Consequently, no provision has been made in the
accompanying financial statements for income taxes on earnings of the
Company.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
5
<PAGE> 9
KAYTON ELECTRIC, INC.
Notes to Financial Statements
September 30, 1998 and 1997 and December 31, 1997
(Data as of and for the nine-months periods ended
September 30, 1998 and 1997 is unaudited)
WARRANTY COSTS
For certain contracts, the Company warrants labor for the first year
after installation of new electrical systems. The Company generally
warrants labor for 30 days after servicing of existing electrical
systems. A reserve for warranty costs is recorded based upon the
historical level of warranty claims and management's estimate of future
costs.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial statements for the nine months ended September 30,
1998 and 1997, are unaudited and have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, the
unaudited interim financial statements contain all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation. The results of operations for the interim periods are
not necessarily indicative of the results for the entire fiscal year.
(2) CONTRACTS IN PROGRESS
Costs incurred to date, estimated earnings and the related progress
billings to date of contracts in progress at September 30, 1998 and
December 31, 1997 are shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Costs incurred to date $ 5,123,025 $5,112,997
Estimated earnings 873,459 739,808
----------- ----------
5,996,484 5,852,805
Less progress billings to date 5,985,652 6,454,514
----------- ----------
$ 10,832 $ (601,709)
=========== ==========
</TABLE>
6
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KAYTON ELECTRIC, INC.
Notes to Financial Statements
September 30, 1998 and 1997 and December 31, 1997
(Data as of and for the nine-months periods ended
September 30, 1998 and 1997 is unaudited)
Included in the accompanying balance sheets at September 30, 1998 and
December 31, 1997, under the following captions:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
contracts in progress $ 625,529 $ 428,756
Billings in excess of costs and estimated earnings on
contracts in progress (614,697) (1,030,465)
------------- ------------
$ 10,832 $ (601,709)
============= ============
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
A summary of the major classifications of property, plant and equipment
at September 30, 1998 and December 31, 1997 is shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Land $ 51,556 $ 51,556
Vehicles and equipment 1,473,259 1,436,386
Tools 750,088 728,730
Office equipment 110,397 99,257
------------- ------------
$2,385,300 $2,315,929
============= ============
</TABLE>
7
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KAYTON ELECTRIC, INC.
Notes to Financial Statements
September 30, 1998 and 1997 and December 31, 1997
(Data as of and for the nine-months periods ended
September 30, 1998 and 1997 is unaudited)
(4) LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt at September 30, 1998 and December 31, 1997 is shown
below:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Note payable to bank, due in monthly principal
installments of $5,000 through May 2008, interest at
a variable rate (9.5% at December 31, 1997), due
semiannually, by asset of the Company - paid in 1998 $ -- $ 600,000
Note payable to a corporation, due in annual principal
installments of $6,000 through April 1999, interest
a fixed rate of 6.00%, due annually, secured by 6,000 12,000
real estate property of the Company
------------- ------------
Total long-term debt 6,000 612,000
Less current installments 6,000 66,000
------------- ------------
Long-term debt, excluding current
installments $ -- $ 546,000
============= ============
</TABLE>
The Company has a $300,000 operating line of credit with a financial
institution with an interest rate of 8.95%. At September 30, 1998 and
December 31, 1997, there was no outstanding balance on the line of
credit. The operating line of credit expires on May 1, 1999 and is
secured by the assets of the Company.
(5) DEFERRED COMPENSATION
The Company has deferred compensation agreements with certain key
employees. The Company has elected to fund the agreements by purchasing
life insurance policies for each employee. The cash surrender value of
the policies is included in other current assets and the deferred
compensation liability is included in other current liabilities in the
financial statements.
(6) RELATED PARTY TRANSACTIONS
The Company has entered into lease agreements with a shareholder for the
use of certain land and buildings. The leases expire June 30, 1999. The
Company incurred $24,320 and $15,300 of lease expense related to this
property for each of the nine-month periods ended September 30, 1998 and
1997 and $20,400 for the year ended December 31, 1997.
8
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KAYTON ELECTRIC, INC.
Notes to Financial Statements
September 30, 1998 and 1997 and December 31, 1997
(Data as of and for the nine-months periods ended
September 30, 1998 and 1997 is unaudited)
(7) 401(K) PROFIT SHARING PLAN AND TRUST
The Company has a 401(k) plan covering substantially all employees with
one year of service and who have attained twenty-one years of age. Each
participant may elect to contribute a percentage of their total
compensation, not to exceed the Internal Revenue Service limitations.
The Company contributes matching funds at a rate of $.50 for each dollar
of the first 3% of the participant's contribution. The employer may also
make an additional discretionary matching contribution each year.
Company contributions to the plan are shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30 DECEMBER 31,
1998 1997 1997
------------- ------------ ------------
<S> <C> <C> <C>
Matching contributions $20,493 $ 23,010 $ 30,027
Discretionary contribution -- -- 8,000
------------- ------------ ------------
Total employer contributions $20,493 $ 23,010 $ 38,027
============= ============ ============
</TABLE>
(8) SUBSEQUENT EVENT
On November 19, 1998, all the Company's common stock was sold to an
unrelated purchaser, Integrated Electrical Services, Inc. and the
Company became a subsidiary of Integrated Electrical Services, Inc.
9
<PAGE> 13
ITEM 7. EXHIBITS.
(c) Exhibits.
23.1 Consent of KPMG Peat Marwick LLP
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on March 16, 1999.
INTEGRATED ELECTRICAL SERVICES, INC.
By: /s/ J. PAUL WITHROW
J. Paul Withrow
VICE PRESIDENT AND
CHIEF ACCOUNTING OFFICER
<PAGE> 15
EXHIBIT INDEX
Exhibit Description
------- -----------
23.1 Consent of KPMG Peat Marwick LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Kayton Electric, Inc.
We consent to the incorporation by reference of our report dated January 28,
1998 (November 19, 1998 as to note 8) on the financial statements of Kayton
Electric, Inc. included in this Form 8-K/A, into Integrated Electrical Services,
Inc.'s previously filed Registration Statements on Form S-8 (File Nos.
333-67113, 333-45447 and 333-45449).
KPMG Peat Marwick LLP
Lincoln, Nebraska
March 17, 1999
