IES Holdings, Inc.
Annual Report 2016

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended September 30, 2016Commission File Number 1-13783 IES Holdings, Inc.(Exact name of registrant as specified in its charter) Delaware 76-0542208(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)5433 Westheimer Road, Suite 500, Houston, Texas, 77056(Address of principal executive offices and ZIP code)Registrant’s telephone number, including area code: (713) 860-1500Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.01 per shareRights to Purchase Preferred Stock NASDAQ Global MarketNASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☒Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒The aggregate market value of the voting stock of the Registrant on March 31, 2016 held by non-affiliates was approximately $113.5 million. On December 7, 2016, there were21,456,523 shares of common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCECertain information contained in the Proxy Statement for the 2017 Annual Meeting of Stockholders of the Registrant to be held on February 7, 2017 is incorporated by referenceinto Part III of this Form 10-K. Table of ContentsFORM 10-KIES HOLDINGS, INC.Table of Contents Page PART I DEFINITIONS 3 DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS 3 Item 1 BUSINESS 5 Item 1A RISK FACTORS 16 Item 1B UNRESOLVED STAFF COMMENTS 25 Item 2 PROPERTIES 25 Item 3 LEGAL PROCEEDINGS 25 Item 4 MINE SAFETY DISCLOSURES 25 PART II Item 5 MARKET FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES 26 Item 6 SELECTED FINANCIAL DATA 28 Item 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 29 Item 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 46 Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 47 Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 88 Item 9A CONTROLS AND PROCEDURES 88 Item 9B OTHER INFORMATION 88 PART III Item 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 89 Item 11 EXECUTIVE COMPENSATION 89 Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS 89 Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 90 Item 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES 90 PART IV Item 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 91 SIGNATURES 96 EX-21.1 EX-23.1 EX-31.1 EX-31.2 EX-32.1 EX-32.2 Table of ContentsPART IDEFINITIONSIn this Annual Report on Form 10-K, the words “IES”, the “Company”, the “Registrant”, “we”, “our”, “ours” and “us” refer to IES Holdings, Inc. and, exceptas otherwise specified herein, to our subsidiaries.DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, all of which are based upon various estimates and assumptions that theCompany believes to be reasonable as of the date hereof. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,”“could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “seek,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,”the negative of such terms or other comparable terminology. These statements involve risks and uncertainties that could cause the Company’s actual futureoutcomes to differ materially from those set forth in such statements. Such risks and uncertainties include, but are not limited to: • the ability of our controlling shareholder to take action not aligned with other shareholders; • the sale or disposition of the shares of our common stock held by our controlling shareholder, which, under certain circumstances, would trigger changeof control provisions in our severance plan or financing and surety arrangements; or any other substantial sale of our common stock, which coulddepress our stock price; • relatively low trading volume of our common stock, which could depress our stock price; • the possibility that we issue additional shares of common stock or convertible securities that will dilute the percentage ownership interest of existingstockholders and may dilute the book value per share of our common stock; • the possibility that certain tax benefits of our net operating losses may be restricted or reduced in a change in ownership; • the potential recognition of valuation allowances on deferred tax assets; • the inability to carry out plans and strategies as expected, including our inability to identify and complete acquisitions that meet our investmentcriteria in furtherance of our corporate strategy; • limitations on the availability of sufficient credit or cash flow to fund our working capital needs and capital expenditures and debt service; • difficulty in fulfilling the covenant terms of our credit facilities; • competition in the industries in which we operate, both from third parties and former employees, which could result in the loss of one or morecustomers or lead to lower margins on new projects; • challenges integrating new businesses into the Company or new types of work, products or processes into our segments; • fluctuations in operating activity due to downturns in levels of construction, seasonality and differing regional economic conditions; • a general reduction in the demand for our services; • a change in the mix of our customers, contracts or business; • our ability to enter into, and the terms of, future contracts; 3Table of Contents• our ability to successfully manage projects; • the possibility of errors when estimating revenue and progress to date on percentage-of-completion contracts; • interruptions to our information systems and cyber security or data breaches; • closures or sales of facilities resulting in significant future charges, including potential warranty losses or other unexpected liabilities, or a significantdisruption of our operations; • inaccurate estimates used when entering into fixed-priced contracts; • the cost and availability of qualified labor and the ability to maintain positive labor relations; • an increased cost of surety bonds affecting margins on work and the potential for our surety providers to refuse bonding or require additional collateralat their discretion; • increases in bad debt expense and days sales outstanding due to liquidity problems faced by our customers; • the recognition of potential goodwill, long-lived assets and other investment impairments; • credit and capital market conditions, including changes in interest rates that affect the cost of construction financing and mortgages, and the inabilityfor some of our customers to retain sufficient financing which could lead to project delays or cancellations; • accidents resulting from the physical hazards associated with our work and the potential for accidents; • 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; • success in transferring, renewing and obtaining electrical and other licenses; • backlog that may not be realized or may not result in profits; • 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 possibility that our internal controls over financial reporting and our disclosure controls and procedures may not prevent all possible errors thatcould occur; • the effect of litigation, claims and contingencies, including warranty losses, damages or other latent defect claims in excess of our existing reserves andaccruals; • growth in latent defect litigation in states where we provide residential electrical work for home builders not otherwise covered by insurance; • the possibility that our current insurance coverage may not be adequate or that we may not be able to obtain a policy at acceptable rates; • future capital expenditures and refurbishment, repair and upgrade costs; and delays in and costs of refurbishment, repair and upgrade projects; and • liabilities under laws and regulations protecting the environment. 4Table of ContentsYou should understand that the foregoing, as well as other risk factors discussed in this document, including those listed in Part I, Item 1A of this report underthe heading “Risk Factors,” could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-lookingstatements. We undertake no obligation to publicly update or revise any information, including information concerning our controlling shareholder, netoperating losses, borrowing availability or cash position, or any forward-looking statements to reflect events or circumstances that may arise after the date ofthis report. Forward-looking statements are provided in this Form 10-K pursuant to the safe harbor established under the Private Securities Litigation ReformAct of 1995 and should be evaluated in the context of the estimates, assumptions, uncertainties and risks described herein. Item 1.BusinessOVERVIEW OF OUR SERVICESIES Holdings, Inc. is a holding company that owns and manages diverse operating subsidiaries across a variety of infrastructure-related end markets. Ouroperations are currently organized into four principal business segments, based upon the nature of our current services: • Communications — Nationwide provider of technology infrastructure services to large corporations and independent businesses. • Residential — Regional provider of electrical installation services for single-family housing and multi-family apartment complexes. • Commercial & Industrial — Provider of electrical and mechanical design, construction, and maintenance services to the commercial andindustrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market. • Infrastructure Solutions — Provider of electro-mechanical solutions for industrial operations.Our businesses are managed in a decentralized manner. While sharing common goals and values, each of the Company’s segments manages its own day-to-day operations. Our corporate office is focused on significant capital allocation decisions, investment activities and selection of segment leadership, as wellas strategic and operational improvement initiatives and the establishment and monitoring of risk management practices within our segments.IES Holdings, Inc. is a Delaware corporation established in 1997 and headquartered in Houston, Texas, with an executive office in Greenwich, Connecticut.In May 2016, we amended our charter to change our name from Integrated Electrical Services, Inc. to IES Holdings, Inc. to better reflect our holding companystrategy.CORPORATE STRATEGYWe seek to create shareholder value through improving operating margins and generating free cash flow by investing in our existing businesses andcompleting acquisitions. We seek to acquire or invest in stand-alone platform companies based in North America or acquire businesses that strategicallycomplement our existing business segments. In evaluating potential acquisition candidates, we seek to invest in businesses with, among other characteristics: • Proven management with a willingness to continue post-acquisition; • Low technological and/or product obsolescence risk; • Established market position and sustainable competitive advantages; and • Strong cash flow characteristics. 5Table of ContentsWe believe that acquisitions provide an opportunity to expand into new end markets and diversify our revenue and profit streams, which we expect willallow us to maximize the value of our significant net operating loss tax carry forwards (“NOLs”). While we may use acquisitions to build our presence in theindustries we serve, we will also consider potential acquisitions in other industries, which could result in changes in our operations from those historicallyconducted by us.Recent TransactionsIn fiscal 2016, we acquired four businesses for aggregate consideration of $59.5 million and disposed of one non-core operation, as described below:Acquisitions: • Calumet Armature & Electric, LLC (“Calumet”), an Illinois-based provider of design, manufacturing, assembly, and repair services of electricmotors for the industrial and mass transit markets, was acquired in October 2015 in our Infrastructure Solutions segment. • Shanahan Mechanical and Electrical, Inc. (“Shanahan”), a Nebraska-based provider of mechanical and electrical contracting services, wasacquired in November 2015 in our Commercial & Industrial segment. • An 80% interest in STR Mechanical, LLC (“STR”), a Charlotte, North Carolina-based provider of commercial and industrial mechanical services,including maintenance, repair, and replacement services, and temperature control system installations, was acquired in April 2016 in ourCommercial & Industrial segment. • Technibus Inc. (“Technibus”), a Canton, Ohio based provider of custom-engineered, metal-enclosed bus duct solutions for use in powerdistribution was acquired in June 2016 in our Infrastructure Solutions segment.Dispositions: • In April 2016, we sold substantially all of the operating assets of HK Engine Components, LLC (“HKEC”), a non-core operation of ourInfrastructure Solutions business that was based in Hagerstown, Maryland and manufactured and remanufactured EMD-style power assembliesfor various engine types used in the railroad and marine markets.We completed one acquisition in fiscal 2015: • Southern Industrial Sales and Services, Inc. (“Southern Rewinding”), a Columbus, Georgia-based motor repair and related field services companywas acquired in May 2015 in our Infrastructure Solutions segment.For more information on these transactions, please see Note 18, “Business Combinations and Divestitures” in the notes to our Consolidated FinancialStatements.Controlling ShareholderA majority of our outstanding common stock is owned by Tontine Associates, L.L.C. and its affiliates (collectively, “Tontine”). On October 5, 2016, Tontinefiled an amended Schedule 13D indicating its ownership level of approximately 58%. As a result, Tontine can control most of our affairs, including mostactions requiring the approval of shareholders, such as the approval of any potential merger or sale of all or substantially all assets, segments, or the Companyitself. Most of Tontine’s shares are registered on a shelf registration statement (the “Shelf Registration Statement”) filed by the Company and declaredeffective in 2013 by the U.S. Securities and Exchange Commission (the “SEC”). Tontine’s sale of all or any portion of its shares could result in a change of 6Table of Contentscontrol, which would trigger the change of control provisions in a number of our material agreements, including our credit facility, bonding agreements withour sureties and our executive severance plan. For more information see Note 3, “Controlling Shareholder” in the notes to our Consolidated FinancialStatements.Net Operating Loss Tax Carry ForwardThe Company and certain of its subsidiaries have an estimated federal NOL of approximately $404.0 million at September 30, 2016, includingapproximately $142.0 million resulting from the additional amortization of personal goodwill.In past periods, we had recorded a significant valuation allowance against our deferred tax assets. In order for the Company to release this valuationallowance, a substantial amount of positive evidence regarding current and future earnings is required to outweigh the significant negative evidenceassociated with historical losses. We have reassessed the need for a valuation allowance at year end fiscal 2016, and due to our significant increase in 2016earnings over prior years, and four acquisitions completed in fiscal 2016, combined with the previous closure of underperforming branches which generatedsignificant historical losses, we concluded, based on information currently available, that the more recent positive evidence now outweighs the historicalnegative evidence regarding current and future earnings. Therefore, we believe it is more likely than not that we will generate sufficient taxable income toutilize $93.5 of deferred tax assets, including $0.5 million of which were not reserved with a valuation allowance at the beginning of the year. As a result ofthis conclusion, we recognized an income tax benefit of $109.0 million in the year ended September 30, 2016. This benefit includes $16.0 million related tothe release of a portion of the valuation allowance in connection with current year earnings and 2016 purchase accounting transactions, as well as $93.0million for the release of valuation allowances on deferred tax assets expected to be utilized in future years. However, this valuation allowance release has noimpact on the amount of cash paid for income taxes. An inability to generate sufficient taxable income in future periods to realize our deferred tax assets maylead to recording of additional valuation allowances in future periods and a reduction in GAAP net income. Further, any future reduction in the federalstatutory tax rate could also cause a reduction in the economic benefit of the NOL available to us, and a corresponding charge to reduce the book value of thedeferred tax asset recorded on our balance sheet.A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of NOLs for federal and state income tax purposes.Should Tontine sell or otherwise dispose of all or a portion of its position in IES, a change in ownership could occur. In addition, a change in ownershipcould result from the purchase of common stock by an existing or a new 5% shareholder as defined by Internal Revenue Code Section 382. Should a changein ownership occur, all net operating losses incurred prior to the change in ownership would be subject to limitation imposed by Internal Revenue CodeSection 382, which would substantially reduce the amount of NOL currently available to offset taxable income. For more information see Note 3,“Controlling Shareholder” in the notes to our Consolidated Financial Statements.On November 8, 2016, the Company implemented a new tax benefit protection plan (the “NOL Rights Plan”), following the expiration of the Company’sprior tax benefit protection plan, which was implemented in January 2013. Like the prior plan, the NOL Rights Plan was designed to deter an acquisition ofthe Company’s stock in excess of a threshold amount that could trigger a change of control within the meaning of Internal Revenue Code Section 382. Formore information see Note 20, “Subsequent Events” in the notes to our Consolidated Financial Statements. 7Table of ContentsOPERATING SEGMENTSThe Company’s reportable segments consist of the consolidated business segments identified above, which offer different services and are managedseparately. The table below describes the percentage of our total revenues attributable to each of our four segments over each of the last three years: Years Ended September 30, 2016 2015 2014 $ % $ % $ % (Dollars in thousands, Percentage of revenues) Communications $189,635 27.2% $141,858 24.7% $116,073 22.7% Residential 225,889 32.5% 206,307 36.0% 182,514 35.6% Commercial & Industrial 222,466 32.0% 178,865 31.2% 166,249 32.4% Infrastructure Solutions 58,003 8.3% 46,827 8.1% 47,559 9.3% Total Consolidated $695,993 100.0% $573,857 100.0% $512,395 100.0% For additional financial information by segment, see Note 10, “Operating Segments” in the notes to our Consolidated Financial Statements.CommunicationsBusiness DescriptionOriginally established in 1984, our Communications segment is a leading provider of network infrastructure services for data centers and other missioncritical environments. Services offered include the design, installation and maintenance of network infrastructure for the financial, medical, hospitality,government, high-tech manufacturing, educational and information technology industries including for Fortune 500 corporations. We also provide thedesign and installation of audio/visual, telephone, fire, wireless access and intrusion alarm systems as well as design/build, service and maintenance of datanetwork systems. We perform services across the United States from our 13 offices, including our Communications headquarters located in Tempe, Arizona,allowing dedicated onsite maintenance teams at our customers’ sites.Industry OverviewOur Communications segment is driven by demand increases for computing and storage resources as a result of technology advancements and obsolescenceand changes in data consumption patterns. The data center market remains strong, and we are continuing to expand our offerings in this market to broadenour customer base. Additionally, demand has been growing for our audio-visual and other building technology offerings. Nevertheless, due to economic,technological and other factors, there can be no assurance that demand will continue to increase.Sales and MarketingOur sales strategy relies on a concentrated business development effort, with centralized marketing programs and direct end-customer communications andrelationships. Due to the mission critical nature of the facilities we service, our end-customers significantly rely upon our past performance record, technicalexpertise and specialized knowledge. A significant portion of our Communications business volume is generated from long-term, repeat customers, some ofwhom use IES as a preferred provider for major projects.Our long-term strategy is to improve our position as a preferred mission critical solutions and services provider to large national corporations and strategiclocal companies. Key elements of our long-term strategy include continued investment in our employees’ technical expertise and expansion of our onsitemaintenance and recurring revenue model as well as opportunistic acquisitions of businesses that serve our markets, consistent with our stated corporatestrategy. 8Table of ContentsCompetitionOur competition consists of both large public companies and small, privately owned contractors who have limited access to capital. We compete on qualityof service and/or price and seek to emphasize our long history of delivering high quality solutions to our customers.Seasonality and Quarterly FluctuationsThe effects of seasonality on our Communications business are insignificant, as work generally is performed inside structures protected from the weather. Ourservice and maintenance business is also generally not affected by seasonality. However, communications infrastructure spending has historically beenhighly cyclical. Our volume of business may be adversely affected by declines in projects resulting from adverse regional or national economic conditions.Quarterly results may also be materially affected by the timing of new construction projects. Accordingly, operating results for any fiscal period are notnecessarily indicative of results that may be achieved for any subsequent fiscal period.ResidentialBusiness DescriptionOriginally established in 1973, our Residential segment is a leading provider of electrical installation services for single-family housing and multi-familyapartment complexes and cable television installations for residential and light commercial applications. In addition to our core electrical construction work,the Residential segment also provides services for the installation of residential solar power, both for new construction and existing residences. TheResidential segment is made up of 32 total locations, which include the segment headquarters in Houston, Texas. These locations geographically cover theSun-Belt, Western and Mid-Atlantic regions of the United States.Industry OverviewOur Residential business is closely correlated to the single and multi-family housing market. Demand for both single-family and multi-family housing hasincreased in recent years. Nevertheless, due to economic, technological or other factors there can be no assurance that construction and demand will continueto increase in the future.Sales and MarketingDemand for our Residential services is highly dependent on the number of single-family and multi-family home starts in the markets we serve. Although weoperate in multiple states throughout the Sun-Belt, Mid-Atlantic and Western regions of the United States, the majority of our segment revenues are derivedfrom services provided in the state of Texas. Our sales efforts include a variety of strategies, including a concentrated focus on national homebuilders andmulti-family developers and a local sales strategy for single and multi-family housing projects. Our cable and solar revenues are typically generated throughthird parties specializing in these industries who select us as a preferred provider of installation services. A significant portion of our Residential businessvolume is generated from long-term, repeat customers, some of whom use IES as a preferred provider for major projects.Our long-term strategy is to continue to be a leading provider of electrical services to the residential market. The key elements of our long-term strategyinclude a continued focus on maintaining a low and variable cost structure and cash generation which has allowed us to effectively scale according to thehousing cycle. During the housing downturn, we modified our strategy by expanding into markets less exposed to national building cycles, such as solarpanel and cable installation services. 9Table of ContentsCompetitionOur competition primarily consists of small, privately owned contractors who have limited access to capital. We believe that we have a competitiveadvantage over these smaller competitors due to our key employees’ long-standing customer relationships, our financial capabilities, and our local marketknowledge and competitive pricing. There are few barriers to entry for electrical contracting services in the residential markets.Seasonality and Quarterly FluctuationsResults of operations from our Residential segment can be seasonal, depending on weather trends, with typically higher revenues generated during springand summer and lower revenues during fall and winter. Our service and maintenance business is generally not affected by seasonality. In addition, theconstruction industry has historically been highly cyclical. Our volume of business may be adversely affected by declines in construction projects resultingfrom adverse regional or national economic conditions. Quarterly results may also be materially affected by the timing of new construction projects.Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.Commercial & IndustrialBusiness DescriptionOur Commercial & Industrial segment offers a broad range of expertise that enables us to provide a wide array of quality services related to electrical andmechanical design, construction, and maintenance to the commercial and industrial markets. The offerings under our electrical design services platform rangefrom budget assistance to providing design build and LEED (Leadership in Energy & Environmental Design) solutions to our end customers. Our electricaland mechanical construction services range from the initial planning and procurement to installation and start-up and are offered to a variety of new andremodel construction projects, ranging from the construction of office buildings and industrial facilities to transmission and distribution projects. Theelectrical and mechanical maintenance services offered include critical plant shutdown, troubleshooting, emergency testing, preventative maintenance, andconstant presence.During fiscal 2016, we expanded our geographic and service offerings with the November 2015 acquisition of Shanahan and added mechanical serviceofferings with the April 2016 acquisition of STR.This segment provides services for a variety of project types, including: office buildings, manufacturing facilities, data centers, chemical plants, refineries,wind farms, solar facilities and municipal infrastructure and health care facilities. The Commercial & Industrial segment consists of 20 locations, whichinclude the segment headquarters in Houston, Texas. These locations geographically cover Texas, Nebraska, Colorado, Oregon, and the Southeast and Mid-Atlantic regions.Industry OverviewGiven the diverse end markets of our Commercial & Industrial customers, which include both commercial buildings, such as offices, healthcare facilities andschools, and industrial projects, such as power, chemical, refinery and heavy manufacturing facilities, we are subject to many trends within the constructionindustry. In general, demand for our Commercial & Industrial services is driven by construction and renovation activity levels, economic growth, andavailability of bank lending. Due to economic, technological or other factors, there can be no assurance that construction and demand will increase.Sales and MarketingOur sales focus varies by location, but is primarily based upon regional and local relationships and a demonstrated expertise in certain industries, such astransmission and distribution. Our maintenance and certain 10Table of Contentsrenovation and upgrade work tend to be either recurring or experience lower sensitivity to economic cycles, or both. A significant portion of our largerprojects are awarded from long-term, repeat customers. From time to time, we are contracted on projects with completion times extending beyond one year orover several years, which are generally more complex and difficult to estimate.With a focus on quality service offerings, our long-term strategy is to continue to be one of the preferred providers of electrical and mechanical services in themarkets where we have demonstrated expertise and/or are a local market leader. Key elements of our long-term strategy include leveraging our expertise incertain niche markets, expanding our service and maintenance business and maintaining our focus on returns on risk adjusted capital.CompetitionThe electrical and mechanical contracting services industry is generally highly competitive and includes a number of regional or small privately-held localfirms. There are few barriers to entry for our electrical and mechanical contracting services in the commercial and industrial markets, which limits ouradvantages when competing for projects. Industry expertise, project size, location and past performance will determine our bidding strategy, the level ofinvolvement from competitors and our level of success in winning awards. Our primary advantages vary by location and market, but mostly are based uponlocal individual relationships with key customers or a demonstrated industry expertise. Additionally, due to the size of many of our projects, our financialresources help us compete effectively against local competitors.Seasonality and Quarterly FluctuationsThe effects of seasonality on our Commercial & Industrial business are insignificant, as work generally is performed inside structures protected from theweather. Most of our service and maintenance business is also generally not affected by seasonality. However, the construction industry has historically beenhighly cyclical. Our volume of business may be adversely affected by declines in construction projects resulting from adverse regional or national economicconditions. Quarterly results may also be materially affected by the timing of new construction projects. Accordingly, operating results for any fiscal periodare not necessarily indicative of results that may be achieved for any subsequent fiscal period.Infrastructure SolutionsBusiness DescriptionOur Infrastructure Solutions segment provides electro-mechanical solutions for industrial operations to domestic and international customers. In particular,our electro-mechanical services include the maintenance and repair of alternating current (AC) and direct current (DC) electric motors and generators, as wellas power generating and distribution equipment; the manufacture, remanufacture, and repair of industrial lifting magnets; maintenance and repair of railroadmain and auxiliary generators, main alternators, and traction motors; and the manufacture of electro mechanical components used in power distribution.This segment serves the steel, railroad, marine, petrochemical, pulp and paper, wind energy, mining, automotive, power generation, scrap yards, and utilityindustries. Our Infrastructure Solutions segment is comprised of 10 locations and is headquartered in Ohio. These segment locations geographically coverAlabama, Georgia, Indiana, Illinois, Ohio, West Virginia, and California.We further enhanced our geographic and service offering through the October 2015 acquisition of Calumet, an Illinois-based provider of design,manufacturing, assembly, and repair services of electric motors for the industrial and mass transit markets, which operates as a subsidiary in this segment.Additionally, through the acquisition of Technibus in June 2016, we expanded our solutions capabilities to include custom-engineered, 11Table of Contentsmetal enclosed bus duct solutions, which are highly engineered electrical components that conduct electricity between medium-voltage generators, breakers,transformers, and switchgear, primarily utilized at power generation plants and large electricity-consuming facilities.Industry OverviewGiven the diverse end-markets of Infrastructure Solutions’ customers, we are subject to many economic trends. In general, demand for our services has beendriven by in-house maintenance departments continuing to outsource maintenance and repair work, output levels and equipment utilization at heavyindustrial facilities, railroad companies’ and mass transit authorities’ capital investments and repair needs, investment in the United States’ aging energy andindustrial infrastructure, and the overall health of the economy.Sales and MarketingDemand for Infrastructure Solutions’ services is largely driven by the degree to which industrial and mechanical services are outsourced by our customers,production rates at steel mills, investments in power generation and other heavy industrial facilities, and the need for electrical infrastructureimprovements. Our sales efforts are primarily driven by personnel based at our 10 locations and independent sales representatives. Given that the majority ofour apparatus repair customers are located within a 200-mile radius of our facilities, we believe that this structure allows us to rapidly address and respond tothe needs of our customers. Our custom-engineered bus system products and services are principally sold in partnership with an original equipmentmanufacturer (OEM) or to an engineering, procurement and construction (EPC) firm on behalf of the end-user. Our long term strategy is to be the preferredsolutions provider of outsourced electro-mechanical services, repairs, and manufacturing to our select markets and a leader in custom-engineered metalenclosed bus systems.CompetitionOur competition is comprised mainly of small, specialized manufacturing and repair shops, a limited number of other multi-location providers of electricmotor repair, engineering and maintenance services, and various OEMs. Participants in this industry compete primarily on the basis of capabilities, service,quality, timeliness and price. We believe that we have a competitive advantage due to our breadth of capabilities, focus on quality, technical support andcustomer service.Seasonality and Quarterly FluctuationsInfrastructure Solutions’ revenues from industrial services may be affected by the timing of scheduled outages at its industrial customers’ facilities and byweather conditions with respect to projects conducted outdoors, but the effects of seasonality on revenues in its industrial services business are insignificant.Infrastructure Solutions’ quarterly results may fluctuate, and the results of one fiscal quarter may not be representative of the results of any other quarter or ofthe full fiscal year.SOURCES OF SUPPLYThe raw materials and components we use within our segments include, but are not limited to, electrical fixtures and system components, copper, aluminum,and raw steel. These raw materials and components are generally available from a variety of domestic suppliers at competitive prices. Delivery times aretypically short for most raw materials and standard components, but during periods of peak demand, may extend to one month or more. Our strategy to reducecommodity cost exposure includes early buying of commodities for particular projects, or for general inventory, as well as including escalation and escapeprovisions in project bids, quotes and contracts wherever possible. 12Table of ContentsRISK MANAGEMENTThe primary risks in our existing operations include project bidding and management, bodily injury, property and environmental damage, and constructiondefects. We monitor project bidding and management practices at various levels within the Company. We maintain automobile, general liability andconstruction defect insurance for third party health, bodily injury and property damage, as well as pollution coverage and workers’ compensation coverage,which we consider appropriate to insure against these risks. Our third-party insurance is subject to deductibles for which we establish reserves. In light ofthese risks, we are also committed to a strong safety and environmental compliance culture. We employ full-time and part-time regional safety managers,under the supervision of our full-time Vice President of Safety, and seek to maintain standardized safety and environmental policies, programs, proceduresand personal protection equipment relative to each segment, including programs to train new employees, which apply to employees new to the industry andthose new to the Company.In the electrical contracting industry, our ability to post surety bonds provides us with an advantage over competitors that are smaller or have fewer financialresources. We believe that the strength of our balance sheet, as well as a good relationship with our bonding providers, enhances our ability to obtainadequate financing and surety bonds, although there can be no assurance that surety bonding coverage will be available when we need it. For a furtherdiscussion of our risks, please refer to Item 1A. “Risk Factors” of this Form 10-K.CUSTOMERSWe have a diverse customer base. During the twelve-month periods ended September 30, 2016, 2015 and 2014, no single customer accounted for more than10% of our consolidated revenues. We emphasize developing and maintaining relationships with our customers by providing superior, high-quality service.Management at each of our segments is responsible for determining sales strategies and sales activities.BACKLOGBacklog is a measure of revenue that we expect to recognize from work that has yet to be performed on uncompleted contracts, and from work that has beencontracted but has not started, exclusive of short-term projects. The increase in our Infrastructure Solutions segment’s backlog as of September 30, 2016 isprimarily attributable to the acquisition of Technibus. Not all of our work is performed under contracts included in backlog; for example, most of theapparatus repair work that is completed by our Infrastructure Solutions segment is performed under master service agreements on an as-needed basis.Additionally, electrical installation services for single-family housing in our Residential segment is completed on a short-term basis and is therefore excludedfrom backlog. The table below summarizes our backlog by segment: Years Ended September 30, 2016 2015 (Dollars in millions) Communications $91 $51 Residential 100 69 Commercial & Industrial 116 148 Infrastructure Solutions 34 2 Total $341 $270 While all of our backlog is supported by documentation from customers authorizing the performance of future work, backlog is not a guarantee of futurerevenues, as contractual commitments may change. We expect that 13Table of Contents$305 million of our September 30, 2016 backlog will result in revenue during fiscal 2017, with the remaining $36 million expected to be realized in fiscal2018; however there can be no assurance that this backlog will be completed within expected time frames or at all.REGULATIONSOur operations are subject to various federal, state and local laws and regulations, including: • licensing requirements applicable to electricians and service technicians; • building and electrical codes; • regulations relating to worker safety, labor relations and protection of the environment; • regulations relating to consumer protection, including those governing residential service agreements; and • qualifications of our business legal structure in the jurisdictions where we do business.Many state and local regulations governing electricians require permits and licenses to be held by individuals. In some cases, a required permit or licenseheld by a single individual may be sufficient to authorize specified activities for all our electricians who work in the state or county that issued the permit orlicense. It is our policy to ensure that, where possible, any permits or licenses that may be material to our operations in a particular geographic area are heldby multiple employees within that area.We believe we have all licenses required to conduct our operations and are in compliance with applicable regulatory requirements. Failure to comply withapplicable regulations could result in substantial fines or revocation of our operating licenses or an inability to perform government work.CAPITAL FACILITIESDuring fiscal year 2016, the Company maintained a revolving credit facility, as described in Item 7. “Management’s Discussion and Analysis of FinancialCondition and Results of Operations — The Revolving Credit Facility” of this Form 10-K. For a discussion of the Company’s capital resources, see Item 7.“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” of this Form 10-K.FINANCIAL INFORMATIONFor information on the Company’s financial information by segment, see Note 10, “Operating Segments” in the notes to our Consolidated FinancialStatements.EMPLOYEESAt September 30, 2016, we had 4,063 employees. We are party to three collective bargaining agreements within our Infrastructure Solutions segment. Wehave not experienced, and do not expect, any work stoppage, and we believe that our relationship with our employees is strong.LOCATIONSAs of September 30, 2016 we have 77 domestic locations serving the United States. In addition to our executive and corporate offices, as of September 30,2016, we have 13 locations within our Communications business, 32 14Table of Contentslocations within our Residential business, 20 locations within our Commercial & Industrial business and 10 locations within our Infrastructure Solutionsbusiness. This diversity helps to reduce our exposure to unfavorable economic developments in any given region.EXECUTIVE OFFICERS OF THE REGISTRANTCertain information with respect to each executive officer is as follows:Robert W. Lewey, 54, has served as a Director of the Company since April 2016 and as President of the Company since May 2015. He previously served asInterim Chief Operating Officer of the Company from January 2015 to May 2015 while continuing to serve as Senior Vice President, Chief Financial Officerand Treasurer of the Company, a role he had held from January 2012 to May 2015. From 2001 to 2006 and from 2007 to January 2012, Mr. Lewey served asDirector of Tax, Vice President, Tax and Treasurer for IES. From 2006 to 2007, he served as Vice President, Tax for Sulzer US Holdings, Inc. From 1995 to2001, Mr. Lewey served as Vice President, Tax for Metamor Worldwide, Inc., a leading provider of information technology solutions. Mr. Lewey began hiscareer with Deloitte LLP.Tracy A. McLauchlin, 46, has served as Senior Vice President, Chief Financial Officer and Treasurer of the Company since May 2015. She previously servedas Vice President and Chief Accounting Officer of the Company since February 2014. Prior to joining IES, Ms. McLauchlin served as Vice President andChief Accounting Officer of Rockwater Energy Solutions, Inc. from June 2011 to November 2013. From June 2004 to June 2011, Ms. McLauchlin was withDynegy Inc., where she served as Senior Vice President and Controller from March 2009 to June 2011, and from June 2004 to March 2009 served in variousother capacities in finance and accounting.Gail D. Makode, 41, has served as Senior Vice President, General Counsel and Corporate Secretary since October 2012. Ms. Makode previously served invarious legal positions at MBIA Inc. and its subsidiaries from 2006 to 2012, including as General Counsel and a member of the Board at MBIA InsuranceCorporation and Chief Compliance Officer of MBIA Inc. Prior to MBIA, Ms. Makode served as Vice President and Counsel for Deutsche Bank AG from 2003to 2006, and before that, was an Associate at Cleary, Gottlieb, Steen & Hamilton, where she specialized in public and private securities offerings and mergersand acquisitions.Thomas E. Santoni, 54, has served as Senior Vice President, Operations of the Company since June 2016. Mr. Santoni previously served as President of IESCommercial & Industrial since June 2011 and, prior to that, held various leadership positions at the Company since joining in 1995, including business unitPresident, Regional General Manager, Vice President of Sales and Central Division Vice President. Prior to joining IES, Mr. Santoni managed electricalcontracting operations at other operations in San Diego, California and Chicago, Illinois. He began his career in the electrical contracting industryapproximately 30 years ago as a journeyman electrician.We have adopted a Code of Ethics for Financial Executives that applies to our principal executive officer, principal financial officer and principalaccounting officer. The Code of Ethics may be found on our website at www.ies-co.com. If we make any substantive amendments to the Code of Ethics orgrant any waiver, including any implicit waiver, from a provision of the Code to our principal executive officer, principal financial officer or principalaccounting officer, we will disclose the nature of such amendment or waiver on that website or in a report on Form 8-K. Paper copies of these documents arealso available free of charge upon written request to us.AVAILABLE INFORMATIONGeneral information about us can be found on our website at www.ies-co.com under “Investor Relations.” We file our interim and annual financial reports, aswell as other reports required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the United States Securities and ExchangeCommission (the “SEC”). 15Table of ContentsOur annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports areavailable free of charge through our website as soon as it is reasonably practicable after we file them with, or furnish them to, the SEC. You may also contactour Investor Relations department and they will provide you with a copy of these reports. The materials that we file with the SEC are also available free ofcharge through the SEC’s website at www.sec.gov. You may also read and copy these materials at the SEC’s Public Reference Room at 100 F Street, NE.,Washington, D.C. 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 1–800–SEC–0330.In addition to the Code of Ethics for Financial Executives, we have adopted a Code of Business Conduct and Ethics for directors, officers and employees (theLegal Compliance and Corporate Policy Manual), and established Corporate Governance Guidelines and adopted charters outlining the duties of our Audit,Human Resources and Compensation and Nominating/Governance Committees, copies of which may be found on our website. Paper copies of thesedocuments are also available free of charge upon written request to us. We have designated an “audit committee financial expert” as that term is defined bythe SEC. Further information about this designee may be found in the Proxy Statement for the 2017 Annual Meeting of Stockholders of the Company. Item 1A.Risk FactorsYou should consider carefully the risks described below, as well as the other information included in this document before making an investment decision.Our business, results of operations or financial condition could be materially and adversely affected by any of these risks, and the value of your investmentmay decrease due to any of these risks.Existence of a controlling shareholder.A majority of our outstanding common stock is owned by Tontine. On October 5, 2016, Tontine filed an amended Schedule 13D indicating its ownershiplevel of approximately 58%. As a result, Tontine can control most of our affairs, including the election of our directors, who in turn appoint executivemanagement, and can control most actions requiring the approval of shareholders, including the adoption of amendments to our corporate charter andapproval of any potential merger or sale of all or substantially all assets, segments, or the Company itself. This control also gives Tontine the ability to bringmatters to a shareholder vote that may not be in the best interest of our other shareholders or stakeholders. Additionally, Tontine is in the business ofinvesting in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us or act as suppliers orcustomers of the Company. Pursuant to a shelf registration statement that was declared effective by the SEC in 2013, Tontine has the ability to resell any orall of its registered shares from time to time in one or more offerings as long as the registration statement remains effective, as described further in theregistration statement and in any prospectus supplement filed in connection with an offering pursuant to the shelf registration statement. Tontine’s sale of allor any portion of its shares could result in a change of control of the Company, which would trigger the change of control provisions in a number of ourmaterial agreements, including our credit facility, bonding agreements with our sureties and our executive severance plan.We may issue additional shares of common stock or convertible securities that will dilute the percentage ownership interest of existing stockholders andmay dilute the book value per share of our common stock.Our authorized capital includes 100,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of September 30, 2016, we had 21,456,539shares of common stock outstanding and no shares of preferred stock outstanding. We have reserved for issuance 79,500 shares of common stock underlyingoptions that are exercisable at a weighted average price of $6.43 per share. In addition, as of September 30, 2016, we had the ability to issue 1,056,574 sharesof common stock pursuant to awards that may be granted in the future under our existing equity compensation plans. 16Table of ContentsAlthough we currently do not have any intention of issuing additional common stock (other than pursuant to our equity compensation plans), we may do soin the future in order to meet our capital needs. Subject to applicable NASDAQ Listing Rules, our Board of Directors generally has the authority, withoutaction by or vote of the stockholders, to issue all or part of any authorized but unissued shares of common stock for any corporate purpose. We may seekadditional equity capital in the future as we develop our business and expand our operations. Any issuance of additional shares of common stock orconvertible securities will dilute the percentage ownership interest of our stockholders and may dilute the book value per share of our common stock.Substantial sales of our common stock could adversely affect our stock price.Sales of a substantial number of shares of our common stock by holders of our common stock, or the perception that such sales could occur, could adverselyaffect the market price of our common stock by introducing a large number of shares into the market. Such sales, or the perception that such sales could occur,could cause the market price of our common stock to decline. We cannot predict whether future sales of our common stock, or the availability of our commonstock for sale, will adversely affect the market price for our common stock or our ability to raise capital by offering equity securities.Our common stock has less liquidity than many other stocks listed on the NASDAQ Global Market.Historically, the trading volume of our common stock has been relatively low when compared to larger companies listed on the NASDAQ Global Market orother stock exchanges. While we have experienced increased liquidity in our stock during the year ended September 30, 2016, we cannot say with certaintythat a more active and liquid trading market for our common stock will continue to develop. Because of this, it may be more difficult for shareholders to sell asubstantial number of shares for the same price at which shareholders could sell a smaller number of shares.Availability of net operating losses may be reduced by a change in ownership.A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of NOLs, for federal and state income tax purposes.Should Tontine sell or otherwise dispose of all or a portion of its position in IES, a change in ownership could occur. A change in ownership could also resultfrom the purchase of common stock by an existing or a new 5% shareholder as defined by Internal Revenue Code Section 382. As of September 30, 2016, wehave approximately $262.0 million of federal NOLs that are available to use to offset taxable income, exclusive of NOLs from the amortization of additionaltax goodwill. Should a change in ownership occur, all NOLs incurred prior to the change in ownership would be subject to limitation imposed by InternalRevenue Code Section 382, which would substantially reduce the amount of NOL currently available to offset taxable income.On November 8, 2016, we implemented the new NOL Rights Plan, following the expiration of a similar plan implemented in January 2013. Like theCompany’s prior tax benefit protection plan, the new NOL Rights Plan was designed to deter an acquisition of the Company’s stock in excess of a thresholdamount that could trigger a change of control within the meaning of Internal Revenue Code Section 382. The NOL Rights Plan is designed to dilute theownership of such an acquirer through the offering of rights to the Company’s other stockholders that will become exercisable upon the acquirer’s purchaseof the Company’s stock in excess of the threshold amount. We can make no assurances the NOL Rights Plan will be effective in deterring a change in controlor protecting or realizing NOLs.Any decrease in the federal statutory tax rate, or other changes in federal tax statutes, could also cause a reduction in the economic benefit of the NOLcurrently available to us. 17Table of ContentsWe have recognized deferred tax assets based upon our estimates of future taxable income, and we may recognize losses if future taxable income islower than our estimates.As of September 30, 2016, we have a net deferred tax asset of $93.5 million on our consolidated balance sheet, of which $86.3 million is attributable toNOLs. To realize the full benefit of this deferred tax asset attributable to NOLs, we must generate sufficient taxable income within the applicable carryforward period to offset against NOLs. Under accounting principles generally accepted in the United States of America (“GAAP”), we are required to assesswhether we believe the benefit of the deferred tax asset is more likely than not to be realized based on our expectation of generating sufficient future taxableincome, and we are required to record a valuation allowance, or offset, against our deferred tax asset based on the portion of the deferred tax asset that webelieve is not more likely than not to be realized.As of September 30, 2016, we concluded it is more likely than not that we will generate sufficient taxable income within the applicable NOL carry-forwardperiods to realize a significant portion of our deferred tax assets. Therefore, we recorded a reversal of our previously assessed valuation allowance in theamount of $109.0 million including amounts related to current year earnings and certain purchase accounting transactions, in 2016. If we are unable togenerate sufficient taxable income in the future to utilize our NOLs, we could be required to record valuation allowances, resulting in an increase in incometax expense and reduction of our consolidated net income. Failure to generate sufficient taxable income in the future could also result in the expiration ofcertain NOLs.Our inability to carry out plans and strategies as expected, including our inability to identify and complete acquisitions that meet our investmentcriteria in furtherance of our corporate strategy, may adversely impact our future growth.Our corporate strategy involves creating shareholder value through acquiring or investing in stand-alone platform companies based in North America oracquiring businesses that we believe will strategically complement our existing business segments. While we believe that acquisitions will provide anopportunity to expand into new end markets and diversify our revenue and profit streams, potential acquisitions in new industries could result in changes inour operations from those historically conducted by us and introduce the requirement for new controls. Alternatively our failure to diversify from existingmarkets may limit our future growth.To service our indebtedness and to fund working capital, we will require a significant amount of cash. Our ability to generate cash depends on manyfactors that are beyond our control.Our ability to make payments on and to refinance our indebtedness and to fund working capital requirements will depend on our ability to generate cash inthe future. This is subject to our operational performance, as well as general economic, financial, competitive, legislative, regulatory and other factors that arebeyond our control.We cannot provide assurance that our business will generate sufficient cash flow from operations or asset sales or that future borrowings will be available tous under our credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or aportion of our indebtedness, on or before maturity. We cannot provide assurance that we will be able to refinance any of our indebtedness on commerciallyreasonable terms, or at all. Our inability to refinance our debt on commercially reasonable terms could have a material adverse effect on our business.We have restrictions and covenants under our credit facility.We may not be able to remain in compliance with the covenants in our credit facility. A failure to fulfill the terms and requirements of our credit facility mayresult in a default under one or more of our material agreements, which could have a material adverse effect on our ability to conduct our operations and ourfinancial condition. 18Table of ContentsThe highly competitive nature of our industries could affect our profitability by reducing our profit margins.With respect to electrical contracting services, the industries in which we compete are highly fragmented and are served by many small, owner-operatedprivate companies. There are also several large private regional companies and a small number of large public companies from which we face competition inthese industries. In the future, we could also face competition from new competitors entering these markets because certain segments, such as our electricalcontracting services, have a relatively low barrier for entry while other segments, such as our services for mission critical infrastructure, have attractivedynamics. Some of our competitors offer a greater range of services, including mechanical construction, facilities management, plumbing and heating,ventilation and air conditioning services. Competition in our markets depends on a number of factors, including price. Some of our competitors may havelower overhead cost structures and may, therefore, be able to provide services comparable to ours at lower rates than we do. If we are unable to offer ourservices at competitive prices or if we have to reduce our prices to remain competitive, our profitability would be impaired.The markets in which Infrastructure Solutions does business are highly competitive, and we do not expect the level of competition that we face to decrease inthe future. An increase in competitive pressures in these markets or our failure to compete effectively (including efficiently managing future capitalexpenditures and refurbishment, repair and upgrade costs) may result in pricing reductions, reduced gross margins, and loss of market share. Many of ourcompetitors have longer operating histories, greater name recognition, more customers, and significantly greater financial, marketing, technical, and othercompetitive resources than we have. These competitors may be able to adapt more quickly to new technologies and changes in customer needs or devotegreater resources to the development, promotion, and sale of their services. While we believe Infrastructure Solutions’ overall product and service offeringsdistinguish it from its competitors, these competitors could develop new products or services that could directly compete with Infrastructure Solutions’services.A failure to secure new contracts may adversely affect our cash flows and financial results.Much of our revenue is derived from projects that are awarded through a competitive bid process. Contract bidding and negotiations are affected by a numberof factors, including our own cost structure and bidding policies. In addition, our ability to secure new contracts depends on our ability to maintain allrequired electrical, construction and business licenses. If we fail to successfully transfer, renew or obtain such licenses where applicable, we may be unable tocompete for new business.The failure to bid and be awarded projects, cancellations of projects or delays in project start dates could affect our ability to deploy our assets profitably.Further, when we are awarded contracts, we face additional risks that could affect whether, or when, work will begin. We could experience a decrease inprofitability if we are unable to replace canceled, completed or expired contracts with new work.We may be unsuccessful at integrating other companies that we may acquire, or new types of work, products or processes into our segments.We are actively seeking to engage in acquisitions of operations, assets and investments, or to develop new types of work or processes, and we may seek toengage in dispositions of certain operations, assets or investments from time to time. If we are unable to successfully integrate newly acquired assets oroperations or if we make untimely or unfavorable investments or dispositions, it could negatively impact the market value of our common stock.Additionally, any future acquisition, investment or disposition may result in significant changes in the composition of our assets and liabilities, and as aresult, our financial condition, results of operations and the market value of our common stock following any such acquisition, investment or disposition maybe affected by factors different from those currently affecting our financial condition, results of operations and market value of our common stock. 19Table of ContentsThe difficulties of integrating a business, assets or operations potentially will include, among other things: • geographically separated organizations and possible differences in corporate cultures and management philosophies; • significant demands on management resources, which may distract management’s attention from day-to-day business; • differences in the disclosure systems, compliance requirements, accounting systems, and accounting controls and procedures of the twocompanies, which may interfere with our ability to make timely and accurate public disclosure; and • the demands of managing new locations, new personnel and new lines of business acquired.Demand for our services is cyclical and vulnerable to economic downturns affecting the industries we serve.Demand for our services has been, and will likely continue to be, cyclical in nature and vulnerable to downturns in the general economy and in theconstruction industry. Many of our customers depend on the availability of credit to purchase our services or electrical and mechanical products. Prolongeduncertainties or the return of constrained credit market conditions could have adverse effects on our customers, which would adversely affect our financialcondition and results of operations.Backlog may not be realized or may not result in profits.Customers often have no obligation under our contracts to assign or release work to us, and many contracts may be terminated on short notice. Reductions inbacklog due to cancellation of one or more contracts by a customer or for other reasons could significantly reduce the revenue and profit we actually receivefrom contracts included in backlog. In the event of a project cancellation, we may be reimbursed for certain costs, but typically have no contractual right tothe total revenues reflected in our backlog.Our use of percentage-of-completion accounting could result in a reduction or elimination of previously reported profits; we may be adverselyimpacted by new accounting, control and operating procedures.A significant portion of our revenues are recognized using the percentage-of-completion method of accounting, utilizing the cost-to-cost method, whichresults in our recognizing contract revenues and earnings ratably over the contract term in proportion to our incurrence of contract costs. The earnings orlosses recognized on individual contracts are based on estimates of contract revenues, costs and profitability. We review our estimates of contract revenue,costs and profitability on an ongoing basis. Prior to contract completion, we may adjust our estimates on one or more occasions as a result of change orders tothe original contract, collection disputes with the customer on amounts invoiced or claims against the customer for increased costs incurred by us due tocustomer-induced delays and other factors. Contract losses are recognized in full when determined to be probable and reasonably estimable. Although wehave historically made reasonably reliable estimates of the progress towards completion of our construction contracts, the uncertainties inherent in theestimating process make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously recorded revenues andprofits. In addition, we may be adversely impacted by new accounting pronouncements which change our revenue recognition or other accounting practicesor otherwise alter how we report our financial results, or which require that we change our control and operating procedures, which we may be unable to do ina timely manner.We may incur significant charges or be adversely impacted by the closure or sale of facilities or assets.In the past, we incurred significant costs associated with the closure or disposition of facilities, and we expect from time to time to evaluate the need for futurefacility closures or dispositions of assets. If we were to elect to dispose of a substantial portion of any of our segments, facilities, or assets, the realized valuesof such assets 20Table of Contentscould be substantially less than current book values, which would likely result in a material adverse impact on our financial results. In addition, we may havewarranty claims or other unexpected liabilities from closed facilities beyond the closing date, which could adversely impact our financial returns.The availability and cost of surety bonds affect our ability to enter into new contracts and our margins on those engagements.Many of our customers require us to post performance and payment bonds issued by a surety. Those bonds guarantee the customer that we will perform underthe terms of a contract and that we will pay subcontractors and vendors. We obtain surety bonds from two primary surety providers; however, there is nocommitment from these providers to guarantee our ability to issue bonds for projects as they are required. Our ability to access this bonding capacity is at thesole discretion of our surety providers. Accordingly, if we were to experience an interruption or reduction in our availability of bonding capacity, we may beunable to compete for, or work on, certain projects.Due to seasonality and differing regional economic conditions, our results may fluctuate from period to period.Our business is subject to seasonal variations in operations and demand that affect the construction business, particularly in the Residential and Commercial& Industrial segments, as well as seasonal variations in the industrial and rail industries in which Infrastructure Solutions participates. Untimely weatherdelay from rain, heat, ice, cold or snow can not only delay our work but can negatively impact our schedules and profitability by delaying the work of othertrades on a construction site. Our quarterly results may also be affected by regional economic conditions that affect the construction market. In particular, aprolonged period of weak demand in the oil and gas industry could dampen the housing market in certain regions, resulting in reduced demand for theservices provided by our Residential segment. Infrastructure Solutions’ revenues from industrial services may be affected by the timing of scheduled outagesat its industrial customers’ facilities and by weather conditions with respect to projects conducted outdoors. Industrial and rail customers may also be affectedby continuing low oil prices. Accordingly, our performance in any particular quarter may not be indicative of the results that can be expected for any otherquarter or for the entire year.The estimates we use in placing bids could be materially incorrect. The use of incorrect estimates could result in reduced profits or in some cases losseson fixed price contracts.We currently generate, and expect to continue to generate, a significant portion of our revenues under fixed price contracts. The cost of fuel, labor andmaterials, including copper wire or other commodities, may vary significantly from the costs we originally estimate. Variations from estimated contract costsalong with other risks inherent in performing fixed price contracts, including our ability to successfully manage projects, may result in actual revenue andgross profits for a project differing from those we originally estimated, and could result in losses on projects. Depending upon the size of a particular project,variations from estimated contract costs can have a significant impact on our operating results.Commodity and labor costs may fluctuate materially, and we may not be able to pass on all cost increases during the term of a contract, which couldhave an adverse effect on our ability to maintain our profitability.We enter into many contracts at fixed prices, and if the costs associated with labor, and commodities such as copper, aluminum, steel, fuel and certain plasticsincrease due to low supply or other forces, losses may be incurred. Some of our materials have been and may continue to be subject to sudden and significantprice increases. Depending on competitive pressures and customer resistance, we may not be able to pass on these cost increases to our customers, whichwould reduce our gross profit margins and, in turn, make it more difficult for us to maintain our profitability. We have a work force of over 4,000 employees,and our labor costs may 21Table of Contentsfluctuate based on supply as well as other labor related risks, including risks related to collective bargaining agreements, benefits arrangements, wage andhour claims and other compensation arrangements.Changes in operating factors that are beyond our control could hurt our operating results.Our operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond management’s control. Thesefactors include the costs of new technology; the relative speed and success with which Infrastructure Solutions can acquire customers for its products andservices; capital expenditures for equipment; sales, marketing, and promotional activities expenses; changes in its pricing policies, suppliers, andcompetitors; changes in operating expenses; increased competition in the markets we serve; changes in regulations; and other general economic and seasonalfactors. Adverse changes in one or more of these factors could hurt our operating results.We may experience difficulties in managing our billings and collections.Our billings under fixed price contracts in our electrical contracting business are generally based upon achieving certain milestones and will be accepted bythe customer once we demonstrate those milestones have been met. If we are unable to demonstrate compliance with billing requests, or if we fail to issue aproject billing, our likelihood of collection could be delayed or impaired, which, if experienced across several large projects, could have a materially adverseeffect on our results of operations. Further, some of our customers may be highly leveraged, or may be subject to their own operating and regulatory risks,which may also limit their ability to pay.Our reported operating results could be adversely affected as a result of goodwill impairment charges.GAAP accounting requires that goodwill attributable to each of our reporting units be tested at least annually, or when changes in circumstance indicate thecarrying value of our reporting units may not be recoverable. Factors that could lead to impairment of goodwill include significant adverse changes in thebusiness climate, declines in the financial condition of our business, and actual or projected operating results affecting our company as a whole or affectingany particular reporting unit. On an ongoing basis, we expect to perform impairment tests at least annually as of September 30. Impairment adjustments, ifany, are required to be recognized as operating expenses. We cannot assure that we will not have future impairment adjustments to our recorded goodwill.The vendors who make up our supply chain may be adversely affected by a deteriorating operating environment and credit market conditions.We are dependent upon the vendors within our supply chain to maintain a steady supply of inventory, parts and materials. Many of our segments aredependent upon a limited number of suppliers, and significant supply disruptions could adversely affect our operations. If market conditions deteriorate,resulting in a slowdown in construction activity or a tightening of the credit market, for example it is possible that one or more of our suppliers will be unableto meet the terms of our operating agreements due to financial hardships, liquidity issues or other reasons related to market conditions.Our operations are subject to numerous physical hazards. If an accident occurs, it could result in an adverse effect on our business.Hazards related to our industry include, but are not limited to, electrocutions, fires, machinery-caused injuries, mechanical failures and transportationaccidents. These hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment, and may result in suspensionof operations. Our insurance does not cover all types or amounts of liabilities. In addition, if our safety record were to substantially deteriorate over time, ourcustomers could cancel our contracts or not award us future business. 22Table of ContentsOur current insurance coverage may not be adequate, and we may not be able to obtain insurance at acceptable rates, or at all.Our third-party insurance is subject to deductibles for which we establish reserves. No assurance can be given that our insurance or our provisions for incurredclaims and incurred but not reported claims will be adequate to cover all losses or liabilities we may incur in our operations; nor can we provide assurancethat we will be able to maintain adequate insurance at reasonable rates.Our internal controls over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur.Internal controls over financial reporting and disclosure controls and procedures, no matter how well designed and operated, can provide onlyreasonable, not absolute, assurance that the control system’s objective will be met.On a quarterly basis we evaluate our internal controls over financial reporting and our disclosure controls and procedures, which include a review of theobjectives, design, implementation and effectiveness of the controls and the information generated for use in our periodic reports. In the course of ourcontrols evaluation, we sought (and seek) to identify data errors, control problems and to confirm that appropriate corrective actions, including processimprovements, are being undertaken. This type of evaluation is conducted on a quarterly basis so that the conclusions concerning the effectiveness of ourcontrols can be reported in our periodic reports.A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will besatisfied. Internal controls over financial reporting and disclosure controls and procedures are designed to give reasonable assurance that they are effectiveand achieve their objectives. We cannot provide absolute assurance that all possible future control issues have been detected. These inherent limitationsinclude the possibility that our judgments can be faulty, and that isolated breakdowns can occur because of human error or mistake. The design of our systemof controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeedabsolutely in achieving our stated goals under all potential future or unforeseeable conditions. Because of the inherent limitations in a cost-effective controlsystem, misstatements due to error could occur without being detected.We have adopted tax positions that a taxing authority may view differently. If a taxing authority differs with our tax positions, our results may beadversely affected.Our effective tax rate and cash paid for taxes are impacted by the tax positions that we have adopted. Taxing authorities may not always agree with thepositions we have taken. We have established reserves for tax positions that we have determined to be less likely than not to be sustained by taxingauthorities. However, there can be no assurance that our results of operations will not be adversely affected in the event that disagreement over our taxpositions does arise.Litigation and claims can cause unexpected losses.In the construction business there are frequently claims and litigation. There are also inherent claims and litigation risks associated with the number of peoplethat work on construction sites and the fleet of vehicles on the road every day. In all of our businesses, we are subject to potential claims and litigation.Claims are sometimes made and lawsuits filed for amounts in excess of their value or in excess of the amounts for which they are eventually resolved. Claimsand litigation normally follow a predictable course of time to resolution. However, there may be periods of time in which a disproportionate amount of ourclaims and litigation are concluded in the same quarter or year. If multiple matters are resolved during a given period, then the cumulative effect of thesematters may be higher than the ordinary level in any one reporting period. 23Table of ContentsLatent defect claims could expand.Latent defect litigation is normal for residential home builders in some parts of the country; however, such litigation is increasing in certain states where weperform work. Also, in recent years, latent defect litigation has expanded to aspects of the commercial market. Should we experience similar increases in ourlatent defect claims and litigation, additional pressure may be placed on the profitability of the Residential and Commercial & Industrial segments of ourbusiness.Interruptions in the proper functioning of our information systems, or security breaches of our information systems or confidential data could disruptoperations and cause increases in costs and/or decreases in revenues.As our Company continues to increase its dependence on information technology systems, networks, and infrastructure to conduct its day to day operations,the proper functioning and security of our information technology environment is critical to the successful operation of our business. Although ourinformation systems, networks and infrastructure are protected through physical and software safeguards, our information technology environment is stillvulnerable to natural disasters, power losses, telecommunication failures, cybersecurity risks, and other problems, which could cause a loss of data, release ofpersonally identifiable information or release of confidential customer information among other items. If critical information systems fail or are otherwiseunavailable or confidential information is released, our business operations could be adversely affected.We may be required to conduct environmental remediation activities, which could be expensive and inhibit the growth of our business and our ability tomaintain profitability, particularly in our Infrastructure Solutions business.We are subject to a number of environmental laws and regulations, including those concerning the handling, treatment, storage, and disposal of hazardousmaterials. These laws predominantly affect our Infrastructure Solutions business but may impact our other businesses. These environmental laws generallyimpose liability on present and former owners and operators, transporters and generators of hazardous materials for remediation of contaminated properties.We believe that our business is operating in compliance in all material respects with applicable environmental laws, many of which provide for substantialpenalties for violations. There can be no assurance that future changes in such laws, interpretations of existing regulations or the discovery of currentlyunknown problems or conditions will not require substantial additional expenditures. In addition, if we do not comply with these laws and regulations, wecould be subject to material administrative, civil or criminal penalties, or other liabilities. We may also be required to incur substantial costs to comply withcurrent or future environmental and safety laws and regulations. Any such additional expenditures or costs that we may incur could hurt our operating results.The loss of a group or several key personnel, either at the corporate or operating level, could adversely affect our business.The loss of key personnel or the inability to hire and retain qualified employees could have an adverse effect on our business, financial condition and resultsof operations. Our operations depend on the continued efforts of our executive officers, senior management and management personnel at our segments. Wecannot guarantee that any member of management at the corporate or subsidiary level will continue in their capacity for any particular period of time. Wehave a severance plan in place that covers certain of our senior leaders; however, this plan can neither guarantee that we will not lose key employees, norprevent them from competing against us, which is often dependent on state and local employment laws. If we lose a group of key personnel or even one keyperson at a segment, we may not be able to recruit suitable replacements at comparable salaries or at all, which could adversely affect our operations.Additionally, we generally do not maintain key man life insurance for members of our management. 24Table of ContentsItem 1B.Unresolved Staff CommentsNone. Item 2.PropertiesFacilitiesAt September 30, 2016, we maintained branch offices, warehouses, sales facilities and administrative offices at 77 locations. Substantially all of our facilitiesare leased. We lease our executive office located in Greenwich, Connecticut and our corporate office located in Houston, Texas. We believe that ourproperties are adequate for our current needs, and that suitable additional or replacement space will be available as required. For a breakdown of our officesby segment, see Item 1. “Business — Operating Segments” of this Form 10-K. Item 3.Legal ProceedingsFor further information regarding legal proceedings, see Note 17, “Commitments and Contingencies — Legal Matters” in the notes to our ConsolidatedFinancial Statements. Item 4.Mine Safety DisclosuresNone. 25Table of ContentsPART II Item 5.Market for Registrant’s Common Equity; Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock trades on the NASDAQ Global Market under the ticker symbol “IESC.” The following table sets forth the daily high and low close pricefor our common stock as reported on NASDAQ for each of the four quarters of the fiscal years ended September 30, 2016 and 2015. High Low Year Ended September 30, 2016 First Quarter $11.37 $7.07 Second Quarter $14.68 $10.50 Third Quarter $15.48 $11.40 Fourth Quarter $17.79 $12.39 Year Ended September 30, 2015 First Quarter $8.04 $6.91 Second Quarter $8.80 $7.00 Third Quarter $8.90 $6.89 Fourth Quarter $8.00 $6.30 As of December 7, 2016, the closing market price of our common stock was $21.15 per share and there were approximately 370 holders of record.We have never paid cash dividends on our common stock and we do not anticipate paying cash dividends in the foreseeable future. We expect that we willutilize all available earnings generated by our operations and borrowings under our credit facility for the development and operation of our business, to retireexisting debt, to repurchase our common stock, or to acquire or invest in other businesses. Any future determination as to the payment of dividends will bemade at the discretion of our Board of Directors and will depend upon our operating results, financial condition, capital requirements, general businessconditions and other factors that the Board of Directors deems relevant. Our debt instruments restrict us from paying cash dividends and also place limitationson our ability to repurchase our common stock. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Working Capital” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity andCapital Resources” of thisForm 10-K.Stock Repurchase ProgramOur Board of Directors has authorized a stock repurchase program for the purchase from time to time of up to 1.5 million shares of the Company’s commonstock. Share purchases are made for cash in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. Thetiming and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractualrestrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under pre-setterms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. Theprogram does not require the Company to purchase any specific number of shares and may be modified, suspended or reinstated at any time at the Company’sdiscretion and without notice. The Company initiated the program in February 2015 and during the year ended September 30, 2015, pursuant to the program,we repurchased 482,156 shares of common stock at an average price of $7.22 per share for a total aggregate purchase price of $3.5 million. During the yearended September 30, 2016, we repurchased 46,929 shares of common stock at an average price of $11.07 per share for a total aggregate purchase price of $0.5million.The Company did not repurchase any of its common stock during the three months ended September 30, 2016. 26Table of ContentsFive-Year Stock Performance GraphThe graph below compares the cumulative 5 year total return provided shareholders on IES Holdings, Inc.’s common stock relative to the cumulative totalreturns of the Russell 2000 index and a customized peer group of five companies that includes: Black Box Corporation, Comfort Systems USA Inc., MYRGroup Inc., Sterling Construction Company Inc. and Team Inc. An investment of $100 (with reinvestment of all dividends) is assumed to have been made inour common stock, in each index, and in the peer group on September 30, 2011, and its relative performance is tracked through September 30, 2016.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among IES Holdings, Inc., the Russell 2000 Index,and a Peer Group *$100 invested on 9/30/11 in stock or index, including reinvestment of dividends.Fiscal year ending September 30.Copyright© 2016 Russell Investment Group. All rights reserved. Years ended September 30, 2011 2012 2013 2014 2015 2016 IES Holdings, Inc. $100.00 224.66 200.46 407.35 381.18 878.39 Russell 2000 $100.00 131.91 171.55 178.30 180.52 208.44 Peer Group $100.00 125.85 160.15 141.98 158.02 173.21 27Table of ContentsItem 6.Selected Financial DataThe following selected consolidated historical financial information for IES should be read in conjunction with the audited historical Consolidated FinancialStatements of IES Holdings, Inc. and subsidiaries, and the notes thereto, set forth in Item 8, “Financial Statements and Supplementary Data” of this Form 10-K. Years Ended September 30, 2016 2015 2014 2013 2012 (In Thousands, Except Share Information) Continuing Operations: Revenues $695,993 $573,857 $512,395 $494,593 $456,115 Cost of services 569,013 473,966 429,269 427,633 398,063 Gross profit 126,980 99,891 83,126 66,960 58,052 Selling, general and administrative expenses 100,558 81,416 75,571 66,598 58,609 Contingent consideration 652 — — — — Loss (gain) on sale of assets 810 (13) (86) (64) (168) Income (loss) from operations 24,960 18,488 7,641 426 (389) Other (income) expense: Interest expense 1,282 1,130 1,574 1,771 2,324 Other expense (income), net (83) (180) (203) 507 (96) Income (loss) from operations before income taxes 23,761 17,538 6,270 (1,852) (2,617) Provision (benefit) for income taxes (97,117) 661 748 326 38 Net income (loss) from continuing operations 120,878 16,877 5,522 (2,178) (2,655) Discontinued operations: Loss from discontinued operations — (339) (198) (1,395) (9,158) Benefit for income taxes — — — — (11) Net loss discontinued operations — (339) (198) (1,395) (9,147) Net income (loss) 120,878 16,538 5,324 (3,573) (11,802) Net income attributable to noncontrolling interest (100) — — — — Net income (loss) attributable to IES Holdings, Inc. $120,778 $16,538 $5,324 $(3,573) $(11,802) Basic earnings (loss) per share attributable toIES Holdings, Inc.: Continuing operations $5.63 $0.79 $0.30 $(0.14) $(0.18) Discontinued operations 0.00 (0.02) (0.01) (0.09) (0.60) Total $5.63 $0.77 $0.29 $(0.23) $(0.78) Diluted earnings (loss) per share attributable toIES Holdings, Inc.: Continuing operations $5.62 $0.79 $0.30 $(0.14) $(0.18) Discontinued operations 0.00 (0.02) (0.01) (0.09) (0.60) Total $5.62 $0.77 $0.29 $(0.23) $(0.78) Shares used to calculate earnings (loss) per share Basic 21,279,342 21,480,622 18,417,564 15,460,424 15,123,052 Diluted 21,492,339 21,526,188 18,473,420 15,460,424 15,123,052 Years Ended September 30, 2016 2015 2014 2013 2012 (In Thousands, Except Share Information) Balance Sheet Data: Cash and cash equivalents $32,961 $49,360 $47,342 $20,757 $18,729 Working capital 43,716 31,601 24,731 24,710 24,272 Total assets 394,340 225,679 199,950 177,803 164,713 Total debt 29,257 9,207 9,050 12,323 10,480 Total stockholders’ equity 223,405 101,414 87,972 62,486 53,157 28Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto, set forth in Item 8,“Financial Statements and Supplementary Data” of this Form 10-K. For additional information, see “Disclosure Regarding Forward Looking Statements”in Part I of this Form 10-K.OVERVIEWExecutive OverviewPlease refer to Item 1. “Business” of this Form 10-K for a discussion of the Company’s services and corporate strategy. IES Holdings, Inc., a Delawarecorporation, is a holding company that owns and manages diverse operating subsidiaries, comprised of providers of industrial infrastructure services to avariety of end markets. Our operations are currently organized into four principal business segments: Communications, Residential, Commercial & Industrial,and Infrastructure Solutions.Industry TrendsOur performance is affected by a number of trends that drive the demand for our services. In particular, the markets in which we operate are exposed to manyregional and national trends such as the demand for single and multi-family housing, the need for mission critical facilities as a result of technology-drivenadvancements, the degree to which in-house maintenance departments outsource maintenance and repair work, output levels and equipment utilization atheavy industrial facilities, demand for our rail services, and changes in commercial, institutional, public infrastructure and electric utility spending. Over thelong term, we believe that there are numerous factors that could positively drive demand and affect growth within the industries in which we operate,including (i) population growth, which will increase the need for commercial and residential facilities, (ii) aging public infrastructure, which must be replacedor repaired, (iii) increased emphasis on environmental and energy efficiency, which may lead to both increased public and private spending, and (iv) the lowprice of natural gas which is expected to spur the construction of and modifications to heavy industrial facilities. However, there can be no assurance that wewill not experience a decrease in demand for our services due to economic, technological or other factors, including the continued weakness in the oil andgas sector, which may reduce the demand for housing in the Texas region, where our Residential division operates. For a further discussion of the industriesin which we operate, please see Item 1. “Business — Operating Segments” of this Form 10-K.Business OutlookWhile there are differences among the Company’s segments, on an overall basis, demand for the Company’s services increased in fiscal 2016 as compared tofiscal 2015, resulting in aggregate year-over-year revenue growth. In addition, the Company’s previous investment in growth initiatives and other business-specific factors discussed below contributed to year-over-year revenue growth. Among our segments, year-over-year revenue growth rates during fiscal 2016were led primarily by growth in our Communications segment followed by our Commercial & Industrial segment. The combination of increasing revenue,effective project execution, and efficient scaling of operations as the economy improves has resulted in a year-over-year increase in profitability. Providedthat no significant deterioration in general economic conditions occurs, the Company expects total revenues from existing businesses to increase on a year-over-year basis during fiscal 2017 due to an increase in overall demand for the services we provide and our efforts to increase our market share. Despite thisexpectation of growth within certain segments, we remain focused on controlled growth within certain markets which continue to experience highlycompetitive margins and increasing costs.To continue to grow our business, including through acquisitions, and to fund working capital, we may require a significant amount of cash. Our ability togenerate cash depends on many factors that are beyond our control, including demand for our services, the availability of projects at margins acceptable tous, the ultimate 29Table of Contentscollectability of our receivables, our ability to borrow on our credit facility, and our ability to raise funds in the capital markets, among many other factors.We anticipate that the combination of cash on hand, cash flows from operations and available capacity under our credit facility will provide sufficient cash toenable us to meet our working capital needs, debt service requirements and capital expenditures for property and equipment through the next twelve months.We expect that our fixed asset requirements will range from $4.0 to $5.0 million for the fiscal year ending on September 30, 2017, and we may acquire theseassets either through capital expenditures or through lease agreements.RESULTS OF OPERATIONSWe report our operating results across our four operating segments: Communications, Residential, Commercial & Industrial and Infrastructure Solutions. Ourconsolidated financial results also reflect expenses associated with our corporate office. The following table presents selected historical results of operationsof IES. Years Ended September 30, 2016 2015 2014 $ % $ % $ % (Dollars in thousands, Percentage of revenues) Revenues $695,993 100.0% $573,857 100.0% $512,395 100.0% Cost of services 569,013 81.8% 473,966 82.6% 429,269 83.8% Gross profit 126,980 18.2% 99,891 17.4% 83,126 16.2% Selling, general and administrative expenses 100,558 14.4% 81,416 14.2% 75,571 14.7% Contingent consideration expense 652 0.1 — 0.0 — 0.0 Loss (gain) on sale of assets 810 0.1% (13) 0.0% (86) 0.0% Income from operations 24,960 3.6% 18,488 3.2% 7,641 1.5% Interest and other expense, net 1,199 0.2% 950 0.2% 1,371 0.3% Income (loss) from operations before income taxes 23,761 3.4% 17,538 3.0% 6,270 1.2% Provision (benefit) for income taxes (97,117) (14.0)% 661 0.1% 748 0.1% Net income (loss) from continuing operations 120,878 17.4% 16,877 2.9% 5,522 1.1% Net loss from discontinued operations — 0.0% (339) (0.1)% (198) 0.0% Net income (loss) 120,878 17.4% 16,538 2.8% 5,324 1.1% Net income attributable to noncontrolling interest (100) 0.0 — 0.0 — 0.0 Net income attributable to IES Holdings, Inc. $120,778 17.4% $16,538 2.8% $5,324 1.1% The increase in net income for the year ended September 30, 2016 compared with the year ended September 30, 2015 is driven by a $109.0 million taxbenefit in connection with the release of a valuation allowance on our deferred tax assets. This release is the result of a recent improvement in earnings, theaddition of four new businesses acquired during the year, and consequently an improvement in our expectations about the generation of future taxableincome to utilize our net operating loss carryforwards. See Note 9 — Income Taxes in our consolidated financial statements for further discussion.Consolidated revenues for the year ended September 30, 2016 were $122.1 million greater than for the year ended September 30, 2015, an increase of21.3%. Revenues increased as the Communications, Commercial & Industrial, and Infrastructure Solutions segments each recognized double digit revenuegrowth driven by an increase in demand for their service offerings combined with continued improvement of conditions in the markets in which they operate.Additionally, newly acquired businesses provided a combined $34.4 million of revenue in our Commercial & Industrial and Infrastructure Solutionssegments for the year ended September 30, 2016. The Residential segment also contributed to the overall year-over-year growth. 30Table of ContentsOur overall gross profit percentage increased to 18.2% during the year ended September 30, 2016 as compared to 17.4% during the year ended September 30,2015. Gross profit as a percentage of revenue increased at our Residential and Infrastructure Solutions operating segments, but declined slightly at ourCommunications and Commercial & Industrial segments, as discussed in further detail for each segment below.Selling, general and administrative expenses include costs not directly associated with performing work for our customers. These costs consist primarily ofcompensation and benefits related to corporate, segment and branch management (including incentive-based compensation), occupancy and utilities,training, professional services, information technology costs, consulting fees, travel and certain types of depreciation and amortization. We allocate certaincorporate selling, general and administrative costs across our segments as we believe this more accurately reflects the costs associated with operating eachsegment.During the year ended September 30, 2016, our selling, general and administrative expenses were $100.6 million, an increase of $19.1 million, or 23.5%, ascompared to the year ended September 30, 2015. The increase is primarily attributable to higher personnel costs in connection with the growth and increasedprofitability at all of our segments. Additionally, our newly acquired businesses incurred general and administrative expense of $4.3 million for the yearended September 30, 2016. On a consolidated basis, our selling, general and administrative expense increased slightly as a percentage of revenue from 14.2%for the year ended September 30, 2015 to 14.4% for the year ended September 30, 2016.Communications2016 Compared to 2015 Years Ended September 30, 2016 2015 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $189,635 100.0% $141,858 100.0% Gross Profit 32,531 17.2% 25,843 18.2% Selling, general and administrative expenses 20,839 11.0% 15,735 11.1% Revenue. Revenues increased by $47.8 million during the year ended September 30, 2016, a 33.7% increase compared to the year ended September 30, 2015.The increase is the result of both the expansion of our customer base and additional work with existing customers. Revenues from data center work increasedby $32.4 for the year ended September 30, 2016 compared with the year ended September 30, 2015. The majority of the other service offerings such as audio-visual and security, cabling, and Voice Over Internet Protocol (VoIP) work increased as we continue to add to our customer base, including entry into newmarkets.Gross Profit. Gross profit during the year ended September 30, 2016 increased $6.7 million, or 25.9%, as compared to the year ended September 30, 2015.This increase was primarily driven by the overall increase in revenues noted above. Gross profit as a percentage of revenue decreased from 18.2% for the yearended September 30, 2015 to 17.2% for the year ended September 30, 2016. During 2016, we took on a larger number of projects where we were paid basedon our cost incurred plus an agreed upon margin. This work is generally lower risk, and is typically performed at lower margins than the fixed pricearrangements which comprise the majority of the work we perform.Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $5.1 million, or 32.4%, during the year endedSeptember 30, 2016 compared to the year ended September 30, 2015 as a result of higher personnel cost, including increased incentive compensationassociated with higher profitability. Selling, general and administrative expenses as a percentage of revenues in the Communications segment decreasedslightly to 11.0% of segment revenue during the year ended September 30, 2016 compared to the year ended September 30, 2015 as we benefited fromincreased activity. 31Table of Contents2015 Compared to 2014 Years Ended September 30, 2015 2014 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $141,858 100.0% $116,073 100.0% Gross Profit 25,843 18.2% 21,169 18.2% Selling, general and administrative expenses 15,735 11.1% 13,481 11.6% Revenue. Revenues increased by $25.8 million during the year ended September 30, 2015, a 22.2% increase compared to the year ended September 30, 2014.The increase is the result of both the expansion of our customer base and additional work with existing customers. The expansion of our service offeringswithin areas such as VoIP resulted in $10.8 million of incremental revenue for the year ended September 30, 2015. The majority of the other service offeringssuch as audio-visual and security, cabling, and data center work increased due to the overall volume of projects completed or in progress during the currentyear. Increases in these areas more than offset a decrease in high-tech manufacturing revenue, which fell by $6.0 million for the year ended September 30,2015 compared to the year ended September 30, 2014.Gross Profit. Gross profit during the year ended September 30, 2015 increased $4.7 million, or 22.1%, as compared to the year ended September 30, 2014.This increase was primarily driven by the overall increase in revenues noted above. Gross profit as a percentage of revenue remained unchanged from theprior year at 18.2% for the year ended September 30, 2015. During 2015, we had an increase in wireless access and VoIP projects, which generated highermargins than our other service offerings during the year ended September 30, 2014. The gross margin increase related to the wireless access was largely offsetby lower margins on certain high-tech manufacturing projects, as the scopes of work contained a larger material component than labor component whencompared to similar projects in progress during the year ended September 30, 2014.Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $2.3 million, or 16.7%, during the year endedSeptember 30, 2015 compared to the year ended September 30, 2014 as a result of higher personnel cost, including increased incentive compensationassociated with higher profitability. Selling, general and administrative expenses as a percentage of revenues in the Communications segment decreased0.5% to 11.1% of segment revenue during the year ended September 30, 2015 compared to the year ended September 30, 2014 as we benefited fromincreased activity.Residential2016 Compared to 2015 Years Ended September 30, 2016 2015 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $225,889 100.0% $206,307 100.0% Gross Profit 54,015 23.9% 41,872 20.3% Selling, general and administrative expenses 37,585 16.6% 31,877 15.5% Revenue. Revenues increased $19.6 million during the year ended September 30, 2016, an increase of 9.5% as compared to the year ended September 30,2015. Single-family construction revenues increased by $22.2 million, primarily from growth in North Carolina and Georgia, as well as Texas, where theeconomy has experienced continued growth and population expansion. Cable and service activity, as well as revenue from solar installations, also increasedyear over year. These increases were partly offset by lower revenue for multi-family construction, which decreased by $8.6 million for the year endedSeptember 30, 2016 as compared with the same 32Table of Contentsperiod in 2015, primarily as a result of delays caused by shortages of qualified labor in other trades. Additional demand for multi-family housing in theHouston market has declined as a result of a slowdown in the oil and gas sector.Gross Profit. During the year ended September 30, 2016, our Residential segment experienced a $12.1 million, or 29.0%, increase in gross profit as comparedto the year ended September 30, 2015. Gross profit increased due to a higher volume of work across most service lines. Gross margin percentage increasedwithin single-family, as demand for single-family housing has increased combined with improved efficiency and favorable commodity prices. Gross marginas a percentage of revenue also increased in our multi-family division, as a result of more competitive pricing and favorable commodity prices. We alsorecognized higher margins on service and cable work during the year ended September 30, 2016 compared with the year ended September 30, 2015.Selling, General and Administrative Expenses. Our Residential segment experienced a $5.7 million, or 17.9%, increase in selling, general and administrativeexpenses during the year ended September 30, 2016 compared to the year ended September 30, 2015. Selling, general and administrative expenses as apercentage of revenues in the Residential segment increased 1.1% to 16.6% of segment revenue during the year ended September 30, 2016. The primarydriver of the increase was the cost of incentive compensation for our operations managers, which is based on a profit-sharing model, combined with otherbonus and commission expense which increased in connection with increased levels of activity and higher profitability.2015 Compared to 2014 Years Ended September 30, 2015 2014 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $206,307 100.0% $182,514 100.0% Gross Profit 41,872 20.3% 33,829 18.5% Selling, general and administrative expenses 31,877 15.5% 27,947 15.3% Revenue. Revenues increased $23.8 million during the year ended September 30, 2015, an increase of 13.0% as compared to the year ended September 30,2014. Single-family construction revenues increased by $15.9 million, primarily from growth in Texas, where the economy has experienced continuedgrowth and population expansion. Revenue for multi-family construction increased by $3.3 million for the year ended September 30, 2015 as compared withthe same period in 2014, primarily as a result of increased demand, particularly on the East Coast and in Texas. Cable and service activity, as well as revenuefrom solar installations, also increased year over year.Gross Profit. During the year ended September 30, 2015, our Residential segment experienced an $8.0 million, or 23.8%, increase in gross profit as comparedto the year ended September 30, 2014. Gross profit increased due to higher volume of work across all service lines. Gross margin percentage increased withinsingle-family, as demand for single-family housing has increased combined with improved efficiency and favorable commodity prices. However, the increasein gross margin as a percentage of revenue for our single-family business was partly offset by lower margins recognized on service and cable work during theyear ended September 30, 2015 due to expansion and training costs.Selling, General and Administrative Expenses. Our Residential segment experienced a $3.9 million, or 14.1%, increase in selling, general and administrativeexpenses during the year ended September 30, 2015 compared to the year ended September 30, 2014. Selling, general and administrative expenses as apercentage of revenues in the Residential segment increased 0.2% to 15.5% of segment revenue during the year ended September 30, 2015. The primarydriver of the increase was the cost of incentive compensation for our operations managers, which is based on a profit-sharing model, combined with higherbonus and commission expense in connection with increased levels of activity and higher profitability. 33Table of ContentsCommercial & Industrial2016 Compared to 2015 Years Ended September 30, 2016 2015 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $222,466 100.0% $178,865 100.0% Gross Profit 24,787 11.1% 21,543 12.0% Selling, general and administrative expenses 17,169 7.7% 15,027 8.4% Revenue. Revenues increased $43.6 million during the year ended September 30, 2016, an increase of 24.4% compared to the year ended September 30,2015. The increase in revenue was driven largely by the Shanahan and STR acquisitions, which contributed $18.6 million of revenue for the year endedSeptember 30, 2016. The market for this segment’s services remains highly competitive and, as such, we continue to seek to maintain a disciplined bidstrategy. However, a continued focus on our sales strategy combined with improved market conditions in certain regions where we operate led to the year-over-year revenue increase.Gross Profit. Gross profit during the year ended September 30, 2016 increased by $3.2 million, or 15.1%, as compared to the year ended September 30, 2015.The increase was due primarily to $3.1 million of additional gross margin contributed by the Shanahan and STR acquisitions. The market remainscompetitive, and we expect continued pressure on our ability to increase project bid margins in most of the markets we serve. Gross profit margins for the yearended September 30, 2016 were reduced compared with the prior year, primarily as a result of an increase in insurance costs.Selling, General and Administrative Expenses. Selling, general and administrative expenses during the year ended September 30, 2016 increased by $2.1million, or 14.2%, compared to the year ended September 30, 2015. The increase is primarily attributable to $1.7 million of expense incurred at our newlyacquired Shanahan and STR businesses. Selling, general and administrative expense as a percentage of revenues in the Commercial & Industrial segmentdecreased by 0.7% during the year ended September 30, 2016, as we benefited from increased activity.2015 Compared to 2014 Years Ended September 30, 2015 2014 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $178,865 100.0% $166,249 100.0% Gross Profit 21,543 12.0% 18,168 10.9% Selling, general and administrative expenses 15,027 8.4% 14,479 8.7% Revenue. Revenues increased $12.6 million during the year ended September 30, 2015, an increase of 7.6% compared to the year ended September 30,2014. The market for this segment’s services remains highly competitive and, as such, we continue to maintain a disciplined bid strategy. However, acontinued focus on our sales strategy combined with improved market conditions in certain regions where we operate led to the year over year revenueincrease.Gross Profit. Gross profit during the year ended September 30, 2015 increased by $3.4 million, or 18.6%, as compared to the year ended September 30,2014. The increase was due to an overall increase in the size of projects in progress, specific to the education, power distribution, and industrial markets.Commercial & Industrial’s gross margin percentage increased 1.1% to 12.0% during the year ended September 30, 2015. The 34Table of Contentsimprovement in margin percentage was primarily attributable to improved productivity, as well as a more selective bidding strategy which we believereduced our exposure to riskier projects that have historically resulted in reduced earnings.Selling, General and Administrative Expenses. Selling, general and administrative expenses during the year ended September 30, 2015 increased by $0.5million, or 3.8%, compared to the year ended September 30, 2014. Selling, general and administrative expense as a percentage of revenues in the Commercial& Industrial segment decreased by 0.3% during the year ended September 30, 2015, as we benefited from increased activity.Infrastructure Solutions2016 Compared to 2015 Years Ended September 30, 2016 2015 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $58,003 100.0% $46,827 100.0% Gross Profit 15,647 27.0% 10,633 22.7% Selling, general and administrative expenses 12,404 21.4% 9,498 20.3% Contingent consideration 652 1.1% 0 0.0% Loss on sale of assets 826 1.4% 12 0.0% Revenue. Revenues in our Infrastructure Solutions segment increased by $11.2 million during the year ended September 30, 2016, an increase of 23.9%compared to the year ended September 30, 2015. The increase in revenue was driven primarily by the Southern Rewinding, Calumet and Technibusacquisitions, which provided additional revenue of $20.6 million for the year ended September 30, 2016. This increase was partially offset by a $6.7 milliondecrease in revenues from our engine component business, for which we sold substantially all of the operating assets in April 2016. For additionalinformation see Note 18, “Business Combinations and Divestitures” in the notes to our Consolidated Financial Statements.Gross Profit. Our Infrastructure Solutions segment’s gross profit during the year ended September 30, 2016 increased by $5.0 million, as compared to the yearended September 30, 2015. The increase was driven primarily by the acquisitions of Southern Rewinding, Technibus and Calumet, which contributed $6.9million of additional gross profit for the year ended September 30, 2016 compared with the year ended September 30, 2015. This increase was partly offset bya $2.0 million reduction in gross profit from our engine component business, for which we sold substantially all of the operating assets in April 2016. Grossprofit as a percent of revenue increased from 22.7% for the year ended September 30, 2015 to 27.0% for the year ended September 30, 2016, as a result ofhigher margins at Calumet and Technibus.Selling, General and Administrative Expenses. Our Infrastructure Solutions segment’s selling, general and administrative expenses during the year endedSeptember 30, 2016 increased by $2.9 million compared to the year ended September 30, 2015. Selling, general and administrative expense as a percentageof revenue increased from 20.3% for the year ended September 30, 2015 to 21.4% for the year ended September 30, 2016. The increase was driven primarilyby the acquisitions of Southern Rewinding, Technibus and Calumet, which contributed $3.6 million of additional expense for the year ended September 30,2016 compared with the year ended September 30, 2015. This increase was partly offset by a $0.5 million reduction in selling, general and administrativeexpense at our engine component business, for which we sold substantially all of the operating assets in April 2016.Contingent Consideration. Results of operations from Calumet have outperformed forecast measures used in our original valuation of the contingentconsideration agreement, which we calculated following the acquisition of Calumet. As we now expect to pay higher contingent consideration because ofincreased profitability, we recorded additional contingent consideration expense of $0.7 million during the year ended September 30, 2016. 35Table of ContentsLoss on Sale of Asset. We recognized $0.8 million in conjunction with the write down to net realizable value of certain assets related to our enginecomponent business. The sale of these assets to a third party pursuant to an asset purchase agreement was finalized on April 15, 2016.2015 Compared to 2014 Years Ended September 30, 2015 2014 $ % $ % (Dollars in thousands, Percentage of revenues) Revenue $46,827 100.0% $47,559 100.0% Gross Profit 10,633 22.7% 9,960 20.9% Selling, general and administrative expenses 9,498 20.3% 9,346 19.7% Revenue. Revenues in our Infrastructure Solutions segment decreased by $0.7 million during the year ended September 30, 2015, a decrease of 1.5%compared to the year ended September 30, 2014. The decrease in revenue was driven primarily by a decrease in demand for power assemblies by certain ofour large rail customers. This decrease was partially offset by improved demand for electric motor repair services and the expansion of our customer base.Revenue for the year ended September 30, 2015 includes $2.9 million from Southern Rewinding, which we acquired in May 2015.Gross Profit. Our Infrastructure Solutions segment’s gross profit during the year ended September 30, 2015 increased by $0.7 million, or 6.8%, as comparedto the year ended September 30, 2014. Gross profit increased due to higher volume of electric motor repair services combined with the addition of SouthernRewinding, which contributed $0.9 million of gross margin for the year ended September 30, 2015. Gross profit as a percentage of revenue increased from20.9% for the year ended September 30, 2014 to 22.7% for the year ended September 30, 2015. Although revenues were down, we were able to improve ourmargins through a focus on workflow and process improvement, as well as cost management. Further, the favorable service and project mix at SouthernRewinding contributed to the higher margin percentage year over year. Although margins have continued to improve year over year, the markets in which weoperate remain competitive due to the current economic conditions of some of the larger industries we serve, particularly the steel and rail industries.Selling, General and Administrative Expenses. Our Infrastructure Solutions segment’s selling, general and administrative expenses during the year endedSeptember 30, 2015 increased by $0.2 million compared to the year ended September 30, 2014. Selling, general and administrative expense as a percentageof revenue increased from 19.7% for the year ended September 30, 2014 to 20.3% for the year ended September 30, 2015. The increases were a result ofcertain one-time legal expenses and costs associated with the acquisition of Southern Rewinding, combined with the addition of selling, general andadministrative expenses associated with Southern Rewinding’s operations. These increases were partially offset by cost reductions made at our locations thatservice our large rail and steel industry customers, due to the decrease in demand for our services during the year ended September 30, 2015.Interest and Other Expense, net Years Ended September 30, 2016 2015 2014 (In thousands) Interest expense $937 $813 $1,189 Deferred financing charges 345 317 385 Total interest expense 1,282 1,130 1,574 Other (income) expense, net (83) (180) (203) Total interest and other expense, net $1,199 $950 $1,371 36Table of ContentsInterest ExpenseDuring the year ended September 30, 2016, we incurred interest expense of $1.3 million primarily comprised of interest expense from our term loan facilitywith Wells Fargo, an average letter of credit balance of $6.9 million under our revolving credit facility and an average unused line of credit balance of $40.6million. This compares to interest expense of $1.1 million for the year ended September 30, 2015, on a debt balance primarily comprised of our term loanfacility with Wells Fargo, an average letter of credit balance of $6.9 million under our revolving credit facility and an average unused line of credit balance of$45.5 million.For the year ended September 30, 2014, we incurred interest expense of $1.6 million on a debt balance primarily comprised of our term loan facility withWells Fargo, an average letter of credit balance of $6.8 million under our revolving credit facility, and an average unused line of credit balance of $23.8million.PROVISION FOR INCOME TAXESFor the year ended September 30, 2016, we recorded a benefit from income tax of $97.1 million. This benefit included $109.0 million attributable to therelease of our valuation allowance on certain of our net operating loss carryforwards and other deferred tax assets during the year ended September 30,2016. This benefit is the result of our assessment that it is now more likely than not that we will generate sufficient taxable income to utilize these netoperating loss carryforwards and other deferred tax assets.Our provision for income taxes was $0.7 million for the years ended September 30, 2015 and 2014. Tax expense increased for the year ended September 30,2015 by $0.2 million related to the federal income tax provision, $0.5 million related to the state income tax provision, and $0.1 million related to uncertaintax benefits. However, these increases were offset by a $0.7 million benefit from a reduction in our valuation allowance as a result of deferred tax liabilitiesadded in connection with the acquisition of Southern Rewinding.WORKING CAPITALDuring the year ended September 30, 2016, working capital exclusive of cash increased by $12.1 million from September 30, 2015, reflecting a $37.1 millionincrease in current assets and an $25.0 million increase in current liabilities during the period.During the year ended September 30, 2016, our current assets increased by $37.1 million, or 26.6%, to $176.8 million, as compared to $139.7 million as ofSeptember 30, 2015. The increase in current assets is driven by current trade accounts receivables, net, which increased by $31.4 million at September 30,2016, as compared to September 30, 2015. The increase in receivables was most notable in our Communications segment, which reported significantly higherrevenues year over year, as well as an increase in cost-plus type contractual arrangements, where receivables usually are not collected as quickly as ourtypical contractual arrangements. At September 30, 2016 we had $13.0 million of accounts receivable of businesses acquired during the period. Days salesoutstanding (“DSOs”) increased to 60 as of September 30, 2016 from 56 as of September 30, 2015. While the rate of collections may vary, our securedposition, resulting from our ability to secure liens against our customers’ overdue receivables, reasonably assures that collection will occur eventually to theextent that our security retains value. Costs and estimated earnings in excess of billings on uncompleted contracts increased by $3.2 million at September 30,2016 as compared to September 30, 2015, primarily as a result of increased activity at our Communications segment, particularly as some of this additionalwork has been on cost plus type jobs, where there is typically some delay between incurring the cost and billing it to the customer.During the year ended September 30, 2016, our total current liabilities increased by $25.0 million to $133.1 million, compared to $108.1 million as ofSeptember 30, 2015. The increase was driven primarily by an increase in accounts payable and accrued expenses, which increased by $25.9 millionat September 30, 2016 as compared with September 30, 2015. The increase is driven by $6.3 million of accounts payable of businesses acquired during theperiod, as well as increased activity in our Communications segment. 37Table of ContentsSuretyMany customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a surety. These bondsprovide a guarantee to the customer that we will perform under the terms of our contract and that we will pay our subcontractors and vendors. If we fail toperform under the terms of our contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide servicesunder the bond. We must reimburse the sureties for any expenses or outlays they incur on our behalf. To date, we have not been required to make anyreimbursements to our sureties for bond-related costs.As is common in the surety industry, sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time. We believe that ourrelationships with our sureties will allow us to provide surety bonds as they are required. However, current market conditions, as well as changes in oursureties’ assessment of our operating and financial risk, could cause our sureties to decline to issue bonds for our work. If our sureties decline to issue bondsfor our work, our alternatives would include posting other forms of collateral for project performance, such as letters of credit or cash, seeking bondingcapacity from other sureties, or engaging in more projects that do not require surety bonds. In addition, if we are awarded a project for which a surety bond isrequired but we are unable to obtain a surety bond, the result could be a claim for damages by the customer for the costs of replacing us with anothercontractor.As of September 30, 2016, the estimated cost to complete our bonded projects was approximately $54.3 million. We believe the bonding capacity currentlyprovided by our sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future.LIQUIDITY AND CAPITAL RESOURCESAs of September 30, 2016, we had cash and cash equivalents of $33.0 million and $33.1 million of availability under our revolving credit facility. Weanticipate that the combination of cash on hand, cash flows from operations and available capacity under our revolving credit facility will provide sufficientcash to enable us to meet our working capital needs, debt service requirements and capital expenditures for property and equipment through the next twelvemonths. Our ability to generate cash flow is dependent on many factors, including demand for our services, the availability of projects at margins acceptableto us, the ultimate collectability of our receivables, and our ability to borrow on our revolving credit facility or raise funds in the capital markets, if needed.We continue to monitor the financial markets and general national and global economic conditions. To date, we have experienced no loss or lack of access toour invested cash or cash equivalents; however, we can provide no assurances that access to our invested cash and cash equivalents will not be impacted inthe future by adverse conditions in the financial markets.The Revolving Credit FacilityWe maintain a revolving credit facility with Wells Fargo Bank, N.A. (the “Credit Facility”), which is evidenced by an Amended and Restated Credit andSecurity Agreement (as amended, the “Credit Agreement”). During fiscal 2016, we amended the maximum revolver amount under the Credit Facility from$60 million to $70 million and extended the maturity date of the Credit Facility by one year to August 9, 2019. In addition, as further described below, weamended the Credit Facility to reduce the interest rate charged, modify the calculation of amounts available, resulting in an increase in available borrowingcapacity, create new minimum thresholds for liquidity and Excess Availability (as defined in the Credit Agreement), and modify the thresholds of Liquidity(which, as defined in the Credit Agreement, is the aggregate amount of unrestricted cash and cash equivalents on hand plus Excess Availability) and ExcessAvailability below which the Company must maintain a specified Fixed Charge Coverage Ratio (as defined in the Credit Agreement). 38Table of ContentsThe Credit Facility is guaranteed by our subsidiaries and secured by first priority liens on substantially all of our subsidiaries’ existing and future acquiredassets, exclusive of collateral provided to our surety providers. The Credit Facility also restricts us from paying cash dividends and places limitations on ourability to repurchase our common stock.Terms of the Credit FacilityThe Credit Facility contains customary affirmative, negative and financial covenants, which were adjusted in fiscal 2016 amendments. At September 30,2016, we were subject to the financial covenant under the Credit Facility requiring, at any time that our Liquidity is less than $14 million or our ExcessAvailability is less than $7 million, that we maintain a Fixed Charge Coverage Ratio of not less than 1.0:1.0. Additionally, pursuant to the amendments, weare required to maintain minimum Liquidity of $8.75 million and Excess Availability of $4.38 million at all times. At September 30, 2016, our Liquidity was$66.0 million and our Excess Availability was $33.1 million, and as such, we were not required to maintain a Fixed Charge Coverage Ratio of 1.0:1.0 as ofsuch date. Nonetheless, at September 30, 2016, our Fixed Charge Coverage Ratio was 17.6:1.0. Compliance with our Fixed Charge Coverage Ratio, while notrequired at September 30, 2016, provides us with the ability to use cash on hand or to draw on our Credit Facility such that we can fall below the ExcessAvailability and Liquidity minimum thresholds described above without violating our financial covenant.Our Fixed Charge Coverage Ratio is calculated as (i) our trailing twelve month EBITDA (as defined in the Credit Agreement), less non-financed capitalexpenditures (other than capital expenditures financed by means of an advance under the Credit Facility) cash taxes and certain pass-through tax liabilities,divided by (ii) the sum of our cash interest and principal debt payments (other than repayment of principal on advances under the Credit Facility) and allRestricted Junior Payments (as defined in the Credit Agreement) (other than pass-through tax liabilities) and other cash distributions. As defined in the CreditAgreement, EBITDA is calculated as consolidated net income (or loss), less extraordinary gains, interest income, non-operating income and income taxbenefits and decreases in any change in LIFO reserves, plus stock compensation expense, non-cash extraordinary losses, interest expense, income taxes,depreciation and amortization and increases in any change in LIFO reserves.If in the future our Liquidity or Excess Availability fall below $14 million or $7 million, respectively, and at that time our Fixed Charge Coverage Ratio isless than 1.0:1.0, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under our Credit Facility, it wouldresult in an event of default under our Credit Facility, which could result in some or all of our indebtedness becoming immediately due and payable.Borrowings under the Credit Facility may not exceed a “borrowing base” that is determined monthly by our lenders based on available collateral, primarilycertain accounts receivables, inventories and personal property and equipment. Under the terms of the Credit Facility, amounts outstanding bear interest at aper annum rate equal to a Daily Three Month LIBOR (as defined in the Credit Agreement), plus an interest rate margin, which is determined quarterly, basedon the following thresholds, which were adjusted in the fiscal 2016 amendments: Level Thresholds Interest Rate MarginI If Liquidity is less than $24.5 million at any time during the period 2.25 percentage pointsII If Liquidity is greater than or equal to $24.5 million at all times during the period and less than $35.0 million at anytime during the period 2.00 percentage pointsIII If Liquidity is greater than or equal to $35.0 million at all times during the period 1.75 percentage pointsIn addition, we are charged monthly in arrears for (1) an unused commitment fee of 0.375% per annum, (2) a collateral monitoring fee ranging from $1thousand to $2 thousand, based on the then-applicable interest rate margin, (3) a letter of credit fee based on the then-applicable interest rate margin and(4) certain other fees and charges as specified in the Credit Agreement. 39Table of ContentsAt September 30, 2016, we had $6.9 million in outstanding letters of credit with Wells Fargo and outstanding borrowings of $29.3 million.Common Stock Rights OfferingOn August 7, 2014, we completed a $20.0 million rights offering (the “Rights Offering”). In the Rights Offering, the Company distributed, at no charge, to theholders of shares of its common stock on July 7, 2014, one non-transferable subscription right for each share of common stock owned. Each right entitled theholder thereof to purchase from the Company 0.214578135 shares of common stock at a subscription price of $5.20 per share, which represented a discountto the market price of the common stock at the closing of the offering. In addition, holders who purchased all of the shares of common stock available to themwere entitled to subscribe, at the same subscription price of $5.20 per share, for a portion of any shares of common stock that other holders did not purchase,subject to certain limitations (the “Over-Subscription Privilege”). The Rights Offering was fully subscribed, after giving effect to the exercise of Over-Subscription Privileges, and we received net proceeds of approximately $19.6 million, after deducting estimated offering expenses, for the issuance of3,846,150 shares of common stock.Immediately after giving effect to the Rights Offering, we had 21,768,642 shares of common stock issued and outstanding. Tontine beneficially ownedapproximately 60% of the shares of common stock outstanding immediately prior to launch of the Rights Offering, and immediately after giving effect to theRights Offering, Tontine beneficially owned approximately 61% of the Company’s outstanding shares. Tontine currently owns approximately 58% of ouroutstanding shares based on its most recently filed amendment to its Schedule 13D.InvestmentsFrom time to time, the Company may invest in non-controlling positions in the debt or equity securities of other businesses. In October 2014, our Board ofDirectors approved an investment policy that permits the Company to invest our cash in liquid and marketable securities that include equities and fixedincome securities, subject to Board approval of any such investment over $0.5 million. Equity securities may include unrestricted, publicly traded stock thatis listed on a major exchange or a national, over-the-counter market and that is appropriate for our portfolio objectives, asset class, and/or investment style,and fixed income securities are required to have an investment grade credit quality at the time of purchase.Operating ActivitiesOur cash flow from operations is not only influenced by cyclicality, demand for our services, operating margins and the type of services we provide, but canalso be influenced by working capital needs such as the timing of our receivable collections. Working capital needs are generally lower during our fiscal firstand second quarters due to the seasonality that we experience in many regions of the country.Operating activities provided net cash of $25.0 million during the year ended September 30, 2016, as compared to $11.5 million of net cash provided in theyear ended September 30, 2015. The increase in operating cash flow is the result of increased net income, slightly offset by an increase in working capital inconnection with the increase in business activity.Operating activities provided net cash of $11.5 million during the year ended September 30, 2015, as compared to $12.6 million of net cash provided in theyear ended September 30, 2014. Although we reported higher net income in the year ended September 30, 2015 as compared to the year ended September 30,2014, we ended fiscal 2015 with higher levels of working capital in connection with increased levels of activity, as well as working capital requirements atSouthern Rewinding, where we used $1.1 million to pay down accounts payable and accrued liabilities immediately upon closing the acquisition. 40Table of ContentsInvesting ActivitiesIn the year ended September 30, 2016, net cash used in investing activities was $60.7 million as compared to $5.9 million of net cash used by investingactivities in the year ended September 30, 2015. Investing activities for the year ended September 30, 2016 include $59.5 million for the acquisition ofbusinesses, as well as $3.4 million of capital expenditures. These expenditures were slightly offset by the receipt of $2.2 million from the sale of substantiallyall of the operating assets of our engine components business. For the year ended September 30, 2015, cash used in investing activities included $3.1 millionused for the acquisition of a business and $2.8 million of capital expenditures.Investing activities of $2.0 million in the year ended September 30, 2014 relate to capital expenditures.Financing ActivitiesFinancing activities provided net cash of $19.4 million in the year ended September 30, 2016 compared to $3.6 million used in the year ended September 30,2015. For the year ended September 30, 2016, we borrowed $20.3 million, which we used to partially fund our acquisition of Technibus. Additionally, weused $0.6 million for the repurchase of common stock under the Company’s stock repurchase program, and $0.3 million to collateralize letters of creditoutstanding at Technibus. For the year ended September 30, 2015, we used $3.6 million for repurchases of the Company’s common stock under theauthorized stock repurchase program. We repurchased an aggregate $3.5 million of common stock from an unrelated, third-party investor and in open markettransactions, pursuant to the stock repurchase program, and we used an additional $0.1 million for the repurchase of common stock to satisfy employeepayroll tax withholding obligations. For the year ended September 30, 2014, we raised $19.6 million through our Rights Offering. This was partly offset by$3.5 million used for repayments on our Credit Facility and $0.2 million used for the repurchase of common stock to satisfy employee payroll taxwithholding obligations.CONTROLLING SHAREHOLDEROn October 5, 2016, Tontine filed an amended Schedule 13D indicating its ownership level of approximately 58% of the Company’s outstanding commonstock. As a result, Tontine can control most of our affairs, including most actions requiring the approval of shareholders, such as the approval of any potentialmerger or sale of all or substantially all assets, segments, or the Company itself.We are a party to a sublease agreement with Tontine Associates, L.L.C., an affiliate of our controlling shareholder, for corporate office space in Greenwich,Connecticut. The sublease extends through April, 2019, with monthly payments due in the amount of approximately $8 thousand. The lease has terms atmarket rates, and payments by the Company are at a rate consistent with that paid by Tontine Associates, L.L.C. to its landlord.Jeffrey L. Gendell has served as a member of the Board of Directors and as non-executive Chairman of the Board since November 2016. He is the managingmember and founder of Tontine, the Company’s controlling shareholder, and the brother of David B. Gendell, who has served as a member of the Board ofDirectors since February 2012 and as non-executive Vice Chairman of the Board since November 2016, having previously served as the Company’s non-executive Chairman of the Board from January 2015 to November 2016. David B. Gendell is also an employee of Tontine.OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONSAs is common in our industry, we have entered into certain off-balance sheet arrangements that expose us to increased risk. Our significant off-balance sheettransactions include commitments associated with non-cancelable operating leases, letter of credit obligations, firm commitments for materials and suretyguarantees. 41Table of ContentsWe enter into non-cancelable operating leases for many of our vehicle and equipment needs. These leases allow us to retain our cash when we do not own thevehicles or equipment, and we pay a monthly lease rental fee. At the end of the lease, we have no further obligation to the lessor. We may cancel or terminatea lease before the end of its term. Typically, we would be liable to the lessor for various lease cancellation or termination costs and the difference between thefair market value of the leased asset and the implied book value of the leased asset as calculated in accordance with the lease agreement.Some of our customers and vendors require us to post letters of credit as a means of guaranteeing performance under our contracts and ensuring payment byus to subcontractors and vendors. If our customer has reasonable cause to effect payment under a letter of credit, we would be required to reimburse ourcreditor for the letter of credit. At September 30, 2016, $0.8 million of our outstanding letters of credit were to collateralize our customers and vendors.Some of the underwriters of our casualty insurance program require us to post letters of credit as collateral, as is common in the insurance industry. To date,we have not had a situation where an underwriter has had reasonable cause to effect payment under a letter of credit. At September 30, 2016, $6.1 million ofour outstanding letters of credit were to collateralize our insurance programs.From time to time, we may enter into firm purchase commitments for materials such as copper wire and aluminum wire, among others, which we expect to usein the ordinary course of business. These commitments are typically for terms less than one year and require us to buy minimum quantities of materials atspecified intervals at a fixed price over the term. As of September 30, 2016, we did not have any open purchase commitments.Many of our customers require us to post performance and payment bonds issued by a surety. Those bonds guarantee the customer that we will perform underthe terms of a contract and that we will pay subcontractors and vendors. In the event that we fail to perform under a contract or pay subcontractors andvendors, the customer may demand the surety to pay or perform under our bond. Our relationship with our sureties is such that we will indemnify the suretiesfor any expenses they incur in connection with any of the bonds they issue on our behalf. To date, we have not incurred any costs to indemnify our suretiesfor expenses they incurred on our behalf.As of September 30, 2016, our future contractual obligations due by September 30 of each of the following fiscal years include (in thousands): Less than1 Year 1 to 3Years 3 to 5Years More than5 Years Total Long-term debt obligations $— $29,257 $— $— $29,257 Operating lease obligations 6,617 8,819 3,856 2,345 21,637 Total (1) $6,617 $38,076 $3,856 $2,345 $50,894 (1)The tabular amounts exclude the interest obligations that will be created if the debt obligations are outstanding for the periods presented.Our other commitments expire by September 30 of each of the following fiscal years (in thousands): 2017 2018 2019 Thereafter Total Standby letters of credit $6,944 $— $— $— $6,944 Total $6,944 $— $— $— $6,944 42Table of ContentsCRITICAL ACCOUNTING POLICIESThe discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have beenprepared in accordance with GAAP. The preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the Consolidated Financial Statements,and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our ConsolidatedFinancial Statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based onour beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to suchestimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from thoseestimates.Accordingly, we have identified the accounting principles which we believe are most critical to our reported financial status by considering accountingpolicies that involve the most complex or subjective decisions or assessments. We identified our most critical accounting policies to be those related torevenue recognition, accounting for business combinations, the assessment of goodwill and asset impairment, our allowance for doubtful accountsreceivable, the recording of our insurance liabilities and estimation of the valuation allowance for deferred tax assets, and unrecognized tax benefits. Theseaccounting policies, as well as others, are described in Note 2, “Summary of Significant Accounting Policies” in the notes to our Consolidated FinancialStatements, and at relevant sections in this discussion and analysis.Revenue Recognition. We enter into contracts principally on the basis of competitive bids. We frequently negotiate the final terms and prices of thosecontracts with the customer. Although the terms of our contracts vary considerably, over approximately 90% of our revenues are based on either a fixed priceor unit price basis in which we agree to do the work for a fixed amount for the entire project (fixed price) or for units of work performed (unit price).Approximately 5% of our revenues are earned from contracts where we are paid on a time and materials basis, and from time to time, we may enter intocontracts on a cost plus basis. Our most significant cost drivers are the cost of labor, the cost of materials and the cost of casualty and health insurance. Thesecosts may vary from the costs we originally estimated. Variations from estimated contract costs along with other risks inherent in performing fixed price andunit price contracts may result in actual revenue and gross profits or interim projected revenue and gross profits for a project differing from those weoriginally estimated and could result in losses on projects. Depending on the size of a particular project, variations from estimated project costs could have asignificant impact on our operating results for any fiscal quarter or year.We complete most of our projects within one year. We frequently provide service and maintenance work under open-ended, unit price master serviceagreements which are renewable annually. We recognize revenue on service, time and material work when services are performed. Work performed under aconstruction contract generally provides that the customers accept completion of progress to date and compensate us for services rendered, measured in termsof units installed, hours expended or some other measure of progress. Revenues from construction contracts are recognized on the percentage-of-completionmethod. Revenues recognized on a percentage-of-completion basis, all of which are fixed price arrangements, comprised approximately 66.8% of our totalrevenue for the year ended December 31, 2016. The percentage-of-completion method for construction contracts is measured principally by the percentage ofcosts incurred and accrued to date for each contract to the estimated total costs for each contract at completion. We generally consider contracts substantiallycomplete upon departure from the work site and acceptance by the customer. Contract costs include all direct material and labor costs and those indirect costsrelated to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Changes in job performance, job conditions, estimatedcontract costs, profitability and final contract settlements may result in revisions to costs and income, and the effects of such revisions are recognized in theperiod in which the revisions are determined. Provisions for total estimated losses on uncompleted contracts are made in the period in which such losses aredetermined. 43Table of ContentsThe current asset “Costs and estimated earnings in excess of billings” represents revenues recognized in excess of amounts billed that management believeswill be billed and collected within the next twelve months. The current liability “Billings in excess of costs and estimated earnings” represents billings inexcess of revenues recognized. Costs and estimated earnings in excess of billings are amounts considered recoverable from customers based on differentmeasures of performance, including achievement of specific milestones, completion of specified units or completion of the contract. Also included in thisasset, from time to time, are claims and unapproved change orders, which include amounts that we are in the process of collecting from our customers oragencies for changes in contract specifications or design, contract change orders in dispute or unapproved as to scope and price, or other related causes ofunanticipated additional contract costs. Claims and unapproved change orders are recorded at estimated realizable value when collection is probable and canbe reasonably estimated. We do not recognize profits on construction costs incurred in connection with claims. Claims made by us involve negotiation and,in certain cases, litigation. Such litigation costs are expensed as incurred.Business Combinations. In accounting for business combinations, certain assumptions and estimates are employed in determining the fair value of assetsacquired, evaluating the fair value of liabilities assumed, as well as in determining the allocation of goodwill to the appropriate reporting unit. Theseestimates may be affected by factors such as changing market conditions affecting the industries in which we operate. The most significant assumptionsrequiring judgment involve identifying and estimating the fair value of intangible assets and the associated useful lives for establishing amortization periods.To finalize purchase accounting for significant acquisitions, we utilize the services of independent valuation specialists to assist in the determination of thefair value of acquired intangible assets.Valuation of Intangibles and Long-Lived Assets. We evaluate goodwill for potential impairment at least annually at year end, however, if impairmentindicators exist, we will evaluate as needed. In evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whetherit is more likely than not that the fair value of a reporting unit is greater than its carrying value. If we determine that it is more likely than not that the carryingvalue of a reporting unit is greater than its fair value, then we perform an impairment test by calculating the fair value of the reporting unit and comparing thiscalculated fair value with the carrying value of the reporting unit. We estimate the fair value of the reporting unit based on the market approach and incomeapproach. Included in this evaluation are certain assumptions and estimates to determine the fair values of reporting units such as estimates of future cashflows and discount rates, as well as assumptions and estimates related to the valuation of other identified intangible assets. Changes in these assumptions andestimates or significant changes to the market value of our common stock could materially impact our results of operations or financial position. We did notrecord goodwill impairment during the years ended September 30, 2016, 2015 or 2014.Each reporting period, we assess impairment indicators related to long-lived assets and intangible assets. If we determine impairment indicators exist, weconduct an evaluation to determine whether any impairment has occurred. This evaluation includes certain assumptions and estimates to determine fair valueof asset groups, including estimates about future cash flows and discount rates, among others. Changes in these assumptions and estimates could materiallyimpact our results of operations or financial projections. No impairment charges were recorded in the years ended September 30, 2016, 2015 or 2014.Current and Non-Current Accounts Receivable and Provision for Doubtful Accounts. We provide an allowance for doubtful accounts for unknowncollection issues, in addition to reserves for specific accounts receivable where collection is considered doubtful. Inherent in the assessment of the allowancefor doubtful accounts are certain judgments and estimates including, among others, our customers’ access to capital, our customers’ willingness to pay,general economic conditions, and the ongoing relationships with our customers. In addition to these factors, the method of accounting for constructioncontracts requires the review and analysis of not only the net receivables, but also the amount of billings in excess of costs and costs in excess of billings. Theanalysis management utilizes to assess collectability of our receivables includes detailed review of older balances, analysis of days sales outstanding wherewe include in the calculation, in addition to accounts receivable 44Table of Contentsbalances net of any allowance for doubtful accounts, the level of costs in excess of billings netted against billings in excess of costs, and the ratio of accountsreceivable, net of any allowance for doubtful accounts plus the level of costs in excess of billings, to revenues. These analyses provide an indication of thoseamounts billed ahead of or behind the recognition of revenue on our construction contracts and are important to consider in understanding the operationalcash flows related to our revenue cycle.Risk-Management. We are insured for workers’ compensation, automobile liability, general liability, construction defects, pollution, employment practicesand employee-related health care claims, subject to deductibles. Our general liability program provides coverage for bodily injury and property damage.Losses up to the deductible amounts are accrued based upon our estimates of the liability for claims incurred and an estimate of claims incurred but notreported. The accruals are derived from actuarial studies, known facts, historical trends and industry averages utilizing the assistance of an actuary todetermine the best estimate of the ultimate expected loss. We believe such accruals to be adequate; however, insurance liabilities are difficult to assess andestimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of incidentsincurred but not reported and the effectiveness of our safety program. Therefore, if actual experience differs from the assumptions used in the actuarialvaluation, adjustments to the reserve may be required and would be recorded in the period that the experience becomes known.Valuation Allowance for Deferred Tax Assets. We regularly evaluate valuation allowances established for deferred tax assets for which future realization isuncertain. We perform this evaluation quarterly. The estimation of required valuation allowances includes estimates of future taxable income. In assessing therealizability of deferred tax assets at September 30, 2016, we concluded, based upon the assessment of positive and negative evidence, that it is more likelythan not that the Company will generate sufficient table income within the applicable NOL carryforward periods to realize $93.5 million of its deferred taxassets. We considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.Over the ten-year period from 2004 through 2013, the Company reported net losses each year, finally returning to profitability in the year ended September30, 2014. Because of this substantial history of losses, a substantial amount of positive evidence regarding current and future earnings is required to outweighthe significant negative evidence associated with our historical losses. For the year ended September 30, 2016, we reported a 35% increase in pretax incomecompared with the prior year. As shown in our Selected Financial Data table in Item 6 of this form 10-K, our earnings have improved. In 2016, we completedfour acquisitions. As of the end of the fourth quarter 2016, all four 2016 acquisitions have been successfully integrated, and are contributing to theCompany’s profitability. The largest of these acquisitions, Technibus, was acquired near the end of the third quarter of fiscal 2016, and we expect to benefitfrom a full year of Technibus operations in fiscal 2017. Improving results at the Company’s existing operations, as well as the integration of newly acquiredbusinesses, have led to an increase in both current year actual and forecasted earnings. These 2016 developments, combined with the wind-down over thepast few years of several underperforming branches closed in our 2011 restructuring, which generated significant historical losses, have led us to concludethat the more recent positive evidence now outweighs the historical negative evidence, and it is more likely than not that we will generate sufficient taxableincome to utilize $93.5 million of deferred tax assets.The release of the valuation allowance has been recorded as an income tax benefit in 2016, resulting in a benefit of $109.0 million, including $16.0 millionrelated to current year activity. This benefit has resulted in a negative effective tax rate for the year ended September 30, 2016. As such, we expect oureffective tax rate to increase in subsequent periods. However, this valuation allowance release has no impact on the amount of cash paid for income taxes. Aninability to generate sufficient taxable income in future periods to realize our deferred tax assets may lead to a future need for a valuation allowance, and acorresponding reduction in GAAP net income. Further, any future reduction in the federal statutory tax rate could also cause a reduction in the economicbenefit of the NOL available to us, and a corresponding charge to reduce the book value of the deferred tax asset recorded on our balance sheet. 45Table of ContentsIncome Taxes. GAAP specifies the methodology by which a company must identify, recognize, measure and disclose in its financial statements the effects ofany uncertain tax return reporting positions that it has taken or expects to take. GAAP requires financial statement reporting of the expected future taxconsequences of uncertain tax return reporting positions on the presumption that all relevant tax authorities possess full knowledge of those tax reportingpositions, as well as all of the pertinent facts and circumstances, but it prohibits discounting of any of the related tax effects for the time value of money.The evaluation of a tax position is a two-step process. The first step is the recognition process to determine if it is more likely than not that a tax position willbe sustained upon examination by the appropriate taxing authority, based on the technical merits of the position. The second step is a measurement processwhereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit/expense to recognize in thefinancial statements. The tax position is measured at the largest amount of benefit/expense that is more likely than not of being realized upon ultimatesettlement.We are currently not under federal audit by the Internal Revenue Service. The tax years ended September 30, 2013 and forward are subject to audit as areprior tax years, to the extent of unutilized net operating losses generated in those years.We anticipate that approximately $3.7 million in liabilities for unrecognized tax benefits, including accrued interest, may be reversed in the next twelvemonths. This reversal is predominantly due to the expiration of the statutes of limitation for unrecognized tax benefits.New Accounting Pronouncements. Recent accounting pronouncements are described in Note 2, “Summary of Significant Accounting Policies — NewAccounting Pronouncements” in the notes to our Consolidated Financial Statements, and at relevant sections in this discussion and analysis. Item 7A.Quantitative and Qualitative Disclosures About Market RiskManagement is actively involved in monitoring exposure to market risk and continues to develop and utilize appropriate risk management techniques. Ourexposure to significant market risks includes fluctuations in labor costs, and commodity prices for copper, aluminum, steel and fuel. Commodity price risksmay have an impact on our results of operations due to the fixed price nature of many of our contracts. We are also exposed to interest rate risk with respect toour outstanding debt obligations on the Credit Facility. For additional information see “Risk Factors” in Item 1A of this Form 10-K.Commodity RiskOur exposure to significant market risks includes fluctuations in commodity prices for copper, aluminum, steel and fuel. Commodity price risks may have animpact on our results of operations due to fixed nature of many of our contracts. Over the long-term, we expect to be able to pass along a portion of thesecosts to our customers, as market conditions in the construction industry will allow.Interest Rate RiskWe are subject to interest rate risk on our floating interest rate borrowings. Floating rate debt, where the interest rate fluctuates periodically, exposes us toshort-term changes in market interest rates.All of the long-term debt outstanding under our Credit Facility is structured on floating interest rate terms. A one percentage point increase in the interestrates on our long-term debt outstanding under our Credit Facility as of September 30, 2016 would cause a $0.3 million pre-tax annual increase in interestexpense. 46Table of ContentsItem 8.Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm 48 Consolidated Balance Sheets 50 Consolidated Statements of Comprehensive Income 51 Consolidated Statements of Stockholders’ Equity 52 Consolidated Statements of Cash Flows 53 Notes to Consolidated Financial Statements 54 47Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Stockholders ofIES Holdings, Inc. and subsidiariesWe have audited the accompanying consolidated balance sheets of IES Holdings, Inc. and subsidiaries (“the Company”) as of September 30, 2016 and 2015,and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period endedSeptember 30, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of IESHoldings, Inc. and subsidiaries at September 30, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the threeyears in the period ended September 30, 2016, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), IES Holdings, Inc. andsubsidiaries internal control over financial reporting as of September 30, 2016, based on criteria established in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 9, 2016 expressed anunqualified opinion thereon.s/ ERNST & YOUNG LLP Houston, TexasDecember 9, 2016 48Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of IES Holdings, Inc. and subsidiaries:We have audited IES Holdings, Inc. and subsidiaries (the “Company”) internal control over financial reporting as of September 30, 2016, based on criteriaestablished in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013framework) (the COSO criteria). IES Holdings, Inc. and subsidiaries management is responsible for maintaining effective internal control over financialreporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report onInternal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on ouraudit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testingand evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on theeffectiveness of internal controls over financial reporting did not include the internal controls over Calumet Armature & Electric, LLC, Shanahan Mechanicaland Electrical, Inc., STR Mechanical, LLC, and Technibus, Inc. acquired during the year ended September 30, 2016, which are included in the 2016consolidated financial statements of the Company. Excluding goodwill and intangible assets, these businesses constituted 7% of consolidated total assets asof September 30, 2016 and 5% of consolidated revenues of IES Holdings, Inc. and subsidiaries for the year then ended. Our audit of internal control overfinancial reporting of IES Holdings, Inc. and subsidiaries also did not include the evaluation of the internal control over financial reporting of thesebusinesses referred to above.In our opinion, IES Holdings, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 30,2016, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof IES Holdings, Inc. and subsidiaries as of September 30, 2016 and 2015, and the related consolidated statements of comprehensive income, stockholders’equity and cash flows for each of the three years in the period ended September 30, 2016 and our report dated December 9, 2016 expressed an unqualifiedopinion thereon./s/ ERNST & YOUNG LLPHouston, TexasDecember 9, 2016 49Table of ContentsIES HOLDINGS, INC. AND SUBSIDIARIESConsolidated Balance Sheets(In Thousands, Except Share Information) September 30,2016 September 30,2015 ASSETS CURRENT ASSETS: Cash and cash equivalents $32,961 $49,360 Restricted cash 260 — Accounts receivable: Trade, net of allowance 124,368 92,976 Retainage 20,135 17,453 Inventories 13,236 13,977 Costs and estimated earnings in excess of billings 15,554 12,318 Prepaid expenses and other current assets 3,214 2,956 Total current assets 209,728 189,040 Property and equipment, net 15,694 11,683 Goodwill 39,936 17,249 Intangible assets, net 31,723 4,723 Deferred tax assets 93,549 — Other non-current assets 3,710 2,984 Total assets $394,340 $225,679 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses 108,822 82,910 Current maturities of long-term debt — 4 Billings in excess of costs and estimated earnings 24,229 25,165 Total current liabilities 133,051 108,079 Long-term debt, net of current maturities 29,257 9,203 Other non-current liabilities 6,832 6,983 Total liabilities 169,140 124,265 Noncontrolling interest 1,795 — STOCKHOLDERS’ 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; 22,049,529 and 22,049,529 shares issued and21,456,539 and 21,475,741 outstanding, respectively 220 220 Treasury stock, at cost, 592,990 and 573,788 shares, respectively (4,781) (4,401) Additional paid-in capital 195,221 193,628 Retained earnings (deficit) 32,745 (88,033) Total stockholders’ equity 223,405 101,414 Total liabilities and stockholders’ equity $394,340 $225,679 The accompanying notes are an integral part of these Consolidated Financial Statements. 50Table of ContentsIES HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Comprehensive Income(In Thousands, Except Share Information) Years Ended September 30, 2016 2015 2014 Revenues $695,993 $573,857 $512,395 Cost of services 569,013 473,966 429,269 Gross profit 126,980 99,891 83,126 Selling, general and administrative expenses 100,558 81,416 75,571 Contingent consideration expense 652 — — (Gain) loss on sale of assets 810 (13) (86) Income from operations 24,960 18,488 7,641 Interest and other (income) expense: Interest expense 1,282 1,130 1,574 Other (income) expense, net (83) (180) (203) Income from continuing operations before income taxes 23,761 17,538 6,270 Provision (benefit) for income taxes (97,117) 661 748 Net income from continuing operations 120,878 16,877 5,522 Net loss from discontinued operations — (339) (198) Net income 120,878 16,538 5,324 Net income attributable to noncontrolling interest (100) — — Net income attributable to IES Holdings, Inc. 120,778 16,538 5,324 Unrealized gain (loss) on interest hedge, net of tax — 2 (19) Comprehensive income attributable to IES Holdings, Inc. $120,778 $16,540 $5,305 Income (loss) per share: Continuing operations $5.63 $0.79 $0.30 Discontinued operations — (0.02) (0.01) Basic $5.63 $0.77 $0.29 Diluted income (loss) per share: Continuing operations $5.62 $0.79 $0.30 Discontinued operations — (0.02) (0.01) Diluted $5.62 $0.77 $0.29 Shares used in the computation of income (loss) per share Basic 21,279,342 21,480,622 18,417,564 Diluted 21,492,339 21,526,188 18,473,420 The accompanying notes are an integral part of these Consolidated Financial Statements. 51Table of ContentsIES HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Stockholders’ Equity(In Thousands, Except Share Information) Common Stock Treasury Stock APIC AccumulatedOtherComprehensiveIncome (Loss) RetainedEarnings(Deficit) TotalStockholders’Equity Shares Amount Shares Amount BALANCE, September 30, 2013 18,203,379 $182 (259,057) $(2,332) $174,514 $17 $(109,895) $62,486 Grants under compensation plans — — 13,500 117 (117) — — — Acquisition of treasury stock — — (36,272) (179) — — — (179) Non-cash compensation — — — — 711 — — 711 Interest rate swap — — — — — (19) — (19) Shares issued in rights offering 3,846,150 38 — — 19,611 — — 19,649 Net income attributable to IES Holdings, Inc. — — — — — — 5,324 5,324 BALANCE, September 30, 2014 22,049,529 $220 (281,829) $(2,394) $194,719 $(2) $(104,571) $87,972 Grants under compensation plans — — 207,874 1,615 (1,615) — — — Acquisition of treasury stock — — (499,833) (3,622) — — — (3,622) Non-cash compensation — — — — 524 — — 524 Interest rate swap — — — — 2 — 2 Shares issued in rights offering — — — — — — — — Net income attributable to IES Holdings, Inc. — — — — — — 16,538 16,538 BALANCE, September 30, 2015 22,049,529 $220 (573,788) $(4,401) $193,628 $— $(88,033) $101,414 Grants under compensation plans — — 5,670 44 (44) — — — Acquisition of treasury stock — — (59,872) (685) 95 — — (590) Stock forfeitures — — (7,500) (72) 72 — — — Options exercised — — 42,500 333 (113) — — 220 Non-cash compensation — — — — 1,583 — 1,583 Net income attributable to IES Holdings, Inc. — — — — — 120,778 120,778 BALANCE, September 30, 2016 22,049,529 $220 (592,990) $(4,781) $195,221 $— $32,745 $223,405 The accompanying notes are an integral part of these Consolidated Financial Statements. 52Table of ContentsIES HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(In Thousands) Years Ended September 30, 2016 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $120,878 $16,538 $5,324 Adjustments to reconcile net income to net cash provided by operating activities: Bad debt expense 360 269 170 Deferred financing cost amortization 345 316 385 Depreciation and amortization 5,664 2,509 2,526 Loss on sale of assets 810 67 218 Non-cash compensation expense 1,583 524 711 Deferred income taxes (98,402) — — Changes in operating assets and liabilities Accounts receivable (22,439) (15,115) (4,137) Inventories 3,897 2,526 3,788 Costs and estimated earnings in excess of billings (3,236) (3,727) (256) Prepaid expenses and other current assets (1,716) (1,902) 2,295 Other non-current assets (1,500) 120 592 Accounts payable and accrued expenses 19,676 6,654 39 Billings in excess of costs and estimated earnings (936) 3,313 1,176 Other non-current liabilities (16) (586) (233) Net cash provided by operating activities 24,968 11,506 12,598 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,417) (2,779) (1,982) Proceeds from sales of assets 2,225 — — Cash paid in conjunction with business combination (59,544) (3,113) — Net cash used in investing activities (60,736) (5,892) (1,982) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of debt 20,289 26 — Repayments of debt (290) — (3,502) Purchase of treasury stock (590) (3,622) (179) Change in restricted cash (260) — — Issuance of shares 220 — 19,650 Net cash provided by (used in) financing activities 19,369 (3,596) 15,969 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16,399) 2,018 26,585 CASH AND CASH EQUIVALENTS, beginning of period 49,360 47,342 20,757 CASH AND CASH EQUIVALENTS, end of period $32,961 $49,360 $47,342 2016 2015 2014 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $1,009 $792 $1,149 Cash paid for income taxes (net) $1,415 $1,532 $732 The accompanying notes are an integral part of these Consolidated Financial Statements. 53Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts)1. BUSINESSDescription of the BusinessIES Holdings, Inc. is a holding company that owns and manages operating subsidiaries in business activities across a variety of end markets. Our operationsare currently organized into four principal business segments based upon the nature of our current services: • Communications — Nationwide provider of technology infrastructure products and services to large corporations and independent businesses. • Residential — Regional provider of electrical installation services for single-family housing and multi-family apartment complexes. • Commercial & Industrial — Provider of electrical and mechanical design, construction, and maintenance services to the commercial andindustrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market. • Infrastructure Solutions — Provider of electro-mechanical solutions for industrial operations.The words “IES”, the “Company”, “we”, “our”, and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our wholly-ownedsubsidiaries.Our Communications segment is a leading provider of network infrastructure services for data centers and other mission critical environments. Servicesoffered include the design, installation and maintenance of network infrastructure for the financial, medical, hospitality, government, high-techmanufacturing, educational and information technology industries, including for Fortune 500 companies. We also provide the design and installation ofaudio/visual, telephone, fire, wireless access and intrusion alarm systems as well as design/build, service and maintenance of data network systems. Weperform services across the United States from our 13 offices, which include our Communications headquarters located in Tempe, Arizona, allowing fordedicated onsite maintenance teams at our customers’ sites.Our Residential segment provides electrical installation services for single-family housing and multi-family apartment complexes and cable televisioninstallations for residential and light commercial applications. In addition to our core electrical construction work, the Residential segment also providesservices for the installation of residential solar power, both for new construction and existing residences. The Residential segment is made up of 32 locations,which include our Residential headquarters in Houston, Texas. These locations geographically cover the Sun-Belt, Western and Mid-Atlantic regions of theUnited States.Our Commercial & Industrial segment offers a broad range of expertise that enables us to provide a wide array of electrical and mechanical design,construction, and maintenance services to the commercial and industrial markets. The offerings under our design services platform range from budgetassistance to providing design build and LEED solutions to our end customers. These services are typically integrated with our construction services. Ourconstruction services range from the initial planning and procurement to installation and start-up. The construction services are offered to a variety of newand remodel construction projects including transmission and distribution projects. The maintenance services offered include constant presence, criticalplant shutdown, troubleshooting, emergency testing, and preventative maintenance. We provide our services for a variety of project types, including: officebuildings, manufacturing facilities, data centers, chemical plants, refineries, wind farms, solar facilities and municipal infrastructure and health care facilities.The Commercial & Industrial segment consists of 20 locations, including the segment headquarters in Houston, Texas. These locations geographically coverTexas, Nebraska, Colorado, Oregon and the Southeast and Mid-Atlantic regions. 54Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Our Infrastructure Solutions segment provides electro-mechanical solutions for industrial operations to domestic and international customers. In particular,our electro-mechanical services include the maintenance and repair of alternating current (AC) and direct current (DC) electric motors and generators, as wellas power generating and distribution equipment; the manufacture, remanufacture, and repair of industrial lifting magnets; maintenance and repair of railroadmain and auxiliary generators, main alternators, and traction motors; and the manufacture of bus duct solutions used in power distribution. In April 2016,Infrastructure Solutions sold substantially all of the assets of its engine components business, which manufactured and remanufactured EMD-style powerassemblies for various engine types and offered premium replacement parts for power assemblies. This segment serves the steel, railroad, marine,petrochemical, pulp and paper, wind energy, mining, automotive, power generation, scrap yards, and utility industries. Infrastructure Solutions is comprisedof 10 locations, headquartered in Ohio. These locations geographically cover Alabama, Georgia, Indiana, Illinois, Ohio, West Virginia and California.Controlling ShareholderAt September 30, 2016, Tontine Associates, L.L.C. and its affiliates (collectively, “Tontine”), was the controlling shareholder of the Company’s commonstock. Accordingly, Tontine has the ability to exercise significant control over our affairs, including the election of directors and most actions requiring theapproval of shareholders, including the approval of any potential merger or sale of all or substantially all assets or segments of the Company, or the Companyitself. For a more complete discussion on our relationship with Tontine, please refer to Note 3, “Controlling Shareholder” in the notes to our ConsolidatedFinancial Statements.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of ConsolidationThe accompanying consolidated financial statements include the accounts of IES Holdings, Inc. and its wholly-owned subsidiaries. All significantintercompany accounts and transactions have been eliminated in consolidation.Asset ImpairmentDuring the fiscal years ended September 30, 2016, 2015 and 2014, the Company recorded no asset impairment charges.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires theuse of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent liabilities at the dateof the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Estimates are primarily used in our revenue recognition of construction in progress, fair value assumptions in accounting for business combinations andanalyzing goodwill, investments, intangible assets and long-lived asset impairments and adjustments, allowance for doubtful accounts receivable, stock-based compensation, reserves for legal matters, realizability of deferred tax assets, unrecognized tax benefits and self-insured claims liabilities and relatedreserves.Cash and Cash EquivalentsWe consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. 55Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) InventoriesInventories generally consist of raw materials, work in process, finished goods, and parts and supplies held for use in the ordinary course of business.Inventory is valued at the lower of cost or market generally using the historical average cost or first-in, first-out (FIFO) method. When circumstances dictate,we write down inventory to its estimated realizable value based on assumptions about future demand, market conditions, plans for disposal, and physicalcondition of the product. Where shipping and handling costs on inventory purchases are borne by us, these charges are included in inventory and charged tocost of services upon use in our projects or the providing of services.Securities and Equity InvestmentsOur investments in entities where we do not have the ability to exercise significant influence are accounted for using the cost method of accounting. Eachperiod, we evaluate whether an event or change in circumstances has occurred that may indicate an investment has been impaired. If, upon furtherinvestigation of such events, we determine the investment has suffered a decline in value that is other than temporary, we write down the investment to itsestimated fair value.Property and EquipmentAdditions of property and equipment are recorded at cost, and depreciation is computed using the straight-line method over the estimated useful life of therelated asset. Leasehold improvements are capitalized and depreciated over the lesser of the life of the lease or the estimated useful life of the asset.Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the usefullives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost andrelated accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statements of comprehensive income inthe caption (gain) loss on sale of assets.GoodwillGoodwill attributable to each reporting unit is tested for impairment by comparing the fair value of each reporting unit with its carrying value. Theseimpairment tests are required to be performed at least annually. On an ongoing basis (absent any impairment indicators), we perform an impairment testannually using a measurement date of September 30. In evaluating goodwill for impairment, we have the option to first assess qualitative factors to determinewhether it is more likely than not that the fair value of a reporting unit is greater than its carrying value. If we determine that it is more likely than not that thecarrying value of a reporting unit is greater than its fair value, then we perform an impairment test by calculating the fair value of the reporting unit andcomparing this calculated fair value with the carrying value of the reporting unit.We estimate the fair value of the reporting unit based on both a market approach and an income approach, using discounted estimated future cash flows. Themarket approach uses market multiples of enterprise value to earnings before interest, taxes, depreciation and amortization for comparable publicly tradedcompanies. The income approach relies on significant estimates for future cash flows, projected long-term growth rates, and the weighted average cost ofcapital.Intangible AssetsIntangible assets with definite lives are amortized over their estimated useful lives based on expected economic benefit with no residual value. Customerrelationships are amortized assuming gradual attrition. Intangible assets 56Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) with indefinite lives are not subject to amortization. We perform a test for impairment annually, or more frequently when indicators of impairment are present.Debt Issuance CostsDebt issuance costs are included as a reduction of our debt outstanding, and are amortized to interest expense over the scheduled maturity of the debt.Amortization expense of debt issuance costs was $345, $317 and $385, respectively, for the years ended 2016, 2015 and 2014. Remaining unamortizedcapitalized debt issuance costs were $976 and $1,031 at September 30, 2016, and September 30, 2015, respectively.Revenue RecognitionRevenue is generally recognized once the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the product hasoccurred or services have been rendered, (iii) the price of the product or service is fixed and determinable, and (iv) collectability is reasonably assured. Costsassociated with these services are recognized within the period they are incurred.We recognize revenue on project contracts using the percentage of completion method. Project contracts generally provide that customers accept completionof progress to date and compensate us for services rendered measured in terms of units installed, hours expended or some other measure of progress. Werecognize revenue on both signed contracts and change orders. A discussion of our treatment of claims and unapproved change orders is described later inthis section. Percentage of completion for construction contracts is measured principally by the percentage of costs incurred and accrued to date for eachcontract to the estimated total cost for each contract at completion. We generally consider contracts to be substantially complete upon departure from thework site and acceptance by the customer. Contract costs include all direct material, labor and insurance costs and those indirect costs related to contractperformance, such as indirect labor, supplies, tools, repairs and depreciation costs. Changes in job performance, job conditions, estimated contract costs andprofitability and final contract settlements may result in revisions to costs and income and the effects of these revisions are recognized in the period in whichthe revisions are determined. Provisions for total estimated losses on uncompleted contracts are made in the period in which such losses are determined. Thebalances billed but not paid by customers pursuant to retainage provisions in project contracts will be due upon completion of the contracts and acceptanceby the customer. Based on our experience, the retention balance at each balance sheet date will be collected within the subsequent fiscal year.Certain divisions in the Residential and Infrastructure Solutions segments use the completed contract method of accounting because the duration of theircontracts are short in nature. We recognize revenue on completed contracts when the project is complete and billable to the customer. Provisions forestimated losses on these contracts are recorded in the period such losses are determined.The current asset “Costs and estimated earnings in excess of billings” represents revenues recognized in excess of amounts billed which managementbelieves will generally be billed and collected within the next twelve months. Also included in this asset, from time to time, are claims and unapprovedchange orders which are amounts we are in the process of collecting from our customers or agencies for changes in contract specifications or design, contractchange orders in dispute or unapproved as to scope and price, or other related causes of unanticipated additional contract costs. Claims are limited to costsincurred and are recorded at estimated realizable value when collection is probable and can be reasonably estimated. We do not recognize profits on projectcosts incurred in connection with claims. Claims made by us involve negotiation and, in certain cases, litigation. Such litigation costs are expensed asincurred. As of September 30, 2016, 2015 and 2014, there were 57Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) no material revenues recorded associated with any outstanding claims. The current liability “Billings in excess of costs and estimated earnings” representsbillings in excess of revenues recognized. Costs and estimated earnings in excess of billings are amounts considered recoverable from customers based ondifferent measures of performance, including achievement of specific milestones, completion of specified units or at the completion of the contract.Accounts Receivable and Allowance for Doubtful AccountsWe record accounts receivable for all amounts billed and not collected. Generally, we do not charge interest on outstanding accounts receivable; however,from time to time we may believe it necessary to charge interest on a case by case basis. Additionally, we provide an allowance for doubtful accounts forspecific accounts receivable where collection is considered doubtful as well as for general unknown collection issues based on historical trends. Accountsreceivable not determined to be collectible are written off as deemed necessary in the period such determination is made. As is common in our industry, someof these receivables are in litigation or require us to exercise our contractual lien rights in order to collect. These receivables are primarily associated with afew branches within our Commercial & Industrial segment. Certain other receivables are slow-pay in nature and require us to exercise our contractual or lienrights. Our allowance for doubtful accounts at September 30, 2016 and 2015 was $736 and $842, respectively. We believe that our allowance for doubtfulaccounts is sufficient to cover uncollectible receivables as of September 30, 2016.Comprehensive IncomeComprehensive income includes all changes in equity during a period except those resulting from investments by and distributions to stockholders.Income TaxesWe follow the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recorded for thefuture income tax consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities, and are measuredusing enacted tax rates and laws.We regularly evaluate valuation allowances established for deferred tax assets for which future realization is uncertain. We perform this evaluation on aquarterly basis. The estimation of required valuation allowances includes estimates of future taxable income. In assessing the realizability of deferred taxassets at September 30, 2016, we concluded, based upon the assessment of positive and negative evidence, that it is more likely than not that the Companywill generate sufficient taxable income within the applicable NOL carryforward periods to realize its net deferred tax assets of $93,549. We considered thescheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. If actual future taxableincome is different from these estimates, our results could be affected.On May 12, 2006, we had a change in ownership as defined in Internal Revenue Code Section 382. Internal Revenue Code Section 382 limits the utilizationof net operating losses that existed as of the change in ownership in tax periods subsequent to the change in ownership. As such, our utilization after thechange date of net operating losses in existence as of the change in ownership is subject to Internal Revenue Code Section 382 limitations for federal incometaxes and some state income taxes.Risk ManagementWe retain the risk for workers’ compensation, employer’s liability, automobile liability, construction defects, general liability and employee group healthclaims, as well as pollution coverage, resulting from uninsured 58Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) deductibles per accident or occurrence which are subject to annual aggregate limits. Our general liability program provides coverage for bodily injury andproperty damage. Losses up to the deductible amounts are accrued based upon our known claims incurred and an estimate of claims incurred but not reported.Each year, we compile our historical data pertaining to the insurance experiences and actuarially develop the ultimate loss associated with our insuranceprograms other than pollution coverage for our Infrastructure Solutions segment. We believe that the actuarial valuation provides the best estimate of theultimate losses to be expected under these programs.The undiscounted ultimate losses of our workers’ compensation, auto and general liability insurance reserves at September 30, 2016 and 2015, was$5,223 and $4,465, respectively. Based on historical payment patterns, we expect payments of undiscounted ultimate losses to be made as follows: Year Ended September 30: 2017 $1,827 2018 1,183 2019 625 2020 403 2021 216 Thereafter 969 Total $5,223 We elect to discount the ultimate losses above to present value using an approximate risk-free rate over the average life of our insurance claims. For the yearsended September 30, 2016 and 2015, the discount rate used was 1.1 percent and 1.4 percent, respectively. The present value of all insurance reserves for theemployee group health claims, workers’ compensation, auto and general liability recorded at September 30, 2016 and 2015 was $5,464 and $4,518,respectively. Our employee group health claims are anticipated to be resolved within the year ended September 30, 2017.We had letters of credit totaling $6,126 outstanding at September 30, 2016 to collateralize certain of our high deductible insurance obligations.Realization of Long-Lived AssetsWe evaluate the recoverability of property and equipment and other long-lived assets as facts and circumstances indicate that any of those assets might beimpaired. If an evaluation is required for our assets we plan to hold and use, the estimated future undiscounted cash flows associated with the asset arecompared to the asset’s carrying amount to determine if an impairment of such property has occurred. The effect of any impairment would be to expense thedifference between the fair value of such property and its carrying value. Estimated fair values are determined based on expected future cash flows discountedat a rate we believe incorporates the time value of money, the expectations about future cash flows and an appropriate risk premium.For the years ended September 30, 2016, 2015 and 2014, no indicators of impairments were identified, and no impairment charges were recorded.Risk ConcentrationFinancial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash deposits and accounts receivable. Throughdelayed payment terms, we at times grant credit, usually without 59Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) collateral, to our customers, who are generally large public companies, contractors and homebuilders throughout the United States. Consequently, we aresubject to potential credit risk related to changes in business and economic factors throughout the United States, specifically, within the construction,homebuilding and mission critical facility markets. However, we are entitled to payment for work performed and generally have certain lien rights in thatwork. Further, management believes that its contract acceptance, billing and collection policies are adequate to manage potential credit risk. We routinelymaintain cash balances in financial institutions in excess of federally insured limits. We periodically assess the financial condition of these institutions wherethese funds are held and believe the credit risk is minimal. We maintain the majority of our cash and cash equivalents in money market mutual funds. Therecan be no assurance, however, that we will not be adversely affected by credit risks we face.No single customer accounted for more than 10% of our consolidated revenues for the years ended September 30, 2016, 2015 and 2014.Fair Value of Financial InstrumentsOur financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, investments, accounts payable, and a loan agreement.We believe that the carrying value of financial instruments, with the exception of our cost method investment in EnerTech Capital Partners II L.P.(“Enertech”), a private investment fund, in the accompanying Consolidated Balance Sheets, approximates their fair value due to their short-term nature. Thecarrying value of our debt approximates fair value, as debt incurs interest at a variable rate.We estimate the fair value of our investment in EnerTech (Level 3) using quoted market prices for underlying publicly traded securities, and estimatedenterprise values determined using cash flow projections and market multiples of the underlying non-public companies. For additional information, pleaserefer to Note 6, “Detail of Certain Balance Sheet Accounts — Securities and Equity Investments — Investment in EnerTech.”Stock-Based CompensationWe measure and record compensation expense for all share-based payment awards based on the fair value of the awards granted, net of estimated forfeitures,at the date of grant. We calculate the fair value of stock options using a binomial option pricing model. The fair value of restricted stock awards and phantomstock unit awards is determined based on the number of shares granted and the closing price of IES’s common stock on the date of grant. For awards vestingupon achievement of a market condition, the likelihood of achieving that market condition is considered in determining the fair value of the grant, which weexpense ratably over the vesting period. For awards vesting upon achievement of a performance condition, we record expense based on the grant date fairvalue when it becomes probable the performance condition will be achieved. Forfeitures are estimated at the time of grant and revised as deemed necessary.The resulting compensation expense from discretionary awards is recognized on a straight-line basis over the requisite service period, which is generally thevesting period.Deferred Compensation PlansThe Company maintains a rabbi trust to fund certain deferred compensation plans. The securities held by the trust are classified as trading securities. Theinvestments are recorded at fair value and are classified as other non-current assets in the accompanying Consolidated Balance Sheets as of September 30,2016 and 2015. The changes in fair values are recorded as a component of other income (expense) in the Consolidated Statements of Comprehensive Income. 60Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) The corresponding deferred compensation liability is included in other non-current liabilities on the Consolidated Balance Sheets and changes in thisobligation are recognized as adjustments to compensation expense in the period in which they are determined.New Accounting PronouncementsIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), a comprehensive new revenue recognitionstandard which will supersede previous existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requirescompanies to exercise judgment when considering contract terms and relevant facts and circumstances. The standard also requires expanded disclosuressurrounding revenue recognition. The effective date will be the first quarter of our fiscal year ended September 30, 2019. The standard allows for either fullretrospective or modified retrospective adoption, and we currently plan to use the modified retrospective basis on the adoption date. We are currentlyevaluating the impact of the adoption of this standard on our consolidated financial statements.In April 2015, the FASB issued ASU No. 2015-03, Interest — Imputation Of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”),which requires that debt issuance costs be presented as a direct deduction from the carrying amount of the related debt liability, consistent with thepresentation of debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as other assets, separate from therelated debt liability. ASU 2015-03 does not change the recognition and measurement requirements for debt issuance costs. In August 2015, the FASB issuedan update (ASU 2015-15) to address revolving lines of credit which may not have outstanding balances. This update allows an entity presenting the cost ofsecuring a revolving line of credit as an asset, regardless of whether a balance is outstanding. The standard was effective for fiscal years beginning afterDecember 15, 2015 on a retrospective basis. The Company adopted this update retrospectively during the period ended September 30, 2016. This adoptionresulted in reductions of $976 and $1,031 at September 30, 2016 and 2015, respectively, of both Other non-current assets and Long term debt in theConsolidated Balance Sheets.In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-PeriodAdjustments (ASU 2015-16), which eliminates the requirement that an acquirer in a business combination account for measurement-period adjustmentsretrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment,including the effect on earnings of any amounts it would have recorded in previous periods if the accounting had been completed at the acquisition date. Theupdate is effective for fiscal years beginning after December 15, 2015. The Company adopted this presentation during the period ended September 30, 2016on a prospective basis. The adoption of this update did not have a material impact on our results of operations or financial position.In November 2015, the FASB issued amended guidance that clarifies that in a classified statement of financial position, an entity shall classify deferred taxliabilities and assets as noncurrent amounts. The Company adopted this presentation during the period ended December 31, 2015. Prior periods have notbeen retrospectively adjusted. At December 31, 2015, the implementation of this guidance resulted in a decrease to prepaid expenses and other current assetsand corresponding increase to other non-current assets of $55.In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). Under ASU 2016-02, lessees will need to recognize a right-of-use asset and alease liability for all of their leases, other than those that meet the definition of a short-term lease. For income statement purposes, leases must be classified aseither operating or finance. Operating leases will result in straight-line expense, similar to current operating leases, while finance 61Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) leases will result in a front-loaded expense pattern, similar to current capital leases. ASU 2016-02 becomes effective for the fiscal year ended September 30,2020. We are currently evaluating whether to early adopt the standard and what impact it will have on our consolidated financial statements.In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (“ASU 2016-09”). ASU 2016-09 eliminates additional paid incapital pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. The accountingfor an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and the accounting for forfeitures is also changing.ASU 2016-09 is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We expect to early adopt ASU 2016-09 in theyear ended September 30, 2017. The adoption of this update is not expected to have a material impact on our results of operations, financial position or cashflows.3. CONTROLLING SHAREHOLDERAt September 30, 2016, Tontine was the controlling shareholder of the Company’s common stock. Accordingly, Tontine has the ability to exercisesignificant control over our affairs, including the election of directors and most actions requiring the approval of shareholders.While Tontine is subject to restrictions under federal securities laws on sales of its shares as an affiliate, in 2013, the Company filed a shelf registrationstatement pursuant to a registration rights agreement to register certain of Tontine’s shares. The shelf registration statement was declared effective by the SECon June 18, 2013. As long as the shelf registration statement remains effective, Tontine has the ability to resell any or all of its registered shares from time totime in one or more offerings, as described in the shelf registration statement and in any prospectus supplement filed in connection with an offering pursuantto the shelf registration statement.Should Tontine sell or otherwise dispose of all or a portion of its position in IES, a change in ownership could occur. A change in ownership, as defined byInternal Revenue Code Section 382, could reduce the availability of net operating losses (“NOLs”) for federal and state income tax purposes. On November 8,2016, the Company implemented a new tax benefit protection plan (the “NOL Rights Plan”), following expiration of the Company’s prior tax benefitprotection plan, which was implemented in January 2013. Like the prior plan, the NOL Rights Plan was designed to deter an acquisition of the Company’sstock in excess of a threshold amount that could trigger a change of control within the meaning of Internal Revenue Code Section 382. There can be noassurance that the NOL Rights Plan will be effective in deterring a change of control or protecting the NOLs. Furthermore, a change in control would triggerthe change of control provisions in a number of our material agreements, including our credit facility, bonding agreements with our sureties and ourseverance arrangements.Jeffrey L. Gendell was appointed as a member of the Board of Directors and as non-executive Chairman of the Board in November 2016. He is the managingmember and founder of Tontine and the brother of David B. Gendell, who has served as a member of the Board of Directors since February 2012 as non-executive Vice Chairman of the Board since November 2016 and as the Company’s non-executive Chairman of the Board from January 2015 to November2016. David B. Gendell is also an employee of Tontine. 62Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) 4. PROPERTY AND EQUIPMENTProperty and equipment consists of the following: EstimatedUseful Livesin Years Years Ended September 30, 2016 2015 Land N/A $876 $936 Buildings 5-20 3,825 4,120 Transportation equipment 3-5 2,395 1,320 Machinery and equipment 3-10 14,049 9,586 Leasehold improvements 5-10 2,632 2,314 Information systems 2-8 16,072 15,800 Furniture and fixtures 5-7 972 790 $40,821 $34,866 Less-Accumulated depreciation (25,307) (23,212) Construction in progress 180 29 Property and equipment, net $15,694 $11,683 Depreciation expense from continuing operations was $2,727, $2,128 and $1,989, respectively, for the years ended September 30, 2016, 2015 and 2014.5. PER SHARE INFORMATIONBasic earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common sharesoutstanding during the period. If the effect is dilutive, participating securities are included in the computation of basic earnings per share. Our participatingsecurities do not have a contractual obligation to share in the losses in any given period. As a result, these participating securities will not be allocated anylosses in the periods of net losses, but will be allocated income in the periods of net income using the two-class method. 63Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) The following table reconciles the components of the basic and diluted loss per share for the years ended September 30, 2016, 2015 and 2014: Years Ended September 30, 2016 2015 2014 Numerator: Net income from continuing operations attributable to common shareholders of IESHoldings, Inc. $119,722 $16,792 $5,500 Net income from continuing operations attributable to restricted shareholders of IESHoldings, Inc. 1,056 85 22 Net income from continuing operations of IES Holdings, Inc. $120,778 $16,877 $5,522 Net loss from discontinued operations attributable to common shareholders of IESHoldings, Inc. $— $(339) $(198) Net loss from discontinued operations of IES Holdings, Inc. $— $(339) $(198) Net income attributable to common shareholders $119,722 $16,453 $5,302 Net income attributable to restricted shareholders 1,056 85 22 Net income of IES Holdings, Inc. $120,778 $16,538 $5,324 Denominator: Weighted average common shares outstanding — basic 21,279,342 21,480,622 18,417,564 Effect of dilutive stock options and non-vested restricted stock 212,997 45,566 55,856 Weighted average common and common equivalent shares outstanding — diluted 21,492,339 21,526,188 18,473,420 Basic earnings (loss) per share attributable to IES Holdings, Inc.: Basic earnings per share from continuing operations $5.63 $0.79 $0.30 Basic loss per share from discontinued operations $0.00 $(0.02) $(0.01) Basic earnings per share $5.63 $0.77 $0.29 Diluted earnings per share attributable to IES Holdings, Inc.: Diluted earnings per share from continuing operations $5.62 $0.79 $0.30 Diluted loss per share from discontinued operations $0.00 $(0.02) $(0.01) Diluted earnings per share $5.62 $0.77 $0.29 6. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTSActivity in our allowance for doubtful accounts on accounts and long-term receivables consists of the following: Years EndedSeptember 30, 2016 2015 Balance at beginning of period $842 $780 Additions to costs and expenses 360 416 Deductions for uncollectible receivables written off, net of recoveries (466) (354) Balance at end of period $736 $842 64Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Accounts payable and accrued expenses consist of the following: Years Ended September 30, 2016 2015 Accounts payable, trade $64,963 $47,033 Accrued compensation and benefits 26,827 22,527 Accrued insurance liabilities 5,464 4,518 Other accrued expenses 11,568 8,832 $108,822 $82,910 Contracts in progress are as follows: Years Ended September 30, 2016 2015 Costs incurred on contracts in progress $409,075 $329,942 Estimated earnings 48,618 37,576 457,693 367,518 Less — Billings to date (466,368) (380,365) Net contracts in progress $(8,675) $(12,847) Costs and estimated earnings in excess of billings 15,554 12,318 Less — Billings in excess of costs and estimated earnings (24,229) (25,165) Net contracts in progress $(8,675) $(12,847) Other non-current assets are comprised of the following: Years Ended September 30, 2016 2015 Deferred tax assets $— $147 Executive Savings Plan assets 599 617 Securities and equity investments 919 919 Other 2,192 1,301 Total $3,710 $2,984 Securities and Equity InvestmentsInvestment in EnerTechAt September 30, 2016 and 2015, we held an investment in EnerTech Capital Partners II L.P. (“EnerTech), a private investment fund. As our investment was2.21 % of the overall ownership in EnerTech at September 30, 2016 and 2015, we account for this investment using the cost method of accounting.EnerTech’s investment portfolio from time to time results in unrealized losses reflecting a possible, other-than-temporary, impairment of our investment. Thecarrying value of our investment in EnerTech at both September 30, 2016 and 2015 was $919. 65Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) The following table presents the reconciliation of the carrying value and unrealized gains (losses) to the fair value of the investment in EnerTech as ofSeptember 30, 2016 and 2015: Years EndedSeptember 30, 2016 2015 Carrying value $919 $919 Unrealized gains 159 66 Fair value $1,078 $985 At each reporting date, the Company performs an evaluation of impairment for securities to determine if any unrealized losses are other-than-temporary. Forequity securities, this evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has beenless than cost, the financial condition and near term prospects of the issuer and management’s ability and intent to hold the securities until fair valuerecovers. The assessment of the ability and intent to hold these securities to recovery focuses on liquidity needs, asset and liability management objectivesand securities portfolio objectives. Based on the results of this evaluation, we believe the unrealized gain at September 30, 2016 indicated our investmentwas not impaired.In December 2015, EnerTech’s general partner, with the consent of the fund’s investors, extended the fund through December 31, 2016. The fund is expectedto terminate on this date unless extended by the fund’s valuation committee. The fund may be extended for another one-year period through December 31,2017 with the consent of the fund’s valuation committee.7. DEBTDebt consists of the following: September 30, September 30, 2016 2015 Capital lease obligation $— $4 Revolving loan (long-term debt) 30,233 10,234 Debt issuance costs (976) (1,031) Total debt $29,257 $9,207 At September 30, 2016, we had $33,070 available to us under the Credit Facility (as defined below), $6,944 in outstanding letters of credit with Wells Fargoand $30,233 outstanding borrowings on our Revolving Loan under the Credit Facility (the “Revolving Loan”). All amounts outstanding under ourRevolving Loan are due and payable in 2019, upon expiration of the Credit Facility, and all amounts described as available are available without triggeringour financial covenant under the Credit Facility.For the years ended September 30, 2016, 2015 and 2014, we incurred interest expense of $1,282, $1,130 and $1,574, respectively.The Revolving Credit FacilityWe maintain a revolving credit facility with Wells Fargo Bank, N.A. (the “Credit Facility”), which is evidenced by an Amended and Restated Credit andSecurity Agreement (as amended, the “Credit Agreement”). During 66Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) fiscal 2016, we amended the maximum revolver amount under the Credit Facility from $60,000 to $70,000 and extended the maturity date by one year toAugust 9, 2019. In addition, as further described below, we amended the Credit Facility to reduce the interest rate charged, modify the calculation of amountsavailable, resulting in an increase in available borrowing capacity, create new minimum thresholds for Liquidity and Excess Availability (as defined in theCredit Agreement), and modify the thresholds of Liquidity (which, as defined in the Credit Agreement, is the aggregate amount of unrestricted cash and cashequivalents on hand plus Excess Availability) and Excess Availability below which the Company must maintain a specified Fixed Charge Coverage Ratio(as defined in the Credit Agreement).The Credit Facility is guaranteed by our subsidiaries and secured by first priority liens on substantially all of our subsidiaries’ existing and future acquiredassets, exclusive of collateral provided to our surety providers. The Credit Facility also restricts us from paying cash dividends and places limitations on ourability to repurchase our common stock.Terms of the Credit FacilityThe Credit Facility contains customary affirmative, negative and financial covenants, which were adjusted in the fiscal 2016 amendments. At September 30,2016, we were subject to the financial covenant under the Credit Facility requiring, at any time that our Liquidity is less than $14,000 or our ExcessAvailability is less than $7,000, that we maintain a Fixed Charge Coverage Ratio of not less than 1.0:1.0. Additionally, pursuant to amendments to the CreditFacility, we are required to maintain minimum Liquidity of $8,750 and Excess Availability of $4,380 at all times. At September 30, 2016, our Liquidity was$66,291 and our Excess Availability was $33,070, and as such, we were not required to maintain a Fixed Charge Coverage Ratio of 1.0:1.0 as of such date.Nonetheless, at September 30, 2016, our Fixed Charge Coverage Ratio was 17.6:1.0. Compliance with our Fixed Charge Coverage Ratio, while not requiredat September 30, 2016, provides us with the ability to use cash on hand or to draw on our Credit Facility such that we can fall below the Excess Availabilityand Liquidity minimum thresholds described above without violating our financial covenant.Our Fixed Charge Coverage Ratio is calculated as (i) our trailing twelve month EBITDA (as defined in the Credit Agreement), less non-financed capitalexpenditures (other than capital expenditures financed by means of an advance under the Credit Facility) cash taxes and certain pass-through tax liabilities,divided by (ii) the sum of our cash interest and principal debt payments (other than repayment of principal on advances under the Credit Facility) and allRestricted Junior Payments (as defined in the Credit Agreement) (other than pass-through tax liabilities) and other cash distributions. As defined in the CreditAgreement, EBITDA is calculated as consolidated net income (or loss), less extraordinary gains, interest income, non-operating income and income taxbenefits and decreases in any change in LIFO reserves, plus stock compensation expense, non-cash extraordinary losses, interest expense, income taxes,depreciation and amortization and increases in any change in LIFO reserves.If in the future our Liquidity or Excess Availability fall below $14,000 or $7,000, respectively, and at that time our Fixed Charge Coverage Ratio is less than1.0:1.0, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under our Credit Facility, it would result inan event of default under our Credit Facility, which could result in some or all of our indebtedness becoming immediately due and payable.Borrowings under the Credit Facility may not exceed a “borrowing base” that is determined monthly by our lenders based on available collateral, primarilycertain accounts receivables, inventories and personal property and equipment. Under the terms of the Credit Facility, amounts outstanding bear interest at aper annum rate 67Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) equal to a Daily Three Month LIBOR (as defined in the Credit Agreement), plus an interest rate margin, which is determined quarterly, based on the followingthresholds, which were adjusted in the fiscal 2016 amendments: Level Thresholds Interest Rate MarginI If Liquidity is less than $24,500 at any time during the period 2.25 percentage pointsII If Liquidity is greater than or equal to $24,500 at all times during the period and less than $35,000 at any timeduring the period 2.00 percentage pointsIII If Liquidity is greater than or equal to $35,000 at all times during the period 1.75 percentage pointsIn addition, we are charged monthly in arrears for (1) an unused commitment fee of 0.375% per annum, (2) a collateral monitoring fee ranging from $1 to $2,based on the then-applicable interest rate margin, (3) a letter of credit fee based on the then-applicable interest rate margin and (4) certain other fees andcharges as specified in the Credit Agreement.At September 30, 2016, the carrying value of amounts outstanding on our Credit Facility approximated fair value, as debt incurs interest at a variable rate.The fair value of the debt is classified as a Level 2 measurement.8. LEASESWe enter into operating leases for many of our facilities, vehicle and equipment needs. These leases allow us to retain cash, and we pay a monthly lease rentalfee. At the end of the lease, we have no further obligation to the lessor. We may cancel or terminate a lease before the end of its term. Typically, we would beliable to the lessor for various lease cancellation or termination costs and the difference between the fair market value of the leased asset and the impliedbook value of the leased asset as calculated in accordance with the lease agreement.For a discussion of leases with certain related parties which are included below, see Note 12, “Related-Party Transactions.”Rent expense was $5,868, $5,295 and $5,300 for the years ended September 30, 2016, 2015 and 2014, respectively.Future minimum lease payments under these non-cancelable operating leases with terms in excess of one year are as follows: Year Ended September 30: 2017 $6,617 2018 5,008 2019 3,811 2020 2,574 2021 1,282 Thereafter 2,345 Total $21,637 68Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) 9. INCOME TAXESFederal and state income tax provisions for continuing operations are as follows: Years Ended September 30, 2016 2015 2014 Federal: Current $762 $417 $183 Deferred (97,093) (564) 182 State: Current 952 729 554 Deferred (1,738) 79 (171) $(97,117) $661 $748 Actual income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate rate of 35 percent to income (loss)before income taxes as follows: Years Ended September 30, 2016 2015 2014 Provision (benefit) at the statutory rate $8,316 $6,139 $2,195 Increase resulting from: Alternative minimum tax — 417 — Non-deductible expenses 1,557 753 563 Long-lived assets — 69 — State income taxes, net of federal deduction 1,105 937 544 Contingent tax liabilities — 51 — Other — 54 — Decrease resulting from: Change in valuation allowance (108,987) (7,034) (2,547) Valuation allowance adjustment — acquisitions — (725) — Contingent tax liabilities (96) — (1) Other 988 — (6) $(97,117) $661 $748 69Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Deferred income tax provisions result from temporary differences in the recognition of income and expenses for financial reporting purposes and for incometax purposes. The income tax effects of these temporary differences, representing deferred income tax assets and liabilities, result principally from thefollowing: Years Ended September 30, 2016 2015 Deferred income tax assets: Allowance for doubtful accounts $280 $322 Accrued expenses 10,729 9,186 Net operating loss carryforward 86,280 99,610 Various reserves 1,410 1,169 Equity losses in affiliate 84 200 Share-based compensation 1,012 573 Capital loss carryforward 338 222 Intangible assets — 413 Other 3,185 1,744 Subtotal 103,318 113,439 Less valuation allowance 2,224 111,211 Total deferred income tax assets $101,094 $2,228 Deferred income tax liabilities: Property and equipment $1,517 $599 Intangible assets 5,629 1,084 Other 399 343 Total deferred income tax liabilities 7,545 2,026 Net deferred income tax assets (liabilities) $93,549 $202 In fiscal 2016, the valuation allowance on our deferred tax assets decreased by $108,987, which is included in our consolidated comprehensive incomestatement.In 2002, we adopted a tax accounting method change that allowed us to deduct goodwill for income tax purposes that had previously been classified as non-deductible. The accounting method change resulted in additional amortizable tax basis in goodwill. We believe the realization of the additional tax basis ingoodwill is not more likely than not and have not recorded a deferred tax asset. Although such a deferred tax asset has not been recorded through September30, 2016, we have derived a cumulative cash tax reduction of $11,487 from the change in tax accounting method and the subsequent amortization of theadditional tax goodwill. In addition, the amortization of the additional tax goodwill has resulted in additional federal net operating loss carry forwards of$142,052 and state net operating loss carry forwards of $11,227. We believe the realization of the additional net operating loss carry forwards is not morelikely than not and have not recorded a deferred tax asset. We have zero tax basis in additional tax goodwill that will be amortized during the year endedSeptember 30, 2017.As of September 30, 2016, we had available approximately $404,032 of federal net tax operating loss carry forward for federal income tax purposes,including $142,052 resulting from the additional amortization of tax goodwill. This carry forward, which may provide future tax benefits, will begin toexpire in 2025. On May 12, 2006, we had a change in ownership as defined in Internal Revenue Code Section 382. As such, our utilization after the changedate of our net operating loss in existence as of the change of control date was subject to Section 382 limitations for federal income taxes and some stateincome taxes. The annual limitation under 70Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Section 382 on the utilization of federal net operating losses was approximately $20,000 for the first five tax years subsequent to the change in ownershipand $16,000 thereafter. Approximately $299,904 of federal net operating losses will not be subject to this limitation. Also, after applying the Section 382limitation to available state net operating loss carry forwards, we had available approximately $85,929 state net tax operating loss carry forwards, including$11,227 resulting from the additional amortization of tax goodwill which begins to expire as of September 30, 2017. We have provided valuation allowanceson all net operating losses where it is determined it is more likely than not that they will expire without being utilized.In assessing the realizability of deferred tax assets at September 30, 2016, we considered whether it was more likely than not that some portion or all of thedeferred tax assets will not be realized. Our realization of deferred tax assets is dependent upon the generation of future taxable income during the periods inwhich these temporary differences become deductible. Over the ten-year period from 2004 through 2013, the Company reported net losses each year,returning to profitability in the year ended September 30, 2014. Because of this substantial history of losses, a substantial amount of positive evidenceregarding current and future earnings is required to outweigh the significant negative evidence associated with our historical losses. During the year endedSeptember 30, 2016, we completed four acquisitions, and as of the end of the fourth quarter 2016, all four 2016 acquisitions have been integrated, and arecontributing to the Company’s profitability. These newly acquired businesses, along with improving results at all of the Company’s existing operations, haveled to an increase in both current year actual and forecast earnings. These 2016 developments, combined with the wind-down over the past few years ofseveral underperforming branches closed in our 2011 restructuring, which generated significant historical losses, have led us to conclude that the more recentpositive evidence now outweighs the historical negative evidence, and it is more likely than not that we will generate sufficient taxable income to utilizecertain of our net operating loss carryforwards. As such, we have released $108,987 of valuation allowance in 2016, of which approximately $16,000 relatedto 2016 activity. As of September 30, 2016, we have provided $326 valuation allowances for federal deferred tax assets and $1,898 for certain state deferredtax assets. We believe that $7,157 and $388 of federal and state deferred tax assets, respectively, will be realized by offsetting reversing deferred taxliabilities. In addition, we have $550 of net state deferred tax assets that we expect will be realized, and therefore valuation allowances were not provided forthese assets. As a result, we have recorded a net deferred tax asset of $93,549 on our consolidated balance sheets. We will continue to evaluate theappropriateness of our remaining deferred tax assets and need for valuation allowances on a quarterly basis. Further, any future reduction in the federalstatutory tax rate could result in a charge to reduce the book value of the net deferred tax assets recorded on our consolidated balance sheet.As a result of the reorganization and related adjustment to the book basis in goodwill, we have tax basis in excess of book basis in amortizable goodwill ofapproximately $24,190. The tax basis in amortizable goodwill in excess of book basis is not reflected as a deferred tax asset. To the extent the amortization ofthe excess tax basis results in a cash tax benefit, the benefit will first go to reduce goodwill, then other long-term intangible assets, and then tax expense.GAAP requires financial statement reporting of the expected future tax consequences of uncertain tax return reporting positions on the presumption that allrelevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but it prohibitsdiscounting of any of the related tax effects for the time value of money. The evaluation of a tax position is a two-step process. The first step is therecognition process to determine if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority,based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than notrecognition threshold is calculated to determine the amount of benefit/expense to recognize in the financial statements. The tax position is measured at thelargest amount of benefit/expense that is more likely than not of being realized upon ultimate settlement. 71Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) A reconciliation of the beginning and ending balances of unrecognized tax benefit is as follows: Years EndedSeptember 30, 2016 2015 Balance at October 1, $55,963 $56,079 Additions for position related to current year — 98 Additions for positions of prior years — 1 Reduction resulting from the lapse of the applicable statutes of limitations 27 198 Reduction resulting from positions of prior years 69 — Reduction resulting from settlement of positions of prior years — 17 Balance at September 30, $55,867 $55,963 As of September 30, 2016 and 2015, $55,867 and $55,963, respectively, of unrecognized tax benefits would result in a decrease in the provision for incometax expense, of which $50,581 for each of those years, respectively, relates to net operating loss from additional goodwill resulting from the tax accountingmethod change discussed above. We believe the realization of the net operating losses resulting from the tax accounting method change is not more likelythan not and have not recorded a deferred tax asset. However, if we are partially or fully successful in defending our tax accounting method change we mayrealize a portion or all of the deferred tax asset related to this net operating loss, offset by an increase in the valuation allowance. We anticipate thatapproximately $3,745 in liabilities for unrecognized tax benefits, including accrued interest, may be reversed in the next twelve months. The reversal ispredominately due to the expiration of the statutes of limitation for unrecognized tax benefits.We had approximately $11 and $18 accrued for the payment of interest and penalties at September 30, 2016 and 2015, respectively. We recognize interestand penalties related to unrecognized tax benefits as part of the provision for income taxes.We are currently not under federal audit by the Internal Revenue Service. The tax years ended September 30, 2013 and forward are subject to federal audit asare tax years prior to September 30, 2013, to the extent of unutilized net operating losses generated in those years. The tax years ended September 30, 2012and forward are subject to state audits as are tax years prior to September 30, 2012, to the extent of unutilized net operating losses generated in those years.10. OPERATING SEGMENTSWe manage and measure performance of our business in four distinct operating segments: Communications, Residential, Commercial & Industrial, andInfrastructure Solutions. These segments are reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for thepurposes of allocating resources and assessing performance. The Company’s CODM is its President.The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance basedon income from operations of the respective business units prior to the allocation of Corporate office expenses. Transactions between segments are eliminatedin consolidation. Our Corporate office provides general and administrative as well as support services to our four operating segments. Management allocatescosts between segments for selling, general and administrative expenses and depreciation expense. 72Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Segment information for the years ended September 30, 2016, 2015 and 2014 is as follows: Years Ended September 30, 2016 Communications Residential Commercial& Industrial InfrastructureSolutions Corporate Total Revenues $189,635 $225,889 $222,466 $58,003 $— $695,993 Cost of services 157,104 171,874 197,679 42,356 — 569,013 Gross profit 32,531 54,015 24,787 15,647 — 126,980 Selling, general and administrative 20,839 37,585 17,169 12,404 12,561 100,558 Contingent consideration — — — 652 — 652 Loss (gain) on sale of assets — 1 (17) 826 — 810 Income (loss) from operations $11,692 $16,429 $7,635 $1,765 $(12,561) $24,960 Other data: Depreciation and amortization expense $577 $509 $1,234 $3,072 $272 $5,664 Capital expenditures 1,102 704 795 721 95 3,417 Total assets $68,018 $43,195 $59,763 $89,447 $133,917 $394,340 Years Ended September 30, 2015 Communications Residential Commercial& Industrial InfrastructureSolutions Corporate Total Revenues $141,858 $206,307 $178,865 $46,827 $— $573,857 Cost of services 116,015 164,435 157,322 36,194 — 473,966 Gross profit 25,843 41,872 21,543 10,633 — 99,891 Selling, general and administrative 15,735 31,877 15,027 9,498 9,279 81,416 Loss (gain) on sale of assets (18) 4 (11) 12 — (13) Income (loss) from operations $10,126 $9,991 $6,527 $1,123 $(9,279) $18,488 Other data: Depreciation and amortization expense $512 $485 $283 $952 $277 $2,509 Capital expenditures 675 352 391 1,197 164 2,779 Total assets $49,500 $37,755 $44,156 $30,112 $64,156 $225,679 73Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Years Ended September 30, 2014 Communications Residential Commercial& Industrial InfrastructureSolutions Corporate Total Revenues $116,073 $182,514 $166,249 $47,559 $— $512,395 Cost of services 94,904 148,685 148,081 37,599 — 429,269 Gross profit 21,169 33,829 18,168 9,960 — 83,126 Selling, general and administrative 13,481 27,947 14,479 9,346 10,318 75,571 Loss (gain) on sale of assets 6 4 (46) (50) — (86) Income (loss) from operations $7,682 $5,878 $3,735 $664 $(10,318) $7,641 Other data: Depreciation and amortization expense $414 $491 $270 $980 $371 $2,526 Capital expenditures 331 420 266 828 137 1,982 Total assets $30,415 $40,555 $43,937 $27,272 $57,771 $199,950 11. STOCKHOLDERS’ EQUITYEquity Incentive PlanThe Company’s 2006 Equity Incentive Plan, which was amended and restated effective February 9, 2016, following approval by shareholders at theCompany’s 2016 Annual Shareholders’ Meeting, provides for grants of stock options as well as grants of stock, including restricted stock. Approximately3.0 million shares of common stock are authorized for issuance under the amended and restated 2006 Equity Incentive Plan, of which approximately1,056,574 shares are available for issuance at September 30, 2016.Stock Repurchase ProgramOur Board of Directors has authorized a stock repurchase program for the purchase from time to time of up to 1.5 million shares of the Company’s commonstock. Share purchases are made for cash in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. Thetiming and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractualrestrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under pre-setterms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. Theprogram does not require the Company to purchase any specific number of shares and may be modified, suspended or reinstated at any time at the Company’sdiscretion and without notice. The Company initiated the program in February 2015 and during the year ended September 30, 2015, pursuant to the program,we repurchased 482,156 shares of common stock at an average price of $7.22 per share for a total aggregate purchase price of $3.5 million. We repurchased46,929 shares of our common stock during the year ended September 30, 2016, in open market transactions at an average price of $11.07 per share.Treasury StockDuring the year ended September 30, 2016, we repurchased 6,084 shares of common stock from our employees to satisfy minimum tax withholdingrequirements upon the vesting of restricted stock issued under the 2006 Equity Incentive Plan, 46,929 shares of common stock were repurchased on the openmarket pursuant to our share repurchase program, and 7,500 shares of common stock were forfeited by former employees and returned to treasury stock. TheCompany had 6,859 shares returned to treasury stock during the same period related to the 74Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) satisfaction of an obligation in connection with a reconciliation of our shares of common stock offered in exchange for shares of MISCOR Group, Ltd duringour 2013 acquisition of that company. During the year ended September 30, 2016, we issued 5,670 unrestricted shares of common stock from treasury stockto members of our Board of Directors as part of their overall compensation, and 42,500 unrestricted shares of common stock to satisfy the exercise ofoutstanding options.During the year ended September 30, 2015, we repurchased 17,677 shares of common stock from our employees to satisfy minimum tax withholdingrequirements upon the vesting of restricted stock issued under the 2006 Equity Incentive Plan. We issued 199,565 shares out of treasury stock under ourshare-based compensation programs for restricted and unrestricted shares granted. We issued 8,309 shares of treasury stock to settle outstanding phantomstock units that vested upon the departure of the Company’s former Chairman and Chief Executive Officer in January 2015.Restricted StockDuring the years ended September 30, 2016, 2015 and 2014, we recognized $522, $290, and $201, respectively, in compensation expense related to ourrestricted stock awards. At September 30, 2016, the unamortized compensation cost related to outstanding unvested restricted stock was $763. We expect torecognize $505 of this unamortized compensation expense during the year ended September 30, 2017 and the remaining $258 during the year endedSeptember 30, 2018. A summary of restricted stock awards for the years ended September 30, 2016, 2015 and 2014 is provided in the table below: Years Ended September 30, 2016 2015 2014 Unvested at beginning of year 207,166 57,666 159,246 Granted — 194,000 13,500 Vested (25,332) (44,500) (115,080) Forfeited (7,500) — — Unvested at end of year 174,334 207,166 57,666 The fair value of shares vesting during the years ended September 30, 2016, 2015 and 2014 was $304, $353 and $571, respectively. Fair value was calculatedas the number of shares vested times the market price of shares on the date of vesting. The weighted average grant date fair value of unvested restricted stockat September 30, 2016 was $8.48.All the restricted shares granted under the Amended Plan (vested or unvested) participate in dividends issued to common shareholders, if any.Phantom Stock UnitsPhantom stock units (“PSUs”) are primarily granted to the members of the Board of Directors as part of their overall compensation. These PSUs are paid viaunrestricted stock grants to each director upon their departure from the Board of Directors. We record compensation expense for the full value of the grant onthe date of grant. For the years ended September 30, 2016, 2015 and 2014, we recognized $136, $224, and $243, respectively, in compensation expenserelated to these grants. 75Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Performance Based Phantom Stock UnitsA performance based phantom stock unit (a “PPSUs”) is a contractual right to receive one share of the Company’s common stock. The PPSUs will generallybecome vested, if at all, upon the achievement of certain specified performance objectives and continued performance of services through mid-December2018. During the year ended September 30, 2016, the Company granted an aggregate of 420,000 three-year performance-based PPSUs. The vesting of theseawards is subject to the achievement of specified levels of cumulative net income before taxes or specified stock price levels. For the year ended September30, 2016, we recognized compensation expense of $808 related to these grants.Stock OptionsWe utilized a binomial option pricing model to measure the fair value of stock options granted. Our determination of fair value of share-based paymentawards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex andsubjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, the risk-free rate of return,and actual and projected employee stock option exercise behaviors. The expected life of stock options is not considered under the binomial option pricingmodel that we utilize. We did not issue stock options during the years ended September 30, 2016 and 2014. The assumptions used in the fair value methodcalculation for the year ended September 30, 2015 are disclosed in the following table: Year EndedSeptember30, 2015 Weighted average value per option granted during the period $3.87 Dividends (1) $— Stock price volatility (2) 55.6 - 57.8% Risk-free rate of return 1.34 - 1.48% Option term 10.0 years Expected life 6.0 years Forfeiture rate (3) 10.0% (1)We do not currently pay dividends on our common stock.(2)Based upon the Company’s historical volatility.(3)Based upon the Company’s historical data.Stock-based compensation expense recognized during the period is based on the value of the portion of the share-based payment awards that is ultimatelyexpected to vest during the period. Stock-based compensation expense recognized in the Consolidated Statements of Comprehensive Income is based onawards ultimately expected to vest. We estimate our forfeitures at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differfrom those estimates. 76Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) The following table summarizes activity under our stock option plans. Shares Weighted AverageExercise Price Outstanding, September 30, 2013 170,000 $5.46 Options granted — — Exercised — — Forfeited and Cancelled — — Outstanding, September 30, 2014 170,000 $5.46 Options granted 37,000 7.25 Exercised — — Forfeited and Cancelled (74,000) 5.76 Outstanding, September 30, 2015 133,000 $5.79 Options granted — — Exercised 42,500 5.17 Forfeited and Cancelled (11,000) 3.60 Outstanding, September 30, 2016 79,500 $6.43 The following table summarizes options outstanding and exercisable at September 30, 2016: Exercise Prices Outstanding as ofSeptember 30,2016 RemainingContractual Life inYears Weighted-AverageExercise Price Exercisable as ofSeptember 30,2016 Weighted-AverageExercise Price $5.76 43,500 6.58 $5.76 43,500 $5.76 $7.27 22,000 8.29 $7.27 — $— $7.21 14,000 8.34 $7.21 — $— 79,500 $6.43 43,500 $5.76 Our 2011 options vested over a three year period at a rate of one-third per year upon the annual anniversary date of the grant. Our 2013 and 2015 options cliffvest at the end of a two year period ending at the anniversary date of the grant. All options expire ten years from the grant date if they are not exercised. Uponexercise of stock options, it is our policy to first issue shares from treasury stock, then to issue new shares. Unexercised stock options expire July 2021, May2023, January 2025 and February 2025.During the years ended September 30, 2016, 2015 and 2014, we recognized $70, $(45) and $267, respectively, in compensation expense related to our stockoption awards. The net benefit in 2015 relates to a revision in forfeiture assumptions upon the departure of the Company’s former Chairman and CEO inJanuary 2015, at which time he forfeited unvested stock options. At September 30, 2016, the unamortized compensation cost related to outstanding unvestedstock options was $23. We expect to recognize all $23 of this unamortized compensation expense during the year ended September 30, 2017.The intrinsic value of stock options outstanding and exercisable was $286 and $88 at September 30, 2016 and 2015, respectively. The intrinsic value iscalculated as the difference between the fair value as of the end of the period and the exercise price of the stock options. 77Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) 12. RELATED-PARTY TRANSACTIONSThe Company is a party to a sublease agreement with Tontine Associates, L.L.C., an affiliate of Tontine, for corporate office space in Greenwich, Connecticut.The lease was renewed for a three-year term in April 2016 with an increase in the monthly rent to $8, reflecting the increase paid by Tontine Associates,L.L.C. to its landlord and the Company’s increased use of the corporate office space. The lease has terms at market rates and payments by the Company are ata rate consistent with that paid by Tontine Associates, L.L.C. to its landlord.13. EMPLOYEE BENEFIT PLANS401(k) PlanIn November 1998, we established the IES Holdings, Inc. 401(k) Retirement Savings Plan. All full-time IES employees are eligible to participate on the firstday of the month subsequent to completing sixty days of service and attaining age twenty-one. Participants become vested in our matching contributionsfollowing three years of service. We recognized $616, $288, and $276 in matching expenses in fiscal years 2016, 2015 and 2014, respectively.Infrastructure Solutions has two 401(k) plans. We recognized $121, $99, and $74 in matching expenses in fiscal years 2016, 2015 and 2014, respectively.Executive Savings PlanUnder the Executive Deferred Compensation Plan adopted on July 1, 2004 (the “Executive Savings Plan”), certain employees are permitted to defer a portion(up to 75%) of their base salary and/or bonus for a plan year. The Human Resources and Compensation Committee of the Board of Directors may, in its solediscretion, credit one or more participants with an employer deferral (contribution) in such amount as the Committee may choose (“Employer Contribution”).The Employer Contribution, if any, may be a fixed dollar amount, a fixed percentage of the participant’s compensation, base salary, or bonus, or a“matching” amount with respect to all or part of the participant’s elective deferrals for such plan year, and/or any combination of the foregoing as theCommittee may choose. No compensation earned during the years ended September 30, 2016, 2015 or 2014 was deferred under this plan.Post Retirement Benefit PlansCertain individuals at one of the Company’s locations are entitled to receive fixed annual payments that reach a maximum amount, as specified in the relatedagreements, for a ten year period following retirement or, in some cases, the attainment of 62 years of age. We recognize the unfunded status of the plan as anon-current liability in our Consolidated Balance Sheet. Benefits vest 50% after ten years of service, which increases by 10% per annum until benefits arefully vested after 15 years of service. We had an unfunded benefit liability of $875 and $871 recorded as of September 30, 2016 and 2015, respectively. Werecognized compensation expense related to these agreements of $65, $11, and $15 during the years ended September 30, 2016, 2015 and 2014, respectively.Multiemployer Pension PlanInfrastructure Solutions participates in a multiemployer direct benefit pension plan for employees covered under our collective bargaining agreement. We donot administer the plan. We do not significantly participate in this plan. As of December 31, 2015, this plan was funded at 83.91%. 78Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) 14. FAIR VALUE MEASUREMENTSFair Value Measurement AccountingFair value is considered the price to sell an asset, or transfer a liability, between market participants on the measurement date. Fair value measurementsassume that the asset or liability is (1) exchanged in an orderly manner, (2) the exchange is in the principal market for that asset or liability, and (3) the marketparticipants are independent, knowledgeable, able and willing to transact an exchange. Fair value accounting and reporting establishes a framework formeasuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures aboutfair value measurements. Considerable judgment is required to interpret the market data used to develop fair value estimates. As such, the estimates presentedherein are not necessarily indicative of the amounts that could be realized in a current exchange. The use of different market assumptions and/or estimationmethods could have a material effect on the estimated fair value.Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2016, are summarized in the following table by the type ofinputs applicable to the fair value measurements: September 30, 2016 Total FairValue Quoted Prices(Level 1) SignificantUnobservable(Level 3) Executive savings plan assets $599 $599 $— Executive savings plan liabilities (486) (486) — Contingent consideration liability (1,100) — (1,100) Total $(987) $113 $(1,100) Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2015, are summarized in the following table by the type ofinputs applicable to the fair value measurements: September 30, 2015 Total FairValue Quoted Prices(Level 1) SignificantUnobservable(Level 3) Executive savings plan assets $617 $617 $— Executive savings plan liabilities (504) (504) — Total $113 $113 $— In the first quarter of 2016, we entered into a contingent consideration arrangement related to a business combination. Please see Note 18, “BusinessCombinations and Divestitures” for further discussion. At September 30, 2016, we estimated the fair value of the contingent consideration liability at$1,100. The table below presents a reconciliation of the fair value of this obligation, which used significant unobservable inputs (Level 3). ContingentConsiderationAgreement Fair Value at September 30, 2015 $— Issuances 448 Adjustments to Fair Value 652 Fair Value at September 30, 2016 $1,100 79Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Below is a description of the inputs used to value the assets summarized in the preceding tables:Level 1 — Inputs represent unadjusted quoted prices for identical assets exchanged in active markets.Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets exchanged in active orinactive markets; quoted prices for identical assets exchanged in inactive markets; and other inputs that are considered in fair value determinations of theassets.Level 3 — Inputs include unobservable inputs used in the measurement of assets. Management is required to use its own assumptions regarding unobservableinputs because there is little, if any, market activity in the assets or related observable inputs that can be corroborated at the measurement date.15. INVENTORYInventories consist of the following components: September 30,2016 September 30,2015 Raw materials $2,538 $1,641 Work in process 4,158 2,641 Finished goods 1,558 1,199 Parts and supplies 4,982 8,496 Total inventories $13,236 $13,977 16. GOODWILL AND INTANGIBLE ASSETSThe following is a progression of goodwill by segment for the years ended September 30, 2016, 2015 and 2014: Residential Commercial &Industrial InfrastructureSolutions Total Balance at September 30, 2014 $8,631 $— $6,362 $14,993 Acquisitions “Note 18” — — 2,256 2,256 Balance at September 30, 2015 8,631 — 8,618 17,249 Acquisitions “Note 18” — 3,806 19,458 23,264 Divestitures “Note 18” — — (577) (577) Balance at September 30, 2016 $8,631 $3,806 $27,499 $39,936 GoodwillBased upon the results of our annual impairment analysis, the fair value of our Infrastructure Solutions and Commercial & Industrial segments exceeded thebook value at September 30, 2016, and warranted no impairment. We evaluated goodwill attributable to our Residential segment qualitatively, and haveconcluded no impairment is indicated. 80Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Intangible assets consist of the following: EstimatedUseful Lives(in Years) September 30, 2016 GrossCarryingAmount AccumulatedAmortization Net Trademarks/trade names 5 - 20 $3,845 $139 $3,706 Technical library 20 400 61 339 Customer relationships 6 - 15 27,414 2,003 25,411 Developed technology 4 400 358 42 Backlog 1 1,621 545 1,076 Construction contracts 1 2,191 1,042 1,149 Total $35,871 $4,148 $31,723 EstimatedUseful Lives(in Years) September 30, 2015 GrossCarryingAmount AccumulatedAmortization Net Trademarks/trade names 8 - Indefinite $1,400 $9 $1,391 Technical library 20 400 41 359 Customer relationships 8 - 12 3,600 788 2,812 Covenants not to compete 3 140 121 19 Developed technology 4 400 258 142 Total $5,940 $1,217 $4,723 For the years ended September 30, 2016, 2015 and 2014, amortization expense of intangible assets was $2,936, $381 and $635, respectively. Our futureamortization expense for years ended September 30, is as follows: Year Ended September 30, 2017 $5,050 2018 3,154 2019 2,903 2020 2,818 2021 2,714 Thereafter 15,084 Total $31,723 17. COMMITMENTS AND CONTINGENCIESLegal MattersFrom time to time we are a party to various claims, lawsuits and other legal proceedings that arise in the ordinary course of business. We maintain variousinsurance coverages to minimize financial risk associated with these proceedings. None of these proceedings, separately or in the aggregate, are expected tohave a material adverse effect on our financial position, results of operations or cash flows. With respect to all such proceedings, we record reserves when it isprobable that a liability has been incurred and the amount of loss can be reasonably estimated. We expense routine legal costs related to these proceedings asthey are incurred. 81Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) The following is a discussion of our significant legal matters:Capstone Construction ClaimsFrom 2003 to 2005, two of our former subsidiaries performed HVAC and electrical work under contract with Capstone Building Corporation (“Capstone”) ona university student housing project in Texas. In 2005, our subsidiaries filed for arbitration against Capstone, seeking payment for work performed, changeorders and other impacts. The parties settled those claims, and the release included a waiver of warranties associated with any of the HVAC work. Severalyears later the subsidiaries discontinued operations, and the Company sold their assets.On October 24, 2013, Capstone filed a petition in the 12th Judicial District Court of Walker County, Texas against these subsidiaries, among othersubcontractors, seeking contribution, defense, indemnity and damages for breach of contract in connection with alleged construction defect claims broughtagainst Capstone by the owner of the student housing project. The owner claims $10,406 in damages, plus attorneys’ fees and costs against Capstone, whichCapstone is seeking to recover from the subcontractors. The claims against the Company are based on alleged defects in the mechanical design, constructionand installation of the HVAC and electrical systems performed by our former subsidiaries.Based on the settlement reached in the 2005 arbitration, we moved for, and the District Court granted us, summary judgment, dismissing all of Capstone’sclaims in the 2013 lawsuit. Capstone appealed, and on April 28, 2016, the 10th Court of Appeals, Waco, Texas Division, reversed the ruling with respect tothe indemnity claims and remanded the case back to the District Court. On September 21, 2016, we filed a petition for review to the Texas Supreme Court. OnOctober 28, 2016, the Supreme Court ordered Capstone to file a response to our petition on or before November 28, 2016. Capstone filed for an extension ofthat deadline; their response is now due December 28, 2016. Should the Texas Supreme Court agree that the claims should be remanded to the District Court,the Company will defend the claims and expects ultimately to prevail on the merits, but there can be no assurance that the Company will prevail or that itwill not incur costs and liability for indemnity in connection with resolution of the claims. To date, the Company has not established a reserve with respect tothis matter, as we believe the likelihood of our responsibility for damages is not probable and a potential range of exposure is not reasonably estimable.Risk-ManagementWe retain the risk for workers’ compensation, employer’s liability, automobile liability, construction defects, general liability and employee group healthclaims, as well as pollution coverage, resulting from uninsured deductibles per accident or occurrence which are generally subject to annual aggregate limits.Our general liability program provides coverage for bodily injury and property damage. In many cases, we insure third parties, including general contractors,as additional insureds under our insurance policies. Losses up to the deductible amounts, or losses that are not covered under our policies, are accrued basedupon our known claims incurred and an estimate of claims incurred but not reported. As a result, many of our claims are effectively self-insured. Many claimsagainst our insurance are in the form of litigation. At September 30, 2016 and September 30, 2015, we had $5,464 and $4,518, respectively, accrued forinsurance liabilities. We are also subject to construction defect liabilities, primarily within our Residential segment. As of September 30, 2016 and September30, 2015, we had $235 and $464, respectively, reserved for these claims. Because the reserves are based on judgment and estimates, and involve variablesthat are inherently uncertain, such as the outcome of litigation and an assessment of insurance coverage, there can be no assurance that the ultimate liabilitywill not be higher or lower than such estimates or that the timing of payments will not create liquidity issues for the Company. 82Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Some of the underwriters of our casualty insurance program require us to post letters of credit as collateral. This is common in the insurance industry. To date,we have not had a situation where an underwriter has had reasonable cause to effect payment under a letter of credit. At September 30, 2016, $6,126 of ouroutstanding letters of credit was utilized to collateralize our insurance program.SuretyAs of September 30, 2016, the estimated cost to complete our bonded projects was approximately $54,287. We evaluate our bonding requirements on aregular basis, including the terms offered by our sureties. We believe the bonding capacity presently provided by our current sureties is adequate for ourcurrent operations and will be adequate for our operations for the foreseeable future. Posting letters of credit in favor of our sureties reduces the borrowingavailability under our Credit Facility.Other Commitments and ContingenciesSome of our customers and vendors require us to post letters of credit as a means of guaranteeing performance under our contracts and ensuring payment byus to subcontractors and vendors. If our customer has reasonable cause to effect payment under a letter of credit, we would be required to reimburse ourcreditor for the letter of credit. At September 30, 2016, $818 of our outstanding letters of credit were to collateralize our vendors.From time to time, we may enter into firm purchase commitments for materials such as copper or aluminum wire which we expect to use in the ordinary courseof business. These commitments are typically for terms of less than one year and require us to buy minimum quantities of materials at specific intervals at afixed price over the term. As of September 30, 2016, we had no such commitments.18. BUSINESS COMBINATIONS AND DIVESTITURESBusiness CombinationsThe Company completed four acquisitions in the year ended September 30, 2016: • Technibus, Inc. (“Technibus”) — We acquired Technibus, a Canton, Ohio based provider of custom engineered, metal enclosed bus ductsolutions, on June 15, 2016. Technibus is included in our Infrastructure Solutions segment, and we expect it will enhance InfrastructureSolutions’ current offerings, which are primarily focused on industrial repairs and services, to include custom engineered solutions for ourcustomers. We believe Technibus’ products and engineering expertise, combined with Infrastructure Solutions’ service capabilities, a sharedcustomer base, and the close geographic proximity of Technibus to our Infrastructure Solutions segment’s Massillon, Ohio headquarters, willenhance our solutions offering. • STR Mechanical, LLC (“STR”) — We acquired 80% of the membership interests in STR, a Charlotte, North Carolina-based provider ofcommercial and industrial mechanical services, including maintenance, repair, and replacement services, and temperature control systeminstallations, on April 27, 2016. STR is included in our Commercial & Industrial segment. We expect STR’s focus on providing comprehensivemechanical maintenance services to its customers, often through preventative maintenance agreements, will contribute to the diversification ofrevenue sources and enhance Commercial & Industrial’s capabilities. • Shanahan Mechanical and Electrical, Inc. (“Shanahan”) — We acquired Shanahan, a Nebraska-based provider of mechanical and electricalcontracting services, on November 20, 2015. Shanahan is 83Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) included in our Commercial & Industrial segment. We believe this acquisition adds mechanical contracting expertise to Commercial &Industrial, and also accelerates our entry into the Lincoln, Nebraska market, an area that we had targeted for expansion. Further, we believe theacquisition gives us the opportunity to expand our geographic coverage and capabilities without the costs and risks of a start-up operation. • Calumet Armature & Electric, LLC (“Calumet”) — We acquired Calumet, an Illinois-based provider of design, manufacturing, assembly, andrepair services of electric motors for the industrial and mass transit markets, on October 30, 2015. Calumet is included in our InfrastructureSolutions segment, and we believe it allows us to enhance our industrial footprint in the greater Chicago, Illinois area and, given Calumet’sexpertise in manufacturing new armatures, that it will support our targeted growth into the mass transit market.The total aggregate consideration of $59,592 for these four acquisitions includes aggregate cash consideration of $59,144 and contingent consideration inconnection with the Calumet acquisition with an acquisition date fair value estimated at $448. Of the cash consideration, $58,448 was paid on the variousacquisition dates, and the remaining $696 was paid within approximately 90 days subsequent to the various acquisition dates, in accordance with theworking capital settlement provisions set forth in various acquisition agreements. The Calumet contingent consideration arrangement provides that amaximum of $2,250 may be earned over the three year period ending October 30, 2018. As of September 30, 2016 the fair value of the contingentconsideration arrangement was $1,100. Based on an increase in the fair value of the liability driven by the improved actual and expected financialperformance of Calumet, we have recorded additional contingent consideration expense as a component of income from continuing operations.The Company accounted for the transactions under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level3). The valuations derived from estimated fair value assessments and assumptions used by management are preliminary pending finalization of certaintangible and intangible asset valuations and assessment of deferred taxes. While management believes that its preliminary estimates and assumptionsunderlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquiredand liabilities assumed. This may result in adjustments to the preliminary amounts recorded. The preliminary valuation of the assets acquired and liabilitiesassumed as of the various acquisition dates is as follows: Current assets $14,903 Property and equipment 4,572 Intangible assets (primarily customer relationships) 30,071 Goodwill 23,264 Current liabilities (6,192) Deferred tax liability (5,331) Noncontrolling interest (1,695) Net assets acquired $59,592 With regard to the aggregate $5,331 deferred tax liability recorded in connection with the acquisitions, we reduced a portion of our valuation allowanceequal to this deferred tax liability, resulting in a corresponding income tax benefit in the year ended September 30, 2016.With regard to goodwill, the balance is attributable to the workforce of the acquired business and other intangibles that do not qualify for separaterecognition. In connection with the Technibus transaction, we acquired tax basis of $15,305 with respect to goodwill. 84Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) In conjunction with these acquisitions, we acquired receivables totaling $9,000, of which we estimate $518 to be uncollectible at the date of acquisition.In the aggregate, these four acquisitions contributed $34,367 in additional revenue and $3,527 in additional operating income during the year endedSeptember 30, 2016.Noncontrolling InterestOur agreement governing the operations of STR contains a provision where, at any time after five years from the acquisition date, we may purchase all or aportion of the 20% noncontrolling interest. Pursuant to this provision, we may purchase the noncontrolling interest, or, with notice, the noncontrollinginterest holders may cause us to purchase their interests, for a contractually determined price based on the trailing 2 year earnings before interest, taxes,depreciation, and amortization of STR, calculated at the time of the purchase.As of the acquisition date, the fair value of the noncontrolling interest in STR was equal to 20% of the overall fair value of STR. As of September 30, 2016,the carrying amount of the noncontrolling interest was in excess of the amount we would pay to acquire the noncontrolling interest pursuant to the terms ofthe operating agreement, if the option to purchase that interest had been available to us as of September 30, 2016.Unaudited Pro Forma InformationThe following unaudited supplemental pro forma results of operations include the results of the four acquisitions completed during year ended September 30,2016, as described above, as if each had been acquired as of October 1, 2014, and have been provided for illustrative purposes only and do not purport to beindicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by thecombined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because offuture events and transactions, finalization of the valuations of deferred taxes, fixed assets, and certain intangible assets, as well as other factors, many ofwhich are beyond IES’s control. Cost savings and other synergy benefits resulting from the business combination have not been included in pro forma results.The unaudited pro forma financial information reflects certain adjustments related to the acquisition, such as the recording of depreciation expense inconnection with fair value adjustments to property and equipment, amortization expense in connection with recording acquired identifiable intangible assetsat fair value, and interest expense calculated on the $20,000 drawn on the Company’s available line of credit at a rate of 2.5%. The unaudited pro formafinancial information also includes the effect of certain non-recurring items as of October 1, 2014 such as the $5,331 of tax benefits and acquisition relatedcosts of $681 incurred during the year ended September 30, 2016, which are shown as if they had been incurred on October 1, 2014.The supplemental pro forma results of operations for the years ended September 30, 2016 and 2015, as if the acquisitions had been completed on October 1,2014, are as follows: Unaudited Year EndedSeptember 30, 2016 Year EndedSeptember 30, 2015 Revenues $721,254 $634,760 Net Income $117,134 $16,430 85Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) Southern RewindingOn May 21, 2015, our wholly-owned subsidiary Magnetech Industrial Services, Inc. (“Magnetech”) acquired all of the common stock and certain related realestate of Southern Industrial Sales and Services, Inc. (“Southern Rewinding”), a Columbus, Georgia-based motor repair and related field services company, fortotal consideration of $3,937. Of that amount, $3,137 was paid at closing, with additional consideration of $400 paid during the year ended September 30,2016, and a final payment of $400 expected to be made in fiscal 2017. After closing, we provided the newly-acquired entity with $1,065 of workingcapital. Southern Rewinding is included in our Infrastructure Solutions segment.The Company accounted for the transaction under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level3). The valuation of the assets acquired and liabilities assumed as of May 21, 2015 is as follows: Current assets $1,225 Property and equipment 911 Intangible assets (primarily customer relationships) 1,700 Non-tax-deductible goodwill 2,256 Current liabilities (1,431) Deferred tax liability (724) Net assets acquired $3,937 Pro forma revenues and results of operations for the acquisition have not been presented because the effects were not material to the consolidated financialstatements.DivestituresIn February 2016, our Board of Directors approved a plan for the sale of substantially all of the operating assets of HK Engine Components, LLC (“HK”), awholly-owned subsidiary of the Company operating in the Infrastructure Solutions segment. In connection with the sale, we allocated $577 of goodwill tothe disposal group. In conjunction with the write down of these assets to their net realizable value of $2,200, we then recognized a loss of $821, recordedwithin “(Gain) loss on sale of assets” within our Condensed Consolidated Statement of Comprehensive Income for the years ended September 30, 2016. Thesale of these assets to a third party was completed on April 15, 2016.19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)Quarterly financial information for the years ended September 30, 2016 and 2015 are summarized as follows: Fiscal Year Ended September 30, 2016 First Second Third Fourth Quarter Quarter Quarter Quarter Revenues $150,766 $159,981 $179,599 $205,647 Gross profit $27,633 $27,812 $33,997 $37,538 Net income attributable to IES Holdings, Inc. $5,799 $2,194 $10,805 $101,980 Earnings per share: Basic $0.27 $0.10 $0.50 $4.75 Diluted $0.27 $0.10 $0.50 $4.74 86Table of ContentsIES HOLDINGS, INC.Notes to Consolidated Financial Statements(All Amounts in Thousands Except Share Amounts) The sum of the individual quarterly earnings per share amounts may not agree with year-to-date earnings per share as each period’s computation is based onthe weighted average number of shares outstanding during the period. Fiscal Year Ended September 30, 2015 First Second Third Fourth Quarter Quarter Quarter Quarter Revenues $136,336 $133,752 $144,082 $159,687 Gross profit $22,704 $21,708 $25,052 $30,427 Net income from continuing operations $3,473 $1,854 $3,962 $7,588 Net loss from discontinued operations $(181) $(44) $(5) $(109) Net income $3,292 $1,810 $3,957 $7,479 Earnings per share from continuing operations: Basic $0.16 $0.08 $0.19 $0.36 Diluted $0.16 $0.08 $0.19 $0.36 Loss per share from discontinued operations: Basic $(0.01) $0.00 $0.00 $(0.01) Diluted $(0.01) $0.00 $0.00 $(0.01) Earnings per share: Basic $0.15 $0.08 $0.19 $0.35 Diluted $0.15 $0.08 $0.19 $0.35 The sum of the individual quarterly earnings per share amounts may not agree with year-to-date earnings per share as each period’s computation is based onthe weighted average number of shares outstanding during the period.20. SUBSEQUENT EVENTSOn November 8, 2016, the Company implemented the new NOL Rights Plan, following the expiration of the Company’s prior tax benefit protection plan,which was implemented in January 2013. Thereafter, the Board of Directors declared and paid a dividend of one preferred share purchase right (a “Right”) foreach outstanding share of common stock. The dividend was payable to the stockholders of record as of the close of business on November 18, 2016. EachRight represents a right to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company at a price of $79.30.As with the prior plan, the Board adopted the NOL Rights Plan in an effort to protect stockholder value by attempting to protect against a possible limitationon the Company’s ability to use its NOLs to reduce potential future federal income tax obligations. The Company historically experienced substantialoperating losses, and under the Internal Revenue Code and rules promulgated by the Internal Revenue Service, the Company may “carry forward” theselosses in certain circumstances to effect any current and future earnings and thus reduce the Company‘s federal income tax liability, subject to certainrequirements and restrictions. To the extent that the NOLs do not otherwise become limited, the Company believes that it will be able to carry forward asignificant amount of NOLs, and therefore these NOLs are a substantial asset to the Company. However, if the Company experiences an “ownership change”,as defined in Section 382 of the Internal Revenue Code, its ability to use the NOLs will be substantially limited, and the timing of the usage of the NOLscould be substantially delayed, which could therefore significantly impair the value of that asset. 87Table of ContentsItem 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and ProceduresChanges in Internal Control Over Financial ReportingThere have been no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2016 that have materiallyaffected, or are reasonably likely to materially affect, our internal controls over financial reporting.Disclosure Controls and ProceduresIn accordance with Exchange Act Rule 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management,including our President and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered bythis report. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of September 30,2016 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controlsand procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the ExchangeAct is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure.Management’s Report on Internal Control over Financial ReportingManagement, including the Company’s President and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control overfinancial reporting for the Company. The Company’s internal control system was designed to provide reasonable assurance to the Company’s Managementand Directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 framework). Based on this assessment, our managementdetermined that as of September 30, 2016, our internal control over financial reporting was effective.In conducting management’s evaluation of the effectiveness of the Company’s internal controls over financial reporting, we have excluded CalumetArmature & Electric, LLC, Shanahan Mechanical and Electrical, Inc., STR Mechanical, LLC, and Technibus, Inc. because they were acquired during the yearended September 30, 2016. Excluding goodwill and intangible assets, these operations accounted for less than 7% of our total assets and less than 5% of ourconsolidated revenues for the year then ended.Ernst & Young LLP, an independent registered public accounting firm that has audited the Company’s financial statements as of and for the three-year periodended September 30, 2016, has issued a report on their audit of management’s internal control over financial reporting, which is included herein. Item 9B.Other InformationNone. 88Table of ContentsPART III Item 10.Directors, Executive Officers and Corporate GovernanceThe information required to be included Item 10 of Part III of this Form 10-K is incorporated by reference from the sections entitled “Security Ownership ofCertain Beneficial Owners and Management;” “Section 16(a) Beneficial Ownership Reporting Compliance;” “Report of the Audit Committee” and “Electionof Directors” in the Company’s definitive Proxy Statement for its 2017 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC nolater than December 31, 2016. Item 11.Executive CompensationThe information required to be included in Item 11 of Part III of this Form 10-K is incorporated by reference from the section entitled “ExecutiveCompensation” in the Proxy Statement. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersCertain information required to be included in Item 12 of Part III of this Form 10-K is incorporated by reference from the section entitled “Security Ownershipof Certain Beneficial Owners and Management” in the Proxy Statement.SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANSEquity Compensation Plan InformationThe following table provides information as of September 30, 2016 with respect to shares of our common stock that may be issued upon the exercise ofoptions, warrants and rights granted to employees, consultants or members of the Board of Directors under the Company’s existing equity compensationplans. For additional information about our equity compensation plans, see Note 11, “Stockholders’ Equity” in the notes to our Consolidated FinancialStatements set forth in Item 8, “Financial Statements and Supplementary Data” of this Form 10-K. Plan Category (a) Number of Securities tobe Issued Upon Exerciseof Outstanding Options,Warrants and Rights (b) Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights (c) Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation Plans(Excluding SecuritiesReflected in Column(a)) Equity compensation plans approved bysecurity holders — — 1,056,574(1) Equity compensation plans not approved bysecurity holders 499,500(2) $6.43 — (1)Represents shares available for issuance under the Company’s 2006 Equity Incentive Plan, which was amended and restated effective February 9, 2016(the “Amended Plan”), following approval by shareholders at the Company’s annual stockholders’ meeting. This plan provides for the granting orawarding of stock options, stock, restricted stock and other forms of equity to employees (including officers), consultants and directors of theCompany.(2)Represents shares issuable upon exercise of outstanding options granted under the Company’s 2006 Equity Incentive Plan (amended and restated as ofOctober 2007), which was in place prior to the Amended Plan. This includes 79,500 options with a weighted-average term of 7.36 years. This alsoincludes 420,000 shares that may be issued pursuant to outstanding PPSUs, based on reported financial results, where applicable, and otherwiseassuming the target award is met. 89Table of ContentsItem 13.Certain Relationships and Related Transactions, and Director IndependenceThe information required to be included in Item 13 of Part III of this Form 10-K is incorporated by reference from the section entitled “Certain Relationshipsand Related Person Transactions” in the Proxy Statement. Item 14.Principal Accountant Fees and ServicesThe information required to be included in Item 14 of Part III of this Form 10-K is incorporated by reference from the section entitled “Audit Fees” in theProxy Statement. 90Table of ContentsPART IV Item 15.Exhibits and Financial Statement Schedules (a)Financial Statements and Supplementary Data, Financial Statement Schedules and ExhibitsSee Index to Financial Statements under Item 8, “Financial Statements and Supplementary Data” of this From 10-K. (b)Exhibits ExhibitNo. Description2.1 — Agreement and Plan of Merger effective as of March 13, 2013, by and among Integrated Electrical Services, Inc. (n/k/a IES Holdings,Inc.), IES Subsidiary Holdings, Inc. and MISCOR Group, Ltd. (Attached as part of Annex A to the joint proxy statement/prospectus thatis part of this Registration Statement) (the schedules and annexes have been omitted pursuant to Item 601(b)(2) of Regulation S-K)2.2 — First Amendment to Agreement and Plan of Merger, dated as of July 10, 2013, by and among Integrated Electrical Services, Inc. (n/k/aIES Holdings, Inc.), IES Subsidiary Holdings, Inc. and MISCOR Group, Ltd. (Attached as part of Annex A to the joint proxystatement/prospectus that is part of this Registration Statement)2.3 — Stock Purchase Agreement dated as of June 1, 2016, by and among IES Infrastructure Solutions, LLC, IES Holdings, Inc., Technibus, Inc.and Technibus, LLC. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed June 15, 2016)3.1 — Second Amended and Restated Certificate of Incorporation of IES Holdings, Inc., as amended by the Certificate of Amendment thereto,effective May 24, 2016 (composite). (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filedon August 8, 2016)3.2 — Certificate of Designations of Series A Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company’sCurrent Report on Form 8-K filed on January 28, 2013)3.3 — Amended and Restated Bylaws of IES Holdings, Inc., effective May 24, 2016 (Incorporated by reference to Exhibit 3.2 to theCompany’s Current Report on Form 8-K, filed on May 24, 2016)4.1(1) — Specimen common stock certificate.4.2 — Tax Benefit Protection Plan Agreement by and between IES Holdings, Inc. and American Stock Transfer & Trust Company, LLC, asRights Agent, dated as of November 8, 2016, including the form of Rights Certificate and Summary of Stockholder Rights Plan attachedthereto as Exhibits A and B, respectively (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filedon November 9, 2016)4.3 — Registration Rights Agreement, dated May 12, 2006, by and among Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.),Tontine Capital Partners, L.P. and certain of its affiliates and Southpoint Master Fund, L.P. (Incorporated by reference to Exhibit 10.5 tothe Company’s Current Report on Form 8-K filed on May 17, 2006)4.4 — First Amendment to Registration Rights Agreement, dated September 11, 2007, by and among Integrated Electrical Services, Inc. (n/k/aIES Holdings, Inc.), Tontine Capital Partners, L.P. and certain of its affiliates. (Incorporated by reference to Exhibit 10.24 to theCompany’s Annual Report on Form 10-K filed on December 14, 2012) 91Table of ContentsExhibitNo. Description10.1 — Restated Underwriting, Continuing Indemnity and Security Agreement, dated May 12, 2006, by Integrated Electrical Services, Inc. (n/k/aIES Holdings, Inc.) and certain of its subsidiaries and affiliates in favor of Federal Insurance Company. (Incorporated by reference toExhibit 10.4 to the Company’s Current Report on Form 8-K filed May 17, 2006)10.2 — First Amendment, dated as of October 30, 2006, to the Restated Underwriting, Continuing Indemnity, and Security Agreement, dated May12, 2006, by Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.), certain of its subsidiaries and Federal Insurance Company andcertain of its affiliates. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 6, 2006)10.3 — Third Amendment, dated May 1, 2007, to the Restated Underwriting, Continuing Indemnity and Security Agreement, dated May 12, 2006,by Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.), certain of its subsidiaries and Federal Insurance Company and certain ofits affiliates. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 12, 2007)10.4 — Fourth Amendment to the Restated Underwriting, Continuing Indemnity and Security Agreement, dated May 12, 2006, by IntegratedElectrical Services, Inc. (n/k/a IES Holdings, Inc.), certain of its subsidiaries and Federal Insurance Company and certain of its affiliates.(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 12, 2007)10.5 — Rider to Add Principal/Indemnitor and Fifth Amendment, dated September 29, 2008, to Restated Underwriting, Continuing Indemnity,and Security Agreement, dated May 12, 2006, by Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.), certain of its subsidiariesand Federal Insurance Company and certain of its affiliates. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Reporton Form 8-K filed October 24, 2008)10.6 — Agreement of Indemnity, dated May 7, 2010, by Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.) and certain of its present andfuture subsidiaries and affiliates and Chartis Property Casualty Company, Chartis Insurance Company of Canada, American HomeAssurance Company, Commerce and Industry Insurance Company, Granite State Insurance Company, Lexington Insurance Company,National Union Fire Insurance Company of Pittsburgh, Pa., New Hampshire Insurance Company and The Insurance Company of the Stateof Pennsylvania and any and all of their affiliates, subsidiaries, successors and assigns. (Incorporated by reference to Exhibit 10.1 to theCompany’s Current Report on Form 8-K filed May 13, 2010)10.7 — Amendment No. 1 to Agreement of Indemnity, dated August 16, 2012, between Integrated Electrical Services, Inc. (n/k/a IES Holdings,Inc.) and certain of its present and future subsidiaries and affiliates and Chartis Property Casualty Company, Chartis Insurance Company ofCanada, American Home Assurance Company, Commerce and Industry Insurance Company, Granite State Insurance Company, LexingtonInsurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., New Hampshire Insurance Company and The InsuranceCompany of the State of Pennsylvania, and any and all of their affiliates, subsidiaries, successors and assigns (Incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8-K filed August 17, 2012)10.8 — Agreement of Indemnity, dated May 7, 2013, by Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.) and certain of its present andfuture subsidiaries and affiliates and XL Specialty Insurance Company, XL Reinsurance America, Inc. and Greenwich Insurance Companyand their affiliates, subsidiaries, successors and assigns. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q filed May 13, 2013) 92Table of ContentsExhibitNo. Description 10.9 — Agreement of Indemnity, September 9, 2016, by IES Holdings, Inc. and certain of its present and future subsidiaries and affiliates andEverest Reinsurance Company and Everest National Insurance Company, and their affiliated, associated and subsidiary companies,successors and assigns. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 13, 2016) 10.10 — Amended and Restated Credit and Security Agreement, dated September 24, 2014, by and among Integrated Electrical Services, Inc. (n/k/aIES Holdings, Inc.), each of the other Borrowers and Guarantors named therein and Wells Fargo Bank, National Association. (Incorporatedby reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 24, 2014) 10.11(1) — First Amendment, dated November 6, 2014, to Amended and Restated Credit and Security Agreement, dated as of September 24, 2014, byand among Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.), each of the other Borrowers and Guarantors named therein andWells Fargo Bank, National Association. 10.12 — Second Amendment, dated May 3, 2016, to Amended and Restated Credit and Security Agreement, dated as of September 24, 2014, by andamong Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.), each of the other Borrowers and Guarantors named therein and WellsFargo Bank, National Association. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 3,2016) 10.13(1) — Third Amendment, dated September 9, 2016, to Amended and Restated Credit and Security Agreement, dated as of September 24, 2014, byand among IES Holdings, Inc., each of the other Borrowers and Guarantors named therein and Wells Fargo Bank, National Association. 10.14 — Sublease Agreement between Tontine Associates, L.L.C. and IES Shared Services, Inc., dated March 29, 2012. (Incorporated by reference toExhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on May 15, 2012) 10.15 — First Amendment between Tontine Associates, L.L.C., IES Shared Services, Inc. and IES Management ROO, LP, dated as of March 31, 2016,to Sublease Agreement between Tontine Associates, L.L.C., and IES Shared Services, Inc., dated March 29, 2012. (Incorporated byreference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2016) 10.16 — Subcontract, dated June 17, 2009, by and between IES Commercial, Inc. and Manhattan Torcon A Joint Venture. (Incorporated by referenceto Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 24, 2009) 10.17 — Letter Agreement, dated November 4, 2009, by and between Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.), IES Commercial,Inc. and Manhattan Torcon A Joint Venture. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filedNovember 24, 2009)*10.18 — Term Life Insurance Plan. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed October 17, 2007)*10.19 — Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.) 2006 Equity Incentive Plan, as amended and restated through 2007.(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 17, 2007)*10.20 — Form of Performance-Based Phantom Stock Unit Award Agreement under the Company’s 2006 Equity Incentive Plan, as amended andrestated through 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed February 8, 2016) 93Table of ContentsExhibitNo. Description*10.21 — Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.) Amended and Restated 2006 Equity Incentive Plan (as of February 9,2016) (Incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement filed on December 28, 2015)*10.22 — Form of Phantom Stock Unit Award under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February 9,2016). (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed May 9, 2016)*10.23 — Form of Stock Option Award Agreement under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February9, 2016). (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2016)*10.24 — Form of Restricted Stock Award Agreement under the Company’s Amended and Restated 2006 Equity Incentive Plan (as ofFebruary 9, 2016). (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed May 9, 2016)*10.25 — Performance-Based Phantom Stock Unit Award Agreement, dated as of June 6, 2016, by and between the Company andMr. Santoni, under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February 9, 2016). (Incorporated byreference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 7, 2016)*10.26 — Performance-Based Phantom Cash Unit Award Agreement, dated as of June 6, 2016, by and between the Company and Mr. Santoni,under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February 9, 2016) (Incorporated by reference toExhibit 10.2 to the Company’s Current Report on Form 8-K filed June 7, 2016)*10.27 — Annual Management Incentive Plan. (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed November19, 2007)*10.28 — Amended and Restated 2009 Deferred Compensation Plan. (Incorporated by reference to Exhibit 10.34 to the Company’s AnnualReport on Form 10-K filed December 15, 2008)*10.29 — Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.) Long Term Incentive Plan, as amended and restated. (Incorporated byreference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 23, 2009)*10.30(1) — Amended and Restated Integrated Electrical Services, Inc. (n/k/a IES Holdings, Inc.) Executive Severance Benefit Plan, effectiveJanuary 12, 2016. 21.1 — Subsidiaries of the Registrant(1) 23.1 — Consent of Ernst & Young LLP(1) 31.1 — Rule 13a-14(a)/15d-14(a) Certification of Robert W. Lewey, President(1) 31.2 — Rule 13a-14(a)/15d-14(a) Certification of Tracy A. McLauchlin, Chief Financial Officer(1) 32.1 — Section 1350 Certification of Robert W. Lewey, President(1) 32.2 — Section 1350 Certification of Tracy A. McLauchlin, Chief Financial Officer(1)(1)101.INS XBRL Instance Document(1)101.SCH XBRL Schema Document(1)101.LAB XBRL Label Linkbase Document(1)101.PRE XBRL Presentation Linkbase Document(1)101.DEF XBRL Definition Linkbase Document(1)101.CAL XBRL Calculation Linkbase Document 94Table of Contents *Management contracts or compensatory plans or arrangements required to be filed herewith pursuant to Item 15(a)(3) of this Annual Report on Form10-K.(1)Filed herewith. 95Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on December 9, 2016. IES HOLDINGS, INC.By: /s/ Robert W. Lewey Robert W. Lewey President and DirectorPOWER OF ATTORNEYKNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of IES HOLDINGS, INC. hereby constitutes and appointsRobert W. Lewey and Gail D. Makode, and each of them individually, as his true and lawful attorneys-in-fact and agents, with full power of substitution, forhim and on his behalf and in his name, place and stead, in any and all capacities, to sign, execute and file any or all amendments to this report, with any andall exhibits thereto, and all other documents required to be filed therewith, with the Securities and Exchange Commission or any regulatory authority,granting unto each such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to bedone in and about the premises in order to effectuate the same, as fully to all intents and purposes as he himself might or could do, if personally present,hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes or substitute, may lawfully do or causeto be done by virtue hereof.SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrantand in the capacities and on the dates indicated. Signature Title Date/s/ Robert W. LeweyRobert W. Lewey President and Director(Principal Executive Officer) December 9, 2016/s/ Tracy A. McLauchlinTracy A. McLauchlin Senior Vice President, Chief FinancialOfficer and Treasurer(Principal Financial Officer)(Principal Accounting Officer) December 9, 2016/s/ Joseph L. Dowling IIIJoseph L. Dowling III Director December 9, 2016/s/ David B. GendellDavid B. Gendell Director and Vice Chairman of the Board December 9, 2016/s/ Jeffrey L. GendellJeffrey L. Gendell Director and Chairman of the Board December 9, 2016/s/ Joe D. KoshkinJoe D. Koshkin Director December 9, 2016/s/ Donald L. LukeDonald L. Luke Director December 9, 2016 96Exhibit 4.1 IES COMMON STOCKIES HOLDINGS, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP 44951W 10 6 SEE REVERSE FOR CERTAIN DEFINITIONS THISCERTIFIES THAT is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE, OF IES HOLDINGS, INC. transferable only on the booksof the Corporation by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned by the Transfer Agent andregistered by the Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. DATED: SEAL SENIOR VICE PRESIDENT AND GENERAL COUNSELCOUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC (Brooklyn, NY) TRANSFER AGENT AND REGISTRAR PRESIDENT AUTHORIZEDSIGNATURE • IES HOLDINGS, INC. The Corporation will furnish to any stockholder, upon request and without charge, a statement of the powers, designations, and relative rights, preferences and limitations of each class ofstock or series thereof of the Corporation, and the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the Corporation or the Transfer Agent. The followingabbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM – as tenants in commonTEN ENT – as tenants by the entireties UNIF GIFT MIN ACT– Custodian (Cust)(Minor) JT TEN – as joint tenants with right of survivorship and not as tenants in common under Uniform Gifts to Minors Act(State) UNIF TRF MIN ACT– Custodian (until age ) (Cust) under Uniform Transfers (Minor) to Minors Act (State) Additional abbreviations may also be used though not in the above list. For Value received,hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,INCLUDING ZIP CODE, OF ASSIGNEE) Shares of the common stock represented by the within Certificate, and do(es) hereby irrevocably constitute and appoint Attorney to transfer the said shares on thebooks of the within named Corporation with full power of substitution in the premises. Dated, X (SIGNATURE) X (SIGNATURE) NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUSTCORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGEWHATEVER. SIGNATURE(S) GUARANTEED: By THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS ANDLOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. Thiscertificate also evidences and entitles the holder hereof to certain rights, subject to adjustment, as set forth in a Tax Benefit Protection Plan Agreement between IES Holdings, Inc. and American Stock Transfer &Trust Company, LLC, dated as of November 8, 2016 as the same may be amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy ofwhich is on file at the principal executive offices of IES Holdings, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights (as defined in the Rights Agreement) will be evidenced byseparate certificates and will no longer be evidenced by this certificate. IES Holdings, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written requesttherefor. Under certain circumstances, as set forth in the Rights Agreement, Rights owned by or transferred to any Person who becomes an Acquiring Person (as defined in the Rights Agreement) and certaintransferees thereof will become null and void and will no longer be transferable.Exhibit 10.11November 6, 2014Integrated Electrical Services, Inc.5433 Westheimer, Suite 500Houston, TX 77056Attention: Robert W. Lewey Re:Amendment and Limited ConsentGentlemen:Reference is hereby made to that certain Amended and Restated Credit and Security Agreement, dated as of September 24, 2014, by and amongIntegrated Electrical Services, Inc. (“Administrative Borrower”), certain of its subsidiaries and affiliates, as Borrowers and Guarantors (as defined therein), andWells Fargo Bank, National Association (“Lender”) (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).Capitalized terms used but not defined herein shall have the meanings given them in the Credit Agreement.Borrowers have requested that the Credit Agreement be amended to permit certain investments, on terms and conditions set forth in this letteragreement (this “Letter Agreement”).Further, Borrowers have informed Lender that IES Subsidiary Holdings, Inc., a Delaware corporation (“Holdings”), desires to contribute, convey andassign all of the issued and outstanding membership interest in HK Engine Components, LLC (“HKEC”), an Indiana limited liability company (the “HKECShares”), to Magnetech Industrial Services, Inc., an Indiana corporation (“Magnetech”), pursuant to that certain Contribution, Conveyance and AssignmentAgreement (the “Contribution Agreement”) dated effective as of October 1, 2014. Borrowers have requested that Lender consent to Holdings and Magnetechentering into the Contribution Agreement and consummating the transactions contemplated therein (the “Proposed Transaction”).Borrowers acknowledge and agree that absent such consent, entering into the Contribution Agreement and the consummation of the ProposedTransaction contemplated therein would violate the Credit Agreement and would result in certain Defaults and Events of Default thereunder.The Borrowers and Lender desire to amend the Credit Agreement as set forth in this Letter Agreement. Therefore, in consideration of the foregoing, andfor good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agreeas follows:I. AMENDMENTEffective as of the date hereof, the following definition set forth in Schedule 1.1 of the Credit Agreement is hereby amended and restated in its entiretyto read as follows:“Permitted Investments” means:(a) Investments in cash and Cash Equivalents;(b) Investments in negotiable instruments deposited or to be deposited for collection in the ordinary course of business; Letter Agreement- Limited Consent(c) advances made in connection with purchases of Goods or services in the ordinary course of business;(d) Investments owned by any Loan Party or any of its Subsidiaries on the Closing Date and set forth on Schedule P-1;(e) Permitted Intercompany Advances;(f) Investments resulting from entering into (i) Bank Product Agreements, or (ii) agreements relative to Indebtedness that is permitted underclause (g) of the definition of Permitted Indebtedness; and(g) Investments in an original amount not to exceed $10,000,000 in the aggregate for all Loan Parties in marketable securities, pursuant to theinvestment policy attached hereto as Exhibit G (provided, that, for the avoidance of doubt, no Investment by any Loan Party made pursuant to thisclause (g) shall be included in the calculation of “Liquidity”).Effective upon the execution of this Letter Agreement, the Credit Agreement shall be amended such that the Investment Policy attached hereto asAnnex A shall be added as Exhibit G to the Credit Agreement immediately following Exhibit F thereto.Effective upon the execution of this Letter Agreement, the Credit Agreement shall be amended such that Schedules 5.1(b) and 5.1(c) to the InformationCertificate attached to the Credit Agreement as Exhibit E thereto shall be replaced with the corresponding schedules attached hereto as Annex B.II. CONSENTSSubject to the terms and conditions set forth below, Lender hereby (a) consents to Holdings and Magnetech entering into the Contribution Agreementand consummating of the Proposed Transaction and (b) agrees that no Default or Event of Default shall have occurred or be deemed to have occurred underthe Credit Agreement or any of the Loan Documents solely as a result of Holdings and Magnetech entering into the Contribution Agreement andconsummating of the Proposed Transaction and that Lender shall not exercise any of its rights and remedies under the Credit Agreement and the LoanDocuments solely as a result of Holdings and Magnetech entering into the Contribution Agreement and consummating of the Proposed Transaction.III. CONDITIONS PRECEDENTThe foregoing consent and agreements by Lender are subject to the satisfaction of the following conditions in form and substance acceptable to Lenderin its sole discretion:(i) Lender shall have received this letter agreement duly and validly executed by Borrowers, Guarantors and Lender;(ii) Lender shall have received a Pledged Interests Addendum duly executed by Magnetech;(iii) Lender shall have received original certificates representing the HKEC Shares, together with corresponding transfer powers in substance andform satisfactory to Lender; Letter Agreement- Limited Consent(iv) Lender shall have received an executed copy of the Contribution Agreement;(v) Lender shall have received evidence of all third party consents and approvals required in connection with the consummation of the ProposedTransaction and authorizing resolutions of Holdings and Magnetech or their equity holders in connection with the Proposed Transaction;(vi) with respect to the Proposed Transaction, after giving effect to the consents set forth herein, immediately prior to and after giving effect tosuch Proposed Transaction, no Default or Event of Default shall have occurred and be continuing; and(vii) after giving effect to the consents set forth herein, the representations and warranties contained in the Credit Agreement and the LoanDocuments shall be true and correct in all material respects as of the date hereof as if made on the date hereof (except to the extent a representation orwarranty relates solely to a specific earlier date, in which case such representation or warranty shall have been true and complete on and as of suchearlier date).IV. MISCELLANEOUSExcept as expressly set forth in this Letter Agreement, nothing contained herein shall be construed as a waiver by Lender of any other present or futureviolation, Default or Event of Default, covenant or provision of the Credit Agreement, any Loan Document, or of any other contract or instrument betweenBorrowers and Lender, and the failure of Lender at any time or times hereafter to require strict performance by Borrowers of any provision thereof shall notwaive, affect or diminish any right Lender has to thereafter demand strict compliance therewith. Lender hereby reserves all rights granted under the CreditAgreement, each Loan Document, and any other contract or instrument among Borrowers and Lender. Irrespective of any previous failures or delays of Lenderin the monitoring or in the requiring of compliance by Borrower with the duties, obligations, and agreements of Borrowers in the Credit Agreement and theLoan Documents, hereafter Borrowers are expected to comply strictly with their duties, obligations and agreements under the Credit Agreement and the LoanDocuments. Similarly, except as set forth above, nothing contained in this Letter Agreement shall directly or indirectly in any way whatsoever either:(i) impair, prejudice or otherwise adversely affect Lender’s rights at any time to exercise any right, privilege or remedy in connection with the CreditAgreement or any Loan Document, (ii) amend or alter any provision of the Credit Agreement or any Loan Document or any other contract or instrument, or(iii) constitute any course of dealing or other basis for altering any obligation of Borrowers under the Credit Agreement and the Loan Documents or any right,privilege or remedy of Lender under the Credit Agreement and the Loan Documents or any other contract or instrument among Borrowers and Lender.Nothing in this Letter Agreement shall be construed to be a consent by Lender to any transactions other than the Proposed Transaction.This Letter Agreement shall be a “Loan Document” and failure to comply with the terms and conditions hereof shall be an Event of Default. This LetterAgreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of whichcounterparts taken together shall constitute one and the same instrument. Any signature delivered by a party by facsimile or other form of electronictransmission shall be deemed to be an original signature hereto.This Letter Agreement is binding upon and shall inure to the benefit of Lender and Borrowers and their respective successors and assigns. This LetterAgreement may be signed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and thesame instrument. THIS LETTER AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY ANDCONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. Letter Agreement- Limited ConsentTHIS LETTER AGREEMENT, THE CREDIT AGREEMENT, AND THE LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENTAMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, ANDUNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED ORVARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.Please execute this Letter Agreement in the space provided below to acknowledge each Borrower’s agreement to the foregoing. By execution of thisLetter Agreement in the space provided below, each Borrower (a) ratifies and confirms that the Credit Agreement and all Loan Documents, and all renewals,extensions, and restatements of, and amendments and supplements to, any of the foregoing, are and remain in full force and effect in accordance with theirrespective terms and (b) agrees to reimburse and save Lender harmless from and against liabilities for the payment of all out-of-pocket costs and expensesarising in connection with the preparation, execution, and delivery of this Letter Agreement, including, without limitation, the reasonable fees and expensesof legal counsel to Lender which may be payable in respect of this Letter Agreement.[Remainder of Page Intentionally Left Blank] Letter Agreement- Limited ConsentIN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first above written. Sincerely,WELLS FARGO BANK, NATIONAL ASSOCIATIONBy: /s/ Howard I. HandmanName: Howard I. HandmanTitle: Authorized Signatory Letter Agreement- Limited Consent AGREED TO AND ACCEPTED AS OFTHE DATE FIRST WRITTEN ABOVEBORROWERS:INTEGRATED ELECTRICAL SERVICES, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Senior Vice PresidentIES COMMERCIAL & INDUSTRIAL, LLCBy: /s/ Robert W. LeweyName: Robert W. LeweyTitle: PresidentIES COMMERCIAL, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentIES PURCHASING & MATERIALS, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: PresidentIES RESIDENTIAL, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentINTEGRATED ELECTRICAL FINANCE, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: President Letter Agreement- Limited ConsentIES MANAGEMENT LPBy: INTEGRATED ELECTRICAL FINANCE,INC., its General PartnerBy: /s/ Robert W. LeweyName: Robert W. LeweyTitle: PresidentIES MANAGEMENT ROO, LPBy: IES OPERATIONS GROUP, INC., itsGeneral PartnerBy: /s/ Robert W. LeweyName: Robert W. LeweyTitle: PresidentIES RENEWABLE ENERGY, LLCBy: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentIES SUBSIDIARY HOLDINGS, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Chief Financial OfficerHK ENGINE COMPONENTS, LLCBy: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentMAGNETECH INDUSTRIAL SERVICES, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice President Letter Agreement- Limited ConsentACKNOWLEDGED AND AGREED TO AS OF THE DATEFIRST WRITTEN ABOVEGUARANTORS:IES CONSOLIDATION, LLCBy: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentIES SHARED SERVICES, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentIES PROPERTIES, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentKEY ELECTRICAL SUPPLY, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentIES TANGIBLE PROPERTIES, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentIES OPERATIONS GROUP, INC.By: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice PresidentICS HOLDINGS LLCBy: /s/ Robert W. LeweyName: Robert W. LeweyTitle: Vice President Letter Agreement- Limited ConsentExhibit 10.13September 9, 2016IES Holdings, Inc.5433 Westheimer, Suite 500Houston, TX 77056Attention: Robert W. Lewey Re:Third AmendmentGentlemen:Reference is hereby made to that certain Amended and Restated Credit and Security Agreement, dated as of September 24, 2014, by and among IESHoldings, Inc. (“Administrative Borrower”), certain of its subsidiaries and affiliates, as Borrowers and Guarantors (as defined therein), and Wells Fargo Bank,National Association (“Lender”) (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized termsused but not defined herein shall have the meanings given them in the Credit Agreement.Borrowers have requested that the Credit Agreement be amended on terms and conditions set forth in this letter agreement (this “Letter Agreement”).Therefore, in consideration of the foregoing, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, theparties hereto, intending to be legally bound, agree as follows:I. AMENDMENT1.1 Effective as of the date hereof, Section 7.17 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:“Use proceeds of the Loans in connection with funding work related to the Bonded Contracts unless such use is upon terms, provisions andconditions acceptable to Lender, in its good faith discretion (such as, without limitation, Lender being satisfied with its Lien priority and right toproceeds relating to Borrowers’ assets and restrictions on when payments may be made by Borrowers in connection with Bonded Contracts); provided,however, except as otherwise provided in the Federal Insurance Company and Liberty Mutual Intercreditor, the Chartis Intercreditor, the EverestIntercreditor, or any intercreditor agreement entered into after the Third Amendment Closing Date in form and substance satisfactory to Lender, Lenderagrees that the foregoing shall not be construed to prevent any ability of Federal Insurance Company, Liberty Mutual, Chartis, Everest, or any otherSurety (so long as such Surety has entered into an intercreditor agreement with Lender in form and substance satisfactory to Lender), as applicable, toreceive payment out of any assets of any Borrower in which Federal Insurance Company, Liberty Mutual, Chartis, Everest or such other Surety hasa first priority Lien in a circumstance where Federal Insurance Company, Liberty Mutual, Chartis, Everest, or such other Surety has made a payment ona Surety Bond and Federal Insurance Company, Liberty Mutual, Chartis, Everest, or such other Surety is seeking reimbursement for such payment fromsuch Borrower.”1.2 Effective as of the date hereof, Schedule 1.1 of the Credit Agreement is hereby amended to add the following definitions in the proper alphabeticalorder:“Everest” means Everest Reinsurance Company, Everest National Insurance Company or any of their Affiliates or Subsidiaries.”“Everest Intercreditor” means an Intercreditor Agreement entered into as of September 9, 2016 by and among Lender, Everest and certain LoanParties, in form and substance satisfactory to Lender in its sole and absolute discretion, as the same may be amended, amended and restated orotherwise modified from time to time.”[IES] Letter Agreement- Third Amendment“Third Amendment Closing Date” shall mean September 9, 2016.”1.3 Effective as of the date hereof, the following definitions set forth in Schedule 1.1 of the Credit Agreement are hereby amended and restated in theirentirety to read as follows:““Excluded Collateral” means (i) the Surety Collateral to the extent (a) the issuer of the Surety Bond is Chartis, Everest, Liberty Mutual FederalInsurance Company, or other Surety (so long as such Surety has entered into an intercreditor agreement with Lender in form and substance satisfactoryto Lender) or a co-surety of such Person under the Specified Surety Agreements in effect on the Third Amendment Closing Date, provided that theChartis Intercreditor, Everest Intercreditor, the Federal Insurance Company and Liberty Mutual Intercreditor, or an intercreditor agreement entered intoafter the Third Amendment Closing Date in form and substance satisfactory to Lender, as applicable, is in full force and effect and (b) such SuretyCollateral has not previously been included in a Borrowing Base Certificate delivered to Lender, (ii) all cash collateral pledged to Federal InsuranceCompany, Everest, Liberty Mutual, Chartis or such other Surety pursuant to the Specified Surety Agreements that is in the possession or under thecontrol of Federal Insurance Company, Everest, Liberty Mutual, Chartis or such other Surety, as applicable, provided that the Chartis Intercreditor,Everest Intercreditor, the Federal Insurance Company and Liberty Mutual Intercreditor, or an intercreditor agreement entered into after the ThirdAmendment Closing Date in form and substance satisfactory to Lender, as applicable, is in full force and effect and (iii) cash collateral pledged toSureties (other than Federal Insurance Company, Everest, Liberty Mutual, Chartis or any other Surety (so long as such Surety has entered into anintercreditor agreement with Lender in form and substance satisfactory to Lender)) up to an aggregate amount of $2,000,000 (exclusive of anydrawings under letters of credit issued for the benefit of such Surety) that is in the possession or under the control of such Surety; provided, however,that in no event shall Excluded Collateral include any amounts which from time to time may be in the Collection Account or any Deposit Account inwhich cash collateral or Qualified Cash is held.”“‘Loan Documents’ means this Agreement, any Borrowing Base Certificate, the Control Agreements, the Cash Management Documents, theGuaranty, the Federal Insurance and Liberty Mutual Intercreditor, the Everest Intercreditor, the Chartis Intercreditor, any intercreditor agreemententered into after the Third Amendment Closing Date in form and substance satisfactory to Lender, the Letters of Credit, each Patent and TrademarkSecurity Agreement, any Copyright Security Agreement, the Seller Subordination Agreement, the Collateral Assignment of Purchase Agreement, theOmnibus Reaffirmation, any note or notes executed by any Borrower in connection with this Agreement and payable to Lender, any Letter of CreditApplications and other Letter of Credit Agreements entered into by any Borrower in connection with the Existing Credit Agreement, and any otherinstrument or agreement entered into, now or in the future, by any Loan Party or any of its Subsidiaries and Lender in connection with this Agreement,but specifically excluding all Hedge Agreements.”“Specified Surety Agreements” means the agreements with Chartis, Everest, Federal Insurance Company, Liberty Mutual and/or any other Suretylisted on Schedule 5.31 to the Information Certificate.”1.4 Effective as of the date hereof, Schedule 1.1 of the Credit Agreement is hereby amended to amend and restated clause (i) of the definition of“Permitted Liens” in its entirety to read as follows:[IES] Letter Agreement- Third Amendment“(i) Liens in favor of Sureties in the Surety Collateral securing reimbursement obligations for Surety Bonds procured by a Borrower in theordinary course of business consistent with past practices pursuant to a bonding program acceptable to Lender; provided, that such Surety has,pursuant to documentation satisfactory to Lender in the good faith exercise of its credit judgment: (a) agreed not to require segregation of funds as toits Bonded Collateral without the prior written consent of Lender (though Federal Insurance Company, Everest, Liberty Mutual, Chartis, and any otherSurety (so long as such Surety has entered into an intercreditor agreement with Lender in form and substance satisfactory to Lender) will be permittedsuch segregation upon a default under the Bonded Contract and notice to Lender from Federal Insurance Company, Everest, Liberty Mutual, Chartis, orsuch other Surety, as applicable; provided, that the Federal Insurance and Liberty Mutual Intercreditor, the Everest Intercreditor, the ChartisIntercreditor, or other intercreditor agreement entered into after the Third Amendment Closing Date in form and substance satisfactory to Lender, asapplicable, is in full force and effect) and (b) (i) acknowledged and agreed that pursuant to the Loan Parties’ cash management system established inconnection with this Agreement, proceeds of the Surety Collateral, including Accounts arising from the Bonded Contracts (collectively, “BondedContract Proceeds”) may be commingled with proceeds of other Accounts and other Property of Borrowers in the Collection Account and other DepositAccounts in which Lender has, or in the future may have, security interests, Liens or other rights, and (ii) consented to such commingling and tosecurity interests, Liens or other rights in the Collection Account and such other Deposit Accounts, and (iii) released and waived any and all securityinterests and other legal and equitable rights and interests that it may then or thereafter have (as secured party, subrogee, trust fund beneficiary, orotherwise) in or to (A) the Collection Account and such other Deposit Accounts and (B) Bonded Account Proceeds that from time to time are in theCollection Account and such other Deposit Accounts are in the possession of Lender, that have been applied to indebtedness, liabilities or obligationsfrom time to time owing to Lender by Borrowers, or have otherwise been removed from, set off against or applied from the Collection Account and suchother Deposit Accounts.”1.5 Effective upon the execution of this Letter Agreement, the Credit Agreement shall be amended such that Schedule 5.31 to the InformationCertificate attached to the Credit Agreement as Exhibit E thereto shall be amended to add the following: “09/09/16 Agreement of Indemnity by and among certain Loan Parties, Everest Reinsurance Company and Everest National InsuranceCompany”II. CONDITIONS PRECEDENTThe foregoing consent and agreements by Lender are subject to the satisfaction of the following conditions in form and substance acceptable to Lenderin its sole discretion:(i) Lender shall have received this letter agreement duly and validly executed by Borrowers, Guarantors and Lender;(ii) Lender shall have received an executed copy of the Agreement of Indemnity by an among Everest Reinsurance Company, Everest NationalInsurance Company and the applicable Loan Parties;(iii) Lender shall have received an executed copy of the Intercreditor Agreement executed by Everest Reinsurance Company, Everest NationalInsurance Company and the applicable Loan Parties; and(iv) the representations and warranties contained in the Credit Agreement and the Loan Documents shall be true and correct in all materialrespects as of the date hereof as if made on the date hereof (except to the extent a representation or warranty relates solely to a specific earlier date, inwhich case such representation or warranty shall have been true and complete on and as of such earlier date).[IES] Letter Agreement- Third AmendmentIII. MISCELLANEOUSExcept as expressly set forth in this Letter Agreement, nothing contained herein shall be construed as a waiver by Lender of any other present or futureviolation, Default or Event of Default, covenant or provision of the Credit Agreement, any Loan Document, or of any other contract or instrument betweenBorrowers and Lender, and the failure of Lender at any time or times hereafter to require strict performance by Borrowers of any provision thereof shall notwaive, affect or diminish any right Lender has to thereafter demand strict compliance therewith. Lender hereby reserves all rights granted under the CreditAgreement, each Loan Document, and any other contract or instrument among Borrowers and Lender. Irrespective of any previous failures or delays of Lenderin the monitoring or in the requiring of compliance by Borrower with the duties, obligations, and agreements of Borrowers in the Credit Agreement and theLoan Documents, hereafter Borrowers are expected to comply strictly with their duties, obligations and agreements under the Credit Agreement and the LoanDocuments. Similarly, except as set forth above, nothing contained in this Letter Agreement shall directly or indirectly in any way whatsoever either: (i)impair, prejudice or otherwise adversely affect Lender’s rights at any time to exercise any right, privilege or remedy in connection with the Credit Agreementor any Loan Document, (ii) amend or alter any provision of the Credit Agreement or any Loan Document or any other contract or instrument, or (iii)constitute any course of dealing or other basis for altering any obligation of Borrowers under the Credit Agreement and the Loan Documents or any right,privilege or remedy of Lender under the Credit Agreement and the Loan Documents or any other contract or instrument among Borrowers and Lender.Nothing in this Letter Agreement shall be construed to be a consent by Lender to any transactions other than the Proposed Transaction.This Letter Agreement shall be a “Loan Document” and failure to comply with the terms and conditions hereof shall be an Event of Default. This LetterAgreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of whichcounterparts taken together shall constitute one and the same instrument. Any signature delivered by a party by facsimile or other form of electronictransmission shall be deemed to be an original signature hereto.This Letter Agreement is binding upon and shall inure to the benefit of Lender and Borrowers and their respective successors and assigns. This LetterAgreement may be signed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and thesame instrument. THIS LETTER AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY ANDCONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.THIS LETTER AGREEMENT, THE CREDIT AGREEMENT, AND THE LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENTAMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, ANDUNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED ORVARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.Please execute this Letter Agreement in the space provided below to acknowledge each Borrower’s agreement to the foregoing. By execution of thisLetter Agreement in the space provided below, each Borrower (a) ratifies and confirms that the Credit Agreement and all Loan Documents, and all renewals,extensions, and restatements of, and amendments and supplements to, any of the foregoing, are and remain in full force and effect in accordance with theirrespective terms and (b) agrees to reimburse and save Lender harmless from and against liabilities for the payment of all out-of-pocket costs and expensesarising in connection with the preparation, execution, and delivery of this Letter Agreement, including, without limitation, the reasonable fees and expensesof legal counsel to Lender which may be payable in respect of this Letter Agreement.[Remainder of Page Intentionally Left Blank][IES] Letter Agreement- Third AmendmentIN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first above written. Sincerely, WELLS FARGO BANK, NATIONAL ASSOCIATIONBy: /s/ Howard I. HandmanName: Howard I. HandmanTitle: Authorized Signatory[IES] Letter Agreement- Third AmendmentAGREED TO AND ACCEPTED AS OF THE DATE FIRST WRITTENABOVEBORROWERS:IES HOLDINGS, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Senior Vice President, CFO & TreasurerIES COMMERCIAL & INDUSTRIAL, LLCBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President & TreasurerIES COMMERCIAL, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President & TreasurerIES PURCHASING & MATERIALS, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerIES RESIDENTIAL, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President, CFO & TreasurerINTEGRATED ELECTRICAL FINANCE, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & Treasurer[IES] Letter Agreement- Third AmendmentIES MANAGEMENT LPBy: INTEGRATED ELECTRICALFINANCE, INC., its General PartnerBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerIES MANAGEMENT ROO, LPBy: IES OPERATIONS GROUP, INC., itsGeneral PartnerBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerIES RENEWABLE ENERGY, LLCBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President & CFOIES SUBSIDIARY HOLDINGS, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Chief Financial OfficerHK ENGINE COMPONENTS, LLCBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President, CFO & TreasurerMAGNETECH INDUSTRIAL SERVICES, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President, CFO & Treasurer[IES] Letter Agreement- Third AmendmentSOUTHERN INDUSTRIAL SALES AND SERVICES, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President, CFO & TreasurerCALUMET ARMATURE AND ELECTRIC, L.L.C.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President, CFO & TreasurerSHANAHAN MECHANICAL & ELECTRICAL, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President & TreasurerIES INFRASTRUCTURE SOLUTIONS, LLCBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President & TreasurerTECHNIBUS, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: Vice President & Treasurer[IES] Letter Agreement- Third AmendmentACKNOWLEDGED AND AGREED TO ASOF THE DATE FIRST WRITTEN ABOVEGUARANTORS:IES CONSOLIDATION, LLCBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerIES SHARED SERVICES, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerIES PROPERTIES, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerKEY ELECTRICAL SUPPLY, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: PresidentIES TANGIBLE PROPERTIES, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerIES OPERATIONS GROUP, INC.By: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & TreasurerICS HOLDINGS LLCBy: /s/ Tracy A. McLauchlinName: Tracy A. McLauchlinTitle: President & Treasurer[IES] Letter Agreement- Third AmendmentExhibit 10.30EXECUTION VERSIONINTEGRATED ELECTRICAL SERVICES, INC.AMENDED AND RESTATED EXECUTIVE OFFICERSEVERANCE BENEFIT PLAN1. PURPOSE AND TERM. The Integrated Electrical Services, Inc. (the “Company”) Executive Officer Severance Benefit Plan was adopted by the Board ofDirectors of the Company on January 23, 2012, and is hereby amended and restated in its entirety as of January 12, 2016. The purpose of the IntegratedElectrical Services, Inc. Amended and Restated Executive Officer Severance Benefit Plan (“Plan”) is to provide severance benefits to certain seniorexecutives of the Company and its adopting Affiliates (as defined below) in the event the executive incurs a Qualifying Termination, as defined below.2. COVERED EXECUTIVES.2.01(a) Automatic Coverage. Subject to Section 2.02, each employee who is a Senior Vice President or above of the Companyautomatically shall be a Covered Executive under this Plan.(b) Additional Coverage. Subject to Section 2.02, any other employee of the Company or a Participating Affiliate who is an officer andis designated as covered under the Plan by the Human Resources and Compensation Committee (the “Committee”) of the Board of Directors of theCompany (the “Board”) also shall be a Covered Executive under this Plan.2.02 An individual who is otherwise described in Section 2.01(a) or 2.01(b) shall cease to be a Covered Executive if:(a) he is covered pursuant to Section 2.01(a) above and subsequently, without a termination of employment, ceases to be a Senior VicePresident or above of the Company;(b) he is covered pursuant to Section 2.01(b) above and subsequently, without a termination of employment, ceases to be an officer ofthe Company or a Participating Affiliate;(c) the Covered Executive’s employment terminates for any reason other than due to a Qualifying Termination;(d) the Covered Executive has or enters into an individual employment or severance agreement with the Company or an Affiliate thatmay provide severance benefits to him or her upon termination of employment: or(e) the Covered Executive does not consent (in a form acceptable to the Company) to be bound by the covenants set forth in Section 9,including with respect to the portion of the Restricted Period (as defined below) following the termination of his or her employment for any reason.For purposes of coverage under this Plan, a transfer of a Covered Executive’s employment to a non-Participating Affiliate shall not be deemedeffective to terminate his or her coverage hereunder until thirty (30) days after written notice of such transfer has been furnished to the Covered Executive.3. QUALIFICATION FOR SEVERANCE BENEFITS. 3.01Qualifying Terminations. In the event that a Covered Executive has a Qualifying Termination, or in the event of a Covered Executive’stermination of employment due to his or her death or Disability, then, subject to Section 3.02, the Company or Participating Affiliate, whicheveris the employer, shall provide to, or on behalf of, such terminated Covered Executive the severance benefits set forth in Section 4.01, 4.02 or4.04 of this Plan, as applicable. 3.02Release and Waiver. Notwithstanding any other provisions of this Plan to the contrary, unless waived by the Committee with respect to theCovered Executive, in its sole discretion, the Company or Participating Affiliate, as the case may be, shall not provide, or have any obligation toprovide, to a Covered Executive any severance payments or benefits under Section 4, other than the Accrued Rights, upon or following suchCovered Executive’s Qualifying Termination or termination of employment due to his or her Disability, unless (i) within fifty (50) days from thedate of such termination of employment, the Covered Executive timely executes and delivers to the Company the Release, which shall beprovided to the Covered Executive by the Company not later than five (5) days following the Covered Executive’s termination, and (ii) theCovered Executive does not revoke the Release within any applicable revocation period therefor following the Covered Executive’s delivery ofthe executed Release to the Company. If the requirements of this Section 3.02 are satisfied, then, subject to Section 5 below, the severancepayments and benefits to which the Covered Executive is otherwise entitled to receive under Section 4 shall begin or be made, as applicable, asprovided in Section 5. If the Release requirements of this Section 3.02 are not timely satisfied by the Covered Executive, then no severancepayments or benefits, other than the Accrued Rights, shall be due the Covered Executive under this Plan.4. SEVERANCE BENEFITS. 4.01Qualifying Termination prior to a Change in Control. If a Covered Executive has a Qualifying Termination prior to a Change in Control (definedbelow) and satisfies the Release conditions under Section 3.02, then, subject to Section 5, the Covered Executive shall receive the followingseverance benefits:(a) Accrued Rights. Without regard to Section 3.02, the Covered Executive’s Accrued Rights.(b) Severance Pay. Continued payment of the Covered Executive’s Base Pay for twelve (12) months following the date of suchtermination, payable monthly in accordance with the Company’s normal payroll practices as in effect on the date of termination, but not later thanthe last business day of each calendar month.(c) Annual Bonus. Any unpaid Annual Bonus that has been “earned” for the immediately preceding fiscal year plus an Annual Bonusfor the current fiscal year, pro rated based on the percentage of the current fiscal year that shall have elapsed through the date of termination. Theamount of any such Annual Bonus(es) shall be as determined by the Committee, including its determination of the extent the performanceobjectives, if any, for such fiscal year have been achieved. Such Annual Bonus(es) shall be payable (i) at the same time(s) that the annual bonus(es)for such respective fiscal year(s) are paid to other similar executives of the Company (or Participating Affiliates) or (ii) on the date immediatelyfollowing the date the Release provided in Section 3.02 becomes irrevocable, whichever shall later occur.(d) Incentive/Equity Awards. A prorated amount of the Covered Executive’s then outstanding unvested cash incentive awards andequity-based awards, other than an Annual Bonus or Performance Award (defined below), shall vest and payment made thereon, if applicable, on thedate immediately following the date the Release provided in Section 3.02 becomes irrevocable. Prior to such date, any unvested award(s) shall notbe forfeited due to the Covered Executive’s termination of employment, notwithstanding anything in the applicable grant agreement(s) to thecontrary. The applicable prorated vested percentage for such an award(s) shall be the percentage of the full vesting period for such award(s) in whichthe Covered Executive was actively employed by the Company (or Participating Affiliate). Payment of such prorated vested awards, if any, shall bemade on the date immediately following the date the Release provided in Section 3.02 becomes irrevocable.A prorated portion of each of the Covered Executive’s then outstanding cash incentive awards or equity-based awards, the paymentof which is dependent upon the achievement of performance objectives during a performance period that has not ended as of the CoveredExecutive’s date of Qualifying Termination (a “Performance Award”), shall vest at the end of the performance period applicable to such award, butonly if and to the extent the performance objectives for such performance period have been achieved, as determined by the CompensationCommittee (the “Performance Amount Achieved”), and the Release provided in Section 3.02 has become irrevocable. The applicable proratedvested percentage for any such Performance Award shall be the product of the percentage of the full performance period for such Performance Awardin which the Covered Executive was actively employed by the Company (or Participating Affiliate) and the Performance Amount Achieved, if any.Payment(s) of such Performance Award(s) that become vested, if any, shall bemade (i) at the same time(s) the performance award(s) for such performance period(s) are paid to other similar executives of the Company (orParticipating Affiliates) or (ii) on the date immediately following the date the Release provided in Section 3.02 becomes irrevocable, whichevershall later occur.(e) COBRA. An amount, paid on the first business day of each month, equal to 100% of the applicable monthly COBRA premiumunder the Company’s (or Participating Affiliate’s) group health plan for the coverage elected by the Covered Executive and his or her eligibledependents, continued for the lesser of (i) twelve (12) months or (ii) until such COBRA coverage for the Covered Executive (and his or herdependents) terminates.(f) Outplacement. The Covered Executive shall be entitled to receive outplacement services from a service provider selected orapproved by the Company for twelve (12) months following his or her Qualifying Termination, in an amount not to exceed $20,000. 4.02Qualifying Termination on or within twelve (12) months following a Change in Control. If a Covered Executive has a Qualifying Terminationon or within twelve (12) months following a Change in Control (defined below) and satisfies the Release conditions under Section 3.02, then,subject to Section 5, the Covered Executive shall receive the following severance benefits:(a) Accrued Rights. The Covered Executive’s Accrued Rights.(b) Severance Pay. In a lump sum, an amount equal to two (2) times the Covered Executive’s annual base pay, payable on the dateimmediately following the date the Release provided in Section 3.02 becomes.(c) Annual Bonus. In a lump sum, an amount equal to two (2) times the greater of the most recent (i) Annual Bonus paid to the CoveredExecutive or (ii) Annual Bonus Opportunity of the Covered Executive, payable on the date immediately following the date the Release provided inSection 3.02 becomes irrevocable.(d) Awards. All of the Covered Executive’s then outstanding unvested incentive, performance and equity-based awards (including, butnot limited to, any unvested options, restricted stock, performance and phantom share units and stock appreciation rights then outstanding underthe LTIP or any other equity plan subsequently adopted by the Company) shall vest in full and payment made thereon, if applicable, on the dateimmediately following the date the Release provided in Section 3.02 becomes irrevocable.(e) COBRA. An amount, paid on the first business day of each month, equal to 100% of the applicable monthly COBRA premiumunder the Company’s (or Participating Affiliate’s) group health plan for the coverage elected by the Covered Executive and his or her eligibledependents, continued for the lesser of (i) twelve (12) months or (ii) until such COBRA coverage for the Covered Executive (and his or herdependents) terminates.(f) Outplacement. The Covered Executive shall be entitled to receive outplacement services from a service provider selected orapproved by the Company for twelve (12) months following his or her Qualifying Termination, in an amount not to exceed $20,000. 4.03Change in Control. For purposes of the Plan, a Change in Control shall mean any of the following:(a) Any person or any persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act,other than Tontine Capital Partners L.P. and its affiliates, the Company or any subsidiary, shall “beneficially own” (as defined in Rule 13d-3 underthe Securities Exchange Act of 1934, as amended from time to time), directly or indirectly, more than fifty percent (50%) of the ordinary votingpower of all classes of capital stock of the Company entitled to vote generally in the election of the Board; or(b) Current Directors (as defined below) shall cease for any reason to constitute at least a majority of the members of the Board (forthese purposes, a “Current Director” means, as of the date of determination, any person who (1) was a member of the Board on the date that theCompany’s Joint Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code became effective or (2) was nominated forelection or elected to the Board with the affirmative vote of a majority of the current directors who were members of the Board at the time of suchnomination or election), or at any meeting of the stockholders of the Company called for the purpose of electing directors, a majority of the personsnominated by the Board for election as directors shall fail to be elected; or(c) The consummation of a sale, lease, exchange or other disposition (in one transaction or a series of transactions) of all orsubstantially all of the assets of the Company; provided, however, a transaction shall not constitute a Change in Control if its sole purpose is tochange the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by thepersons who held the Company’s securities immediately before such transaction.Notwithstanding the above definition, with respect to any payment or acceleration hereunder that is subject to Section 409A of theCode, Change in Control shall mean a “change in control event” within the meaning of Section 409A and the Treasury Regulations thereunder. 4.04Death or Disability. If a Covered Executive’s employment terminates by reason of death or Disability, the Covered Executive or his or her estate(as the case may be) shall be entitled to receive the following:(a) Accrued Rights. Without regard to Section 3.02, the Covered Executive’s Accrued Rights.(b) Annual Bonus. Any unpaid Annual Bonus that has been “earned” for the immediately preceding fiscal year plus an AnnualBonus for the current fiscal year, pro rated based on the percentage of the current fiscal year that shall have elapsed through the date of termination.The amount of any such Annual Bonus(es) shall be as determined by the Compensation Committee, including its determination of the extent theperformance objectives, if any, for such fiscal year have been achieved. Such Annual Bonus(es) shall be payable (i) at the same time(s) that theannual bonus(es) for such respective fiscal year(s) are paid to other similar executives of the Company (or Participating Affiliates) or (ii) on the dateimmediately following the date the Release provided in Section 3.02 becomes irrevocable, whichever shall later occur.(c) Awards. All of the Covered Executive’s then outstanding unvested incentive, performance and equity-based awards (including,but not limited to, any unvested options, restricted stock, performance and phantom share units and stock appreciation rights then outstandingunder the LTIP or any other equity plan subsequently adopted by the Company) shall vest in full and payment made thereon, if applicable, on thedate immediately following the date the Release provided in Section 3.02 becomes irrevocable. Prior to such date, any unvested award(s) shall notbe forfeited due to the Covered Executive’s termination of employment, notwithstanding anything in the applicable grant agreement(s) to thecontrary; provided, however, any stock options or stock appreciation rights shall continue to be exercisable for the lesser of (i) twelve (12) monthsfollowing the Covered Executive’s termination or (ii) the term of such awards.(d) COBRA. An amount, paid on the first business day of each month, equal to 100% of the applicable monthly COBRA premiumunder the Company’s (or Participating Affiliate’s) group health plan for the coverage elected by the Covered Executive and his or her eligibledependents, continued for the lesser of (i) twelve (12) months or (ii) until such COBRA coverage for the Covered Executive (and his or herdependents) terminates.(e) Any question as to the existence of the Disability of the Covered Executive as to which the Covered Executive and the Companycannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Covered Executive and the Company.If the Covered Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those twophysicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company andthe Covered Executive shall be final and conclusive for all purposes of the Agreement.(f) If a Covered Executive dies after his or her Qualifying Termination and prior to the payment of all severance payments andbenefits due under this Plan (the Covered Executive shall be deemed to have complied with Section 3.02 if his or her death occurs prior to the endof the period for executing the Release), the remaining payments shall be paid to his or her estate and the COBRA benefits shall continue asprovided above. 4.05Parachute Tax Cut-Back. Notwithstanding anything in this Plan to the contrary, if the Covered Executive is a “disqualified individual” (asdefined in Section 280G(c) of the Code), and the payments and benefits to be provided to Covered Executive under this Plan, together with anyother payments and benefits to which the Covered Executive has the right to receive from the Company or any other person, would constitute a“parachute payment” (as defined in Section 280G(b)(2) of the Code), then the payments and benefits to be provided under this Plan either (a)shall be reduced (but not below zero) so that the present value of such total amounts and benefits received by the Covered Executive under thePlan will be $1.00 less than three times the Covered Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code), so that noportion of the amounts to be received will be subject to the excise tax imposed by Section 4999 of the Code or (b) shall be paid in full,whichever result produces the better “net after-tax” benefit to the Covered Executive (taking into account all applicable taxes, including excisetax under Section 4999 of the Code). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, paymentsto be paid in cash hereunder (beginning with such payment that would be made last in time and continuing, to the extent necessary, through tosuch payment that would be made first in time) and, then, reducing any benefits to be provided hereunder in-kind in a similar order. Thedetermination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by theCompany in good faith.5. TIME OF PAYMENT/SECTION 409A COMPLIANCE. 5.01Payment. Subject to Section 5.02, the payments due, if any, pursuant to Sections 4.01 and 4.02 hereof shall be made as provided therein. 5.02409A Compliance.(a) Required Delay. Notwithstanding anything in the Plan to the contrary concerning the time of payment of any severance benefit,if the Covered Executive is a “specified employee,” as defined in Treas. Reg. § 1.409A-1(i), as of his or her Qualifying Termination, then to theextent an amount payable under the Plan to such Covered Executive upon or as a result of his or her “separation from service” would be subject tothe additional tax provided by Section 409A of the Code, such amount shall not be paid to the Covered Executive until the date that is six(6) months after the date of his or her Qualifying Termination (or, if earlier, his or her date of death). Such delayed payment shall be made in a lumpsum on such delayed payment date and shall bear interest at the rate of 6% per annum from the date payment was otherwise to be made underSection 4 and the date the delayed amount is actually paid. Severance payments and benefits that are not subject to such Section 409A additionaltax shall not be subject to this delay.(b) Separate Payments. To the extent permitted under Section 409A and the applicable Treasury Regulations thereunder, eachpayment to a Covered Executive under the Plan shall be treated as a “separate payment.”(c) Reimbursements. Any severance payment or benefit under this Plan to which Code Section 409A applies that constitutes areimbursement or the in- kind benefit shall be subject to the following: (i) the amount of expenses eligible for reimbursement or in-kind benefitsprovided during the Covered Executive’s taxable year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, inany other taxable year (this requirement shall not apply to an arrangement that provides for the reimbursement of expenses referred to in CodeSection 105(b)); (ii) the reimbursement of an eligible expense shall be made on or before the last day of the Covered Executive’s taxable yearfollowing the taxable year in which the expense was incurred; and (iii) the right to reimbursement or to receive an in-kind benefit shall not besubject to liquidation or exchange by the Covered Executive for other payment or benefit.(d) Timing of Certain Payments. Notwithstanding anything in the Plan to the contrary (i) if it is determined that the payment underSection 4.02 (b) is a “substitution” payment under Code Section 409A, such payment will be made in the same form and at the same time as the“substituted payment” would have been made and (ii) with respect to any payment that is conditioned on the Release becoming irrevocable, in theevent the potential period for the Release’s irrevocable date straddles two calendar years, the earliest date on which such payment will be made isJanuary 1st of the year following the Covered Executive’s termination.(e) 409A Compliance. The Plan shall be construed to comply with Section 409A of the Code, to the extent applicable, and, in thisregard, a “termination of employment” shall mean, and must be, a “separation from service” for purposes of Section 409A of the Code.6. ADMINISTRATION.The Company shall be responsible for the administration of this Plan and shall serve as the Plan’s administrator. The Company may appoint or employsuch persons as it deems necessary to render advice with respect to any responsibility of the Company under this Plan. The Company shall have thediscretionary authority to decide all questions concerning the eligibility of any person to participate in this Plan, the right to and amount of anybenefit payable under this Plan to any individual and the date on which any individual ceases to be a Plan participant. The Company may allocate toany one or more of its employees any responsibility it may have under this Plan. Any such person who receives full-time pay from the Company or anAffiliate shall receive no compensation from this Plan for his or her services in such capacity (other than expense reimbursements). Any such personshall not have any fiduciary responsibilities under this Plan. As Plan administrator, the Company shall maintain records of the Plan’s administrationand shall be responsible for the handling, processing and payment of claims for benefits under this Plan.7. CLAIMS PROCEDURE. 7.01Notification of Benefit Determination and Initiation of Claims.(a) The Company shall notify each Covered Executive who the Company determines is entitled to benefits under this Plan of his orher entitlement to receive such benefits and shall provide any forms required in connection with the application for such benefits.(b) If any such Covered Executive disagrees with the determination of his or her benefits, he or she may submit a written statementdescribing the basis of his or her claim for benefits, together with any forms required in connection with the application for such benefits.(c) Any Covered Executive who is not so notified but believes that he or she is entitled to benefits under this Plan may submit awritten statement describing the basis of his or her claim for benefits and requesting any forms required in connection with the application for suchbenefits.(d) Each Covered Executive claiming a benefit under this Plan must complete and file with the Company any required applicationforms.7.2 Claim Denial. If the claim of a Covered Executive is wholly or partially denied after he or she has completed the required documents asdescribed above, he or she shall be notified by registered mail within ninety (90) days after the written claims statement is submitted, or within ninety(90) days after any required application forms are filed, if later (except that in special circumstances the Company may take an additional ninety (90) days toconsider its decision, in which case the Covered Executive will be notified of the extension). Such notification shall set forth:(a) the specific reasons for the denial (including reference to any pertinent Plan provisions on which the denial is based);(b) if applicable, a description of any additional material or information necessary for the claimant to perfect the claim, and an explanationof why such material or information is necessary; and,(c) the claims review procedure and the time limits applicable to such procedures, including a statement of the right to institute anarbitration proceeding under Section 12.07.7.3 Review of Claim Denials.(a) The Company will review such claim denials. Any Covered Executive who has filed a claim for benefits may make a written requestto the Company, within sixty (60) days after denial of his or her claim, for a review of such claim. Any such request may include a statement by the CoveredExecutive of any relevant issues and comments and may include a request for an opportunity to review this Plan and any other pertinent documents (whichwill be made available to him or her within thirty (30) days after such request is received at a convenient location during business hours).(b) The Covered Executive claiming benefits shall be notified of the final decision of the Company within sixty (60) days after his or herrequest for a review is received. However, if the Company finds it necessary due to special circumstances (such as, for example, the need to hold a hearing), toextend this period and so notifies the claimant in writing, the decision shall be rendered as soon as practicable, but in no event later than one hundred andtwenty (120) days after the claimant’s request for review. The decision shall be in writing and shall set forth the specific reasons for the denial (includingreference to any pertinent Plan provisions on which the denial is based). Such decision shall be final and conclusive on all persons claiming benefits underthis Plan, subject to applicable law.8. FUNDING.This Plan shall not be funded through a trust, an insurance contact or otherwise and all benefit payments due under this Plan shall be payable solelyfrom the general assets of the Company. A Covered Executive shall not have any claim against any specific assets of the Company and shall be only anunsecured general creditor of the Company with respect to any rights he or she may have under this Plan.9. NON-COMPETITION; NON-SOLICITATION.9.1 The Covered Executive’s eligibility to participate in the Plan and the Company’s obligation to remit or convey the severance benefits andpayments set forth in Section 4 on account of a Qualifying Termination are expressly conditioned on the Covered Executive’s consent to be bound by, andcompliance with, the restrictions and covenants set forth in this Section 9.9.2 During the term of the Covered Executive’s employment with the Company or an Affiliate and (i) for a period of six (6) months following the dateof a Qualifying Termination covered by Sections 4.01 or 4.04 or a Executive’s voluntary resignation of employment other than for Good Reason (each, a“Termination”) or (ii) for a period of twelve (12) months following the date of a Qualifying Termination covered by Section 4.02 (the period establishedunder either subclause (i) or (ii), as applicable, hereafter called the “Restricted Period”), the Covered Executive will not, whether on the Covered Executive’sown behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entityor enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any client orprospective client:(a) with whom the Covered Executive had personal contact or dealings on behalf of the Company during the one year period preceding theTermination;(b) with whom employees reporting to the Covered Executive have had personal contact or dealings on behalf of the Company during the oneyear period immediately preceding the Termination; or(c) for whom the Covered Executive had direct or indirect responsibility during the one year period immediately preceding the Termination.9.3 During the Restricted Period, the Covered Executive will not directly or indirectly:(a) engage in any business that materially competes with any business of the Company or its Affiliates (including, without limitation, businesseswhich the Company or its Affiliates have specific plans to conduct within twelve (12) months from the effective date of the Termination and as towhich the Covered Executive is personally aware of such planning) in any geographical area that is within 100 miles of any geographical area wherethe Company or its Affiliates manufactures, produces, sells, leases, rents, licenses or otherwise provides its products or services and over which theCovered Executive had substantive responsibilities (a “Competitive Business”);(b) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or whichengages in a Competitive Business;(c) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual,partner, shareholder, officer, director, principal, agent, trustee or consultant; or(d) interfere with, or attempt to interfere with, business relationships between the Company or any of its Affiliates and customers, clients,suppliers, partners, members or investors of the Company or its Affiliates.9.4 Notwithstanding anything to the contrary in this Section 9, the Covered Executive may, directly or indirectly, own, solely as an investment,securities of any Person engaged in the business of the Company or its Affiliates that is publicly traded on a national stock exchange or on the over-the-counter market if the Covered Executive (i) is not a controlling person of, or a member of a group which controls, such person or (ii) does not, directly orindirectly, own 5% or more of any class of securities of such Person.9.5 During the Restricted Period, the Covered Executive will not, whether on the Covered Executive’s own behalf or on behalf of or in conjunctionwith any Person, directly or indirectly:(a) solicit or encourage any employee of the Company or its Affiliates to leave the employment of the Company or its Affiliates; or(b) hire any such employee who was employed by the Company or its affiliates as of the date of the Termination or who left the employment ofthe Company or its affiliates coincident with, or within six (6) months prior to or after, the Covered Executive’s Termination.9.6 During the Restricted Period, the Covered Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or itsAffiliates any consultant then under contract with the Company or its Affiliates.9.7 If a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in thisSection 9 is an unenforceable restriction against the Covered Executive, the provisions of this Section 9 shall not be rendered void but shall be deemedamended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine to be enforceable.10. AMENDMENT AND TERMINATION.This Plan may be amended or terminated, in whole or in part, at any time by a written instrument signed by the President of the Company and approvedby the Committee; provided, however, a copy of such action must be furnished to each Covered Executive at least thirty (30) days prior to its effective date orsuch action shall be deemed null and void for all purposes as to such Covered Executive.11. ADOPTION AND WITHDRAWAL BY AFFILIATES.11.1 Adoption by Affiliates. Subject to the prior approval of the Committee, an Affiliate of the Company may adopt this Plan pursuant toappropriate written resolutions of its board of directors and by executing and delivering to the Company an adoption agreement in which the adoptingAffiliate agrees to be bound by all of the terms of this Plan with respect to its Covered Executives (each a “Participating Affiliate”). The adoption agreementshall become, as to such adopting Affiliate and its employees, a part of this Plan as then amended or thereafter amended. It shall not be necessary for theadopting Affiliate to sign or execute the original or amended Plan document. The effective date of this Plan for any such adopting Affiliate shall be thatstated in the adoption agreement, and from and after such effective date, the adopting Affiliate shall assume all the rights, obligations, and liabilities underthis Plan. The administrative powers and control of the Company, as provided in this Plan, including the sole right to amend, shall not be diminished byreason of participation of any such Affiliate in this Plan.11.2 Special Provisions by Affiliates. With the approval of the Company, an adopting Affiliate may elect to have special provisions apply withrespect to its Covered Executives. Such special provisions, which may differ from the provisions of this Plan which are applicable to employees of otherAffiliates, shall be stated in this Plan text or in an Appendix to this Plan.11.3 Withdrawal. Any Affiliate of the Company participating in this Plan may withdraw from this Plan at any time without affecting otherAffiliates of the Company by complying with the provisions of this Plan. The Committee may, in its absolute discretion, terminate an adopting Affiliate’sparticipation at any time.12. MISCELLANEOUS.12.1 Other Benefits. The payment of severance benefits under this Plan shall not be taken into account to increase any benefits provided (orcontinued coverage) under any other plan or policy of the Company or any Affiliate, except as otherwise specifically provided in such other plan or policy.12.2 No Assignments. No benefit payable under this Plan may be assigned, transferred, pledged as a security for indebtedness or otherwiseencumbered, or subjected to any legal process for the payment of any claim against a Covered Executive.12.3 At-Will Employment. This Plan does not create a contract of employment or give any Covered Executive the right to continuedemployment or change the at- will nature of any employee’s employment with the Company or an Affiliate.12.4 Savings Clause. If any provision of this Plan should be held invalid or unenforceable, such invalidity or unenforceability shall not affectany other provision of this Plan, and this Plan shall be construed and enforced as if such provisions had not been included.12.5 Construction.(a) Whenever appropriate in this Plan, words used in the singular may be read in the plural; words used in the plural may be read in the singular;and words importing the masculine gender shall be deemed equally to refer to the feminine or be neutral. Any reference to a Section shall refer to a Section ofthis Plan, unless otherwise indicated.(b) The headings of sections are included solely for convenience of reference, and if there be any conflict between such headings and the text ofthis Plan, the text shall control.12.6 Choice of Law. Except to the extent preempted by federal law, this Plan shall be construed, administered and enforced according to the laws of thestate of Texas without regard to conflict of laws principles.12.7 Arbitration of Disputes. Any controversy, dispute or claim arising out of or relating, in any way, to this Plan or a purported breach of the Plan shallbe settled through arbitration proceedings conducted in Houston, Texas in accordance with the Commercial Arbitration Rules of the American ArbitrationAssociation. The matter shall be heard and decided, and awards rendered by, a panel of three arbitrators. An Employer and the Covered Executive shall eachselect one arbitrator and the American Arbitration Association shall select the third arbitrator, each of whom shall be on the American ArbitrationAssociation’s nationalpanel of commercial arbitrators. The award rendered by this arbitration panel shall be final and binding as between the parties hereto and their heirs,executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction. The Covered Executive’sEmployer shall pay all arbitration fees, unless the panel makes a factual finding or conclusion that the Covered Executive’s claim in the matter was frivolous.Likewise, the Covered Executive’s Employer shall pay his or her legal fees in all disputes, other than those deemed frivolous. The Covered Executive shallbe responsible for all of his or her fees and costs along with 50% of all arbitration fees in any matter the arbitrators find frivolous.12.8 Successors. The Company shall require any successor or any entity acquiring substantially all of the assets of the Company to assume the Plan inwriting and agree to honor all terms of this Plan.12.9 Required Clawbacks. Notwithstanding anything in this Plan to the contrary, in the event that the Dodd-Frank Wall Street Reform and ConsumerProtection Act of 2010 (the “Act”) requires a Covered Executive to repay the Company, or for the Company to recoup from the Covered Executive, any“erroneously awarded” amounts of incentive compensation, then the Company may recoup any such “erroneously awarded” incentive compensation that ithas made to the Covered Executive by reducing any severance pay or benefit otherwise due the Covered Executive under this Plan.12.10 No Mitigation. A Covered Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Plan by seekingother employment or otherwise, nor shall the amount of any payment or benefit provided for in Plan be reduced by any compensation or benefit earned by theCovered Executive as the result of employment by another employer. Subject to the foregoing, the benefits under the Plan are in addition to any otherbenefits to which a Covered Executive is otherwise entitled.12.11 Survival. All obligations of the Company and a Participating Affiliate under the Plan with respect to a Qualifying Termination occurring beforethe termination or any amendment of the Plan shall continue and survive such Plan termination or amendment.13. ADMINISTRATIVE INFORMATION.13.1 Plan Year. Each plan year begins on January 1 and ends on December 31 of the same year. Records concerning this Plan are to be kept on a planyear basis.13.2 Legal Notices. The person designated to receive any legal notices concerning this Plan is:Integrated Electrical Services, Inc.c/o Chairman, Human Resources and CompensationCommittee of the Board of Directors5433 Westheimer Rd., Suite 500Houston, TX 7705614. DEFINITIONS. For purposes of this Plan, the following terms are defined as follows:(a) “Accrued Rights” means a Covered Executive’s (i) earned, but unpaid, annual base salary up to the date of his or her Qualifying Termination,(ii) any accrued, but untaken, vacation time or paid-time off, and (iii) the reimbursement, within sixty (60) days following submission to the Company orParticipating Affiliate of appropriate supporting documentation, for any unreimbursed reasonable business expenses properly incurred by the CoveredExecutive in the performance of his or her duties in accordance with the Company’s or Participating Affiliate’s expense policy prior to the CoveredExecutive’s Qualifying Termination, provided claims for such reimbursement (accompanied by appropriate supporting documentation) are submitted to theCompany or Participating Affiliate within ninety (90) days following the date such expenses were incurred and within thirty (30) days following the CoveredExecutive’s Qualifying Termination, and (iv) such employee benefits, if any, as to which the Covered Executive may be entitled under the terms of theemployee benefit plans of the Company or Participating Affiliate.(b) “Affiliate” means, with respect to any person or entity, any person or entity, directly or indirectly, controlled by, controlling or undercommon control with such person or entity.(c) “Annual Bonus” means incentive compensation payable to a Covered Executive dependent upon the achievement of performance objectivesestablished by the Compensation Committee for each fiscal year during such Covered Executive’s employment with the Company or Participating Affiliate.(d) “Annual Bonus Opportunity” means the target annual bonus opportunity for each fiscal year ending during a Covered Executive’semployment with the Company or Participating Affiliate as set by the Compensation Committee, in its sole discretion.(e) “Base Pay” means a Covered Executive’s annual rate of base salary at his or her Qualifying Termination or, if greater, his or her annual basepay for the fiscal year preceding his or her Qualifying Termination.(f) “Cause” means (i) the Covered Executive’s gross negligence in the performance or intentional nonperformance of any of the CoveredExecutive’s material duties and responsibilities to the Company or a Participating Affiliate; (ii) the Covered Executive’s dishonesty, theft, embezzlement orfraud with respect to the business, property, reputation or affairs of the Company or a Participating Affiliate; (iii) the Covered Executive’s conviction of, or aplea of other than not guilty to, a felony or a misdemeanor involving moral turpitude; (iv) the Covered Executive’s confirmed drug or alcohol abuse thatmaterially affects the Covered Executive’s service or violates the Company’s or a Participating Affiliate’s drug or alcohol abuse policy; (v) the CoveredExecutive’s violation of a material Company or a Participating Affiliate’s personnel or similar policy, such policy having been made available to theCovered Executive by the Company or a Participating Affiliate; or (vi) the Covered Executive’s havingcommitted any material violation of any federal or state law regulating securities (without having relied on the advice of the Company’s attorney) or havingbeen the subject of any final order, judicial or administrative, obtained or issued by the Securities and Exchange Commission, for any securities violationinvolving fraud, including, without limitation, any such order consented to by the Covered Executive in which findings of facts or any legal conclusionsestablishing liability are neither admitted nor denied.(g) “Code” means the Internal Revenue Code of 1986, as amended.(h) “Disability” means a physical or mental condition that renders the Covered Executive incapacitated and unable for a period of six(6) consecutive months or for an aggregate of nine (9) months in any twenty-four (24) consecutive month period to substantially perform (with suchaccommodation, if any, required by applicable law) the Covered Executive’s duties.(i) “Qualifying Termination” means any termination of the Covered Executive’s employment with the Company or an Affiliate (if applicable)either:(i) by the Company or the Affiliate other than for Cause; or(ii) by the Covered Executive due to, and within thirty (30) days following, the occurrence of:(1) a material reduction in his or her duties or responsibilities;(2) a material reduction in the Covered Executive’s annual rate of base cash compensation;(3) a change in the location of a Covered Executive’s principal place of employment by more than fifty (50) miles fromHouston, Texas;(4) the receipt of a written notice of termination of this Plan or of any amendment to the Plan that would adversely reducethe Covered Executive’s potential severance payments or benefits or his or her coverage under the Plan; or(5) a demotion or transfer of the Covered Executive’s employment that results or would result in him or her no longer beinga Covered Executive under this Plan.(j) “Release” means a general release and waiver, prepared or approved by the Company, in which the Covered Executive releases the Company,its Affiliates and their respective directors, officers, employees and agents from any and all employment-related claims and cause of actions of the CoveredExecutive.IN WITNESS WHEREOF, the Company has adopted this Plan, as amended and restated, effective as of January 12, 2016. INTEGRATED ELECTRICAL SERVICES, INC.By: /s/ Robert W. LeweyTitle: PresidentExhibit 21.1SUBSIDIARIES OF THE REGISTRANTAs of September 30, 2016 Subsidiary Jurisdiction of IncorporationCalumet Armature and Electric, L.L.C.HK Engine Components, LLCICS Holdings LLCIES Commercial, Inc.IES Commercial & Industrial, LLCIES Consolidation, LLCIES Infrastructure Solutions, LLCIES Management, LPIES Management ROO, LPIES Operations Group, Inc.IES Properties, Inc.IES Purchasing & Materials, Inc.IES Renewable Energy, LLCIES Residential, Inc.IES Shared Services, Inc.IES Subsidiary Holdings, Inc.IES Tangible Properties, Inc. IllinoisIndianaArizonaDelawareDelawareDelawareDelawareTexasTexasDelawareDelawareDelawareDelawareDelawareDelawareDelawareDelawareIntegrated Electrical Finance, Inc. DelawareKey Electrical Supply, Inc. TexasMagnetech Industrial Services, Inc. IndianaShanahan Mechanical and Electrical, Inc.Southern Industrial Sales and Services, Inc.STR Mechanical, LLCTechnibus, Inc. NebraskaGeorgiaNorth CarolinaDelawareThomas Popp & Company OhioExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement on Form S-8 (No. 333-209483) pertaining to the Amended and Restated 2006 Equity Incentive Plan of IES Holdings,Inc.; (2)Registration Statement on Form S-8 (No. 333-1 34100) pertaining to the 2006 Equity Incentive Plan of IES Holdings, Inc.; and (3)Registration Statement on Form S-3 (No. 333-186786) pertaining to the registration for resale of common stock of IES Holdings, Inc. by theselling stockholders named therein;of our reports dated December 9, 2016, with respect to the consolidated financial statements of IES Holdings, Inc. and subsidiaries and the effectiveness ofinternal control over financial reporting of IES Holdings, Inc. and subsidiaries, included in this Annual Report (Form 10-K) for the year ended September 30,2016./s/ ERNST & YOUNG LLPHouston, TexasDecember 9, 2016Exhibit 31.1CERTIFICATIONI, Robert W. Lewey, certify that:1. I have reviewed this Annual Report on Form 10-K of IES Holdings, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theRegistrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with accounting principles generally accepted in the United States of America;(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recentfiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theRegistrant’s internal control over financial reporting; and5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controlover financial reporting.Date: December 9, 2016 /s/ ROBERT W. LEWEYRobert W. LeweyPresident and Directoras Principal Executive OfficerExhibit 31.2CERTIFICATIONI, Tracy A. McLauchlin, certify that:1. I have reviewed this Annual Report on Form 10-K of IES Holdings, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theRegistrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with accounting principles generally accepted in the United States of America;(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recentfiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theRegistrant’s internal control over financial reporting; and5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controlover financial reporting.Date: December 9, 2016 /s/ TRACY A. MCLAUCHLINTracy A. McLauchlinSenior Vice President, Chief Financial Officer and Treasureras Principal Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with this Annual Report of IES Holdings, Inc. (the “Company”) on Form 10-K for the period ending September 30, 2016 (the “Report”), I,Robert W. Lewey, President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: December 9, 2016 By: /s/ ROBERT W. LEWEY Robert W. Lewey President and Directoras Principal Executive OfficerExhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with this Annual Report of IES Holdings, Inc. (the “Company”) on Form 10-K for the period ending September 30, 2016 (the “Report”), I,Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adoptedpursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: December 9, 2016 By: /s/ TRACY A. MCLAUCHLIN Tracy A. McLauchlin Senior Vice President, Chief Financial Officer and Treasureras Principal Financial Officer

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