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2017 ANNUAL REPORT
Infrastructure and Energy Alternatives, Inc.
Letter to Stockholders
To Our Fellow Stockholders:
November 2, 2018
We look forward to hosting our first annual meeting of stockholders as a publicly-traded company this coming
December, a virtual stockholders meeting to be held at 9:00 AM EST on December 14, 2018. In connection with this
meeting, today we filed our 2017 proxy statement. Our 2018 financial statements will be provided early next Spring
on our fourth quarter earnings call, and we currently expect that our 2019 annual meeting of stockholders will be held
in the second quarter of 2019.
2018 was a truly transformational year for IEA. In March, we began our journey as a publicly-traded company and
listed on the NASDAQ. Through the significant development and diversification of our business, IEA now has over
2,600 employees and a fleet topping 4,000 pieces of equipment – eightfold from where we started the year. We also
have licenses to operate across all 50 states and can offer full turnkey services to our longstanding base of blue-chip
clients, including the largest utilities and renewable energy developers and class 1 rail customers. There has never
been a more exciting time to be a part of IEA.
In less than a year, we built a scaled, highly diversified engineering and construction services platform with leadership
in attractive and growing niche end markets. Throughout this transformational process, we remained dedicated to
sustaining a high-performance, engaging work environment that reflects our long legacy of industry-leading
performance. Our company’s core values — people, clients, excellence, safety and integrity — are paramount to our
continued success. As we expand and diversify our business, our employee-first culture and focus on delivering
projects on budget and on time will remain intact.
IEA’s core beliefs date back over 70 years to the founding of our predecessor, White Construction, a leader in heavy
civil engineering that expanded into renewable energy construction in 2004. White Construction remains our
unionized arm, while IEA Constructors performs similar services in non-unionized regions of the country. Since
2004, IEA has built on that legacy to become number-one for wind energy projects in the United States, garnering an
approximtely 30% market share in the wind energy construction market. Over the past 14 years, our wind engineers
have built more than 7,300 turbines generating 14 gigawatts out of a total 90 gigawatts of installed wind energy in
the U.S. today. We have also completed over 200 utility-scale solar installations across the country representing over
700 megawatts of power.
We have now put in place the strong foundation needed to continue to grow and diversify our business. Our capital-
allocation priorities continue to be of high importance as the company focuses on stockholder value, organic growth
and additional M&A opportunities in the coming year.
Looking ahead, we believe that our broadened geographic footprint and expanded capabilities in the end markets we
serve have created exciting growth potential for our business. Our strong free cash flow generation supports our long-
term growth initiatives, enabling us to invest in additional strategic M&A while also de-levering our business by
continuing to pay down debt on our balance sheet.
I want to thank M III Acquisition Corp. and Oaktree, along with our entire Board of Directors for all of your assistance
and guidance this past year. I would also like to extend my gratitude to each of our clients, our employees, and
especially our stockholders for your continued support, without which, IEA’s success would not be possible.
Sincerely,
JP Roehm
President, Chief Executive Officer and Director
IEA Services, LLC completed its business combination with M III Acquisition Corp., a special purpose
acquisition company, on March 26, 2018 and the combined company changed its name to Infrastructure and Energy
Alternatives, Inc. As a result, IEA Services, LLC, the Company's predecessor was not required to file an Annual
Report on Form 10-K for the year ended December 31, 2017 but instead filed the information required by Form 10
on a Form 8-K on March 29, 2018 (the “Form 10 Information”) following completion of the merger.
The following sections are reproduced from the Form 10 Information: “Description of the Company’s
Business,” “Selected Historical Financial Data, “ “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and the “Audited Consolidated Financial Statements of IEA Services, LLC and its
subsidiaries as of December 31, 2017 and 2016 and for each of the years ended December 31, 2017, December 31,
2016 and December 31, 2015,” filed as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively, to the Form 10 Information.
“Change of the Company’s Independent Registered Public Accounting Firm” is reproduced from Item 4.01 of the
Form 10 Information and Item 4.01 of the Form 8-K filed by the Company on April 25, 2018.
Description of the Company's Business
Overview
We are a leading U.S. provider of infrastructure solutions for the renewable energy, traditional power and civil
infrastructure industries. Currently, we are primarily focused on the wind energy industry, where we specialize in providing a
broad range of EPC services throughout the U.S. We are one of three Tier 1 providers in the wind energy industry and have
completed more than 190 wind and solar projects in 35 states. The services we provide include the design, site development,
construction, installation and restoration of infrastructure. As of December 31, 2017, we believe that we have the #1 U.S.
market share among EPCs for wind. We believe we have the ability to continue to grow our wind energy industry business as
the industry grows and that we are well-positioned to leverage our expertise and relationships to provide infrastructure
solutions in other areas, including the solar energy industry, the traditional power generation industry and civil infrastructure
industry.
We trace our roots back to the founding of White Construction in 1947. In the 70 years since, we have diversified
our business and expanded our geographic footprint, both organically and through acquisition. Our historical roots are in
civil infrastructure construction, and we continue to operate in that sector today. We have also expanded into the utility-
scale solar energy construction space. We have completed more than 190 wind and solar projects, including more than 14
GW of wind energy generating capacity and more than 700 MW of utility-scale, solar generating capacity. We have a
scalable workforce, with more than 2,000 peak employees. As of December 31, 2017, we had approximately 695
employees.
We intend to broaden our solar, power generation, and civil infrastructure capabilities and geographic presence and
to expand the services we provide within our existing business areas. We expect that this growth will come through initiatives
for organic growth and through acquisitions, as we deepen our capabilities and service offerings in our existing businesses,
expand geographically, and enter new sectors that are synergistic with our existing capabilities and product offerings.
We believe that continuing demand for renewable energy production will help to drive organic growth over the
coming years. Industry experts, including the U.S. Department of Energy (the ‘‘DOE’’), are predicting significant growth in
renewable energy production capacity over the coming decade. We believe this growth will be driven by macroeconomic
factors (including increasing demand for renewable energy from corporations and consumers), broad upgrades to existing
transmission infrastructure, increasing proliferation of smart grid technology and the maturation of technologies and services
within the renewable energy industry, including increased turbine and photovoltaic efficiencies, a coordinated global supply
chain and improved equipment maintenance and reliability. We believe that we have positioned ourselves to expand our market
share in renewable energy production (particularly in utility-scale solar power) and have developed in-house capabilities that
will provide us with an opportunity to enhance our margins by expanding our self-perform capabilities and, as a result, reduce
our use of subcontractors.
We also expect to accelerate our growth through carefully selected acquisitions of companies with strong management
teams and good reputations, with the goal of expanding our geographic or technical capabilities in our traditional businesses or
opportunistically expanding into adjacent sectors. Our management team has existing relationships with a number of potential
target companies and we believe that the reputation and track record of our experienced management team makes us an
attractive partner for potential targets.
Industry Trends
Our industry is composed of national, regional and local companies in a range of industries, including renewable
power generation, traditional power generation and the civil infrastructure industries. We believe the following industry
trends will help to drive our growth and success over the coming years:
Renewable Power Generation Opportunities
In recent years, we have maintained a tight focus on construction of renewable power production capacity as
renewable energy- particularly from wind and solar-have become widely accepted within the electric utility industry and
have become cost-effective solutions for the creation of new generating capacity. We believe that this shift has occurred
because federal and state government policies and subsidies have helped develop the renewable energy market to a level of
scale and maturity that permits these technologies to now be cost-effective competitors to more traditional power generation
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technologies, including on an unsubsidized basis. Under many circumstances, wind and solar power production offer the
lowest levelized cost of energy (i.e., the all-in cost of generating power, including construction and operating costs) of any
technology. As a result, wind and solar power are among the leading sources of new power generation capacity in the U.S.,
and wind and utility-scale solar energy generation is projected to become even more cost-effective in coming years as
technological improvements make wind turbines and photovoltaic cells (and other solar generating technologies) even more
efficient.
Governmental policies focused on a clean environment and the desire to decrease U.S. dependence on foreign oil
imports have created incentives historically for the development of renewable energy production capacity and have created
demand for more domestic, environmentally sensitive electrical power production facilities, such as wind and solar
collection farms. The federal government has offered tax credits for investments in renewable energy infrastructure and
production of power from renewable sources. Other tax incentives available to the renewable energy industry include
accelerated tax depreciation provisions, including bonus depreciation, for certain renewable energy generation assets, such
as equipment using solar or wind energy. These incentives specify a five-year depreciable life for qualifying assets rather
than the longer depreciable lives of many non-renewable energy assets. In addition to shorter depreciable lives, those assets
qualifying for bonus depreciation benefit from significant allowable first-year depreciation.
In addition to federal policies that historically have favored power production from renewable sources, a number of
states also have supported the expansion of renewable energy generating capacity. Currently, nearly 40 states, as well as the
District of Columbia and four territories, have adopted renewable portfolio standards or goals. Similarly, we believe that
many corporations and retail consumers are increasingly focused on obtaining energy from renewable sources and have
become a significant driver of incremental demand for wind and solar energy production capacity.
In light of changes in federal government priorities and the cost-competitiveness of wind and solar power production,
certain of the tax credits for production of renewable energy are phasing out. The Consolidated Appropriations Act of 2016
(‘‘CAA’’), which contains certain federal tax incentives applicable to the renewable energy industry, provided for the gradual
elimination of certain of these incentives. Currently, the tax code provides that the production tax credit for wind projects (the
‘‘PTC’’) applies to qualifying projects for which the construction commencement date was prior to January 1, 2020. The PTC
was reduced by 20% for 2017, have been reduced by 40% for 2018, and finally will be reduced by 60% for 2019. Similarly, a
phase down rate of the investment tax credit (the ‘‘ITC’’), which is available in lieu of PTC, is available for wind projects: 30%
ITC for projects commencing before 2017, 24% for projects commencing in 2017, 18% for projects commencing in 2018 and
12% for projects commencing in 2019. Solar projects, however, will be eligible for an investment tax credit (the ‘‘Solar ITC’’)
only. The Solar ITC is 30% for projects commencing prior to 2020 and will be reduced to 26% for projects commencing in
2020 and to 22% for projects commencing in 2021. After 2021, the Solar ITC will remain at 10% for projects that commence
prior to 2022, but are placed in service after 2023.
Additionally, although the enactment of the 2017 Tax Act in December 2017 did not modify the existing production
tax credit and investment tax credit incentive structures, a base erosion and anti-abuse tax, or ‘‘BEAT’’ provision, contained
in the 2017 Tax Act imposes a minimum tax on certain corporations, and only 80% of the value of any such corporation’s
production or investment tax credits can be applied as a reduction to such corporation’s BEAT liability. Accordingly, this
BEAT provision could reduce the incentive for certain taxable investors to invest in tax equity financing arrangements and
could materially reduce the value and availability such tax credits, grants and incentives for certain participants and
financing sources in the wind and solar industry. The 2017 Tax Act permits the immediate expensing of certain capital
expenditures between September 27, 2017 and January 1, 2023, but this new rule could be less valuable than a dollar-for-
dollar investment tax credit or production tax credit, given the reduced corporate income tax rate of 21%. Any of the
foregoing changes arising from the 2017 Tax Act, as well as other changes in law not mentioned herein, could adversely
impact the demand for development of wind and solar energy generation facilities. See ‘‘Tax reform legislation recently
enacted by the U.S. Congress may reduce materially the value of production tax credits and investment tax credits under
certain circumstances.’’ for a discussion of the risks associated with these federal and state tax incentives.
Despite these reductions in tax incentives for the development and operation of renewable power generation
capacity, the market for the development of utility-scale wind and solar power generation is expected to remain robust. The
Annual Energy Outlook 2018 published by the U.S. Department of Energy in February 2018 projected the addition of
approximately 80 gigawatts of new utility- scale wind and solar capacity from 2018 to 2021, which we estimate will drive
more than $19.4 billion of construction (or more than $4.0 billion per year). Although this demand is driven, in part, by
accelerated, incremental investment in renewable power generation sources during the phase-out period for existing tax
incentives, demand for renewable power construction-and particularly for utility- scale solar farms-is projected to remain
strong thereafter.
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Heavy Civil and Infrastructure Construction
Although heavy civil and infrastructure construction is only a small part of our business today and accounts for
less than 5% of our revenue, our historical roots are in this sector and we have maintained a reputation for high quality
work, dating back 70 years. Although state and federal funding for this industry has been neglected for decades, the near-
term outlook on both state and federal levels has led us to believe that spending for infrastructure may experience
significant growth over the next few years. Not only is state and federal funding likely to increase, but alternative methods
of construction, such as public and private partnerships, have gained significant traction in the United States.
We are taking steps to enhance our heavy civil and public infrastructure construction business in order to take
advantage of these growth opportunities. We believe that our business relationships with customers in this sector are strong and
that the reputation in the marketplace that we have built over 70 years will provide us with the foundation to grow our revenue
base in this business. There is significant overlap in labor, skills and equipment needs between our renewable energy
construction business and our heavy civil and public infrastructure business, which will provide us with operating efficiencies
as we expand in this sector. Our renewable energy experience also provides us with expertise in working in difficult conditions
and environments, which we believe will provide us with a competitive advantage when bidding for more complicated-and
often higher margin-civil and infrastructure projects.
Electrical Power and High Voltage Opportunities
The U.S. electrical transmission and distribution infrastructure requires significant ongoing maintenance, upgrade
and expansion to manage power line congestion and avoid delivery failures. Regional shifts in population and industry may
also create pockets of demand for increased transmission and distribution construction and upgrades. According to the
DOE’s Annual Energy Outlook 2018 published in February 2018, approximately 190 gigawatts of new electricity generating
capacity is expected to be added through 2050.
Renewable energy generation projects, which are typically located in remote areas, often require investment in new
transmission lines to interconnect with the electrical grid. Although we have outsourced our high-voltage electrical needs
historically, we implemented a program to upgrade our in-house capacity during 2017 and expect to gradually transition over
2018 to self-performing our high-voltage electrical work. We believe that this transition will afford us the opportunity to
capture incremental margin on our projects and to provide enhanced service to our customers.
We believe that the same capabilities that we are building in order to self-perform high-voltage electrical work will
enable us to capture incremental revenue by providing these services to others. With investment by utilities and transmission
companies to modernize, secure and visually improve the existing transmission system expected to be strong over the
coming years, we believe that our existing customer relationships and reputation will leave us well-positioned for growth in
this sector.
Competitive Strengths
Our competitive strengths include:
Reputation for High Quality, Reliable Customer Service and Technical Expertise. We are a national Tier 1
provider for wind energy infrastructure projects due to our established reputation for safe, high quality performance, reliable
customer service and technical expertise. Because the construction and development of wind energy projects is very
technically demanding, industry participants have increasingly emphasized safety, high quality performance and technical
reliability. Our management estimates that construction costs represent only approximately 20% to 25% of total project cost,
but construction-related risks pose the most significant threat to completion of the project. As a result, we believe that we
have become the best-in-class provider to the wind industry. We have successfully completed over 190 wind and solar
projects over the past approximately 10 years. Our reputation gives us an advantage when competing for new work, both
from existing and potential customers.
An Industry Leader in Safety Performance. Our industry-leading safety performance helps us enhance our
reputation for high quality and reliability. Our management team strives to instill a corporate culture committed to health and
safety. Our experience modification rate, a measure of our history and safety record as compared to other businesses in our
industry, was 0.51 and our total recordable incident rate was 0.30 in 2017, both of which were significantly below the
industry averages of 1.0 and 2.9, respectively, reported by the U.S. Department of Labor and U.S. Bureau of Labor Statistics
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2016. In our experience, safety records are an important factor to customers in contracting for services and we believe that
our exemplary safety record is a significant differentiator for us.
Strong Relationships With Leading Wind Industry Players. Our business model has enabled us to hold a leading
position in the wind industry by successfully winning key contracts and establishing strong relationships with many established
developers and operators in the renewable energy sector, as well as with market leaders in the petrochemical, heavy civil and
industrial construction industries. These relationships have provided us with a recurring base of blue-chip utility and other
customers. We also have strong relationships with the leading original equipment manufacturers who produce the equipment
for both solar and wind farms. In recent years, developers of wind and solar projects have come to emphasize reliability and
excellence in execution, as well as a strong safety record, in selecting their EPC partners, and our track record and reputation
has made us a provider of choice to those industry participants. We have completed wind projects with 12 of the 16 top U.S.
developers or owners, who are collectively responsible for approximately 63% of the total U.S. megawatts of installed wind
energy production capacity. Our longstanding relationships have enabled us to develop strong alliances with many of our
customers and vendors in the wind sector and provide us with a strong base for our solar power expansion initiatives. We strive
to further improve these relationships and enhance our status as a preferred vendor to our customers.
Self-Perform Capabilities. We have made substantial investments in our self-perform capabilities and, as a result,
are able to self-perform across a large portion of the services that we deliver. We continue to seek opportunities to expand our
self-perform capabilities and expect to begin self- performing our high-voltage electrical work in 2018. Leveraging our
technical expertise, project management experience and our highly skilled and stable work force, we are in a position to
provide our customers with a compelling package of technical reliability, consistent execution and safety to our customers. In
addition, our self-perform capabilities provide us with an opportunity to retain margin while better controlling scheduling of
projects, potentially leading to greater operational efficiencies for us and enhanced reliability for our customers.
Ability to Cross-Sell Our Product and Service Offerings.
A majority of our wind customers also build
utility-scale solar projects, and a number of them are in active discussions with us for solar projects.
By leveraging our established relationships with our customers, we have realized additional revenues by selling
products and services that our customers historically purchased from various other providers. Since 2010, we have built over
700 installed megawatts of utility-scale solar, and we have a growing pipeline of utility-scale solar projects.
Ability to Respond Quickly and Effectively. The skills required to serve each of our end-markets are similar, which
allows us to utilize qualified personnel across multiple end-markets and projects. We are able to respond quickly and
effectively to industry and technological changes, demand fluctuations and major weather events by allocating our
employees, fleet and other assets as and where they are needed, enabling us to provide cost effective and timely services for
our customers. Additionally, we have a track record of successfully recruiting and retaining skilled labor, despite industry
shortages.
Experienced Management Team. Our senior management team has over 175 years of combined experience and
proven expertise in wind, utility-scale solar and other energy sectors, and a deep understanding of our customers and their
requirements. Our senior management team plays a significant role in establishing and maintaining long-term relationships
with our customers, supporting the growth of our business, integrating acquired businesses and managing the financial
aspects of our operations.
Strategy
The key elements of our business strategy are as follows:
Focus on Growth Opportunities. We intend to use our broad geographic presence, technical expertise, financial and
operational resources, customer relationships and full range of services to capitalize on favorable industry trends and grow our
business in the wind energy, solar energy, traditional power generation and civil infrastructure industries. We expect continued
spending by key customers in many of the industries we currently serve, and we expect that spending to expand into the future.
In particular, we expect to further develop our capabilities in the area of utility-scale wind and solar development and storage
and to expand the amount of work we self-perform, rather than subcontract with respect to high voltage electrical work. In
coming years, we expect civil, industrial and mechanical infrastructure and construction services to be growth areas and intend
to expand our operations both organically and through potential acquisitions to position our company to be a high-quality
provider of infrastructure solutions to meet those opportunities.
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We believe we are well positioned to capture market opportunities associated with the anticipated growth of the
renewable energy industry in the United States. We believe this growth will be driven by:
• macroeconomic factors, including an increase in overall energy prices and federal and state-level wind
development incentives;
• broad upgrades to existing transmission infrastructure and increasing proliferation of smart grid technology; and
• the maturation of technologies and services within the renewable energy industry, including increased turbine and
photovoltaic efficiencies, a coordinated global supply chain and improved equipment maintenance and reliability.
Leverage Performance and Core Expertise Through Strategic Acquisitions and Arrangements. We expect to
pursue selected and opportunistic acquisitions, investments and strategic arrangements that allow us to expand our
operations into targeted geographic areas or continue to expand our service offerings in related fields. Having successfully
developed our wind energy business to be a market leader, we plan to further grow our business by diversifying and
expanding our service offerings, both organically and through acquisition.
Maintain Operational Excellence. We will seek to improve our profit margins and cash flows by focusing on
profitable services and projects that have high margin potential. We will also strive to identify opportunities to leverage our
existing resources within our business, such as deploying resources across multiple customers and projects in order to
enhance our operating effectiveness and utilization rates, while continuing to maintain strong working capital management
practices. We expect to continue to pursue actions and programs designed to achieve these goals, such as increasing
accountability throughout our organization, effectively managing customer contract bidding procedures, evaluating
opportunities to improve our working capital cycle time through contractual provisions and certain financing arrangements,
hiring and retaining experienced operating and financial professionals, and expanding and further integrating the use of our
financial and other management information systems.
Customers
We have longstanding customer relationships with many established companies in the wind, solar, renewable
energy, thermal power, petrochemical, civil and industrial power industries, with a recurring base of blue-chip utility
customers, as well as original equipment manufacturers that produce the equipment for both solar and wind farms. We have
completed wind projects with 12 of the 16 top U.S. developers or owners, which are collectively responsible for
approximately 63% of U.S. megawatts installed capacity in wind.
Although we are not dependent upon any one customer in any year, a relatively small number of repeat customers
constitute a substantial portion of our total revenues. Accordingly, our management is responsible for developing and
maintaining existing relationships with customers to secure additional projects and increase revenue from our current
customer base. We believe that our strategic relationships with customers will result in future opportunities. Our
management is also focused on pursuing growth opportunities with prospective new customers.
For the year ended December 31, 2017, we had three customers who each accounted for at least 10% of our revenue
and three customers who each accounted for at least 10% of our accounts receivable. For the year ended December 31, 2017,
E.ON Climate & Renewables Inc., Enel Green Power North America, and EDF Renewable Energy accounted for 22%, 21%
and 14% of our revenue, respectively. Trishe Wind Ohio, LLC, Enel Green Power North America and EDF Renewable energy
accounted for 17%, 15% and 11% of our accounts receivable, respectively. For the years ended December 31, 2016 and 2015,
we had three and three customers, respectively, who each accounted for at least 10% of our revenue, and we had three and two
customers, respectively, who each accounted for at least 10% of our accounts receivable. For the year ended December 31,
2016, three of our customers, Enel Green Power North America, NextEra Energy and Algonquin Power, accounted for 17%,
11% and 11% of our revenue, respectively. Enel Green Power North America, NextEra Energy and Deerfield Wind Energy,
LLC accounted for 36%, 13% and 12% of our accounts receivable, respectively, in 2016. For the year ended December 31,
2015, Apex and Canadian Solar Solutions, Inc. accounted for 25% and 43% of our revenue respectively, and E.ON Climate &
Renewables Inc. and Northland Power accounted for 37% and 54% of our accounts receivable, respectively. See ‘‘Risk
Factors’’ for a discussion of risks related to customer concentration.
Our work is generally performed pursuant to contracts for specific projects or jobs that require the construction or
installation of an entire complex of specified units within an infrastructure system. Customers are billed monthly throughout
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the completion of work on a project; however, some contracts provide for additional billing upon the achievement of specific
completion milestones, which may increase the billing period to more than one month. Such contracts may include retainage
provisions under which, generally, from 5% to 10% of the contract price is withheld until the work has been completed and
accepted by the customer. Because we may not be able to maintain our current revenue levels or our current level of capacity
and resource utilization if we are not able to replace work from completed projects with new project work, we actively
review our backlog of project work and take appropriate action to minimize such exposure.
We believe that our industry experience, technical expertise and reputation for customer service, as well as the
relationships developed between our customers and our senior management and project management teams are important to
our being retained by our customers. See Note 11-Commitments and Contingencies in the notes to IEA’s audited
consolidated financial statements, included elsewhere in this proxy statement for further discussion of our significant
customer concentrations.
Backlog
For companies in the construction industry, backlog can be an indicator of future revenue streams. Estimated
backlog represents the amount of revenue we expect to realize through 2020 from the uncompleted portions of existing
construction contracts, including new contracts under which work has not begun and awarded contracts for which the
definitive project documentation is being prepared, as well as revenue from change orders and renewal options. Estimated
backlog for work under fixed price contracts and cost-reimbursable contracts is determined based on historical trends,
anticipated seasonal impacts, experience from similar projects and estimates of customer demand based on communications
with our customers. Cost-reimbursable contracts are included in backlog based on the estimated total contract price upon
completion. We expect to realize approximately 55.3% of our estimated backlog during 2018 and 44.7% during 2019.
As of December 31, 2017, our total backlog was approximately $1.1 billion, representing an increase of $685.0
million, or 165.1%, from $415.0 million as of December 31, 2016. Based on historical trends in the Company’s backlog, we
believe awarded contracts to be firm and that the revenue for such contracts will be recognized over the life of the project.
Timing of revenue for construction and installation projects included in our backlog can be subject to change as a result of
customer delays, regulatory factors and/or other project-related factors. These changes could cause estimated revenue to be
realized in periods later than originally expected, or not at all. In the past, we have occasionally experienced postponements,
cancellations and reductions on construction projects, due to market volatility and regulatory factors. There can be no assurance
as to our customers’ requirements or the accuracy of our estimates. As a result, our backlog as of any particular date is an
uncertain indicator of future revenue and earnings.
Backlog is not a term recognized under U.S. GAAP, although it is a common measurement used in our industry.
Our methodology for determining backlog may not be comparable to the methodologies used by others. See ‘‘Risk Factors’’
for a discussion of the risks associated with our backlog.
Safety and Insurance/Risk Management
We strive to instill and enforce safe work habits in our employees, and we require that our employees participate in
training programs relevant to their employment, including all those required by law. We evaluate employees in part based
upon their safety records and the safety records of the employees they supervise. Our business units have established robust
safety programs to encourage, monitor and improve compliance with safety procedures and regulations including,
behavioral based safety, jobsite safety analysis, site-specific safety orientation, subcontractor orientation, site safety audits,
accident and incident safety investigations, OSHA 30-hour and 10-hour training, drug and alcohol testing and regular
trainings in fall protection, confined spaces, crane rigging and flagman, first aid, CPR and AED.
Our business involves the use of heavy equipment and exposure to potentially dangerous workplace conditions.
While we are committed to operating safely and prudently, we are subject to claims by employees, customers and third
parties for property damage and personal injuries that occur in connection with our work. We maintain insurance policies for
worker’s compensation, employer liability, automobile liability, general liability, inland marine property and equipment,
professional and pollution liability, excess liability, and director and officers’ liability. See Note 11-Commitments and
Contingencies in the notes to IEA’s audited consolidated financial statements, included in this Form 8-K on Exhibit 99.4.
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Suppliers, Materials and Working Capital
Under many of our contracts, our customers provide the necessary materials and supplies for projects and we are
responsible for the installation, but not the cost or warranty, of those materials. Under certain other projects, we purchase the
necessary materials and supplies on behalf of our customers from third-party providers. We are not dependent upon any one
vendor and have not experienced significant difficulty in obtaining project-related materials or supplies as and when required
for the projects we manage.
We utilize independent contractors to assist on projects and to help manage our work flow. Our independent
contractors typically provide their own vehicles, tools and insurance coverage. We need working capital to support seasonal
variations in our business, such as the impact of weather conditions on external construction and maintenance work and the
spending patterns of our customers, both of which influence the timing of associated spending to support related customer
demand. See ‘‘IEA Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’
Competition
We compete with a number of companies in the markets in which we operate, ranging from small local independent
companies to large national firms, and some of our customers employ their own personnel to perform infrastructure services
of the type we provide. The national or large regional firms that compete with us include Blattner Energy, MA Mortenson
Construction, and Wanzek Construction.
We are one of only three Tier 1 wind construction providers and the nature of our work is highly specialized. The
primary factors influencing competition in our industry are price, reputation, quality and delivery, relevant expertise, adequate
financial resources, geographic presence, high safety ratings and a proven track record of operational success. We believe that
our national platform, track record of completion, relationships with vendors, strong safety record and access to skilled labor
enables us to compete favorably in all of these factors. We also believe that our ability to provide unionized and non-unionized
workforces across a national footprint allows us to compete for a broad range of projects. While we believe our customers
consider a number of factors when selecting a service provider, they award most of their work through a bid process. We
believe our safety record, experience and price are often principal factors in determining which service provider is selected.
Seasonality and Cyclicality
Our revenues and results of operations can be subject to seasonal and other variations. These variations are
influenced by weather, customer spending patterns, bidding seasons, receipt of required regulatory approvals, permits and
rights of way, project timing and schedules and holidays. See ‘‘IEA Management’s Discussion and Analysis of Financial
Condition and Results of Operations-Impact of Seasonality, Cyclicality and Variability.’’
Regulation and Environmental Matters
We are subject to state and federal laws that apply to businesses generally, including laws and regulations related
to labor relations, wages, worker safety and environmental protection. While many of our customers operate in regulated
industries (for example, utilities regulated by the public service commission, we are not generally subject to such regulation
and oversight.
As a contractor, our operations are subject to various laws, including:
• regulations related to vehicle registrations, including those of the states and the U.S. Department of Transportation;
• regulations related to worker safety and health, including those established by the Occupational Safety
and Health Administration and state equivalents;
• contractor licensing, permitting and inspection requirements; and
• building and electrical codes.
We are also subject to numerous environmental laws, including the handling, transportation and disposal of non-
hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including
8
discharges into air, surface water, groundwater and soil. We also are subject to laws and regulations that impose liability and
cleanup responsibility for releases of hazardous substances into the environment.
We believe we have all material licenses and permits needed to conduct operations and that we are in material
compliance with applicable regulatory requirements. However, we could incur significant liabilities if we fail to comply
with applicable regulatory requirements. See ‘‘Risk Factors-We could incur substantial costs to comply with
environmental, health, and safety laws and regulations and to address violations of liabilities under these requirements.’’
The potential impact of climate change on our operations is highly uncertain. Climate change may result in, among
other things, changes in rainfall patterns, storm patterns and intensity and temperature levels. As discussed elsewhere in this
proxy statement, our operating results are significantly influenced by weather and major changes in historical weather patterns
could significantly impact our future operating results. For example, if climate change results in significantly more adverse
weather conditions in a given period, we could experience reduced productivity, which could negatively impact revenues and
gross margins.
Employees
IEA has a workforce of both union and non-union employees that allow us to work anywhere in the U.S. We have a
scalable workforce, with more than 2,000 peak employees. As of December 31, 2017, we had approximately 695
employees, approximately 175 of whom were represented by unions or were subject to collective bargaining agreements.
See Note 14-Employee Benefit Plans in the notes to IEA services’ audited consolidated financial statements, included
elsewhere on this Annual Report.
We hire employees from a number of sources, including our industry, trade schools, colleges and universities. We
attract and retain employees by offering a competitive salary, benefits package, opportunities for advancement and an
exemplary safety record. We strive to offer a caring and stable work environment that enables our employees to improve
their performance, and enhance their skills and knowledge. We believe that our corporate culture and core value system helps
us to attract and retain employees. We provide opportunities for promotion and mobility within our organization, which we
also believe helps us to retain our employees. Our employees participate in ongoing educational programs, some of which
are internally developed, to enhance their technical and management skills through classroom and field training. We believe
we have good employee relations.
9
Selected Historical Financial Data
The following table sets forth summary historical financial information for IEA as of and for the years ended
December 31, 2017, 2016, 2015 and 2014. Such information for the years ended December 31, 2017, 2016 and 2015 have been
derived from the audited consolidated financial statements of IEA, included elsewhere in this Annual Report. Such information
as of and for the year ended December 31, 2014 have been derived from the unaudited consolidated financial statements of
IEA.
Management has prepared the unaudited consolidated financial information set forth below on the same basis as IEA’s
audited consolidated financial statements and have included all adjustments, consisting of only normal recurring adjustments,
that it considers necessary for a fair presentation of our financial position and operating results for such periods. IEA’s
historical results are not necessarily indicative of the results to be expected in any future period. The information below is only
a summary and should be read in conjunction with ‘‘IEA Management’s Discussion and Analysis of Financial Condition and
Results of Operations’’ and ‘‘Information About IEA’’ and in IEA’s financial statements and the related notes, included
elsewhere in this Annual Report.
(in thousands)
Statement of Operations Data:
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses(1)
Income (loss) from operations (2)
Other income (expense), net
Net income (loss) from continuing operations
Net income (loss) from discontinued operations (3)
Net income (loss)
Cash Flow Data:
Net cash provided by (used in) operating activities (4)
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Balance Sheet Data:
Cash and cash equivalents
Accounts receivable, net
Years Ended December 31,
2017
2016
2015
2014
454,949 $
602,665 $
204,640 $
388,928
517,419
184,850
66,021 $
85,246 $
19,790 $
286,254
268,559
17,695
33,543
32,478
(2,090)
16,525
—
30,705
54,541
(303)
64,451
1,087
16,525 $
65,538 $
27,169
(8,907)
317
(8,696)
(19,487)
(28,183) $
31,377
(15,343)
(728)
(10,205)
(76,636)
(86,841)
(9,109) $
(3,508)
(4,113)
53,591 $
(3,000)
(29,617)
(5,617) $
352
8,541
(55,928)
(1,000)
39,405
4,877 $
21,607 $
— $
—
60,981
69,977
37,594
124,800
$
$
$
$
$
Costs and estimated earnings in excess of billings on
uncompleted contracts
Property, plant and equipment, net
Total assets
18,613
30,905
14,143
20,540
16,016
14,152
$
126,703 $
147,716 $
74,363 $
Accounts payable and accrued liabilities
70,030
97,244
79,043
Billings in excess of costs and estimated earnings on
uncompleted contracts
Line of credit
Total liabilities
Total member's equity (deficit)
7,398
33,674
28,181
—
15,902
27,946
$
$
136,722 $
(10,019) $
134,841 $
12,875 $
150,207 $
(75,844) $
32,787
18,603
194,637
159,027
33,752
39,405
242,944
(48,307)
10
(1)
(2)
(3)
(4)
Selling, general and administrative expenses for the year ended December 31, 2017 includes $3,825 of costs
associated with electrical and solar teams for which revenue is not anticipated prior to 2018. Includes payments made
to Oaktree for guarantees provided by Oaktree on certain borrowings of IEA of $1,535, $2,340, $1,961 and $827 for
each of the periods ended December 31, 2017, 2016, 2015 and 2014, respectively. Includes supplemental bonuses of
$1,500 and $2,000 in the periods ended September 30, 2016 and fiscal 2016 related to IEA’s successful completion of
IEA’s exit of its Canadian operations.
Includes $1,528 and $1,661 in fiscal 2015 and 2014, respectively, related to restructuring costs associated with the
abandonment of the Canadian solar operations of White Construction, Inc. and its wholly-owned subsidiary, H.B.
White Canada Corp. (‘‘H.B. White’’) and refocusing the business on the U.S. wind energy market. Restructuring
expenses represented severance expense for employees who were terminated as a result of the abandonment of the
Canadian solar operations of H.B. White.
IEA made the decision to abandon its operations in Canada in 2014 and to refocus the business on the U.S. wind
energy market. In early 2015, IEA began the process of finalizing all projects in Canada and reducing or eliminating
all costs and expenses. IEA completely abandoned the Canadian solar operations of H.B. White and effectively
completed all significant projects in Canada, and reduced or redeployed substantially all of its Canadian resources,
facilities and equipment as of July 2016.
Cash flow from operations can fluctuate from period to period based on the number of awarded projects in process.
See ‘‘IEA Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and
Capital Resources’’.
11
IEA'S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following management’s discussion and analysis in conjunction with ‘‘Selected Historical
Financial Information,’’ ‘‘Unaudited Pro Forma Combined Financial Information’’ and the accompanying financial statements
and related notes included elsewhere in this Current Report on Form 8-K. The discussion below includes forward-looking
statements about IEA’s business, operations and industry that are based on current expectations that are subject to
uncertainties and unknown or changed circumstances. Our actual results may differ materially from these expectations as a
result of many factors, including those risks and uncertainties described in the sections entitled ‘‘Risk Factors’’ and
‘‘Cautionary Note Regarding Forward Looking Statements.’’ Throughout this section, unless otherwise noted, ‘‘we,’’ ‘‘us,’’ and
‘‘our’’ refer to IEA Services and its consolidated subsidiaries. Certain amounts in this section may not foot due to rounding.
Overview
We are a leading U.S. provider of infrastructure solutions for the renewable energy, traditional power and civil
infrastructure industries. Currently, we are primarily focused on the wind energy industry, where we specialize in providing
complete engineering, procurement and construction (‘‘EPC’’) services throughout the U.S. We are one of three Tier 1
providers in the wind energy industry and have completed more than 190 wind and solar projects in 35 states. The services we
provide include the design, site development, construction, installation and restoration of infrastructure. As of December 31,
2017, we believe that we have the #1 U.S. market share among EPCs for wind. We believe we have the ability to continue to
grow our wind energy industry business as the industry grows and that we are well-positioned to leverage our expertise and
relationships to provide infrastructure solutions in other areas, including the solar energy industry, the traditional power
generation industry and civil infrastructure.
We intend to broaden our solar, power generation, and civil infrastructure capabilities and geographic presence and to
expand the services we provide within our existing business areas. We expect that this growth will come through initiatives for
organic growth and through acquisitions, as we deepen our capabilities and service offerings in our existing businesses, expand
geographically, and enter new sectors that are synergistic with our existing capabilities and product offerings.
We believe that continuing demand for renewable energy production will help to drive organic growth over the
coming years. Industry experts, including the U.S. Department of Energy, are predicting significant growth in renewable
energy production capacity over the coming decade. We believe this growth will be driven by macroeconomic factors
(including increasing demand for renewable energy from corporations and consumers), broad upgrades to existing transmission
infrastructure, increasing proliferation of smart grid technology and the maturation of technologies and services within the
renewable energy industry, including increased turbine and photovoltaic efficiencies, a coordinated global supply chain and
improved equipment maintenance and reliability. We believe that we have positioned ourselves to expand our market share in
renewable energy production (particularly in utility-scale solar power) and have developed in-house capabilities that will
provide us with an opportunity to enhance our margins by expanding our self-perform capabilities and, as a result, reduce our
use of subcontractors.
On March 26, 2018, the registrant consummated the previously announced business combination pursuant to that
certain Agreement and Plan of Merger, as amended by Amendment No. 1 thereto, dated November 15, 2017, Amendment No. 2
thereto, dated December 27, 2017, Amendment No. 3 thereto, dated January 9, 2018, Amendment No. 4 thereto, dated February
7, 2018, and Amendment No. 5 thereto, dated March 9, 2018 (the “Merger Agreement”), by and among Infrastructure and
Energy Alternatives, Inc. (f/k/a M III Acquisition Corp.), a Delaware corporation (the “registrant”), IEA Energy Services LLC,
a Delaware limited liability company (“IEA Services”), Wind Merger Sub I, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company (“Merger Sub I”), Wind Merger Sub II, LLC, a Delaware limited liability company and a wholly-
owned subsidiary of the registrant (“Merger Sub II”), Infrastructure and Energy Alternatives, LLC, a Delaware limited liability
company (“Seller”), Oaktree Power Opportunities Fund III Delaware, L.P., a Delaware limited partnership (“Oaktree”), solely
in its capacity as the Seller’s representative and, solely for purposes of certain sections therein, M III Sponsor I LLC, a
Delaware limited liability company, and M III Sponsor I LP, a Delaware limited partnership, which provided for, among other
things, the merger of Merger Sub I with and into IEA Services with IEA Services surviving such merger and, immediately
thereafter, merging with and into Merger Sub II with Merger Sub II surviving such merger as an indirect, wholly-owned
subsidiary of the registrant and, the issuances in connection therewith of shares of the registrant’s common stock, par value
$0.0001 per share, and shares of the registrant’s Series A preferred stock, par value $0.0001 per share (together with the other
transactions contemplated by the Merger Agreement, the “Business Combination”).
12
Economic, Industry and Market Factors
We closely monitor the effects that changes in economic and market conditions may have on our customers. General
economic and market conditions can negatively affect demand for our customers’ products and services, which can lead to
reductions in our customers’ capital and maintenance budgets in certain end-markets. In the face of increased pricing pressure,
we strive to maintain our profit margins through productivity improvements and cost reduction programs. Other market,
regulatory and industry factors could also affect demand for our services, such as:
•
changes to our customers’ capital spending plans;
• mergers and acquisitions among the customers we serve;
•
•
•
•
access to capital for customers in the industries we serve;
new or changing regulatory requirements or other governmental policy uncertainty;
economic, market or political developments; and
changes in technology, tax and other incentives.
While we actively monitor economic, industry and market factors that could affect our business, we cannot predict the
effect that changes in such factors may have on our future results of operations, liquidity and cash flows, and we may be unable
to fully mitigate, or benefit from, such changes.
Impact of Seasonality and Cyclical Nature of Business
Our revenue and results of operations are subject to seasonal and other variations. These variations are influenced by
weather, customer spending patterns, bidding seasons, fiscal year-ends, project schedules and timing, in particular, for large
non-recurring projects and holidays. Typically, our revenue is lowest in the first quarter of the year because cold, snowy or wet
conditions experienced in the northern climates are not conducive to efficient or safe construction practices. Revenue in the
second quarter is typically higher than in the first quarter, as some projects begin, but continued cold and wet weather and
effects from thawing ground conditions can often impact second quarter productivity. The third and fourth quarters are typically
the most productive quarters of the year, as a greater number of projects are underway, and weather is normally more
accommodating to construction projects. In the fourth quarter, many projects tend to be completed by customers seeking to
spend their capital budgets before the end of the year, which generally has a positive impact on our revenue. Nevertheless, the
holiday season and inclement weather can cause delays, which can reduce revenue and increase costs on affected projects. Any
quarter may be positively or negatively affected by adverse or unusual weather patterns, including from excessive rainfall,
warm winter weather or natural catastrophes such as hurricanes or other severe weather, making it difficult to predict quarterly
revenue and margin variations.
Our industry is also highly cyclical. Fluctuations in end-user demand within the industries we serve, or in the supply
of services within those industries, can impact demand for our services. As a result, our business may be adversely affected by
industry declines or by delays in new projects. Variations in project schedules or unanticipated changes in project schedules, in
particular, in connection with large construction and installation projects, can create fluctuations in revenue, which may
adversely affect us in a given period. In addition, revenue from master service agreements, while generally predictable, can be
subject to volatility. The financial condition of our customers and their access to capital, variations in project margins, regional,
national and global economic, political and market conditions, regulatory or environmental influences, and acquisitions,
dispositions or strategic investments can also materially affect quarterly results. Accordingly, our operating results in any
particular period may not be indicative of the results that can be expected for any other period.
Understanding our Operating Results
Revenue
We provide engineering, building, installation, maintenance and upgrade services to our customers. We derive revenue
from projects performed under fixed price contracts and other service agreements for specific projects or jobs requiring the
construction and installation of an entire infrastructure system or specified units within an entire infrastructure system. We
recognize a significant portion of our revenue based on the percentage-of-completion method. See ‘‘—Critical Accounting
Estimates—Revenue Recognition for Percentage-of-Completion Projects.’’
13
Cost of Revenue
Cost of revenue, consists principally of: salaries, wages and employee benefits; subcontracted services; equipment
rentals and repairs; fuel and other equipment expenses, including allocated depreciation and amortization expense; material
costs, parts and supplies; insurance; and facilities expenses. Project profit is calculated by subtracting a project’s cost of
revenue, including project related depreciation, from project revenue. Project profitability and corresponding project margins
will be reduced if actual costs to complete a project exceed our estimates on fixed price and installation/ construction service
agreements. Estimated losses on contracts are recognized immediately when estimated costs to complete a project exceed the
remaining revenue to be received over the remainder of the contract. Various factors, some controllable and some not, can
impact our margins on a quarterly or annual basis, including:
•
Seasonality and Geographical Factors. Seasonal patterns can have a significant impact on project margins. Generally,
business is slower at the beginning of the year. Adverse or favorable weather conditions can impact project margins in
a given period. For example, extended periods of rain or snowfall can negatively impact revenue and project margins
as a result of reduced productivity from projects being delayed or temporarily halted. Conversely, in periods when
weather remains dry and temperatures are accommodating, more work can be done, sometimes with less cost, which
can favorably impact project margins. In addition, the mix of business conducted in different geographic areas can
affect project margins due to the particular characteristics associated with the physical locations where the work is
being performed, such as mountainous or rocky terrain versus open terrain. Site conditions, including unforeseen
underground conditions, can also impact project margins.
• Revenue Mix. The mix of revenues derived from the industries we serve and the types of services we provide within
an industry will impact margins, as certain industries and services provide higher margin opportunities. Additionally,
changes in our customers’ spending patterns in any of the industries we serve can cause an imbalance in supply and
demand and, therefore, affect margins and mix of revenues by industry served.
• Performance Risk. Overall project margins may fluctuate due to work volume, project pricing and job productivity.
Job productivity can be impacted by quality of the work crew and equipment, availability of skilled labor,
environmental or regulatory factors, customer decisions and crew productivity. Crew productivity can be influenced
by weather conditions and job terrain, such as whether project work is in a right of way that is open or one that is
obstructed (either by physical obstructions or legal encumbrances).
•
Subcontracted Resources. Our use of subcontracted resources in a given period is dependent upon activity levels and
the amount and location of existing in-house resources and capacity. Project margins on subcontracted work can vary
from project margins on self-perform work. As a result, changes in the mix of subcontracted resources versus self-
perform work can impact our overall project margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of compensation and benefit expenses, travel expenses
and related costs for our finance, benefits and risk management, legal, facilities, information services and executive personnel.
Selling, general and administrative expenses also include outside professional and accounting fees, expenses associated with
information technology used in administration of the business and various forms of insurance.
Interest Expense, Net
Interest expense, net, consists of contractual interest expense on outstanding debt obligations, amortization of deferred
financing costs and other interest expense, including interest expense related to financing arrangements, with all such expenses
net of interest income.
Restructuring Expense
Restructuring expense consist of expenses associated with our decision to simplify the business in 2014 by focusing on our
U.S.-based wind, solar and heavy civil operations. The costs are related to the restructuring expenses for employees who were
terminated as a result of the abandonment of the Canadian solar operations of H.B. White.
14
Discontinued Operations
Discontinued operations consist of expenses associated with the complete abandonment of our Canadian operations. We
effectively completed all significant projects in Canada, and reduced or redeployed substantially all of our Canadian resources,
facilities and equipment as of July 2016.
Critical Accounting Estimates
This management’s discussion and analysis of our financial condition and results of operations is based upon IEA’s
audited consolidated financial statements included in this Current Report on Form-8-K as Exhibit 99.4, which have been
prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires the use of
estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying
notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under
the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Given that management estimates, by their nature, involve judgments
regarding future uncertainties, actual results may differ from these estimates if conditions change or if certain key assumptions
used in making these estimates ultimately prove to be inaccurate. For discussion of all of our significant accounting policies,
see Note 2—Summary of Significant Accounting Policies in the notes to IEA’s audited consolidated financial statements,
included in this Current Report on Form 8-K as Exhibit 99.4.
We believe that the accounting policies described below are the most critical in the preparation of our consolidated
financial statements, as they are important to the portrayal of our financial condition and require significant or complex
judgment and estimates on the part of management.
Revenue Recognition for Percentage-of-Completion Projects
Revenue from fixed price contracts provides for a fixed amount of revenue for the entire project, subject to certain
additions for changed scope or specifications. We recognize revenue from these contracts, as well as for certain projects
pursuant to master and other service agreements, using the percentage-of-completion method. Under this method, the
percentage of revenue to be recognized for a given project is measured by the percentage of costs incurred to date on the
contract to the total estimated costs for the contract. The estimation process for revenue recognized under the percentage-of-
completion method is based on the professional knowledge and experience of our project managers, engineers and financial
professionals. Our management reviews the estimates of contract revenue and costs on an ongoing basis. Changes in job
performance, job conditions and management’s assessment of expected settlements of disputes related to contract price
adjustments are factors that influence estimates of total contract value and total costs to complete those contracts and, therefore,
our profit recognition. Changes in these factors may result in revisions to costs and income, and their effects are recognized in
the period in which the revisions are determined, which could materially affect our results of operations in the period in which
such changes are recognized. Provisions for losses on uncompleted contracts are made in the period in which such losses are
determined to be probable and the amount can be reasonably estimated. The substantial majority of fixed price contracts are
completed within one year.
We may incur costs subject to change orders, whether approved or unapproved by the customer, and/or claims related
to certain contracts. We determine the probability that such costs will be recovered based upon engineering studies and legal
opinions, past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer.
We treat project costs as a cost of contract performance in the period incurred if it is not probable that the costs will be
recovered, or we defer the cost and/or recognize revenue up to the amount of the related cost if it is probable that the contract
price will be adjusted and can be reliably estimated. We had change orders and/or claims that had been included as contract
price adjustments on certain contracts that were in the process of being resolved in the normal course of business, including
through negotiation, arbitration and other proceedings. These contract price adjustments, which are included within costs and
earnings in excess of billings or billed accounts receivable, as appropriate, represent management’s best estimate of contract
revenue that has been or will be earned and that we believe is probable of collection. We actively engage in substantive
meetings with these customers to complete the final approval process, and generally expect these processes to be completed
within one year. The amounts ultimately realized upon final acceptance by our customers could be higher or lower than
such estimated amounts.
Valuation of Goodwill and Intangible Assets
We have goodwill and certain intangible assets that have been recorded in connection with our acquisitions of
businesses. Goodwill and intangible assets are tested for impairment at least annually. We perform our annual impairment tests
15
of goodwill and intangible assets during the fourth quarter of each year, and we monitor goodwill and intangible assets for
potential impairment triggers on a quarterly basis. Under applicable guidance, any impairment charges are required to be
recorded as operating expenses. We did not to record any goodwill with respect to the Business Combination because the
transaction will be accounted for as a reverse recapitalization.
We performed a qualitative assessment for our goodwill and intangible assets by examining relevant events and
circumstances that could influence their fair values, such as: macroeconomic conditions, industry and market conditions, entity-
specific events, financial performance and other relevant factors or events that could affect earnings and cash flows.
We believe that the recorded balances of goodwill and intangible assets are recoverable; however, goodwill and
intangible assets may be impaired in future periods. Significant changes in the assumptions or estimates used in our impairment
analyses, such as a reduction in profitability and/or cash flows, could result in additional non-cash goodwill and intangible asset
impairment charges and materially affect our operating results.
Self-Insurance
We are self-insured up to the amount of our deductible for our insurance policies. Liabilities under our insurance
programs are accrued based upon our estimate of the ultimate liability for claims, with assistance from third-party actuaries.
The determination of such claims and the related liability is reviewed and updated quarterly, but these insurance liabilities are
difficult to assess and estimate due to unknown factors, including the severity of an injury, the determination of our liability
relative to other parties. Accruals are based upon known facts and historical trends. Although we believe such accruals are
currently adequate, a change in experience or actuarial assumptions could materially affect our results of operations in a
particular period.
Litigation and Contingencies
Accruals for litigation and contingencies are based on our assessment, including advice of legal counsel, of the
expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies.
Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount
is reasonably estimable. As additional information becomes available, we reassess potential liabilities related to pending claims
and litigation and may revise previous estimates, which could materially affect our results of operations in a given period.
Business Strategy
• Continue to develop strong relationships with our wind and solar partners — We believe that we have strong, long-
term relationships with each of our partners and have historically worked together with them to meet their renewable
energy needs. Historically, we have provided safe, reliable, and cost-efficient solutions for our partners. We remain
focused on anticipating and continuing to assist our partners with their business strategies.
• Continue to expand self-performing capabilities — We intend to continue to evaluate specific job functions within the
construction process to complete in-house. These functions include, but are not limited to electrical, mechanical,
concrete and foundation and service road services. We believe expansion of our in-house performance capabilities
will allow the Company to retain margin, while better controlling safety and scheduling of projects.
• Continue to build our solar and civil, industrial & power market share — We plan to expand the Company’s footprint
in the solar and civil, industrial & power markets by leveraging our years of experience coupled with our ability to
cross-sell these services with our wind customers. There is tremendous growth in these two markets and we believe
that our reputation in the industry will allow us to capitalize on future opportunities.
• Continue to evaluate strategic mergers and acquisitions — We are actively pursuing acquisition opportunities that
would enhance the Company’s ability to diversify its revenue base or enhance the market share of relevant areas of our
business.
Results of Operations
This section includes a summary of our historical results of operations, followed by detailed comparisons of our
results for the years ended December 31, 2017, 2016 and 2015. We have derived this data from our consolidated financial
statements included in this Annual Report.
16
The following table reflects our consolidated results of operations in dollar and percentage of revenue terms for the periods
indicated (dollar amounts in thousands).
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Restructuring expense
Income (loss) from operations
Interest expense, net
Other income
Income (loss) from continuing operations before
income taxes
Benefit (provision) for income taxes
Net income (loss) from continuing operations
Net income (loss) from discontinued operations
Net income (loss)
$
For the year ended December 31,
2017
2016
2015
$ 454,949
100.0% $ 602,665 100.0 % $ 204,640
100.0 %
388,928
66,021
33,543
—
32,478
(2,201)
111
30,388
(13,863)
16,525
—
16,525
85.5%
14.5%
7.4%
—%
7.1%
0.5%
—%
6.7%
3.0%
3.6%
—%
3.6% $
517,419
85.9 %
184,850
90.3 %
85,246
30,705
—
54,541
(516)
213
54,238
10,213
64,451
1,087
65,538
14.1 %
5.1 %
— %
9.0 %
(0.1)%
— %
19,790
27,169
1,528
(8,907)
(557)
874
1.7 %
9.0 %
(8,590)
(106)
(8,696)
(19,487)
0.2 %
10.9 % $ (28,183)
10.7 %
9.7 %
13.3 %
0.7 %
(4.4)%
(0.3)%
0.4 %
(4.2)%
(0.1)%
(4.2)%
(9.5)%
(13.8)%
Comparison of Years Ended December 31, 2017 and 2016
Revenue. For the year ended December 31, 2017, consolidated revenue decreased to $454.9 million from $602.7 million, a
decrease of approximately $147.8 million, or 24.5%, as compared with the prior year. In 2016, a refocus on U.S. wind energy
construction, as well as a pull forward of volume in anticipation of a decline in tax credits in 2017, resulted in higher revenue in
2016 and caused a slow-down in projects in 2017. Ultimately, the tax credits were extended in 2017, so we expect a favorable
impact on the U.S. wind energy construction market in 2018, as project development activities conclude, and projects go into
construction. In addition, revenue in the fourth quarter of 2017 was negatively impacted by uncertainty caused by the
legislative process for enacting the 2017 Tax Act, which caused some participants in the renewable energy industry to delay
new development projects until the ultimate terms of 2017 Tax Act could be evaluated. We estimate that approximately $28.0
million of revenue that would have been received in the fourth quarter of 2017 will instead be realized in 2018.
Cost of revenue. Cost of revenue was $388.9 million, or 85.5% of revenue, for the year ended December 31, 2017, as
compared to $517.4 million, or 85.9% of revenue, over the same period in 2016, for a decrease of approximately $128.5
million or 24.8%. The decrease in the dollar amount cost of revenue was primarily driven by decreased project activity. We
were able to achieve a slight reduction in our cost of revenue percentage primarily through our continued focus on operating
efficiency.
Gross profit. Gross profit decreased by $19.2 million, or 22.6%, to $66.0 million for the year ended December 31, 2017, as
compared to $85.2 million over the same period in 2016. The decrease in 2017 gross profit was due to decreased project
activity relative to the prior year. A refocus on core U.S. operations and strengthened project controls in 2016 carried over to
2017 allowing us to maintain gross profit as a percentage of revenue of 14.5%, as compared to 14.1% in 2016.
Selling, general and administrative expenses. Selling, general and administrative expenses were $33.5 million, or 7.4% of
revenue for the year ended December 31, 2017, as compared to $30.7 million, or 5.1% of revenue over the same period in
2016, an increase of $2.8 million, or 9.1%. The increase in selling, general and administrative expenses was primarily driven by
an increase to diversification selling, general and administrative expenses related to our recent initiatives to grow our solar and
transmission businesses of $3.8 million as well as $3.8 million consulting fees and professional expenses, offset by a decrease
in payments of employee incentives.
Interest expense, net. Interest expense, net of interest income, was $2.2 million for the year ended December 31, 2017 as
compared to $0.5 million for the same period in 2016. This increase was primarily driven by a significant increase in equipment
financed under capital leases.
17
Other income. Other income was $0.1 million for the year ended December 31, 2017, as compared to $0.2 million for the
same period in 2016. The decrease in other income was primarily driven by lower gains on the sale of assets in the current year.
Benefit (provision) for income taxes. Income tax provision was $13.9 million for the year ended December 31, 2017 as
compared with a tax benefit of $10.2 million for the year ended December 31, 2016, an increase of approximately $24.1
million. The increase in provision for income taxes was primarily driven by the release of the valuation allowance during 2016.
Net income (loss) from discontinued operations. Net loss from discontinued operations was $1.1 million for the year ended
December 31, 2016 and related to the wind down of our Canadian operations that concluded in 2016.
Comparison of Years Ended December 31, 2016 and 2015
Revenue. For the year ended December 31, 2016, consolidated revenue increased to $602.7 million from $204.6 million, an
increase of approximately $398.0 million, or 194.5%, as compared with the prior year. In 2015, we completed our final project
in Canada. With the wind-down of Canadian operations and favorable market conditions in the U.S. wind energy market, we
refocused the business on the U.S. wind energy construction market, and in addition, there was a pull-forward in volume in
2016 in anticipation of a decline in tax credits in 2017. As a result, our revenue increased significantly in 2016.
Cost of revenue. Cost of revenue was $517.4 million, or 85.9% of revenue, for the year ended December 31, 2016, as
compared to $184.9 million, or 90.3% of revenue, over the same period in 2015, for an increase of approximately $332.6
million or 179.9%. The increase in the dollar amount cost of revenue was primarily driven by increased project activity. The
decrease in the cost of revenue percentage was primarily due to our continued focus on improving efficiency within our
operations.
Gross profit. Gross profit increased by $65.5 million, or 330.8%, to $85.2 million for the year ended December 31, 2016, as
compared to $19.8 million over the same period in 2015. The increase in gross profit was due to improved efficiency and
profitability in our execution of projects, coupled with an increased margin profile based on tighter project controls and a
refocus on core U.S. operations implemented by the new management team.
Selling, general and administrative expenses. Selling, general and administrative expenses were $30.7 million, or 5.1% of
revenue for the year ended December 31, 2016, as compared to $27.2 million, or 13.3% of revenue over the same period in
2015, an increase of approximately $3.5 million, or 12.9%. The increase in the dollar amount selling, general and
administrative expense was primarily driven by an increase to employee incentives and benefits related to significantly more
wind energy projects in the U.S. The decrease in selling, general and administrative expenses as a percentage of revenue was
primarily due to our continued cost containment and efficiency efforts.
Restructuring expenses. Restructuring expenses were $1.5 million for the year ended December 31, 2015, related to expenses
for simplifying the business strategy from 2014 to 2016.
Interest expense, net. Interest expense, net of interest income, was $0.5 million for the year ended December 31, 2016 as
compared to $0.6 million for the same period in 2015.
Other income. Other income was $0.2 million for the year ended December 31, 2016, as compared to $0.9 million for the
same period in 2015. The decrease in other income was primarily driven by lower gains on the sale of assets in the current year.
Benefit (provision) for income taxes. Income tax benefit was $10.2 million for the year ended December 31, 2016 as
compared with a tax provision of $0.1 million in 2015, a decrease of approximately $10.3 million. This decrease in provision
for income taxes was primarily driven by the increase in tax provision of $18.7 million caused by positive taxable earnings,
$1.9 million related to state taxes, $0.4 of other minor adjustments, and offset by a $31.1 million release of the valuation
allowance at the end of December 31, 2016.
Net income (loss) from discontinued operations. Income from discontinued operations was $1.1 million for the year ended
December 31, 2016 as compared to loss from discontinued operations of $19.5 million for the same period in 2015. We started
reducing our Canadian operations in 2014, and the change was primarily related to the wind down of operations from 2016
compared to 2015.
Non-U.S. GAAP Financial Measures
18
We define EBITDA from continuing operations as net income (loss) from continuing operations, determined in
accordance with GAAP, for the period presented, before depreciation and amortization, interest expense and provision (benefit)
for income taxes. We define Adjusted EBITDA as net income (loss) from continuing operations plus depreciation and
amortization, interest expense, provision (benefit) for income taxes, restructuring expenses, acquisition or disposition related
expenses, non-cash stock compensation expense, and certain other non-cash charges, unusual, non-operating or non- recurring
items and other items that we believe are not representative of our core business or future operating performance.
Adjusted EBITDA is a supplemental non-GAAP financial measure and, when considered along with other
performance measures, is a useful measure as it reflects certain drivers of the business, such as revenue growth and operating
costs. We believe Adjusted EBITDA can be useful in providing an understanding of the underlying operating results and trends
and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is
not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast business performance.
Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net
income as it does not take into account certain requirements, such as capital expenditures and related depreciation, principal
and interest payments, and tax payments. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use
of the term Adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential
inconsistencies in the method of calculation and differences due to items subject to interpretation.
The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or
superior to, the financial information prepared and presented in accordance with GAAP. You should read this discussion and
analysis of our financial condition and results of operations together with the condensed consolidated financial statements and
the related notes thereto also included within.
The following table outlines the reconciliation from net income (loss) to Adjusted EBITDA for the periods indicated:
(in thousands)
Net income (loss)
Net loss (income) from discontinued operations
Net income (loss) from continuing operations
Interest expense, net
Provision (benefit) for income taxes
Depreciation and amortization
EBITDA - Continuing Operations
Restructuring expense(1)
Diversification SG&A(2)
Credit support fee(3)
Canadian wind-down bonus expense(4)
Consulting fees & expense(5)
Non-cash stock compensation expenses(6)
Sale costs(7)
Full year impact of 2017 capital leasing program(8)
For the year ended December 31,
2017
2016
2015
$
$
$
$
$
16,525
—
16,525
2,201
13,863
5,044
$
$
65,538
(1,087)
64,451
516
(10,213)
3,433
37,633
$
58,187
$
—
3,825
1,535
—
4,799
53
—
4,700
—
—
2,340
2,000
1,015
161
—
—
(28,183)
19,487
(8,696)
557
106
3,446
(4,587)
1,528
—
1,961
—
752
93
25
—
(228)
Adjusted EBITDA
$
52,545
$
63,703
$
(1)
(2)
Restructuring expenses—represent severance expense for employees who were terminated as a result of the
abandonment of IEA’s Canadian solar operations.
Diversification selling, general and administrative—reflects the costs, including recruiting, compensation and benefits
for additional personnel, associated with IEA beginning to expand into electrical transmission work and corresponding
services, which were historically subcontracted to third parties, U.S. utility scale solar, and heavy civil infrastructure.
These costs currently do not have corresponding revenue, but management anticipates revenue in fiscal 2018.
19
(3)
(4)
(5)
Credit support fees—reflect payments to Oaktree for its guarantee of certain borrowings, which guarantees are not
expected to continue post-combination.
Canadian wind-down bonus expense—reflects an adjustment for bonus payments to our executive leadership team
made in fiscal 2016 as a result of the successful wind down of IEA’s Canadian solar operations.
Consulting fees and expenses—in 2015 and 2016, represents consulting fees and expenses related to the wind down of
IEA’s Canadian operations and, in 2017, represents consulting and professional fees and expenses in connection with
the proposed Business Combination.
(6)
Non-cash stock compensation expenses—represents non-cash stock compensation expense.
(7)
Sale costs—removal of the third-party expense related to a potential sale of IEA.
(8)
Full year impact of 2017 capital leasing program—reflects the annualization of the EBITDA effects of the capital
leasing program for cranes and yellow iron, which was implemented during 2017, consisting of (i) a $1.7 million
positive adjustment due to the elimination of cost of goods sold attributable to operating lease payments, (ii) $1.6
million in reduction in cost of goods due to estimated operational efficiencies resulting from the program, and (iii)
$1.4 million, representing a pro rata portion of the estimated gain due to estimated future residual value exceeding
depreciated carrying value on the sale of the leased assets following the 48 month term of the lease.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations, our cash balances and the new credit facility we
entered into to replace our old credit facility as described below under “—New Credit Facility”. Our primary liquidity needs
are for working capital, income taxes, capital expenditures, insurance collateral in the form of cash and letters of credit, cost
and equity investee funding requirements and debt service. We also evaluate opportunities for strategic acquisitions and
investments from time to time, which may require our use of cash.
We anticipate that funds generated from operations, borrowings from the new credit facility and cash flow from
operations will be sufficient to meet our working capital requirements, required income tax payments, debt service obligations,
anticipated capital expenditures, cost and equity investee funding requirements, insurance collateral requirements, earn-out
obligations, and letter of credit needs for at least the next twelve months.
Capital Expenditures
For the year ended December 31, 2017, we incurred approximately $18.3 million of equipment purchases under
capital lease and other financing arrangements. We estimate that we will spend approximately two percent of revenue for
capital expenditures for 2018 and 2019. Actual capital expenditures may increase or decrease in the future depending upon
business activity levels, as well as ongoing assessments of equipment lease versus buy decisions based on short and long-term
equipment requirements.
Working Capital
We require working capital to support seasonal variations in our business, primarily due to the effect of weather
conditions on external construction and maintenance work and the spending patterns of our customers, both of which influence
the timing of associated spending to support related customer demand. Our business is typically slower in the first quarter of
each calendar year. Working capital needs are generally lower during the spring when projects are awarded, and we receive
down payments from customers. Conversely, working capital needs generally increase during the summer or fall months due to
increased demand for our services when favorable weather conditions exist in many of the regions in which we operate.
Conversely, working capital needs are typically lower and working capital is converted to cash during the winter months. These
seasonal trends, however, can be offset by changes in the timing of projects, which can be affected by project delays or
accelerations and/or other factors that may affect customer spending.
Generally, we receive 5% to 10% cash payments from our customers upon the inception of the projects. Timing of
billing milestones and project close-outs can contribute to changes in unbilled revenue. As of December 31, 2017, substantially
all of our costs in excess of billings and earnings will be billed to customers in the normal course of business within the next
twelve months. Accounts receivable balances, which consist of contract billings as well as costs and earnings in excess of
20
billings and retainage, decreased to $79.6 million as of December 31, 2017 from $84.1 million as of December 31, 2016, due
primarily to lower levels of revenue, timing of project activity, and collection of billings to customers.
Our billing terms are generally net 30 days, and some of our contracts allow our customers to retain a portion of the
contract amount (generally, from 5% to 10%) until the job is completed. As part of our ongoing working capital management
practices, we evaluate opportunities to improve our working capital cycle time through contractual provisions and certain
financing arrangements. Our agreements with subcontractors often contain a ‘‘pay-if-paid’’ provision, whereby our payments to
subcontractors are made only after we are paid by our customers.
Sources and Uses of Cash
Sources and uses of cash are summarized below (in thousands):
(in thousands)
Net cash (used) provided by operating activities
Net cash (used) provided in investing activities
Net cash (used) provided by financing activities
Year Ended December 31, 2017 and 2016
2017
For the years ended December 31,
2016
2015
(9,109)
(3,508)
(4,113)
53,591
(3,000)
(29,617)
(5,617)
352
8,541
Operating Activities. Net cash used in operating activities for the year ended December 31, 2017 was ($9.1) million,
as compared to net cash provided by operating activities of $53.6 million over the same period in 2016. The decrease of cash
flow from operations in the year ended 2017 was driven by lower operating income from continuing operations of $22.1
million and a reduction of $48.0 million of accounts payable, and billings in excess of costs and estimated earnings on
uncompleted contracts, offset by $8.9 million of a decrease in accounts receivable. This was due to a decrease in overall wind
energy construction in the U.S. in 2017 and decreased project activity.
Investing Activities. Net cash used in investing activities increased by $0.5 million to ($3.5) million in the year ended
December 31, 2017 from ($3.0) million over the same period in 2016. The primary driver for the increase in cash used in
investing activities is related to company owned life insurance.
Financing Activities. Net cash used in financing activities for the year ended December 31, 2017 was $(4.1) million,
as compared to $(29.6) million of cash used in financing activities for the same period in 2016, for a decrease in net cash used
in financing activities of approximately $25.5 million. The primary decrease in cash used in financing activities is related to
$33.7 million of proceeds received from the line of credit in the current year compared to $27.9 million of repayments in the
prior year, offset by $34.7 million of distributions to parent and increased payments on capital lease obligations for equipment.
Years Ended December 31, 2016 and 2015
Operating Activities. Net cash provided by operating activities for the year ended December 31, 2016 was $53.6
million, as compared with cash used in operating activities of ($5.6) million over the same period in 2015. The increase of
$59.2 million of net cash provided by operating activities in the year ended 2016 was primarily related to an increase in net
income of $93.7 million over the same period, offset by a reduction in accounts receivable related to increased project
construction, with a corresponding increase in accounts payable and accrued liabilities for related materials purchased for these
projects.
Investing Activities. Net cash used in investing activities increased by $3.4 million to ($3.0) million in the years ended
December 31, 2016 from cash provided from investing activities of $0.4 million over the same period in 2016. The increase for
cash used in 2016 was primarily related to $2.8 million of assets purchased compared to $0.6 million in the prior year, coupled
with a decrease of $0.9 million of proceeds collected for the year ended December 31, 2016 compared to December 31, 2015.
Financing Activities. Net cash used in financing activities for the year ended December 31, 2016 was ($29.6) million,
as compared to cash provided by financing activities of $8.5 million for the same period in 2015, for an increase in net cash
used in financing activities of approximately $38.1 million. The increase in cash used in financing activities is primarily related
to repayments of borrowings made on the old credit facility of $27.9 million for year ended 2016 compared to $11.4 million in
2015. This was coupled with a reduction of borrowings of $20.0 million of subordinated debt for year ended 2015.
21
Old Credit Facility
IEA, Seller and certain of their subsidiaries are co-borrowers under the old credit facility with Wells Fargo Bank,
National Association, which was amended on January 20, 2017, with a maturity date of December 31, 2018. The old credit
facility allows for aggregate revolving borrowings of up to $55.0 million, including letters of credit up to $15.0 million through
December 31, 2018. As of December 31, 2017, IEA had $33.7 million outstanding under the old credit facility and $5.9 million
of outstanding letters of credit. Interest on outstanding borrowings under the old credit facility was based on the prime rate. The
borrowing rate under the old credit facility was 4.50% as of December 31, 2017. The interest rate on outstanding letters of
credit was 2% per annum.
The old credit facility also has an unused commitment fee of 0.35% per annum. For the year ended December 31,
2017, interest expense under the old credit facility was $0.5 million. The old credit facility was fully guaranteed by Oaktree
Power Opportunities Fund III, L.P. and Oaktree Power Opportunities Fund III (Parallel), L.P. and was secured by substantially
all of the assets of Seller and its subsidiaries. IEA was in compliance with all required financial covenants as of December 31,
2017.
In connection with the Closing of the Business Combination, all outstanding indebtedness, if any, under the old credit
facility was repaid or refinanced under the new credit facility described below under ‘‘—New Credit Facility’’ and the old
credit facility was terminated.
New Credit Facility
At Closing, Merger Sub I, as initial borrower, IEA Services, as borrower, and its subsidiaries entered into the new
credit facility with Bank of America, N.A., as administrative and collateral agent, and a syndicate of commercial lenders from
time to time party thereto. IEA Intermediate Holdco, LLC, a recently formed intermediate holding company wholly owned by
the post-combination company (‘‘Holdings’’), owns 100% of IEA Services and is also party to the new credit facility as a
guarantor thereunder. The new credit facility initially provides for aggregate revolving borrowings of up to $50.0 million and a
$50.0 million delayed-draw term loan facility, each maturing on the third anniversary of the Closing Date. The term loan may
be drawn down for a period of two years following the Closing Date (in not more than four drawdowns) and matures three
years following the Closing Date. Each draw under the term loan facility will be subject to quarterly amortization of principal,
commencing on the last day of the first fiscal quarter ending after such draw, in an amount equal to 3.5% of the initial amount
of such draw (the ‘‘Scheduled Amortization’’).
In addition to the Scheduled Amortization, and subject to exceptions and baskets, (a) 100% of all net cash proceeds,
subject to reinvestment rights, from (i) sales of property and assets of Holdings and its subsidiaries (excluding sales of
inventory and equipment in the ordinary course of business and other exceptions set forth in the loan documentation) and (ii)
any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any property of Holdings and
its subsidiaries and (b) 100% of all net cash proceeds from the issuance or incurrence of additional debt for borrowed money of
Holdings and its subsidiaries not otherwise permitted under the loan documentation, are required to be applied to the
prepayment of the new credit facilities in the following manner: first, to the term loan facility and, second, to the revolving
credit facility (without a reduction of the commitments under the credit facilities).
With respect to any draw of the term loan facility, after giving effect to such draw on a pro forma basis: (i) the
Consolidated Leverage Ratio (defined below under ‘‘Debt Covenants’’) must not exceed the amount that is 0.25:1.0 lower than
the maximum Consolidated Leverage Ratio permitted in the definitive documentation for the new credit facility and (ii) IEA
Services must have liquidity (defined as unrestricted cash and revolver availability) of at least $20.0 million.
On the Closing Date, $19.0 million was drawn under the revolving credit facility to refinance existing indebtedness
(including replacing or backstopping existing letters of credit), pay transaction expenses and working capital overage. After the
Closing Date, the revolving credit facility may be used for working capital, capital expenditures and other lawful corporate
purposes. Obligations under the new credit facility are guaranteed by Holdings and each existing and future, direct and indirect
wholly owned material domestic subsidiary of Holdings other than IEA Services (together with IEA Services, the ‘‘Credit
Parties’’), and are secured by all of the present and future assets of the Credit Parties, subject to customary carve-outs. Interest
on the new credit facility will accrue at an interest rate of (x) LIBOR plus a margin of 3.00% or (y) an alternate base rate plus a
margin of 2.00%.
We may from time to time after the Closing Date add one or more tranches of term loans to the credit facility (each an
22
‘‘Incremental Term Loan Facility’’) and/or increase the aggregate commitments under the revolving credit facility (a
‘‘Revolving Credit Facility Increase’’ and collectively with each Incremental Term Loan Facility, an ‘‘Incremental Facility’’)
with consent required only from those Lenders that participate in such Incremental Facility; provided that, among other things,
the aggregate principal amount of all Incremental Facilities may not exceed $25.0 million. No existing lender shall be under
any obligation to provide any commitment to an Incremental Facility, and any such decision whether to provide a commitment
to an Incremental Facility shall be in such Lender’s sole and absolute discretion.
Debt Covenants
We were in compliance with the provisions and covenants contained in our outstanding debt instruments as of
December 31, 2017.
Under the new credit facility, we are subject to affirmative and negative covenants. Our financial covenants include (i)
a Maximum Consolidated Leverage Ratio (defined as total funded debt / EBITDA), which may not exceed 3.00:1.0, and (ii) a
Minimum EBITDA requirement of at least $35.0 million as of the end of each of our four fiscal quarter periods. Each of the
covenants referred to above will be calculated on a consolidated basis for each consecutive four fiscal quarter period,
commencing with the first full fiscal quarter following the Closing Date.
In addition, Holdings and its subsidiaries are subject to affirmative covenants requiring (i) delivery of financial
statements, budgets and forecasts; (ii) delivery of certificates and other information; (iii) delivery of notices (of any default,
material adverse condition, ERISA event, material change in accounting or financial reporting practices); (iv) payment of tax
obligations; (v) preservation of existence; (vi) maintenance of properties; (vii) maintenance of insurance; (viii) compliance with
laws; (ix) maintenance of books and records; (x) inspection rights; (xi) use of proceeds; (xii) covenants to guarantee obligations
and give security; (xiii) compliance with environmental laws; and (xiv) further assurances.
Holdings and its subsidiaries are subject to negative covenants including restrictions (subject to certain exceptions) on
(i) liens; (ii) indebtedness, (including guarantees and other contingent obligations) (provided that the loan documents will
permit, among other items, indebtedness under the Incremental Facility); (iii) investments (including loans, advances and
acquisitions); (iv) mergers and other fundamental changes; (v) sales and other dispositions of property or assets; (vi) payments
of dividends and other distributions and share repurchases (provided, that the loan documents shall permit) (x) distributions to
Holdings or any of its subsidiaries, (y) tax distributions and (z) certain other distributions by Holdings (including distributions
for customary public company expenses and distributions for payments on preferred equity of the post-combination company
subject to terms and conditions set forth in the loan documentation); (vii) changes in the nature of the business; (viii)
transactions with affiliates; (ix) burdensome agreements; (x) use of proceeds; (xi) capital expenditures, provided that (A)
unfinanced capital expenditures will be permitted in an aggregate amount up to $20.0 million per annum and (B) unlimited
financed capital expenditures, subject to pro forma compliance with the Company’s financial covenants; (xii) amendments of
organizational documents; (xiii) changes in accounting policies, reporting practices, fiscal year, legal name, state of formation
or form of entity; (xiv) sale and lease-back transactions; (xv) payment of credit support, advisory and similar fees to affiliates;
(xvi) ownership of subsidiaries; (xvii) sanctions and (xviii) use of proceeds in violation of anti-corruption laws.
Contractual Obligations
The following table sets forth our contractual obligations and commitments for the periods indicated as of December
31, 2017 on a pro forma basis giving effect to the replacement of our old credit facility outstanding as of the Closing of the
Business Combination.
(in thousands)
Capital leases (1)
Operating leases (2)
Line of credit (3)
Total
Payments due by period
Total
Less than 1
year
1 to 3 years
3 to 5 years
More than
5 years
23,689
16,277
43,000
82,966
$
$
6,874
1,683
—
8,557
$
16,815
2,941
43,000
62,756
$
—
2,015
—
2,015
$
—
9,638
—
9,638
(1)
IEA has obligations, exclusive of associated interest, under various capital leases for equipment totaling $20.6 million
at December 31, 2017. The gross property under these capitalized lease agreement at December 31, 2017, amounted to
a net total of $24.2 million.
23
(2)
(3)
IEA leases real estate, vehicles, office equipment, and certain construction equipment from unrelated parties under
noncancelable leases. Lease terms range from month-to-month to terms expiring through 2038.
IEA entered into the new credit facility upon the Closing of the Business Combination. The new credit facility
provides for aggregate revolving borrowings of up to $50.0 million and a $50.0 million delayed-draw term loan
facility, each maturing on the third anniversary of the Closing Date.
As of December 31, 2017, and December 31, 2016, IEA is contingently liable under a letter of credit agreement with a
financial institution in the amount of $5.9 million and $3.1 million, respectively, related to projects.
For detailed discussion and additional information pertaining to our debt instruments, see Note 8— Debt in the notes
to IEA’s audited consolidated financial statements, included in this Annual Report.
Off-Balance Sheet Arrangements
As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of
business. Our significant off-balance sheet transactions include liabilities associated with non-cancelable operating leases, letter
of credit obligations, surety and performance and payment bonds entered into in the normal course of business, self-insurance
liabilities, liabilities associated with multiemployer pension plans, liabilities associated with certain indemnification and
guarantee arrangements. See Note 11—Commitments and Contingencies in the notes to IEA’s audited consolidated financial
statements, included in this Annual Report, for discussion pertaining to our off-balance sheet arrangements. See Note 2—
Summary of Significant Accounting Policies and Note 15—Related Parties in the notes to IEA’s audited consolidated financial
statements, included in this Annual Report, for discussion pertaining to certain of our investment arrangements.
Recently Issued Accounting Pronouncements
See Note 2—Summary of Significant Accounting Policies in the notes to IEA’s audited consolidated financial
statements, included in this Annual Report.
Quantitative and Qualitative Disclosures About Market Risk
Credit Risk
We are subject to concentrations of credit risk related to our net receivable position with customers, which includes
amounts related to billed and unbilled accounts receivable and costs and earnings in excess of billings (‘‘CIEB’’) on
uncompleted contracts net of advanced billings with the same customer. We grant credit under normal payment terms, generally
without collateral, and as a result, we are subject to potential credit risk related to our customers’ ability to pay for services
provided. This risk may be heightened if there is depressed economic and financial market conditions. However, we believe the
concentration of credit risk related to billed and unbilled receivables and costs and estimated earnings in excess of billings on
uncompleted contracts is limited because of the diversity of our customers.
Interest Rate Risk
Borrowings under the old credit facility and certain other borrowings are at variable rates of interest and expose us to interest
rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the
amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our
indebtedness, will correspondingly decrease. There was an outstanding balance of $33.7 million on the old credit facility as of
December 31, 2017 and no outstanding balance as of December 31, 2016. As of December 31, 2017, we had no derivative
financial instruments to manage interest rate risk.
Foreign Currency Risk
Prior to discontinuing our Canadian operations in 2014, which were substantially wound down in 2016, we were
exposed to foreign currency risk related to our operations in Canada. Revenue generated from foreign operations is less than
5% of our total revenue for the year ended December 31, 2017. Revenue and expense related to our foreign operations are, for
the most part, denominated in the functional currency of the foreign operation, which minimizes the impact that fluctuations in
exchange rates would have on net income or loss. We are subject to fluctuations in foreign currency exchange rates when
transactions are denominated in currencies other than the functional currencies. Such transactions were not material to our
24
operations in the year ended December 31, 2017. Translation gains or losses, which are recorded in other comprehensive
income or loss, result from translation of the assets and liabilities of our foreign subsidiaries into U.S. dollars.
JOBS Act
Following the Business Combination, the post-combination company will continue to qualify as an ‘‘emerging growth
company’’ as defined in the JOBS Act, enacted on April 5, 2012. Section 102 of the JOBS Act provides that an ‘‘emerging
growth company’’ can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for
complying with new or revised accounting standards.
Subject to certain conditions set forth in the JOBS Act, the combined company will not be required to, among other
things, (1) provide an auditor’s attestation report on our systems of internal controls over financial reporting pursuant to Section
404, (2) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the
Dodd-Frank Wall Street Reform and Consumer Protection Act, (3) comply with any requirement that may be adopted by the
Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report
providing additional information about the audit and the financial statements (auditor discussion and analysis), and (4) disclose
certain executive compensation-related items such as the correlation between executive compensation and performance and
comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply
until the combined company no longer meets the requirements of being an emerging growth company. The post combination
company will remain an emerging growth company until the earlier of (a) the last day of the fiscal year (i) following July 12,
2021, the fifth anniversary of the completion of the Company’s IPO, (ii) in which the post-combination company has total
annual gross revenue of at least $1.07 billion or (iii) in which the post-combination company is deemed to be a large
accelerated filer, which means the market value of its common stock that is held by non-affiliates exceeds $700 million as of
the last business day of its prior second fiscal quarter, and (b) the date on which the post-combination company has issued more
than $1.0 billion in nonconvertible debt during the prior three-year period.
25
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IEA Energy Services, LLC
and Subsidiaries
Consolidated Financial Statements
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
Table of Contents
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Changes in Member’s Equity (Deficit) for the years ended December
31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
3
4
5
6
7
Notes to the Consolidated Financial Statements
8 – 29
J), Crowe Horwath.
Crowe Horwath LLP
Independent
Member Crowe Horwath
International
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
IEA Energy Services, LLC and Subsidiaries
Indianapolis, Indiana
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of IEA Energy Services, LLC and Subsidiaries (the "Company")
as of December 31, 2017 and 2016, the related consolidated statements of operations, changes in member’s equity (deficit), and
cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with standards generally accepted in
the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 2016.
Crowe Horwath LLP
Indianapolis, Indiana
February 19, 2018
3
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
2017
2016
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowances of $216 and $135, respectively
Costs and estimated earnings in excess of billings on uncompleted
contracts
Prepaid expenses and other current assets
Deferred income taxes
Total current assets
$
Property, plant and equipment, net of accumulated depreciation of $17,770
and $17,484, respectively
Goodwill
Intangibles, net of accumulated amortization of $2,061 and $1,941,
respectively
Company-owned life insurance
Other assets
Deferred income taxes – long term
Total assets
Liabilities and Member’s Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities
Current portion of capital lease obligations
Billings in excess of costs and estimated earnings on uncompleted
contracts
Line of credit
Total current liabilities
Capital lease obligations, net of current maturities
Deferred compensation
Total liabilities
Commitments and contingencies
Member’s equity (deficit):
Member’s equity (deficit)
Total member’s equity (deficit)
Total liabilities and member’s equity (deficit)
$
$
$
$
$
$
4,877
60,981
18,613
862
–
85,333
30,905
3,020
69
4,250
46
3,080
126,703
70,030
4,691
7,398
33,674
115,793
15,899
5,030
136,722
(10,019)
(10,019)
126,703
$
21,607
69,977
14,143
1,449
11,735
118,911
20,540
3,020
189
2,214
45
2,797
147,716
97,244
920
28,181
–
126,345
4,410
4,086
134,841
12,875
12,875
147,716
See accompanying notes to consolidated financial statements
4
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Year ended December 31,
2016
2017
2015
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Restructuring expense
Income from operations
Other income (expense), net:
Interest expense, net
Other income
Income before benefit (provision) for income taxes
Benefit (provision) for income taxes
Net income from continuing operations
Discontinued operations:
Net income from discontinued operations
$
$
454,949
388,928
66,021
33,543
-
32,478
(2,201)
111
30,388
(13,863)
16,525
–
16,525
Other comprehensive income (loss)
Foreign currency translation adjustment
Net income
$
-
16,525
$
602,665
517,419
85,246
30,705
-
54,541
(516)
213
54,238
10,213
64,451
1,087
65,538
-
65,538
204,640
184,850
19,790
27,169
1,528
(8,907)
(557)
874
(8,590)
(106)
(8,696)
(19,487)
(28,183)
868
(27,315)
See accompanying notes to consolidated financial statements
5
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER’S EQUITY (DEFICIT)
(in thousands)
Balance, January 1, 2015
Net loss
Change in foreign currency translation
Profit unit expense
Other
Balance, December 31, 2015
Net income
Member’s equity
(deficit)
Accumulated other
comprehensive
income (loss)
Total
(47,706) $
(601)
$
(48,307)
(28,183)
–
93
(315)
–
868
–
–
(28,183)
868
93
(315)
(76,111) $
267
$
(75,844)
65,538
–
65,538
$
$
Change in foreign currency translation
Cumulative translation adjustment on discontinued operations
Profit unit expense
Conversion of Subordinated Debt into equity
Balance, December 31, 2016
Net income
Distributions
Distribution of Land and Building
Profit unit expense
–
–
161
23,287
12,875
16,525
(34,738)
(4,734)
53
Balance, December 31, 2017
$
(10,019) $
(780)
513
–
–
–
–
–
–
–
–
(780)
513
161
23,287
12,875
16,525
(34,738)
(4,734)
53
$
(10,019)
See accompanying notes to consolidated financial statements
6
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation of property, plant and equipment
Amortization of intangible assets
Provision for loss on uncompleted contracts
Interest accrual on subordinated debt
Profit units compensation expense
Other
(Gain) loss on sale of equipment
Deferred compensation
Deferred income taxes
Allowance for doubtful accounts
Change in operating assets and liabilities:
Accounts receivable
Costs and estimated earnings in excess of billings on
uncompleted contracts
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Billings in excess of costs and estimated earnings on
uncompleted contracts
Net cash (used in) provided by operating activities
Cash flows from investing activities:
Company-owned life insurance
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Net proceeds and repayments under line of credit
Distribution
Proceeds from the issuance of subordinated debt
Payments on capital lease obligations
Net cash used in financing activities
Years ended December 31,
2016
2017
2015
$
16,525
$
65,538
(28,183)
4,924
120
–
–
53
–
(244)
944
11,451
81
8,915
(4,470)
587
(27,212)
(20,783)
(9,109)
(2,036)
(2,248)
776
(3,508)
33,674
(34,738)
–
(3,049)
(4,113)
3,323
120
(634)
1,862
161
–
(213)
(446)
(14,687)
(11,942)
(21,089)
2,093
(539)
17,862
12,182
53,591
(514)
(2,821)
335
(3,000)
(27,946)
–
–
(1,671)
(29,617)
3,671
120
(5,532)
1,425
93
(315)
321
872
155
2,129
77,067
14,738
11,799
(68,412)
(15,565)
(5,617)
152
(677)
877
352
(11,459)
–
20,000
–
8,541
Effect of currency translation on cash
–
633
(3,276)
Net change in cash and cash equivalents
(16,730)
21,607
Cash and cash equivalents, beginning of year
21,607
–
Cash and cash equivalents, end of year
$
4,877
$
21,607
–
–
–
See accompanying notes to consolidated financial statements
7
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Supplemental disclosure of cash and non-cash transactions:
Cash paid for interest
Cash paid for income taxes
Acquisition of assets/liabilities through capital lease
Distribution of Land and Building
Conversion of Subordinated Debt into Equity
$
$
$
$
$
2,221
3,686
18,309
4,734
-
$
$
$
$
$
1,189
2,673
7,501
-
23,287
3,870
-
-
-
-
See accompanying notes to consolidated financial statements
8
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Nature of Operation
IEA Energy Services, LLC (“IEA Services”) is a Delaware limited liability company, formed on August 3,
2011, together with its wholly-owned subsidiaries (collectively the “Company”) and a wholly-owned subsidiary of
Infrastructure and Energy Alternatives, LLC (“IEA Parent”). The Company specializes in providing complete
engineering, procurement and construction (“EPC”) services throughout the U.S. for the renewable energy, traditional
power and civil infrastructure industries. The services are performed under fixed-price and time-and-materials
contracts.
On November 3, 2017, IEA Parent entered into an Agreement and Plan of Merger (the “Merger Agreement”)
by and among M III Acquisition Corp. (“M III”), IEA Energy Services LLC, Wind Merger Sub I, Inc., a wholly-
owned subsidiary of M III (“Merger Sub I”), Wind Merger Sub II, LLC, a wholly-owned subsidiary of M III (“Merger
Sub II”), Oaktree Power Opportunities Fund III Delaware, L.P. (“Oaktree”), solely in its capacity as the seller’s
representative and, M III Sponsor I LLC, a Delaware limited liability company, and M III Sponsor I LP (together, the
“Sponsors”), solely with respect to certain to certain provisions.
Pursuant to a Merger Agreement, a business combination between the IEA Services and M III will be
effected through two consecutive mergers—Merger Sub I will merge with and into IEA Services with IEA Services
surviving such merger and, immediately thereafter, this surviving entity will merge with and into Merger Sub II with
Merger Sub II surviving such merger as a wholly-owned subsidiary of M III (together, the “Mergers”). Upon the
consummation of the Mergers, subject to adjustments in accordance with the Merger Agreement, IEA Parent will
receive approximately $100,000 in cash, 10,000,000 shares of common stock of M III, par value $0.0001 per share
(“Common Shares”), and an initial stated value of $35,000 in preferred stock of the combined company, par value
$0.0001 per share. At the closing of the transaction, IEA Parent will hold approximately 34% of the issued and
outstanding Common Shares and the existing shareholders of M III will hold approximately 66% of the issued and
outstanding Common Shares. IEA Parent will also receive “earnout shares” if certain EBITDA thresholds specified in
the Merger Agreement are met in either or both of fiscal years 2018 and 2019, with a total of 9,000,000 Common
Shares being earnable for both such years in the aggregate. As of February 19, 2018, the Merger is pending
shareholder approval and an executed definitive agreement.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of IEA Energy Services, LLC and
its wholly-owned domestic and foreign subsidiaries: IEA Management Services, Inc. (“IMS”), IEA Renewable, Inc.
(“Renewable”), White Construction, Inc. (“White”), White Electrical Constructors, Inc. (“WECI”), and IEA
Equipment Management, Inc. (“IEM”), and White’s wholly-owned subsidiary H.B. White Canada Corp. (“H.B.
White”). The capital structure of IEA Services consists of one class of common units fully owned by IEA Parent.
On May 24, 2017, IEA Services and IEA Parent entered into a Contribution Agreement in which IEA Parent
contributed 100% of the issued and outstanding capital stock of IMS to IEA Services. As a result of which IMS
became wholly-owned subsidiary of IEA Services. The contribution is considered a business combination of
companies under common control. Furthermore, the Company is presenting its financial statements as though the
assets and liabilities had been transferred at the beginning of the earliest period presented. All inter-company
transactions and balances have been eliminated in consolidation. The Company has no involvement with variable
interest entities.
Basis of Accounting and Use of Estimates
The accompanying consolidated financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America (“GAAP”). The preparation of the consolidated
financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts
reported in the consolidated financial statements and the accompanying notes. Key estimates include: the recognition
of revenue and project profit or loss (which the Company defines as project revenue less project costs of revenue), in
particular, on construction contracts accounted for under the percentage-of-completion method, for which the recorded
amounts require estimates of costs to complete projects, ultimate project profit and the amount of probable contract
price adjustments as inputs; allowances for doubtful accounts; estimated fair values of intangible assets; accrued self-
9
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
insured claims; share-based compensation; other reserves and accruals; accounting for income taxes; and the estimated
impact of contingencies and ongoing litigation. While management believes that such estimates are reasonable when
considered in conjunction with the Company’s consolidated financial position and results of operations taken, actual
results could differ materially from those estimates.
Foreign Currency Translation
The Company’s reporting currency is the U.S. dollar. Operations outside the United States are generally
measured using the local currency as the functional currency. H.B. White’s functional currency is the Canadian dollar
and the financial statements have been translated from the Canadian dollar to U.S. dollars based on the current
translation rates in effect during the period or at end-of-period exchange rates; income and expenses are translated
using the average exchange rates for the reporting period. Resulting cumulative translation adjustments (“CTA”) were
recorded as a component of member’s equity (deficit) in the Consolidated Balance Sheet in accumulated other
comprehensive income (loss). Upon the abandonment of the Canadian solar operations of H.B. White, in July 2016,
the CTA is included within other income in order to determine the total gain or loss from discontinued operations.
Any CTA for future periods will be included as a component of other income from continuing operations.
Cash and Cash Equivalents
The Company considers all unrestricted, highly liquid investments with maturity of three months or less
when purchased to be cash and cash equivalents. The Company maintains cash balances, which, at times, may exceed
the amounts insured by the Federal Deposit Insurance Corporation.
Accounts Receivable and Allowance for Doubtful Accounts
The Company does not accrue interest to its customers and carries its customer receivables at their face
amounts, less an allowance for doubtful accounts. Accounts receivable include amounts billed to customers under the
terms and provisions of the contracts. Most billings are determined based on contractual terms. Included in accounts
receivable are balances billed to customers pursuant to retainage provisions in certain contracts that are due upon
completion of the contract and acceptance by the customer, or earlier as provided by the contract. As is common
practice in the industry, the Company classifies all accounts receivable, including retainage, as current assets. The
contracting cycle for certain long-term contracts may extend beyond one year, and accordingly, collection of retainage
on those contracts may extend beyond one year. Accounts receivable include amounts billed to customers under
retention provisions in construction contracts. Such provisions are standard in the Company’s industry and usually
allow for a small portion of progress billings or the contract price, typically 10%, to be withheld by the customer until
after the Company has completed work on the project. Based on the Company’s experience with similar contracts in
recent years, billings for such retention balances at each balance sheet date are finalized and collected after project
completion. Generally, unbilled amounts will be billed and collected within one year. The Company determined that
there are no material amounts due past one year and no material amounts billed but not collected within one year.
The Company grants trade credit, on a non-collateralized basis, to its customers and is subject to potential
credit risk related to changes in business and overall economic activity. The Company analyzes specific accounts
receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in
customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a
customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful
accounts.
Revenue Recognition
Revenue under construction contracts are accounted for under the percentage-of-completion method of
accounting and time and materials basis. Under the percentage-of-completion method, the Company estimates profit
as the difference between total estimated revenue and total estimated cost of a contract and recognizes that profit over
the contract term based on costs incurred. Contract costs include all direct materials, labor and subcontracted costs and
those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, depreciation and the
operational costs of capital equipment.
The estimation process for revenue recognized under the percentage-of-completion method is based on the
professional knowledge and experience of the Company’s project managers, engineers and financial professionals.
10
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Management reviews estimates of contract revenue and costs on an ongoing basis. Changes in job performance, job
conditions and management’s assessment of expected contract settlements are factors that influence estimates of total
contract value and total costs to complete those contracts and, therefore, the Company’s profit recognition. Changes in
these factors may result in revisions to costs and income, and their effects are recognized in the period in which the
revisions are determined, which could materially affect the Company’s results of operations in the period in which
such changes are recognized.
Revenue derived from projects billed on a fixed-price basis totaled 97.8%, 90.4% and 97.6% of consolidated
revenue from continuing operations for the years ended December 31, 2017, 2016 and 2015, respectively; and 99.9%
and 96.0% of consolidated revenue from discontinued operations for the year ended December 31, 2016 and 2015,
respectively. Revenue and related costs for construction contracts billed on a time and materials basis are recognized
as the services are rendered. Revenue derived from projects billed on a time and materials basis totaled 2.2%, 9.6%
and 2.4% of consolidated revenue from continuing operations for the years ended December 31, 2017, 2016 and 2015
respectively; and 0.1% and 4.0% of consolidated revenue from discontinued operations for the year ended December
31, 2016 and 2015, respectively.
Provisions for losses on uncompleted contracts are made in the period in which such losses are determined to
be probable and the amount can be reasonably estimated. The Company may incur costs subject to change orders,
whether approved or unapproved by the customer, and/or claims related to certain contracts. Management determines
the probability that such costs will be recovered based upon engineering studies and legal opinions, past practices with
the customer, specific discussions, correspondence or preliminary negotiations with the customer. The Company treats
such costs as a cost of contract performance in the period incurred if it is not probable that the costs will be recovered
and/or recognizes revenue up to the amount of the related cost if it is probable that the contract price will be adjusted
and can be reliably estimated.
As of December 31, 2017, 2016 and 2015, the Company had revenue related to unapproved change orders
totaled approximately $33,479, $17,813 and 9,734 respectively. The Company actively engages in substantive
meetings with its customers to complete the final approval process, and generally expects these processes to be
completed within one year. The amounts ultimately realized upon final acceptance by its customers could be higher or
lower than such estimated amounts.
Changes in job performance, job conditions, estimated profitability, and final contract settlements that result
in revisions to costs and income are recognized in the accounting period when these matters are known. Claims for
additional contract revenue are recognized when realization of the claim is assured, and the amount can reasonably be
determined. When realization is probable, but the amount cannot be reasonably determined, revenue is recognized to
the extent of cost incurred.
Classification of Construction Contract-Related Assets and Liabilities
Contract costs include all direct subcontract, material, and labor costs, and those indirect costs related to
contract performance, such as indirect labor, supplies, tools, insurance, repairs, maintenance, communications, and use
of Company-owned equipment. Contract revenues are earned and matched with related costs as incurred.
Costs and estimated earnings in excess of billings on uncompleted contracts are presented as a current asset
in the accompanying consolidated balance sheets, and billings in excess of costs and estimated earnings on
uncompleted contracts are presented as a current liability in the accompanying consolidated balance sheets. The
Company’s contracts vary in duration, with the duration of some larger contracts exceeding one year. Consistent with
industry practices, the Company includes the amounts realizable and payable under contracts, which may extend
beyond one year, in current assets and current liabilities. These balances are generally settled within one year.
Self-Insurance
The Company is self-insured up to the amount of its deductible for its medical and workers’ compensation
insurance policies. For the years ended December 31, 2017, 2016 and 2015, the Company maintains insurance policies
subject to per claim deductibles of $500, $500 and $500, respectively, for its workers’ compensation policy. Liabilities
under these insurance programs are accrued based upon management’s estimates of the ultimate liability for claims
reported and an estimate of claims incurred but not reported with assistance from third-party actuaries. The
Company’s liability for employee group medical claims is based on analysis of historical claims experience and
11
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
specific knowledge of actual losses that have occurred. The Company is also required to post letters of credit and
provide cash collateral to certain of its insurance carriers and to obtain surety bonds in certain states. Cash collateral
deposited with insurance carriers is included in accounts payable and accrued liabilities in the Consolidated Balance
Sheets.
The Company’s self-insurance liability is reflected in the Consolidated Balance Sheets within accounts
payable and accrued liabilities. The determination of such claims and expenses and the appropriateness of the related
liability is reviewed and updated quarterly, however, these insurance liabilities are difficult to assess and estimate due
to unknown factors, including the severity of an injury, the determination of the Company’s liability in proportion to
other parties and the number of incidents not reported. Accruals are based upon known facts and historical trends.
Although management believes its accruals are adequate, a change in experience or actuarial assumptions could
materially affect the Company’s results of operations in a particular period.
Company-Owned Life Insurance
The Company has life insurance policies on certain key executives. Company-Owned life insurance is
recorded at its cash surrender value or the amount that can be realized.
Leases
The Company leases certain real estate, construction equipment and office equipment. The terms and
conditions of leases (such as renewal or purchase options and escalation clauses), if material, are reviewed at inception
to determine the classification (operating or capital) of the lease. Nonperformance-related default covenants, cross-
default provisions, subjective default provisions and material adverse change clauses contained in material lease
agreements, if any, are also evaluated to determine whether those clauses affect lease classification in accordance with
Accounting Standards Codification (“ASC”) Topic 840-10-25.
Long-Lived Assets
The Company’s long-lived assets consist primarily of property, plant and equipment and finite-lived
intangible assets. Property and equipment are recorded at cost, or if acquired in a business combination, at the
acquisition date fair value. Depreciation and amortization of long-lived assets is computed using the straight-line
method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the
shorter of the term of the lease or the estimated useful lives of the improvements. Property and equipment under
capital leases are depreciated over their estimated useful lives. Expenditures for repairs and maintenance are charged
to expense as incurred. Expenditures for betterments and major improvements are capitalized and depreciated over the
remaining useful lives of the assets. The carrying amounts of assets sold or retired and the related accumulated
depreciation are eliminated in the year of disposal, with resulting gains or losses included in other income or expense.
When the Company identifies assets to be sold, those assets are valued based on their estimated fair value less costs to
sell, classified as held-for-sale and depreciation is no longer recorded. Estimated losses on disposal are included within
other expense. Acquired intangible assets that have finite lives are amortized over their useful lives, which are
generally based on contractual or legal rights. Finite-lived intangible assets are amortized in a manner consistent with
the pattern in which the related benefits are expected to be consumed.
The assets' estimated lives used in computing depreciation for property, plant and equipment are as follows:
Buildings and leasehold improvements
Construction equipment
Furniture, fixtures and equipment
Vehicles
2 to 39 years
3 to 15 years
3 to 7 years
3 to 5 years
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. If an evaluation is required, the estimated future undiscounted
cash flows associated with the asset are compared with the asset’s carrying amount to determine if there has been an
impairment, which is calculated as the difference between the fair value of an asset and its carrying value. Estimates of
future undiscounted cash flows are based on expected growth rates for the business, anticipated future economic
conditions and estimates of residual values. Fair values take into consideration management’s estimates of risk-
adjusted discount rates, which are believed to be consistent with assumptions that marketplace participants would use
12
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
in their estimates of fair value. As of December 31, 2017, 2016 and 2015, management believes that no impairment
existed.
Goodwill
Goodwill represents the excess purchase price paid over the fair value of acquired intangible and tangible
assets. The Company applies the provisions of ASC Topic 350, Intangibles - Goodwill and Other (ASC 350).
Accordingly, goodwill is not amortized but rather is assessed at least annually for impairment and tested for
impairment more frequently if events and circumstances indicate that the asset might be impaired. The Company may
assess its goodwill for impairment initially using a qualitative approach (“step zero”) to determine whether conditions
exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If
management concludes, based on its assessment of relevant events, facts and circumstances, that it is more likely than
not that a reporting unit’s carrying value is greater than its fair value, then a quantitative analysis will be performed to
determine if there is any impairment. The Company may also elect to initially perform a quantitative analysis instead
of starting with step zero. The quantitative assessment for goodwill is a two-step process. “Step one” requires
comparing the carrying value of a reporting unit, including goodwill, to its fair value using the income approach. The
income approach uses a discounted cash flow model, which involves significant estimates and assumptions, including
preparation of revenue and profitability growth forecasts, selection of a discount rate, and selection of a terminal year
multiple. If the fair value of the respective reporting unit exceeds its carrying amount, goodwill is not considered to be
impaired and no further testing is required. If the carrying amount of a reporting unit exceeds its fair value, the second
step of the goodwill impairment test is to measure the amount of impairment loss, if any. “Step two” compares the
implied fair value of goodwill to the carrying amount of goodwill. The implied fair value of goodwill is determined by
a hypothetical purchase price allocation using the reporting unit’s fair value as the purchase price. If the carrying
amount of goodwill exceeds the implied fair value, an impairment charge is recorded to write down goodwill to its
implied fair value and is recorded as a selling, general and administrative expense within the Company’s Consolidated
Statements of Operations. As of December 31, 2017, 2016 and 2015 management performed a qualitative assessment
for its goodwill and indefinite-lived intangible assets by examining relevant events and circumstances that could have
an effect on their fair values, such as: macroeconomic conditions, industry and market conditions, entity-specific
events, financial performance and other relevant factors or events that could affect earnings and cash flows. Based on
evaluation of qualitative assessment there was no change in goodwill during the years ended December 31, 2017, 2016
and 2015.
Equity Appreciation Plan
IEA Parent has an equity appreciation plan which grants profit units of IEA Parent to certain key employees
and members of the board of directors of the Company (the “Board”) for their services on the Board. The Company
recognizes compensation expense for its profit units in accordance with the provisions of ASC 718, Stock
Compensation, which requires the recognition of expense related to the fair value of the profit units in the Company’s
Consolidated Statements of Operations.
The Company estimates the grant date fair value of each profit unit at issuance. For profit units subject to
service based-vesting conditions, the Company recognizes compensation expense equal to the grant date fair value on
a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are accounted for
when incurred. For profit units subject to both performance and service-based vesting conditions, the Company
recognizes stock-based compensation expense using the straight-line recognition method when it is probable that the
performance condition will be achieved.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary differences are expected to be
recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets
that it determines will not be realizable in the future.
Pursuant to ASC 740-10-45-15, management considered the implications of the rate change, 100%
immediate expensing, toll charge, Alternative Minimum Tax "AMT" credit change, and state impacts on the provision
13
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
for income taxes calculated for the year ended December 31, 2017. The effects of these changes in tax law is $316,
which the Company recognized and reflected in the provision for income taxes for the year ended December 31, 2017.
Other provisions within the Tax Cuts and Jobs Act of 2017 were deemed to apply prospectively and do not impact the
provision for income taxes for the year ended December 31, 2017.
The Company is a limited liability company but elected to be taxed as a corporation and is subject to United
States federal income tax, various state income taxes, Canadian federal taxes, and provincial taxes. The Company
recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if
such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the
technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate resolution.
Litigation and Contingencies
Accruals for litigation and contingencies are reflected in the consolidated financial statements based on
management’s assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute
resolution proceedings and/or the expected resolution of contingencies. Liabilities for estimated losses are accrued if
the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably
estimated. Significant judgment is required in both the determination of probability of loss and the determination as to
whether the amount is reasonably estimable. Accruals are based only on information available at the time of the
assessment due to the uncertain nature of such matters. As additional information becomes available, management
reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which
could materially affect the Company’s results of operations in a given period.
Fair Value of Financial Instruments
The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for
measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an
exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s
principal or most advantageous market in an orderly transaction between market participants on the measurement date.
The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions
that market participants would use in pricing the asset or liability and are developed based on market data obtained
from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on
market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or
liability, and are to be developed based on the best information available in the circumstances.
The Company’s financial instruments include cash and cash equivalents, accounts receivable, deferred
compensation plan assets and liabilities, accounts payable and other current liabilities, certain intangible assets and
liabilities, and debt obligations.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based
on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy
are described below:
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to
the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets
or liabilities.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and
liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates
and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and
valuation techniques when little or no market data exists for the assets or liabilities.
14
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair values of financial instruments are estimated using public market prices, quotes from financial
institutions and other available information. Due to their short-term maturity, the carrying amounts of cash and cash
equivalents, accounts receivable, accounts payable and other current liabilities approximate their fair values.
Management believes that as of December 31, 2017 and 2016, carrying values of deferred compensation plan
liabilities of $5,030 and $4,086, respectively, approximate their fair values. Additionally, management believes that
the outstanding balance on the line of credit as of December 31, 2017 of $33,674 approximates its fair value.
Segments
Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker, or decision-making group, in making
decisions on how to allocate resources and assess performance. The Company’s chief operating decision makers are
the chief executive officer and chief financial officer. The Company’s operations are reported as a single segment in
accordance with GAAP, as they are similar in nature in regard to services, types of customer, and regulatory
environment.
Discontinued Operations
The Company accounts for business dispositions, businesses held for sale and abandonments in accordance
with ASC 205-20, Discontinued Operations (“ASC 205-20”). ASC 205-20 requires the results of operations of
business dispositions to be segregated from continuing operations and reflected as discontinued operations in current
and prior periods. See Note 17, Discontinued Operations for further information.
Interest Allocation
Interest expense that is specifically identifiable to debt related to supporting Canadian operations qualifies as
discontinued operations, and is allocated to interest expense from discontinued operations in our consolidated financial
statements. The Canadian solar operations of H.B. White were abandoned in 2016 (see Note 17, Discontinued
Operations for further information). The amount of debt related to supporting Canadian operations is identified by
determining the sum of (1) the lump sum cash transfers from the parent entity to H.B. White to fund working capital;
and, (2) the Canadian expenses covered by the parent entity. The sum of these compared to the total amount of debt
outstanding at the time is used to determine the percentage of total interest expense allocable to Canadian operations.
Restructuring Expense
In connection with the abandonment of the Canadian solar operations of H.B. White, the Company incurred
restructuring costs, which were recorded as restructuring expenses in the accompanying Consolidated Statement of
Operations and Comprehensive Loss. The costs related to the restructuring expenses represent severance expenses for
employees who were terminated as a result of the abandonment of the Canadian solar operations of H.B. White.
New Accounting Pronouncements
The effective dates shown in the following pronouncements are private company effective dates, based on the
Company’s current status as a private company.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. To
simplify presentation in the balance sheet, the new guidance requires that all deferred tax assets and liabilities, along
with any related valuation allowance, be classified as noncurrent. As a result, each jurisdiction within the reporting
group will now only have one net noncurrent deferred tax asset or liability. The guidance does not change the existing
requirement that only permits offsetting within a jurisdiction, and companies are still prohibited from offsetting
deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The guidance may be
applied either prospectively or retrospectively by reclassifying the comparative balance sheets. For entities, other than
public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim
periods within fiscal years beginning after December 15, 2018, with early adoption permitted. This ASU, which the
Company adopted prospectively as of January 1, 2017, did not have a material effect on the Company’s consolidated
financial statements.
15
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The core
principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods and services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date. The amendments in this update deferred the effective date for
implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after
December 15, 2018. Early application is permitted only as of annual reporting periods beginning after December 15,
2016 including interim reporting periods within that period. The Company is currently evaluating the impact of the
new accounting standard and its impact on the consolidated financial statements.
From March 2016 through December 2016, the FASB issued ASU 2016-08, Revenue from Contracts with
Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU 2016-
11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because
of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF
Meeting, ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606):Narrow-Scope Improvements and
Practical Expedients, ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from
Contracts with Customers and ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with
Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the
Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and
Observer Comments. These amendments are intended to improve and clarify the implementation guidance of Topic
606. The effective date and transition requirements for the amendments are the same as the effective date and
transition requirements of ASU No. 2014-09 and ASU No. 2015-14.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which is effective
for annual reporting periods beginning after December 15, 2019. Under ASU 2016-02, lessees will be required to
recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease
liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis,
and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified
asset for the lease term. The guidance is effective for the annual period beginning after December 15, 2019. The
Company is currently evaluating the impact of the new accounting standard and its impact on the consolidated
financial statements.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment
Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions
including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as
classification of related amounts within the statement of cash flows. The amendments are effective for annual periods
beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
Early adoption is permitted for any interim or annual period. The Company is currently evaluating the impact of the
new accounting standard and its impact on the consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other, Simplifying the
Accounting for Goodwill Impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a
hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s
carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment
guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment
to determine if a quantitative impairment test is necessary. This new guidance will be applied prospectively, and is
effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early
adoption is permitted for any impairment tests performed after January 1, 2017. The Company is currently evaluating
the impact of the new accounting standard and its impact on the consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of
Certain Cash Receipts and Cash Payments. ASU 2016-15 eliminates the diversity in practice related to the
classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a
zero-coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from
insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a
financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements
to allocate certain components of these cash receipts and payments among operating, investing and financing
16
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
activities. The guidance is effective for the Company beginning after December 15, 2017, although early adoption is
permitted. The Company is currently evaluating the impact of the new accounting standard and its impact on the
consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a
Business, which amends the current definition of a business. Under ASU 2017-01, to be considered a business, an
acquisition would have to include an input and a substantive process that together significantly contributes to the
ability to create outputs. ASU 2017-01 further states that when substantially all of the fair value of gross assets
acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a
business. The new guidance also narrows the definition of the term "outputs" to be consistent with how it is described
in Topic 606, Revenue from Contracts with Customers. The changes to the definition of a business will likely result in
more acquisitions being accounted for as asset acquisitions. The guidance is effective for the annual period beginning
after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the new
accounting standard and its impact on the consolidated financial statements.
Management has evaluated other recently issued accounting pronouncements and does not believe that they
will have a significant impact on the combined financial statements and related disclosures.
Note 3. Accounts Receivable, net of allowance
The following table provides details of accounts receivable, net of allowance, as of the dates indicated (in
thousands):
Contract receivables
Contract retainage
Accounts receivable, gross
Less: allowance for doubtful accounts
Accounts receivable, net
December 31,
2017
2016
$
$
46,696
16,501
61,197
(216)
60,981
$
$
41,575
28,537
70,112
(135)
69,977
Activity in the allowance for doubtful accounts for the periods indicated is as follows (in thousands):
Allowance for doubtful accounts at beginning of year
Less: (reduction in) provision for allowances
Less: write-offs, net of recoveries
Allowance for doubtful accounts at end of year
$
$
2017
Years ended December 31,
$
135
81
–
216
$
2016
12,077
(10,534)
(1,408)
$
135
$
2015
11,812
265
–
12,077
See Note 11 for a description of the change in the provision for allowances for the year ended December 31,
2016.
Note 4. Contracts in Progress
Contracts in progress were as follows (in thousands):
Costs on contracts in progress
Estimated earnings on contracts in progress
$
December 31,
2017
861,050
131,997
993,047
$
2016
940,359
107,144
1,047,503
17
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Less: billings on contracts in progress
$
(981,832)
11,215
$
(1,061,541)
(14,038)
The above amounts have been included in the accompanying Consolidated Balance Sheets under the
following captions (in thousands):
Costs and estimated earnings in excess of billings on
uncompleted contracts
Billings in excess of costs and earnings on uncompleted
contracts
December 31,
2017
2016
$
$
18,613
(7,398)
11,215
$
$
14,143
(28,181)
(14,038)
The Company has asserted claims and may have unapproved change orders on certain construction projects. These
occur typically as a result of scope changes and project delays. Management evaluates these items and estimates the
recoverable amounts if this occurs. If significant, these recoverability estimates are evaluated to determine the net
realizable value. If additional amounts are recovered, additional contract revenue would be recognized. The current
estimated net realizable value on such items as recorded in costs and estimated earnings in excess of billings on
uncompleted contracts in the consolidated balance sheets is listed below at December 31 (in thousands):
Gross amount of unresolved change orders and claims
Valuation allowance
Net amount of unresolved change orders and claims
$
$
December 31,
2017
33,479
-
33,479
$
$
2016
17,813
-
17,813
$
$
2015
9,734
-
9,734
The Company anticipates that the majority of such amounts will be earned as revenue within one year.
Note 5. Property, Plant and Equipment, net
Property, plant and equipment, net consisted of the following (in thousands):
Land
Buildings and leasehold improvements
Construction equipment
Office equipment, furniture and fixtures
Vehicles
Accumulated depreciation
Property, plant and equipment, net
December 31,
2017
2016
$
$
–
416
46,404
1,451
404
48,675
(17,770)
30,905
$
$
250
7,177
28,863
1,451
283
38,024
(17,484)
20,540
Depreciation expense of property, plant and equipment for the years ended December 31, 2017, 2016 and
2015 was $4,998, $3,323 and $3,671; of which $0, $10 and $345, respectively, are a component of discontinued
operations. In October 2017, the Company distributed its land and building to the Parent at its total net book value at
the date of distribution of $4,734, through an equity distribution. At the date of distribution, the land and building had
historical cost values of $250 and $7,024, respectively, and the building had accumulated depreciation of $2,540.
See further discussion in Note 11.
18
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Goodwill and Intangible Assets
Changes in goodwill during the years ended December 31, 2017 and 2016 were as follows (in thousands):
January 1, 2016
Acquisitions and other adjustments
December 31, 2016
Acquisitions and other adjustments
December 31, 2017
Goodwill
3,020
–
3,020
–
3,020
$
$
Intangible assets consisted of the following at December 31 (in thousands):
2017
2016
Intangible
assets
Customer
relationship
Trade-
name
Non-
compete
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
1,220
$
(1,220)
$
820
90
(751)
(90)
$
2,130
$
(2,061)
$
–
69
–
69
$
1,220
$
(1,220)
$
820
90
(631)
(90)
$
2,130
$
(1,941)
$
–
189
-
189
Remaining
Weighted
Average
Amortization
Period in
Years
0.58
Amortization expense associated with intangible assets for the years ended December 31, 2017, 2016 and
2015 totaled $120, $120 and $120. Intangible asset amortization expense for the years subsequent to December 31,
2017 is expected to be approximately $69 in 2018.
Note 7. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following (in thousands):
Accounts payable – trade
Accrued project costs
Accrued compensation and related expenses
Other accrued expenses
Note 8. Debt
Line of Credit Agreement
December 31,
2017
2016
$
$
23,880
27,097
8,855
10,198
70,030
$
$
52,199
24,300
13,349
7,396
97,244
IEA Parent and the Company, collectively, are co-borrowers on a credit agreement with a bank, which
includes an aggregate limit of borrowings on the line of credit plus aggregate undrawn amounts of all issued and
outstanding letters of credit issued. The Line of Credit Agreement was amended in September 2015 with a maturity
date of December 31, 2017. Beginning January 1, 2016, maximum availability on the line is reduced as follows:
19
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$75,000 from January 1, 2016 through March 31, 2016, $65,000 from April 1, 2016 through December 31, 2016 and
$55,000 from January 1, 2017 through December 31, 2017. On January 20, 2017, the credit agreement was amended
to extend the maturity date to December 31, 2018 and allows for aggregate revolver borrowings up to $55,000
including letters of credit up to $15,000 through December 31, 2018.
The Company had outstanding borrowings of $33,674 and $0, and outstanding letters of credit of $5,934 and
$3,056 as of December 31, 2017 and 2016, respectively. Interest on outstanding borrowings under the line of credit is
based on the greater of LIBOR plus 2.5% or the prime rate. Interest was calculated at the prime rate at December 31,
2017 and 2016, and was 4.5% and 3.75% (as amended on January 20, 2017), respectively. Interest on the outstanding
letters of credit is 2% per annum. The credit agreement also has an unused commitment fee of 0.35% per annum.
Interest expense under this agreement for the years ended December 31, 2017, 2016 and 2015 totaled $548, $904 and
$2,006, respectively.
The credit agreement is fully guaranteed by Oaktree Power Opportunities Fund III, LP. and Oaktree Power
Opportunities Fund III (Parallel), LP, the two funds that have majority ownership in IEA Parent, and is collateralized
by substantially all of the assets of the Company. The Company was in compliance with all required financial
covenants as of December 31, 2017.
Subordinated Debt Second Lien Term Loan Agreement
During February 2015, IEA Parent and the Company collectively entered into a Second Lien Term Loan
agreement ("Subordinated Debt") with the two funds that have majority ownership in IEA Parent, Oaktree Power
Opportunities Fund III, LP. and Oaktree Power Opportunities Fund III (Parallel), LP. that provides for the ability to
borrow up to $50,000. The Subordinated Debt had an original maturity date of June 30, 2016, which was subsequently
extended to February 12, 2020. Along with the extension, Oaktree was subsequently issued additional common units
which effectively made it 99% owner of IEA Parent. The value of the additional common units was determined to be
de minimis. The Subordinated Debt accrued interest at a fixed rate of 8% per annum.
On December 31, 2016, the outstanding principal and accrued interest of $23,287 of the Subordinated Debt
was converted into 23,286,846.43 Preferred Units of IEA Parent. IEA Parent’s Preferred Units are non-voting and
have the right to receive interest in an amount equal to the aggregate amount that would have been due under the
Subordinated Debt Second Lien Term Loan Agreement if it had remained outstanding (including all interest accrued).
Pursuant to the Subordinated Debt Contribution Agreement, IEA Parent contributed to IEA Services the existing debt
interests as a contribution to capital. Accordingly, no amounts are currently outstanding, and the Subordinated Debt
agreement was terminated on December 31, 2016.
20
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Concentrations
The Company had the following approximate revenue and accounts receivable concentrations, net of
allowances, for the years ended and as of December 31, 2017 and 2016:
2017
2016
2015
Revenue
%
Accounts
Receivable
%
Revenue
%
Accounts
Receivable
%
Revenue
%
Accounts
Receivable
%
Trishe Wind Ohio, LLC
Thunder Ranch Wind Project,
LLC
EDF Renewable Development,
Inc.
Bruenning's Breeze Wind Farm,
LLC
Twin Forks Wind Farm, LLC
Cimarron Bend Wind Project,
LLC
Deerfield Wind Energy, LLC
Osborn Wind Energy, LLC
Grant Plains Wind, LLC
Canadian Solar Solutions, INC
Cameron Wind, LLC
Colbeck’s Corner, LLC
Northland Power
* Amount less than 10%
*
21%
14%
11%
11%
*
*
*
*
*
*
*
*
Note 10. Equity Appreciation Plan
17%
15%
11%
*
*
*
*
*
*
*
*
*
*
*
*
11%
*
*
17%
*
11%
*
*
*
*
*
*
*
*
*
*
36%
12%
13%
*
*
*
*
*
*
*
*
*
*
*
*
*
12%
43%
13%
*
*
*
*
*
*
*
*
*
*
*
*
*
37%
54%
Infrastructure and Energy Alternatives, LLC’s Profits Interest Unit Incentive Plan (the “Plan”) was created in
2011 and is designed to promote the long-term financial interests and growth by attracting and retaining officers, key
employees, directors and other employees and consultants by aligning the participants interests by providing them
with equity-based awards in the form of Profits Units (the “Units”). Profits Units means the Class A Profits Units,
Class B Profits Units and any future class of profits units designated by the Board. The Profits Units issued are
intended to benefit from appreciation in the fair value of the aggregate members’ equity in IEA Parent over and above
such respective Baseline Value. Profits Units issued at the same Baseline Value shall be treat as one subclass of Profits
Units. Profits Units shall not be entitled to vote on any matter.
The aggregate number of Profits Units that may be issued under the Plan shall not exceed 10% of the
aggregate number of units and other equity interest of IEA Parent and the aggregate number of Class B Profits Units
that may be issued under the Plan shall not exceed 80,723,420.95, which represents 25.5% of the outstanding
Common Units and Class B Profit Units assuming issuance of the authorized Class B Profits Units in full. The
issuance of Profits Units or the payment of cash in consideration of the cancellation or termination of a Profit Unit
shall reduce the total number of Profit Units available under the Plan, as applicable. If the participant’s employment
terminates for any reason, then the unvested percentage of profits units as of the termination date shall be canceled and
immediately be forfeited to the Company for no consideration payable to the participant. In addition, if the
participant’s employment terminated for cause, then the vested percentage of Profits Units as of the termination date
shall be canceled and immediately be forfeited to the Company for no consideration payable to the participant.
21
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company recognizes compensation cost in its Consolidated Statements of Operations for Units granted
by IEA Parent to its officers, key employees, or directors under the Plan. As Infrastructure and Energy Alternatives,
LLC is the Parent of the Company, and no substantive services are provided to IEA Parent by employees of the
Company who received the Units, the Company accounts for these awards accordingly.
The Company expenses Profits Units compensation over the requisite service period based on the estimated
grant-date fair value of the awards. Profits Units compensation expense is recognized as a component of selling,
general, and administrative expense. Share based awards with graded-vesting schedules are recognized on a straight-
line basis over the requisite service period for each separately vesting portion of the award. The Company estimates
the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in
calculating the fair value of stock-based awards represent management’s best estimates and involve inherent
uncertainties and the application of management’s judgment.
The table below summarizes the Time and Performance Profit Units activities for the years ended December
31, 2017, 2016 and 2015.
Number of Units
Time Units
Performance
Units
Class A
Class A-1
Class A-2
Class B
Class A
Total
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term
(months)
Outstanding as of
January 1, 2015
848,787
75,149
100,298
Granted
-
–
–
Forfeited/Cancelled
266,162
28,333
50,000
–
582,625
109,967
12,574
–
680,018
–
–
–
680,018
–
46,816
–
–
–
46,816
–
–
–
46,816
–
50,298
–
–
–
50,298
–
–
–
50,298
–
-
–
–
-
84,463,293
–
–
84,463,293
–
–
–
84,463,293
680,018
46,292
37,724
36,952,691
680,018
46,816
50,298
52,789,558
Exercised
Outstanding as of
December 31, 2015
Granted
Forfeited/Cancelled
Exercised
Outstanding as of
December 31, 2016
Granted
Forfeited/Cancelled
Exercised
Outstanding as of
December 31, 2017
Vested Profit Units at
December 31, 2016
Vested Profit Units at
December 31, 2017
71,675
1,095,909
$ 2.53
13.32
–
-
50,299
394,794
–
21,376
–
21,376
–
-
–
–
–
–
–
–
–
701,115
84,573,260
33,950
–
85,240,425
–
–
–
$ 2,32
0.00
9.56
$ 0.02
35.68
85,240,425
$ 0.02
23.78
37,716,725
$ 0.04
53,566,690
$ 0.04
35.29
23.65
As of December 31, 2017, 2016 and 2015, the Company had unrecognized compensation expense of $41,
$94 and $110, respectively.
22
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 11. Commitments and Contingencies
Operating Leases
The Company leases real estate, vehicles, office equipment, and certain construction equipment from
unrelated parties under non-cancelable leases. Additionally, in October 2017, the Company signed a lease with a
subsidiary of its IEA Parent to lease an office building and land. Lease terms range from month-to-month to terms
expiring through 2038. The table below shows the future minimum lease commitments under non-cancelable
operating leases (in thousands):
Years ending December 31,
2018
2019
2020
2021
2022 and thereafter
Operating Leases
$
1,683
1,244
866
832
11,653
16,277
$
Rent expense relating to these agreements totaled approximately $1,568, $1,234 and $885 for the years ended
December 31, 2017, 2016 and 2015, respectively.
Capital Leases
The Company signed various capital leases in 2016 and 2017 for equipment. The Company has obligations,
exclusive of associated interest, under various capital leases for equipment totaling $20,590 and $5,330 at December
31, 2017 and 2016, respectively. Gross property under this capitalized lease agreement at December 31, 2017 and
2016 totaled $27,005 and $7,501, respectively, less accumulated depreciation of $2,817 and $248, respectively, for net
balances of $24,188 and $7,253, respectively. Amortization of assets held under the capital lease is included in cost of
revenue on the Consolidated Statements of Operations.
The future minimum payments of capital lease obligations are as follows (in thousands):
Years ending December 31,
2018
2019
2020
2021
Less: Amount representing interest
Present value of minimum lease payments
Less: Current portion
Capital lease obligation, long term
Legal Proceedings
NPI Litigation/CCAA Resolution
Capital Leases
6,874
6,874
7,116
2,825
23,689
3,099
20,590
4,691
15,899
$
$
H.B. White had three contracts for construction of alternative energy projects with Northland Power, Inc. and
certain affiliates (“NPI”). H.B. White and NPI had ongoing disputes on one project and, in December 2014, NPI
provided notice that it had terminated the contract. The Company recorded a provision for bad debt of CAD $12,153.
H.B. White disputed this termination. On July 6, 2016, H.B. White entered into agreement with NPI to settle all
disputes and claims between H.B. White and NPI. In conjunction with the settlement, on July 7, 2016, H.B. White
obtained court protection under the Companies’ Creditors Arrangement Act (the “CCAA”), which was approved by
23
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
court order on November 22, 2016. On February 22, 2017, the CCAA plan and process was successfully completed
and all of the claims filed in relation to the dispute and related liens on the projects were released. The matter is now
resolved, and the total effect of the settlement resulted in a net gain to the Company of CAD $4,564 recognized in
November 2016.
Pursuant to the CCAA, IEA or White shall pay NPI, or its designee cash in the aggregate amount of CAD
$1,500 provided that the closing date of a material transaction is on or before December 31, 2017. If the closing date
occurs after December 31, 2017 but on or before December 31, 2018, IEA or White shall pay to NPI CAD $1,000. A
material transaction is defined as a change in control or a public offering of equity securities.
Sterret Crane v. White, and Zurich Insurance v. White
White is a defendant in a lawsuit filed in January 2016 by Sterret Crane for an incident that occurred in 2014
during construction of a wind farm. On October 26, 2017, a trial of the liability suit concluded, resulting in a judgment
against White in the sum of $609. The Company had $609 and $500 accrued on the balance sheet as of December 31,
2017 and 2016, respectively. Subsequently, Sterret filed a motion for an award of actual damages of $659 for pre-
judgement interest and legal fees. White has made demand to Zurich, White’s insurer, for payment of the judgment
amount; however, Zurich has not yet agreed to pay. It does not appear probable that White can successfully appeal the
judgment or recover from Zurich for the judgment amount; however, White has filed an appeal of the verdict. A
mediation occurred on January 11, 2018 and February 2, 2018 to discuss potential settlement of the liability claim
without further appeal or litigation, but was unsuccessful. Mediation between the Companies is ongoing.
In addition to the foregoing, in the ordinary course of business, the Company is involved in ordinary, routine
legal proceedings. The Company believes the ultimate resolution of such matters will not have a material adverse
effect on the results of operations, cash flows or the financial position of the Company.
Deferred Compensation
The Company has two deferred compensation plans. The first plan is a supplemental executive retirement
plan established in 1993 that covers four specific employees or former employees, whose deferred compensation was
determined by the number of service years. Payment of the benefits is to be made for 20 years after employment ends.
The two former employees are currently receiving benefits, two participants are still employees of the company. The
present value of the liability is estimated using the early retirement method. Of the two current employees, one has
reached the full benefit level, the other will reach full benefit in 2018. Annual payments under this plan for 2018 will
be $93. Maximum aggregate payments per year if all participants were retired would be $255. As of December 31,
2017, and 2016, the Company has a long-term liability of $3,356 and $3,124, respectively, for the supplemental
executive retirement plan related to four specific employees or former employees.
The Company offers a non-qualified deferred compensation plan which is made up of an executive excess
plan and an incentive bonus plan. This plan was designed and implemented to enhance employee savings and
retirement accumulation on a tax-advantaged basis, beyond the limits of traditional qualified retirement plans. This
plan allows employees to: (1) defer annual compensation from multiple sources; (2) create wealth through tax-
deferred investments; (3) save and invest on a pretax basis to meet accumulation and retirement planning needs; (4)
utilize a diverse choice of investment options to maximize returns. The Executive Excess Plan is for employees in the
salary grade 15 or higher and awards typically vest over 3 years but can vary. Awards are expensed as vested. The
Incentive Bonus Plan includes Project Management Incentive Payments (“PMIP”) and incentive payments for those in
salary grade 14 or lower. Some employees can be in both of these plans. PMIP payments are expensed when awarded
as they were earned through the course of the performance of the project they are related to. Other payments are
expensed when vested as they are considered to be earned by retention. Unrecognized compensation expense for the
non-qualified deferred compensation plan at December 31, 2017, 2016 and 2015, is $1,348, $184 and $264,
respectively. As of December 31, 2017, and 2016, the Company has a long-term liability of $1,674 and $962,
respectively, for deferred compensation to certain current and former employees.
Letters of Credit
In the ordinary course of business, the Company is required to post letters of credit in support of performance
under certain contracts. Such letters of credit are generally issued by a bank or similar financial institution. The letter
of credit commits the issuer to pay specified amounts to the holder of the letter of credit under certain conditions. If
24
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
this were to occur, the Company would be required to reimburse the issuer of the letter of credit, which, depending
upon the circumstances, could result in a charge to earnings. As of December 31, 2017, and 2016, the Company is
contingently liable under letters of credit issued under the Company Line of Credit Agreement in the amount of
$5,934 and $3,056, respectively, related to projects.
Note 12. Income Taxes
The Company is a limited liability company but elected to be taxed as a corporation and is subject to United
States federal income tax, various state income taxes, Canadian federal taxes, and provincial taxes. The Company files
a consolidated tax return that includes Renewable, White, IEM, WECI and H.B. White. IMS is a wholly-owned
subsidiary of IEA Parent, for tax purposes as of December 31, 2016, and is taxed as a separate corporation and subject
to United States federal and state income taxes. On May 24, 2017, IMS was contributed into the Company
consolidated group and as of December 31, 2017 is included in the consolidated tax return filed by the Company.
H.B. White is a wholly owned subsidiary of White and is considered a Foreign-Branch Operation under the
U.S. federal income tax system. H.B. White’s income and losses are taxable in Canada and in the Unites States based
on U.S. federal income tax law. Under U.S. federal tax law, Canadian taxes imposed on the branch are considered
foreign taxes of the Company, which may be deducted as a business expense or may be claimed as direct, creditable
foreign taxes of a U.S. corporation. As such, there are no unremitted foreign earnings in the group.
The income before income taxes and the related tax provision benefit are as follows (in thousands):
Income before income taxes
U.S. operations
Non-U.S. operations
Total income before income taxes
Current provision (benefit)
Federal
State
Total current tax provision (benefit)
Deferred provision (benefit)
Federal
State
Total deferred tax provision (benefit)
Years ended December 31,
2016
2017
2015
$
$
29,313
1,075
30,388
$
54,238
–
54,238
(8,590)
–
(8,590)
312
2,099
2,412
11,638
(186)
11,452
1,168
3,307
4,475
(12,776)
(1,912)
(14,688)
(75)
26
(49)
145
10
155
106
Total (benefit) provision for income
$
13,863
$
(10,213)
$
taxes
As disclosed in Note 17, the income tax benefit included in discontinued operations for the years ended
December 31, 2017, 2016 and 2015 is $0, $1,219 and $0, respectively. A substantial portion of the deferred benefit at
December 31, 2016 was a result of the release of the valuation allowance during 2016 offset by the utilization of
$44,144 of Federal NOL’s during the period ended December 31, 2016.
25
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the statutory federal income tax rate to the Company's effective tax rate from Continuing
Operations is as follows:
December 31, 2017 December 31, 2016 December 31, 2015
Federal statutory tax rate
State and local income taxes, net of federal benefit
Permanent items
Change in valuation allowance
Rate change
Other
Effective tax rate
34.00%
3.88%
3.81%
-0.08%
1.04%
2.96%
45.62%
34.00%
3.35%
-0.10%
-57.52%
0.00%
1.44%
-18.83%
34.00%
3.12%
-1.46%
-37.82%
0.00%
0.93%
-1.23%
Significant differences between the years ended December 31, 2017 and 2016 related to state taxes and
absence of the benefit received in 2016 related to the release of the valuation allowance.
Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities
for financial statement purposes and the comparable amounts recorded for income tax purposes. Significant
components of the deferred tax assets (liabilities) at December 31, 2017 and 2016, respectively, are as follows (in
thousands):
December 31,
2017
2016
$
Deferred tax assets:
Allowance for doubtful accounts
Accrued liabilities and deferred compensation
Alternative minimum tax credit carry
forwards
Foreign exchange differences
Net operating loss carry forwards
Goodwill
Other reserves and accruals
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Equipment under capital leases
Intangibles
Other
Total deferred tax liabilities
$
31
1,600
1,043
–
2,532
1,239
–
(4)
6,441
(2,977)
(346)
(17)
(21)
(3,361)
Net deferred tax asset
$
3,080
$
13
5,329
1,575
262
8,633
383
225
(27)
16,393
(1,422)
(333)
(68)
(38)
(1,861)
14,532
26
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred income taxes are classified on the balance sheets as follows at December 31 (in thousands):
Deferred tax assets – current
Deferred tax assets – noncurrent
Net deferred tax asset
December 31,
2017
$ –
3,081
$ 3,081
2016
$ 11,735
2,797
$ 14,532
The Company assesses the realizability of the deferred tax assets at each balance sheet date based on actual
and forecasted operating results in order to determine the proper amount, if any, required for a valuation allowance.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable
income, and tax-planning strategies in making this assessment. As of December 31, 2016, the Company released its
valuation allowance against certain deferred tax assets within the consolidated group. As explained in the analysis
below, it is management’s belief that it is more likely than not that the net deferred tax assets related to the Company
will be utilized prior to expiration. The valuation allowance that remains as of December 31, 2017 relates to the White
Florida state net operating loss.
The change in the valuation allowance was driven by management’s assessment at the end of 2016
that there was sufficient positive evidence and tax-planning strategies to overcome the negative evidence of a three-
year cumulative loss position and to provide a more-likely-than-not conclusion that the Company is able to realize its
net deferred tax assets. As of the end of 2016, the Company had $23 million of net operating losses, which includes $8
million from IMS. The losses at IMS are attributable to insufficient amounts of intercompany revenue recorded to
cover the costs at IEAMS. As explained in the following analysis, the Company looked to the 2016 performance, the
2017 backlog, and considered tax-planning strategies specific to IEAMS to support the release of the valuation
allowances at both entities.
The losses during 2014 and 2015 in Canada were considered an aberration rather than a continuing
condition. The 2014 and 2015 significant operating losses related to discontinued operations in Canada
and were a result of three distinct and separable contracts under dispute. These contracts have now been
terminated and the Canadian operations have been discontinued.
In conjunction with the settlement of the disputed contracts noted above, IEA obtained court protection
in Canada under the Companies’ Creditors Arrangement Act (the ‘‘CCAA’’), as approved by court order
on November 22, 2016. On February 22, 2017, the CCAA plan and process was successfully completed,
and all of the claims filed in relation to the dispute and related liens on the projects were released. This
approved court order removed the risk of the creditors forcing the Company into bankruptcy, which
provides additional positive evidence with respect to the Company’s ability to continue operations.
The cumulative losses include discontinued operations, which relates to operations in Canada. The
continuing U.S. operations, White and Renewable, have been profitable on a historical basis and were
such that the Company could utilize the net operating loss carryforward in approximately two years
(2017 and 2018), which is within the net operating loss carryforward period of twenty years.
The Company built a backlog during 2016 that is expected to generate 2017 book income of $33 million,
along with strong 2016 results. management believes that the aggregation of the above positive evidence
outweighs the negative evidence to meet the ‘‘more-likely-than-not’’ threshold of realizability in relation
to the deferred tax assets of IEA.
The tax-planning strategy specific to IMS was to contribute IMS into the consolidated group of the
Company and, if necessary, liquidate it into a profitable operating subsidiary within IES to utilize the $8
million net operating loss within the expiration period, which is achievable based on the analysis
mentioned above.
27
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2017, the Company is in a three-year cumulative income position and a valuation
allowance assessment on the deferred taxes of the Company is not considered necessary. While IMS is in a three-year
cumulative loss position as of December 31, 2017, management has employed the above strategy of contributing IMS
into the consolidated group and is managing the intercompany revenue in order to utilize the IMS's net operating
losses. As such, it is management's continued belief that it is more likely than not that the net deferred tax assets
related to IMS will be utilized prior to expiration.
As of December 31, 2017, the Company has a federal net operating loss carryover of $5,455 and net
operating loss carryovers in certain state tax jurisdictions of approximately $26,443, which will begin to expire in
2034 and 2024, respectively and may be applied against future taxable income. At December 31, 2017, the Company
had total alternative minimum tax credit carryovers of approximately $1,043, which are refundable starting in 2018.
The Company files income tax returns in U.S. federal, state and certain international jurisdictions. For federal
and certain state income tax purposes, the Company's 2014 through 2016 tax years remain open for examination by
the tax authorities under the normal statute of limitations. For certain international income tax purposes, the
Company’s 2013 through 2016 tax years remain open for examination by the tax authorities under the normal statute
of limitations.
The Company classifies interest expense and penalties related to unrecognized tax benefits as components of
the tax provision for income taxes. Interest and penalties recognized in the Consolidated Income Statement for the
years ended December 31, 2017, 2016 and 2015 were $0, respectively. As of December 31, 2017, and December 31,
2016, the Company has recorded accrued interest and penalties of $0, respectively.
Note 13. Self-Insurance
The Company is insured for workers’ compensation and group health claims. As of December 31, 2017, and
2016, the gross amount accrued for medical insurance claims totaled $350 and $278, respectively. As of December 31,
2017, and 2016, the gross amount accrued for workers’ compensation claims totaled $1,672 and $387, respectively.
For the year ended December 31, 2017, 2016 and 2015, health care expense totaled $1,133, $4,977 and $3,886
respectively, and workers compensation expenses totaled $3,395, $3,177 and $387, respectively.
Note 14. Employee Benefit Plans
The Company participates in numerous multi-employer pension plans ("MEPPs") that provide retirement
benefits to certain union employees in accordance with various collective bargaining agreements (“CBAs”). As of
December 31, 2017, and December 31, 2016, 25% and 25%, respectively, of the Company’s employees are members
of collective bargaining units. As one of many participating employers in these MEPPs, the Company is responsible,
with the other participating employers, for any plan underfunding. Contributions to a particular MEPP are established
by the applicable collective bargaining agreements; however, required contributions may increase based on the funded
status of a MEPP and legal requirements of the Pension Protection Act of 2006, which requires substantially
underfunded MEPPs to implement a funding improvement plan ("FIP") or a rehabilitation plan ("RP") to improve
their funded status. Factors that could impact funded status of a MEPP include investment performance, changes in the
participant demographics, decline in the number of contributing employers, changes in actuarial assumptions, and the
utilization of extended amortization provisions. If a contributing employer stops contributing to a MEPP, the unfunded
obligations of the MEPP may be borne by the remaining contributing employers. Assets contributed to an individual
MEPP are pooled with contributions made by other contributing employers; the pooled assets will be used to provide
benefits to the Company’s employees and the employees of the other contributing employers.
A FIP or RP requires a particular MEPP to adopt measures to correct its underfunding status. These measures
may include, but are not limited to: (a) an increase in the contribution rate as a signatory to the applicable collective
bargaining agreement, (b) a reallocation of the contributions already being made by participating employers for
various benefits to individuals participating in the MEPP and/or (c) a reduction in the benefits to be paid to future
and/or current retirees. In addition, the Pension Protection Act of 2006 requires that a 5% surcharge be levied on
employer contributions for the first year commencing shortly after the date the employer receives notice that the
MEPP is in critical status and a 10% surcharge on each succeeding year until a collective bargaining agreement is in
place with terms and conditions consistent with the RP. The zone status included in the table below is based on
information that that Company received from the plan and is certified by the plan's actuary. Among other factors,
28
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
plans in the red zone are generally less than 65% funded, plans in the yellow zone are greater than 65% and less than
80% funded, and plans in the green zone are at least 80% funded.
The Company could also be obligated to make payments to MEPPs if the Company either ceases to have an
obligation to contribute to the MEPP or significantly reduces its contributions to the MEPP because of a reduction in
the number of employees who are covered by the relevant MEPP for various reasons. Due to uncertainty regarding
future factors that could trigger withdrawal liability, as well as the absence of specific information regarding the
MEPP's current financial situation, the Company is unable to determine (a) the amount and timing of any future
withdrawal liability, if any, and (b) whether participation in these MEPPs could have a material adverse impact on the
Company's financial condition, results of operations, or cash flow.
The nature and diversity of the Company's business may result in volatility of the amount of contributions to
a particular MEPP for any given period. That is because, in any given market, the Company could be working on a
significant project and/or projects, which could result in an increase in its direct labor force and a corresponding
increase in its contributions to the MEPP(s) dictated by the applicable collective bargaining agreement. When the
particular project(s) finishes and is not replaced, the level of direct labor of contributions to a particular MEPP could
also be affected by the terms of the collective bargaining agreement, which could require at a particular time, an
increase in the contribution rate and/or surcharges.
The following tables list the MEPPs the Company considers individually significant in 2017 and 2016 (in
thousands). The Company considers individually significant to be any plan over 5% of its total contributions to all
MEPP plans for that year. For the years ended December 31, 2017 and 2016, they represent 54% and 65%,
respectively and four of 52 and eight of 23, respectively, of total plan contributions. All of the amounts were less than
5% of the Total Plan contributions by employers. This information was obtained from the respective plans' Form 5500
for the most current available filing. These dates may not correspond with the Company's calendar year contributions.
The above noted percentages of contributions are based upon disclosures contained in the plan's Form 5500 filing
("Forms"). Those Forms, among other things, disclose the names of individual participating employers whose annual
contributions account for more than 5% of the aggregate annual amount contributed by all participating employers for
a plan year.
For the year ended December 31, 2017:
Plan
Federal ID#
2017
FIP/RP Status
2017 Contribution
Surcharge
Imposed
Plan Year
36-6052390
Green
No
$
1,646
No
January 2017
37-6052379
15-0614642
Yellow
Implemented
Red
Implemented
839
597
No
December
2016
No
March 2017
June 2018
Expiration
of CBA
April 2019,
March 2018,
May 2018
April 2018
43-6052659
Green
No
384
No
October 2016 April 2017
$
2,946
6,412
For the year ended December 31, 2016:
Plan
Federal ID#
2016
FIP/RP Status
2016 Contribution
Surcharge
Imposed
Plan Year
Expiration
of CBA
38-6056780
Red
Implemented
$
989
No
April 2016 May 2019
Iron Workers
Local Union No
25 Pension Plan
Central Pension
Fund of the IUOE
36-6052390
Green
No
772
No
January 2016 March 2018
29
Central Pension
Fund of the IUOE
& Participating
Employers
Central Laborers’
Pension Fund
Upstate New
York Engineers
Pension Fund
Iron Workers St.
Louis District
Council Pension
Trust
Other funds
& Participating
Employers
Central Pension
Fund of the IUOE
and Participating
Operating
Engineers' local
324 Pension Fund
Mo-Kan Iron
Workers Pension
Fund
Iron Workers
Mid-America
Pension Plan
Midwest
Operating
Engineers
Pension Trust
Fund
Central Laborers’
Pension Fund
Other funds
Central Pension
Fund of the IUOE
& Participating
Employers
Indiana Laborers
Pension Fund
Indiana
Carpenters
Pension Plan
Iron Workers
Laborers Pension
Plan of
Cumberland MA
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
36-6052390
Green
No
496
No
January 2016 March 2018
38-1900637
Yellow
Implemented
675
No
April 2016 May 2018
43-6130595
Green
36-6488227
Green
No
No
619
No
January 2016 March 2017
560
No
December
2015
May 2018
36-6140097
37-6052379
Yellow
Implemented
482
No
March 2016 May 2018
Red
Implemented
408
No
December
2015
April 2017,
April 2018
$
2,427
7,428
For the year ended December 31, 2015:
Plan
Federal ID#
2015
FIP/RP Status
2014 Contribution
Surcharge
Imposed
Plan Year
36-6052390
Green
No
406
No
January 2016
35-6027150
Yellow
Implementation
35-6057648
Green
No
220
164
No
No
52-6067609
Red
RP
146
No
Central Laborers
Pension Fund
Iron Workers 568
Retirement Plan
Operating
Engineers Local
37 Pension Plan
Other funds
37-6052379
Red
Implemented
32-0124306
Green
52-6128064
Red
No
RP
$
No
No
No
126
104
101
596
1,863
Expiration
of CBA
March 2015,
March 2018
May 2015 March 2017
December
2015
March 2016,
May 2017
December
2014
December
2014
December
2014
December
2014
April 2016
April 2015,
April 2018,
April 2017
April 2016
April 2016
The zone status above represents the most recent available information for the respective MEPP, which is
2016 for the plan year ended 2017, 2015 for the plan year ended 2016 year and 2014 for the plan year ended 2015
year.
Note 15. Related Parties
Certain of the Company's debt facilities and other obligations under surety bonds and stand-by letters of
credit are guaranteed by the majority member of IEA Parent. The Company pays a fee for those guarantees based on
the total amount outstanding. The Company expensed $1,535, $2,965 and $4,531 related to these fees during the years
30
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ended December 31, 2017, 2016 and 2015, respectively, of which $0, $625 and $2,570, respectively, is included in
discontinued operations on Consolidated Statements of Operations.
As of December 31, 2017, and 2016, the Company has a long-term liability of $5,030 and $4,086,
respectively, for deferred compensation to certain current and former employees.
The Company has life insurance policies on certain key executives. Company-Owned life insurance is
recorded at its cash surrender value or the amount that can be realized. As of December 31, 2017, and 2016, the
Company has a long-term asset of $4,250 and $2,214, respectively. For the years ended December 31, 2017, 2016 and
2015, the Company recognized increases of $2,036 and $514 and a decrease of $152, respectively, in the cash
surrender value of the policies.
Contribution of IMS to IEA Services
On May 24, 2017, IEA Services and IEA Parent entered into a Contribution Agreement in which IEA Parent
contributed 100% of the issued and outstanding capital stock of IMS to IEA Services. As a result of which IMS
became wholly-owned subsidiary of IEA Services.
Clinton Lease Agreement
On October 20, 2017, IEA Parent enacted a plan to restructure the ownership of its building and land from its
consolidated subsidiary WCI to Clinton RE Holdings, LLC (Cayman) (“Cayman Holdings”), a directly owned
subsidiary of IEA Parent. Refer to Note 11. Commitments and Contingencies for further detail.
Note 16. Restructuring Expenses
In connection with the abandonment of the Canadian solar operations of H.B. White, the Company incurred
restructuring costs, which were recorded as restructuring expenses at December 31, 2015, in the Consolidated
Statements of Operations. The costs related to the restructuring expenses represented severance expense for employees
who were terminated as a result of the abandonment of the Canadian solar operations of H.B. White. Additional
disclosures regarding these discontinued operations and the related costs are provided in Note 17. The balance of the
restructuring accrual and the related restructuring activity as of and for the years ending December 31, 2017 and 2016
was as follows:
Balance at December 31, 2014
2015 Restructuring charges
2015 Payments
Balance at December 31, 2015
2016 Payments
Balance at December 31, 2016
2017 Payments
Balance at December 31, 2017
Note 17. Discontinued Operations
Employee
Severance
$ 1,600
1,528
(2,088)
$ 1,040
(365)
675
(675)
$ –
The Company had experienced significant operating losses related to its operations in Canada. The Company
made the decision to abandon its operations in Canada during 2014 and to refocus the business on the U.S. wind
energy market. In early 2015, the Company began the process of finalizing all projects in Canada and reducing or
eliminating all costs and exposures. The Company completely abandoned the Canadian solar operations of H.B. White
and effectively completed all significant projects in Canada and reduced or redeployed substantially all of its Canadian
resources, facilities and equipment as of July 2016. Accordingly, the operating results of its operations in Canada for
all years presented have been reclassified in the Consolidated Statements of Operations as “loss from discontinued
operations". Management expects major classes of assets and liabilities attributable to discontinued operations will be
31
IEA ENERGY SERVICES, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
settled through a normal wind down process. Interest expense that is specifically identifiable to debt related to
supporting Canadian solar operations of H.B. White qualifies as discontinued operations and is allocated to interest
expense from discontinued operations in the Company’s consolidated financial statements.
As of December 31, 2016, the carrying amounts of major classes of assets and liabilities from the
discontinued operations in Canada was $0.
Major classes of line items constituting the loss from discontinued operations for the periods indicated was as
follows (in thousands):
Revenue
Cost of earned revenue, excluding depreciation
Operating expenses
Interest and other expense, net
Gain on abandonment
Income tax benefit
Net income (loss) from discontinued operations
Year ended December 31,
2016
$
1,911
$
1,626
1,610
3,060
(4,253)
(1,219)
1,087
$
$
2015
128,772
130,289
14,551
3,419
-
-
(19,487)
Significant categories of cash flows of discontinued operations for the years indicated are as follows (in
thousands):
Net cash used in operating activities
Net cash provided by investing activities
Net cash provided by financing activities
Note 18. Subsequent Events
Year ended December 31,
2016
(15,539)
82
15,664
$
$
$
2015
(26,076)
186
16,039
$
$
$
On February 7, 2018, MIII announced that it had set a special meeting of its stockholders to be held on
February 28, 2018 to consider and vote on proposals related to the previously announced business combination
pursuant to the definitive agreement and plan of merger dated as of November 3, 2017 with IEA.
Note 19. Events Subsequent to the Issuance of the Financial Statements (unaudited)
On March 21, 2018, MIII shareholders voted to approve the proposed business combination with IEA,
pursuant to the definitive agreement and plan of merger dated as of November 3, 2017. The business combination
closed on March 26, 2018, for an aggregate purchase price of approximately $215M, consisting of approximately
$80M of cash considerations, approximately $100M of common stock considerations, and approximately $35M of
preferred stock consideration.
32
Additional Annual Report Information
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common stock is currently listed on the NASDAQ stock market under the symbol “IEA.” The following table sets
forth the high and low reported sales prices per share of our common stock for the quarters indicated:
Market Information
First Quarter
Second Quarter
Third Quarter
Fourth Quarter*
Years Ended December 31,
2018
2017
High
Low
High
Low
$ 10.33
$
9.86
$ 11.27
$
$
$
8.25
8.70
9.40
$ 11.06
$ 10.13
$ 10.09
$
$
$
9.80
9.91
9.93
$
$
$
$
9.60
9.50
9.77
9.79
* Fourth quarter 2018 was stock price through October 26, 2018.
Holders of Record
On October 16, 2019 there were 1,113 holders of record of our common stock.
Dividend Policy
Our current credit facility includes certain limitations on the payment of cash dividends on our common stock. We
have not paid any cash dividends since the closing of the business combination on our common shares and do not anticipate
paying any cash dividends on our common stock in the foreseeable future.
1
Stock Performance
The performance graph below compares the cumulative five year total return for our common stock with the
cumulative total return (including reinvestment of dividends) of the Russell 3000, and with that of our peer group, which is
composed of MasTec, Inc., Quanta Services, Inc., MYR Group, Inc., Dycom Industries, Inc., Tetra Tech, Inc., Granite
Construction, Inc., Emcor Corporation, Construction Partners, Inc., Willdan Group Inc. and Primoris Services Corporation.
The graph assumes that the value of the investment in our common stock, as well as that of the Russell 3000 and our peer
group, was $100 on March 26, 2018 and tracks it through October 19, 2018. The comparisons in the graph are based upon
historical data and are not intended to forecast or be indicative of possible future performance of our common stock.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by
reference this Annual Report into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to
the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
2 Quarterly Information (unaudited)
The following table sets forth summary quarterly financial information for the year ended December 31, 2017:
(in thousands)
Continuing Operations - 2017
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Other income (expense), net
Quarters Ended (1)
March 31
June 30
September 30 December 31
$
$
52,256 $
106,042 $
177,830 $
118,821
44,192
91,838
153,526
8,064 $
14,204 $
24,304 $
6,067
1,997
150
8,395
5,809
(204)
9,491
14,813
(304)
99,372
19,449
9,590
9,859
(1,732)
Net income (loss)
$
1,390 $
3,588 $
9,155 $
2,392
(1)
Our results of operations for any interim period are not necessarily indicative of those for an entire year, since the
business is subject to seasonal fluctuations and general economic conditions.
3
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On April 19, 2018, we dismissed Crowe as the Company’s independent registered public accounting firm and
subsequently engaged Deloitte as the Company’s independent registered public accounting firm for the Company’s fiscal year
ended December 31, 2018, effective immediately. The change in the Company’s independent auditor was approved by the
Audit Committee.
Crowe’s audit reports on the IEA Energy Services, LLC consolidated financial statements as of and for the fiscal years
ended December 31, 2017 and 2016 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2017, and 2016, and the subsequent interim periods through April 19,
2018, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions)
between the Company and Crowe on any matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to Crowe’s satisfaction, would have caused Crowe to make reference
thereto in their reports on the financial statements for such years, and (ii) no “reportable events” within the meaning of Item
304(a)(1)(v) of Regulation SK, except that Crowe advised the Company of the existence of material weaknesses as of
December 31, 2017 and 2016, respectively, relating to the Company not yet developing an entity level and financial reporting
control environment that is designed with appropriate precision, including (i) accounting personnel with an appropriate level of
accounting knowledge, experience, and training commensurate with complex accounting issues and financial reporting
requirements, (ii) adequate procedures to prepare, document and review areas of significant judgments and accounting
estimates, revenue recognition, and accruals (iii) timely and systematic review by management of journal entries.
We have implemented a remediation plan, which included the hiring of an experienced Chief Accounting Officer and a
Director of SEC Reporting, and engaged a big four accounting firm to assist in the implementation of effective internal controls
over financial reporting and disclosure controls and procedures. There is no assurance that the measures We have taken to date,
or any measures the combined company may take in the future, will be sufficient to remediate the material weaknesses
described above or to avoid potential future material weaknesses.
During the fiscal years ended December 31, 2017 and 2016, and the subsequent interim periods through April 19,
2018, neither the Company nor anyone acting on its behalf has consulted with Deloitte regarding (i) the application of
accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered
on the Company’s financial statements or the effectiveness of internal control over financial reporting, and neither a written
report or oral advice was provided to the Company that Deloitte concluded was an important factor considered by the Company
in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a
disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of
Item 304(a)(1)(v) of Regulation S-K.
4
Corporate Information
Directors
Moshin Y. Meghji1,2,3,4
Ian Schapiro2,3,5
John Paul Roehm
Terence Montgomery1,5
John Eber5
Peter Jonna4
Derek Glanvill4,5
Charles Garner1,4,5
Position/Title
Managing Partner of
M-III Partners, LP
Managing Director
and the portfolio
manager for Oaktree’s
GFI Energy Group
President and Chief
Executive Officer of
Infrastructure and
Energy Alternatives,
Inc.
Former interim CFO
of Infrastructure and
Energy Alternatives,
Inc.
Former CEO/President
at JPM Capital
Corporation
Senior Vice President
of Oaktree Capital’s
GFI Energy Group
Senior Advisor to
Oaktree’s GFI Energy
Group
Managing Director
and General Counsel
of M-III Partners, LP
1 Audit Committee
2 Compensation Committee
3 Governance and Nominating Committee
4 Investment Committee
5 Bid Committee
Executive Officers
John Paul Roehm
Andrew D. Layman
Chris Hanson
Bharat Shah
Position/Title
President and
Chief Executive
Officer
Chief Financial
Officer
Executive Vice
President of Wind
Operations
Chief Accounting
Officer
Transfer Agent
Continental Stock Transfer & Trust
1 State Street, 30th Floor
New York, NY 10004
Auditors
Deloitte & Touche LLP
111 Monument Circle #4200
Indianapolis, IN 46204
Investor Relations
Financial Profiles, Inc.
Kimberly Esterkin, Senior Vice
President
kesterkin@finprofiles.com
310-622-8235
Ticker Symbol
IEA
5 Infrastructure and Energy Alternatives, Inc.
6325 Digital Way, Suite 460
Indianapolis, Indiana 46278
BR45686J-1018-AR