IES (IESC) Q4 2004 earnings summary

Executive summary

• FY04 revenue was $1.424B, down 2% YoY; net loss was $124.9M, reflecting a $99.8M goodwill impairment and weaker gross profit.

• Strategic review focused on profitability and capital efficiency; plans targeted divestitures of businesses with $289.2M revenue and $13.1M operating losses in FY04.

• Residential work remained the strongest-performing area; priorities included cost reduction, cash collection and higher-margin, shorter-duration projects.

Financial highlights

• Revenue $1,424.1M vs. $1,447.8M in FY03; gross profit $173.9M vs. $206.4M, down 16% YoY.

• Operating loss $84.8M vs. income of $52.8M; net loss $124.9M vs. net income of $19.4M; diluted EPS $(3.23) vs. $0.50.

• Excluding the $99.8M goodwill impairment, operating margin was 1% vs. 4% in FY03; FY04 results also included an $8.0M lawsuit settlement accrual.

• Total assets $580.9M, total debt $231.0M and stockholders’ equity $143.2M at Sept. 30, 2004.

Outlook and guidance

• F.W. Dodge forecast construction spending growth of 2% in 2005; no company guidance was issued amid planned divestitures and cost reductions.

• FY05 capital expenditures were expected to be $5.0M; forecast cash flows, asset sales and borrowing capacity were expected to cover working capital, debt service and capex through the next 12 months.

• Planned asset-sale proceeds were intended primarily to reduce debt; management expected planned sales to generate enough net proceeds to repay bank debt in FY05.