IES (IESC) Q4 2006 earnings summary

Executive summary

• FY06 was a transition year: emerged from Chapter 11 on May 12, 2006, with a restructured balance sheet and new CEO; operating focus shifted to consistent execution and rebuilding core processes.

• Combined FY06 continuing operations generated $950.2M revenue and $15.4M operating income; discontinued operations recorded a $23.9M loss, leaving a $0.4M net loss.

Financial highlights

• FY06 revenue was $950.2M, up from $869.1M in FY05; gross profit was $139.5M versus $129.0M.

• FY06 operating income was $15.4M versus an operating loss of $55.7M in FY05; FY05 included a $53.1M goodwill impairment, while FY06 had none.

• Continuing-operations income was $23.5M; discontinued-operations loss was $23.9M, resulting in a $0.4M net loss and loss per share of $0.02 for combined FY06.

• Net reorganization income was $26.2M, including a $46.1M debt-extinguishment gain, partly offset by bankruptcy professional fees and other charges.

Outlook and guidance

• Management expected operating cash flows and available revolver capacity to cover working capital, debt service and capital expenditures for the next 12 months, subject to execution and liquidity risks.

• FY07 capital expenditures were expected to be approximately $6.0M; cash flow depended on demand, acceptable project margins, receivable collection, asset disposals and borrowing availability.

• Management anticipated continued commodity inflation in FY07 and expected to pass a portion of higher costs to customers over the long term.