| þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) |
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
| B. | Name and issuer of the securities held pursuant to the plan and the address of its principal executive office: |
/s/ KPMG LLP
|
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| 2005 | 2004 | |||||||
Assets: |
||||||||
Investments, at fair value |
$ | 87,421,464 | $ | 109,772,389 | ||||
Accrued income |
2,737 | 372 | ||||||
Contributions receivable: |
||||||||
Employee |
173,619 | 487,576 | ||||||
Employer |
47,441 | 183,043 | ||||||
Loan repayments receivable |
— | 78,496 | ||||||
Total assets |
87,645,261 | 110,521,876 | ||||||
Liabilities: |
||||||||
Accrued liabilities |
100,000 | 110,000 | ||||||
Excess contributions payable |
263,448 | — | ||||||
Total liabilities |
363,448 | 110,000 | ||||||
Net assets available for benefits |
$ | 87,281,813 | $ | 110,411,876 | ||||
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| 2005 | 2004 | |||||||
Net investment income: |
||||||||
Interest |
$ | 182,555 | $ | 335,044 | ||||
Dividends |
3,250,370 | 2,337,834 | ||||||
Net appreciation in fair value of investments |
541,861 | 3,201,139 | ||||||
| 3,974,786 | 5,874,017 | |||||||
Contributions: |
||||||||
Employee |
8,381,408 | 11,085,238 | ||||||
Employer, net of forfeitures |
1,675,850 | 1,867,582 | ||||||
Rollovers |
812,869 | 299,966 | ||||||
| 10,870,127 | 13,252,786 | |||||||
Transfers to
other plans (note 4) |
(18,230,201 | ) | — | |||||
Withdrawals |
(19,381,327 | ) | (16,977,101 | ) | ||||
Excess contributions |
(263,448 | ) | — | |||||
Administrative expenses |
(100,000 | ) | (195,469 | ) | ||||
Net decrease / increase |
(23,130,063 | ) | 1,954,233 | |||||
Net assets available for benefits: |
||||||||
Beginning of year |
110,411,876 | 108,457,643 | ||||||
End of year |
$ | 87,281,813 | $ | 110,411,876 | ||||
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| (1) | Description of the Plan | |
| The following description of the Integrated Electrical Services, Inc. 401(k) Retirement Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for more complete information about the Plan’s provisions. |
| (a) | General | ||
| The Plan is a defined contribution plan established by Integrated Electrical Services, Inc. (the Company), on January 1, 1999. The Plan was established under the provisions of Section 401(a) of the Internal Revenue Code of 1986, as amended (the Code), which includes a qualified deferred arrangement as described in Section 401(k) of the Code, for the benefit of eligible employees of the Company. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Plan was amended and restated effective January 1, 2002. | |||
| The Company, as plan administrator, established an administrative committee (the Administrative Committee). The Administrative Committee is responsible for the general administration of the Plan. The Administrative Committee is given all powers necessary to enable it to carry out its duties including, but not limited to, the power to interpret the Plan. | |||
| On February 14, 2006, the Company and all of its domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division and on May 12, 2006, the Company and all of its domestic subsidiaries emerged from bankruptcy. The bankruptcy had no impact on the Plan. | |||
| During October 2004, the Company announced plans to begin a strategic alignment including the planned divestiture of certain commercial segments, underperforming subsidiaries and those that rely heavily on surety bonding for obtaining a majority of their projects. In December 2005, the Company completed its previously announced divestiture program. Since its start in October 2004, the Company sold 14 units, primarily operating in the commercial and industrial markets (Note 4). | |||
| (b) | Trustee | ||
| Merrill Lynch Trust Company, FSB (Merrill Lynch) is the trustee for the Plan. Trustee fees, audit fees and all other administrative costs incurred during 2005 and 2004 were paid either by the Plan or through unallocated forfeitures within the Plan unless the Company elected to pay such expenses on behalf of the Plan. Any administrative expenses not paid by the Company or through the use of unallocated forfeitures are allocated to participant accounts. Prior to July 1, 2004, loan processing fees were charged to the account of the participant requesting the loan. Effective July 1, 2004, participants are no longer assessed loan processing fees. | |||
| (c) | Eligibility | ||
| All employees, excluding members of a collective bargaining unit, nonresident aliens, leased employees, and employees of an affiliate of the Company that has not adopted the Plan, are eligible to participate in the Plan on the first day of any month following the date on which he or she completes 60 days of service and attains age 21. | |||
| (d) | Rollovers | ||
| Participants may contribute account balances from other qualified plans or accounts as allowed under the Plan’s provisions. | |||
| (e) | Contributions | ||
| Eligible employees may contribute, on a pretax basis, an amount up to 100% of their compensation, as defined. In addition, eligible employees who have attained age 50 before the close of the Plan year are eligible to make catch-up contributions subject to limitations of Section 414(v) of the Code. The Company does not match the employees’ catch-up contributions. Employee contributions are subject to certain limitations. | |||
| Employee contributions for the year ended December 31, 2005, included excess contributions which were refunded to participants subsequent to year end as the contributions were determined to be in excess of maximum contributions levels for certain participants. A liability for excess contributions in the amount of $263,448 has been reflected in the statement of net assets available for plan benefits as of December 31, 2005. There were no excess contributions for the year ended |
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| December 31, 2004, and accordingly no liability for excess contributions is reflected in the statement of net assets available for plan benefits as of December 31, 2004. | |||
| The Company will make matching contributions based on a percentage, if any, as determined each plan year by the Company. During 2005 and 2004, the Company made matching contributions equal to 25% of the first 6% of each participant’s contribution. | |||
| The Plan allows the Company to make a “true-up” matching contribution at its sole discretion at the end of a plan year for eligible participants in an amount which, when aggregated with the Company contributions made during the year, will produce aggregate matching contributions equal to the percentage established by the Company. The Company did not elect to make a “true-up” matching contribution for the 2005 and 2004 plan years. | |||
| (f) | Participant Accounts | ||
| Each participant’s account is credited with the participant’s contributions, the Company’s matching contributions and an allocation of earnings, losses, any appreciation or depreciation of the funds invested and administrative expenses. Allocations are based on the participant account balances as defined in the Plan document. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account. | |||
| (g) | Loans | ||
| Participants may borrow from their before-tax vested contribution accounts a minimum of $1,000 to a maximum equal to the lesser of (a) $50,000 minus any outstanding loan balance(s) in the last 12 months or (b) 50% of their vested account balances. No more than one loan is allowed per account at any given time. Interest rates are established by the Administrative Committee. Interest rates on outstanding loans at December 31, 2005 range from 5.0 percent to 10.5 percent. Maturity dates on outstanding loans at December 31, 2005 range from January 13, 2006 to May 10, 2019. Loans must be repaid within five years. For loans initiated prior to July 1, 2004, the repayment period for loans used to purchase a primary residence was fifteen years. Principal and interest are repaid through after-tax payroll deductions. | |||
| (h) | Investment Options | ||
| The Plan allows for participant transactions on the first day of any given month with respect to changes in the contribution level. The Plan allows for participant transactions on a daily basis with respect to (a) the transfer of funds from one investment alternative to another and (b) changes in the investment of new contributions. Participants may cease their deferrals at the beginning of any payroll period with proper notice. | |||
| The Plan provided for contributions to be invested by Merrill Lynch among seven mutual funds and one common/collective trust fund in accordance with participant investment elections and the provisions of the trust agreement. The trustee utilizes a short-term investment account to invest assets of the Plan pending investment into the directed funds. Prior to May 1, 2005 the Company’s common stock was provided as an investment option. On May 10, 2005, it was announced that all contributions and inter-fund transfers into the Company’s common stock would be suspended. Participants were notified to instruct Merrill Lynch to transfer the balance in the Company’s common stock to a fund of their choice. Any shares left in the Company’s common stock fund at December 31, 2005 were sold and the proceeds deposited into the Merrill Lynch Retirement Preservation Trust on January 6, 2006. | |||
| (i) | Company Common Stock Voting Rights | ||
| Participants were entitled to exercise voting rights attributable to the shares of Integrated Electrical Services, Inc. common stock allocated to their account and were notified prior to the time that such rights are to be exercised. The Trustee voted any shares for which instructions had not been given by the participant in proportion to the votes received. |
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| (j) | Vesting | |
| Participants are 100% vested in their contributions, rollover contributions, and earnings thereon. Participants vest in their Company matching contributions, and earnings thereon, as follows: |
| Vested | ||||
| Completed Years of Service | Percentage | |||
Less than 3 |
0 | % | ||
3 or more |
100 | % | ||
| For participants whose balances were transferred to new plans associated with companies divested during 2005, the unvested portions of employee balances were 100% vested and the transfers consisted of those employee balances including the 100% vested employer contributions (Note 4). |
| (k) | Forfeitures | |
| Forfeitures result from termination of employment before full vesting has occurred. Forfeitures are first used to pay the Plan’s ordinary and necessary administrative expenses and then any remaining forfeitures are used to reduce the Company matching contributions. At December 31, 2005 and 2004, forfeited unvested accounts totaled approximately $111,700 and $20,700, respectively. During 2005 and 2004, approximately $0 and $109,500 of forfeitures were utilized to pay plan expenses, respectively, and during 2005 and 2004, approximately $0 and $275,600, respectively, of forfeitures were utilized to reduce Company matching contributions. | ||
| (l) | Withdrawals | |
| Once age 59 1 / 2 is attained, a participant may withdraw some or all of the vested amounts in his or her account. If the participant is younger than 59 1 / 2 , he or she may withdraw some or all of the vested amounts in his or her account, excluding earnings thereon, only in the event of financial hardship. Upon retirement, termination of employment, death, or permanent disability, participants or their beneficiaries will be paid in the form of a lump sum equal to the vested value of their accounts. If a participant account balance exceeds $5,000 at termination of employment, the participant may elect to defer the distribution until age 70 1 / 2 . If the value of the participant’s nonforfeitable account balance is $5,000 or less, the Plan will immediately distribute the participant’s entire nonforfeitable account balance. In April 2006, the Plan was amended so that if the value of the participant’s nonforfeitable account balance is $1,000 or less, the Plan will immediately distribute the participant’s entire nonforfeitable account balance. |
| (a) | Basis of Accounting | |
| The financial statements are prepared on the accrual basis of accounting. Withdrawals are recorded when paid. | ||
| (b) | Use of Estimates | |
| The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to use estimates and assumptions that affect the reported amounts of net assets, liabilities and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. | ||
| (c) | Investment Valuation and Income Recognition | |
| Investments are reported at fair value. Mutual funds and the Company’s common stock are valued based upon quoted market prices. The common/collective trust fund is valued at fair value as determined by the issuer based upon quoted market prices, when available, of the underlying assets. Participant loans are valued at cost, which approximates fair value. Purchase and sales of securities are recorded on a trade-date basis. Interest is recorded as earned. Dividends are recorded on the ex-dividend date. Realized gains (losses) on the sale of investments and unrealized appreciation |
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| (depreciation) in the fair value of investments are shown as net appreciation in fair value of investments in the statements of changes in net assets available for benefits. | ||
| The Plan invested in the Merrill Lynch Retirement Preservation Trust (Preservation Trust), the common/collective trust fund, which is a fully benefit-responsive fund that invests primarily in GICs, synthetic GICs, and U.S. government securities, which are recorded at contract value which approximates fair value. The average yield of the Preservation Trust was 4.14% and 3.95% for the years ended December 31, 2005 and 2004, respectively. | ||
| (3) | Investments | |
| The following table presents investments that represent 5% or more of the Plan’s net assets for December 31, 2005 and 2004: |
| 2005 | 2004 | |||||||
Merrill Lynch Retirement Preservation Trust |
$ | 24,166,166 | $ | 29,872,816 | ||||
MFS International New Discovery Fund Class A |
8,280,785 | 8,572,612 | ||||||
Pimco Total Return Fund Class A |
7,667,623 | 9,192,722 | ||||||
Merrill
Lynch S&P 500 Index Fund Class A |
19,211,376 | 26,374,900 | ||||||
Lord Abbett
Affiliated Fund Class P |
6,954,988 | 8,712,452 | ||||||
American Growth Fund of America Class A |
16,030,223 | 18,683,174 | ||||||
| During 2005 and 2004, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in fair value as follows: |
| 2005 | 2004 | |||||||
Common/collective trust funds |
$ | — | $ | 924,119 | ||||
Mutual funds |
2,935,764 | 4,743,201 | ||||||
Company common stock |
(2,393,903 | ) | (2,466,181 | ) | ||||
Net appreciation |
$ | 541,861 | $ | 3,201,139 | ||||
| (4) | Transfers to Other Plans | |
| During 2005, account balances of employees of various divested companies who had participated in the Plan were transferred to plans maintained by the divesting companies. Transfers to the divested companies’ plans totaled $18,230,201 and are as follows: |
| 2005 | Transfer Date | ||||||
Britt Rice Electric LP |
$ | 1,719,140 | 02/07/2005 | ||||
Goss Electric Company, Inc. |
1,077,792 | 03/15/2005 | |||||
Ace Electric, Inc. |
1,213,620 | 04/13/2005 | |||||
DKD Electric Company, Inc. |
565,706 | 05/12/2005 | |||||
Delco Electric, Inc. |
271,108 | 06/01/2005 | |||||
Howard Brothers Electric Co., Inc. |
2,603,502 | 06/01/2005 | |||||
T & H Electrical Corporation |
1,283,491 | 06/06/2005 | |||||
Canova Electrical Contracting, Inc. |
522,913 | 06/06/2005 | |||||
Anderson & Wood Const Co., Inc. |
1,193,517 | 07/29/2005 | |||||
Tech Electric Co., Inc. |
270,842 | 08/31/2005 | |||||
Ernest P. Breaux Electrical, Inc. |
3,756,014 | 08/31/2005 | |||||
Brink Electric Construction Co. |
2,349,641 | 09/30/2005 | |||||
Florida Industrial Electric, Inc. |
1,402,915 | 10/31/2005 | |||||
| $ | 18,230,201 | ||||||
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| (5) | Risks and Uncertainties | |
| The Plan provides for various investments in a common/collective trust fund, mutual funds, and the Company’s common stock (prior to December 31, 2005). Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term. | ||
| (6) | Tax Status | |
| The Plan obtained its latest determination letter on October 30, 2001, in which the Internal Revenue Service (IRS) stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. The Plan has been amended since receiving the determination letter. Even so, the Administrative Committee believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code and that the Plan was qualified and the related trust was tax-exempt as of December 31, 2005 and 2004. | ||
| (7) | Priorities upon Termination | |
| Under the terms of the Plan, the Company has the right at any time to discontinue contributions and terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become fully vested in the balance of their accounts. The trustee would then commence distribution as directed by the Administrative Committee. | ||
| (8) | Related-Party and Party-in-Interest Transactions | |
| The plan also invests in a common/collective trust fund and a mutual fund managed by Merrill Lynch, the trustee for the Plan; therefore, these transactions qualify as party-in-interest transactions. The Plan provides for investment in Company common stock which qualifies as a related-party transaction. At December 31, 2005 and 2004, the Plan’s investment in Company common stock totaled $220,084 (400,155 shares) and $3,098,740 (640,236 shares), respectively. These transactions, as well as participant loans, are covered by an exemption from the “prohibited transaction” provisions of ERISA and the Code. | ||
| (9) | Delinquent Participant Contributions | |
| As reported on schedule H, Line 4a – schedule of delinquent participant contributions for the year ended December 31, 2005, certain participant contributions and participant loan repayments were not remitted to the trust within the time frame specified by the Department of Labor’s Regulation 29 CFR 2510.3-102, thus constituting nonexempt transactions between the Plan and the Company for the years ended December 31, 2002, 2003, 2004, and 2005. On June 28, 2005, the Company remitted $31,786, $39,507 and $18,365 of earnings on the delinquent participant contributions relating to 2002, 2003 and 2004, respectively. On June 29, 2006, the Company remitted earnings on the delinquent participant contributions for 2005 in the amount of $30,588. |
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| (10) | Reconciliation of Financial Statements to Form 5500 | |
| The following is a reconciliation of net assets available for plan benefits as reported in the financial statements and the Form 5500 as of December 31, 2005 and 2004: |
| 2005 | 2004 | |||||||
Net assets available for plan benefits per the financial statements |
$ | 87,281,813 | $ | 110,411,876 | ||||
Less amounts allocated to withdrawing participants at December 31, 2005
and 2004 |
(101,380 | ) | (109,744 | ) | ||||
Net assets available for plan benefits per Form 5500 |
$ | 87,180,433 | $ | 110,302,132 | ||||
| The following is a reconciliation of withdrawals as reported in the financial statements and the Form 5500 for the years ended December 31, 2005 and 2004: |
| 2005 | 2004 | |||||||
Withdrawals per the financial statements |
$ | 19,381,327 | $ | 16,977,101 | ||||
Add amounts allocated to withdrawing participants at December 31, 2005 and 2004 |
101,380 | 109,744 | ||||||
Less amounts allocated to withdrawing participants at December 31, 2004 and 2003 |
(109,744 | ) | (51,974 | ) | ||||
Withdrawals per Form 5500 |
$ | 19,372,963 | $ | 17,034,871 | ||||
| Amounts allocated to withdrawing participants are recorded on the Form 5500 for withdrawals that have been processed and approved for payment prior to December 31, but not yet paid as of that date. | ||
| (11) | Subsequent Events |
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| (b) | (d) | |||||||||||||||
| (a) | Relationship to plan, | (c) | Amount | (e) | ||||||||||||
| Identity of | employer or other | Description of transaction, | on line | Lost | ||||||||||||
| party involved | party-in-interest | including rate of interest | 4(a) | Interest | ||||||||||||
Integrated Electrical Services, Inc |
Plan sponsor | 2002 employee deferrals and loan repayments not deposited to Plan in a timely manner. Interest rate range of 1% to 25% |
$ | 54,774 | $ | 31,786 | ||||||||||
Integrated Electrical Services, Inc |
Plan sponsor | 2003 employee deferrals and loan repayments not deposited to Plan in a timely manner. Interest rate range of 2% to 33% |
$ | 105,720 | $ | 39,507 | ||||||||||
Integrated Electrical Services, Inc |
Plan sponsor | 2004 employee deferrals and loan repayments not deposited to Plan in a timely manner. Interest rate range of 1% to 9% |
$ | 88,043 | $ | 18,365 | ||||||||||
Integrated Electrical Services, Inc |
Plan sponsor | 2005 employee deferrals and loan repayments not deposited to Plan in a timely manner. Interest rate range of 1% to 8% |
$ | 225,430 | $ | 30,588 | ||||||||||
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| Principal | ||||||||
| amount | ||||||||
| Identity of issue/ | or numbers of | Current | ||||||
| description of investment | shares | Value | ||||||
Merrill Lynch Retirement Preservation Trust, common/collective trust* |
24,166,166 | $ | 24,166,166 | |||||
Hotchkis & Wiley Small Cap Value Fund Class A, mutual fund |
30,763 | 1,512,002 | ||||||
MFS International New Discovery Fund Class A, mutual fund |
347,348 | 8,280,785 | ||||||
Blackrock Small/Mid Cap, mutual fund |
41,246 | 591,049 | ||||||
Pimco Total Return Fund Class A, mutual fund |
730,250 | 7,667,623 | ||||||
Merrill
Lynch S&P 500 Index Fund Class A, mutual fund* |
1,258,937 | 19,211,376 | ||||||
Lord Abbett Affiliated Fund Class P, mutual fund |
495,723 | 6,954,988 | ||||||
American Growth Fund of America Class A, mutual fund |
519,450 | 16,030,223 | ||||||
Integrated Electrical Services, Inc., common stock* |
400,155 | 220,084 | ||||||
Interest-bearing cash |
$ | 105,069 | 105,069 | |||||
Participant loans* (interest rates ranging from 5.00% to 10.50% and
maturity dates ranging from January 13, 2006 to May 10, 2019 ) |
$ | 2,682,099 | 2,682,099 | |||||
Total assets (held at end of year) |
$ | 87,421,464 | ||||||
| * | Identified party-in-interest. |
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| Integrated Electrical Services, Inc. 401(k) Retirement Savings Plan |
||||
| By: | /s/ Robert Callahan | |||
| Robert Callahan | ||||
| Senior Vice President – Human Resources and a Member of the Administrative Committee | ||||
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