You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements, the related notes, and management's discussion and analysis included in our annual report on Form 10-K/A for the fiscal year ended September 30, 2011. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to the risk factors discussed in Item 1A, "Risk Factors" in our annual report on Form 10-K/A for the fiscal year ended September 30, 2011, and the factors set forth in "Disclosures Regarding Forward-Looking Statements", and elsewhere in this quarterly report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements.

All dollar values reported in this section are reported in thousands of dollars unless otherwise specified.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. Preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

We have identified the accounting principles that we believe are most critical to our reported financial status by considering accounting policies that involve the most complex or subjective decisions or assessments. These accounting policies are those related to revenue recognition, the assessment of goodwill impairment, our allowance for doubtful accounts receivable, the recording of our self-insurance liabilities and our estimation of the valuation allowance for deferred tax assets. These accounting policies, as well as others, are described in Part 2. Item 8. Financial Statements and Supplementary Data - Note 2, "Summary of Significant Accounting Policies" in our annual report on Form 10-K/A for the year ended September 30, 2011.

Sales of Facilities

Sale of Non-Strategic Manufacturing Facility

On November 30, 2010, a subsidiary of the Company sold substantially all the assets and certain liabilities of a non-strategic manufacturing facility engaged in manufacturing and selling fabricated metal buildings housing electrical equipment, such as switchgears, motor starters and control systems, to Siemens Energy, Inc. As part of this transaction, Siemens Energy, Inc. also acquired the real property upon which the fabrication facilities are located from a subsidiary of the Company. The transaction was completed on December 10, 2010 for a purchase price of $10,086 at which time we recognized a gain of $6,763.

Sale of Non-Core Electrical Distribution Facility

On February 28, 2011, Key Electrical Supply, Inc., a wholly owned subsidiary of the Company, sold substantially all the assets and certain liabilities of a non-core electrical distribution facility engaged in distributing wiring, lighting, electrical distribution, power control and generators for residential and commercial applications to Elliot Electric Supply, Inc. for a purchase price of $6,676. The loss on this transaction was immaterial.

Seasonality and Quarterly Fluctuations

Results of operations from our Residential construction segment are subject to seasonal fluctuations, depending on weather trends, with typically higher revenues generated during spring and summer and lower revenues generated during fall and winter. The Communications and Commercial & Industrial segments of our business are less subject to seasonal trends, as work in these segments generally is performed inside structures protected from the weather. Our service and maintenance business is generally not affected by seasonality. In addition, the construction industry has historically been highly cyclical. Our volume of business may be adversely affected by declines in construction projects resulting from adverse regional or national economic conditions. Quarterly results may also be materially affected by the timing of new construction projects. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.

The 2011 Restructuring Plan

In the second quarter of our 2011 fiscal year, we began a new restructuring program (the "2011 Restructuring Plan") that was designed to consolidate operations within our Commercial & Industrial business. Pursuant to the 2011 Restructuring Plan we will finalize the sale or closure of certain underperforming facilities within our Commercial & Industrial operations. The 2011 Restructuring Plan is a key element of our commitment to return the Company to profitability.

The facilities directly affected by the 2011 Restructuring Plan are in several locations throughout the country, including Arizona, Florida, Iowa, Massachusetts, Louisiana, Nevada and Texas. These facilities were selected due to current business prospects and the extended time frame needed to return the facilities to a profitable position. We expect that closure costs will not exceed $5,500 in the aggregate. Closure costs associated with the 2011 Restructuring Plan include equipment and facility lease termination expenses, incremental management consulting expenses and severance costs for employees. As part of our restructuring charges within our Commercial & Industrial segment we recognized $951 in consulting services, and $124 in costs related to lease terminations during the nine months ended June 30, 2012. Additionally, we recognized a reduction in $58 in severance costs, resulting from the reversal of severance agreements when conditions were not met. The Company is in the process of winding down these facilities. As the Company concludes the wind-down and closure process for each of these facilities, their respective results of operations will be reclassified and presented within future statements of operations as "Discontinued Operations." U.S. GAAP does not permit an earlier reclassification.

At June 30, 2012, the estimated costs to complete the 12 projects remaining at these facilities totaled approximately $1,513, of which all but approximately $532 has been subcontracted to other electrical contractors. Historically, these wind-down operations have negatively impacted liquidity due to their underperformance. For fiscal year ended September 30, 2010, the last reporting period prior to the impact of winding-down, these facilities experienced revenue of $62,968, selling, general & administrative expenses of $9,590, and an operating loss of $9,536. For fiscal year ended September 30, 2011 these wind down facilities experienced revenue of $43,736, selling, general and administrative expenses of $5,019 and an operating loss of $18,084. Included within the fiscal 2011 selling, general and administrative expenses is a $2,850 settlement of an outstanding receivable, written off in a prior period. Excluding this settlement, operating loss for these wind-down facilities for the fiscal year ended September 30, 2011 was $20,934. In many cases, the losses increased as these facilities experienced costs associated with the wind-down. These costs include, subcontracting previously self-performed work, difficulties in retaining experienced staff, charges associated with facility lease termination, employee severance and retention agreements and professional fees.

As of June 30, 2012, we have completed approximately 96% of the backlog of these facilities that existed at the adoption of the 2011 Restructuring Plan. As a result, revenues and selling, general & administrative expenses have been substantially reduced. For the nine months ended June 30, 2012, these wind-down facilities experienced revenues of $8,649, selling, general & administrative expenses of $881 and an operating loss of $4,248. The operating loss for the nine months ended June 30, 2012 is enhanced by the operational difficulties associated with the wind-down as detailed above. Additionally, to date we have recognized the majority of the expected severance, retention and lease termination charges.

The completion of the wind-down of these facilities will eliminate the revenues, as well as the associated operating losses and negative liquidity impact. The majority of costs associated with these facilities are directly related to their distinct operations. As such, the majority of the costs will be eliminated upon the completion of the wind-down process. The go-forward operations will benefit from the elimination of the negative financial impact of these underperforming operations.

The following tables present the results of operations (unaudited) for the facilities affected by the 2011 Restructuring Plan for the three and nine months ended June 30, 2012 and 2011:

                                             Three Months        Three Months
                                                Ended               Ended
                                            June 30, 2012       June 30, 2011
       Revenues                             $        2,471      $       11,147
       Gross loss                                     (504 )            (4,300 )
       Selling, general, & administrative              354               2,410
       Restructuring                                   137               1,667
       Gain from sale of assets                         (1 )               (24 )

       Loss from operations                 $         (994 )    $       (8,353 )

                                             Nine Months         Nine Months
                                                Ended               Ended
                                            June 30, 2012       June 30, 2011
       Revenues                             $        8,649      $       36,758
       Gross loss                                   (2,465 )            (5,611 )
       Selling, general, & administrative              881               2,619
       Restructuring                                   955               1,667
       Gain from sale of assets                        (53 )               (40 )

       Loss from operations                 $       (4,248 )    $       (9,857 )

       Other data:
       Working capital                      $          405      $        9,578
       Total assets:                        $          296      $       15,992

Additional Facility Closing

During the first quarter of fiscal 2012, the Company determined the underperforming Baltimore facility within its Commercial & Industrial and Communications segments would be either sold or closed over the next three to six months. This closing is a key element of management's overall plan to return the Company to profitability. The Baltimore location was selected based upon current businesses performance and the extended time frame needed to return the operation to profitability. We have subsequently determined to close this facility.

The following tables present the results of operations (unaudited) for the Baltimore facility for the three months and nine months ended June 30, 2012 and 2011:

                                             Three Months        Three Months
                                                Ended               Ended
                                            June 30, 2012       June 30, 2011
       Revenues                             $          702      $        7,283
       Gross (loss) profit                            (773 )               376
       Selling, general, & administrative              215                 951
       Gain from sale of assets                         (2 )                -

       Loss from operations                 $         (987 )    $         (575 )


                                             Nine Months         Nine Months
                                                Ended               Ended
                                            June 30, 2012       June 30, 2011
       Revenues                             $        6,724      $       18,267
       Gross (loss) profit                          (2,199 )               423
       Selling, general, & administrative            1,313               2,630
       Gain from sale of assets                        135                  -

       Loss from operations                 $       (3,647 )    $       (2,207 )

Results of Operations

We report our operating results across three operating segments: Communications, Residential and Commercial & Industrial. Expenses associated with our Corporate office are classified as a fourth segment. The following table presents selected historical results of operations of IES and subsidiaries.

                                                                 Three Months Ended June 30,
                                                            2012                               2011
                                                          Unaudited                          Restated
                                                     $                  %                $              %
                                                       (Dollars in thousands, Percentage of revenues)
Revenues                                        $    119,300           100.0  %      $ 122,714         100.0  %
Cost of services                                     106,321            89.1  %        113,668          92.6  %

Gross profit                                          12,979            10.9  %          9,046           7.4  %
Selling, general and administrative expenses          15,525            13.0  %         18,142          14.8  %
Gain (loss) on sale of assets                            (12 )             -  %            137           0.1  %
Restructuring charges                                    153             0.1  %          1,667           1.4  %

Loss from operations                                  (2,687 )           (2.2 )%       (10,900 )         (8.9 )%

Interest and other expense, net                          514             0.4  %            579           0.5  %

Loss from operations before income taxes              (3,201 )           (2.6 )%       (11,479 )         (9.4 )%
Benefit for income taxes                                 (25 )             -  %           (103 )         (0.1 )%

Net loss from continuing operations                   (3,176 )           (2.6 )%       (11,376 )         (9.3 )%

Net loss                                        $     (3,176 )           (2.6 )%     $ (11,376 )         (9.3 )%