Quanta Services Reports 2010 Third Quarter Results

HOUSTON, Nov. 3, 2010 /PRNewswire-FirstCall/ -- Quanta Services, Inc. (NYSE: PWR) today announced results for the three and nine months ended Sept. 30, 2010. As previously announced, Quanta completed the acquisition of Price Gregory Services, Incorporated on Oct. 1, 2009. Therefore, these reported results of operations include the results of Price Gregory in the three and nine months ended Sept. 30, 2010 and are compared to the pre-acquisition historical results of Quanta for the three and nine months ended Sept. 30, 2009.

Revenues in the third quarter of 2010 were $1.21 billion compared to revenues of $780.8 million in the third quarter of 2009. For the third quarter of 2010, net income attributable to common stock was $62.8 million or $0.30 per diluted share. Included in net income attributable to common stock for the third quarter of 2010 is $9.4 million of income, or a benefit of $0.04 per diluted share, from the release of income tax contingencies. Net income attributable to common stock for the third quarter of 2009 was $63.4 million or $0.32 per diluted share. Included in net income attributable to common stock for the third quarter of 2009 was $22.4 million of income, or a benefit of $0.11 per diluted share, from the release of income tax contingencies. The benefits recorded in both periods are due to the expiration of various statutes of limitations related to federal and state tax returns. Adjusted diluted earnings per share (a non-GAAP measure) were $0.32 for the third quarter of 2010 compared to $0.25 for the third quarter of 2009. Adjusted diluted earnings per share is GAAP diluted earnings per share before the impact of tax contingency releases, certain acquisition expenses and certain non-cash items such as amortization of intangible assets, non-cash interest expense and non-cash compensation expense, all net of tax.  See the attached table for a reconciliation of non-GAAP measures to the reported GAAP measures.  

"Our third and fourth quarters have been negatively impacted by several project delays and lower than expected margins on two pipeline projects due to above-average rainfall.  We also incurred approximately $5 million in costs associated with acquisition opportunities and losses on disposals of equipment during the third quarter," said John R. Colson, chairman and CEO of Quanta Services.  "We believe the industries we serve are in a transitional period.  Long-awaited telecom stimulus projects are being awarded, CREZ projects are out for bid, distribution spending is showing signs of recovery, and the bidding season for our natural gas and pipeline segment appears to be robust.  In general, we are seeing a breakthrough in the accumulation of delayed projects, postponed bids and deferred infrastructure spending.  We believe this breakthrough will impact us positively beginning in 2011."

Revenues for the first nine months of 2010 were $2.82 billion compared to $2.33 billion for the first nine months of 2009.  For the first nine months of 2010, net income attributable to common stock was $119.5 million or $0.57 per diluted share, which includes a $0.02 per diluted share effect of the loss on early extinguishment of debt resulting from the redemption of all of Quanta's outstanding 3.75% convertible subordinated notes on May 14, 2010. Also included in net income attributable to common stock for the first nine months of 2010 and 2009 are the previously discussed benefits from the third quarter releases of income tax contingencies.  The results for the first nine months of 2010 compare to net income attributable to common stock of $118.2 million or $0.59 per diluted share for the first nine months of 2009.  Adjusted diluted earnings per share were $0.69 for the first nine months of 2010 as compared to $0.59 for the first nine months of 2009.  See the attached table for a reconciliation of non-GAAP measures to the reported GAAP measures.

RECENT HIGHLIGHTS

    --  Completed Acquisition of Valard Construction– On Oct. 25, 2010, Quanta
        completed the acquisition of Valard Construction (Valard), based in
        Edmonton, Alberta. Valard delivers full engineering, procurement and
        construction services and turnkey solutions to the Canadian power
        industry. The acquisition strategically expands Quanta's Canadian
        service offering and provides Valard's diverse customer base with access
        to Quanta's extensive energy infrastructure resources.
    --  Secured Contracts for Utility-scale Solar Installations– Quanta has
        initiated work under two contracts with Avenal Solar Holdings LLC for
        the construction of two utility-scale solar installations near Avenal,
        Calif. Under the contracts, Quanta is providing engineering, procurement
        and construction services for the 20-megawatt Sun City Project and the
        19-megawatt Sand Drag Project. Also, Constellation Energy has awarded
        Quanta a contract for the construction of a 4.4-megawatt solar facility.
        Upon completion, this facility will be the third large-scale solar
        project that Quanta has installed at the Denver International Airport.
    --  Secured Broadband Projects Funded by the American Recovery and
        Reinvestment Act– Quanta has been selected to install approximately
        200 miles of fiber in the western part of North Carolina for MCNC, an
        independent, non-profit organization that employs advanced networking
        technologies and systems to continuously improve learning and
        collaboration throughout North Carolina's education community. Over the
        past 60 days, Quanta has received in excess of $50 million in
        stimulus-related awards.


OUTLOOK

The slow economy and regulatory hurdles continue to create a challenging business environment in the industries Quanta serves.  Management cannot predict the timing or extent of the impact that these issues may have on demand for Quanta's services, particularly in the near term. The following forward-looking statements are based on current expectations and actual results may differ materially.

After taking into consideration delays in the start-up of several large projects and the lower than anticipated margins on certain gas transmission projects due to the unfavorable weather conditions previously discussed, Quanta now expects revenues for the fourth quarter of 2010 to range between $950 million and $1.05 billion and diluted earnings per share to be between $0.15 and $0.17. Quanta expects adjusted diluted earnings per share (a non-GAAP measure) for the fourth quarter of 2010 to range from $0.23 to $0.25. This non-GAAP measure is calculated on the same basis as the historical adjusted diluted earnings per share presented in this release. Fourth quarter estimates include the results of Valard for part of the quarter.  Amortization of intangibles, which is subject to adjustment due to the finalization of the purchase price accounting for the acquisition of Valard, is forecasted to be approximately $10.2 million for the fourth quarter of 2010.  In addition, acquisition costs are expected to be about $7.5 million and non-cash stock compensation expenses are forecasted to be approximately $5.6 million for the fourth quarter of 2010.

Quanta Services has scheduled a conference call for Nov. 3, 2010, at 9:30 a.m. Eastern time. To participate in the call, dial (480) 629-9818 at least ten minutes before the conference call begins and ask for the Quanta Services conference call. Investors, analysts and the general public will also have the opportunity to listen to the conference call over the Internet by visiting the company's website at www.quantaservices.com. To listen to the call live on the Web, please visit the Quanta Services website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live webcast, an archive will be available shortly after the call on the company's website at www.quantaservices.com. A replay will also be available through Nov. 10, 2010, and may be accessed at (303) 590-3030, using the pass code 4380675#.  For more information, please contact Kip Rupp at DRG&L by calling (404) 880-9276 or email krupp@drg-l.com.  

The non-GAAP measures in this press release and on the company's Web site are provided to enable investors, analysts and management to evaluate Quanta's performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods.  In addition, management believes these measures are useful in comparing Quanta's operating results with those of its competitors.  These measures should be used as an addition to, and not in lieu of, results prepared in conformity with GAAP.  Reconciliations of other GAAP to non-GAAP measures not included in this press release can be found on the company's Web site at www.quantaservices.com in the "Investors & Media" section.

Quanta Services is a leading specialized contracting services company, delivering infrastructure solutions for the electric power, natural gas and pipeline and telecommunication industries. The company's comprehensive services include designing, installing, repairing and maintaining network infrastructure nationwide. Additionally, Quanta licenses point-to-point fiber optic telecommunications infrastructure in select markets and offers related design, procurement, construction and maintenance services. With operations throughout North America, Quanta has the manpower, resources and expertise to complete projects that are local, regional, national or international in scope.  

Forward-Looking Statements

This press release (and oral statements regarding the subject matter of this release, including those made on the conference call and webcast announced herein) contains forward-looking statements intended to qualify for the "safe harbor" from liability established by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include, but are not limited to, projected revenues and earnings per share and other projections of financial and operating results and capital expenditures; growth or opportunities in particular markets; the impact of renewable energy initiatives, the economic stimulus package and other existing or potential legislative actions on future spending by customers; the potential benefits from acquisitions, including Price Gregory and Valard; the expected value of, and the scope, services, term and results of any related projects awarded under, agreements for services to be provided by Quanta; potential opportunities that may be indicated by bidding activity; statements relating to the business plans or financial condition of our customers; and Quanta's strategies and plans, as well as statements reflecting expectations, intentions, assumptions or beliefs about future events, and other statements that do not relate strictly to historical or current facts.  Although Quanta's management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.  These statements can be affected by inaccurate assumptions and by a variety of risks and uncertainties that are difficult to predict or beyond our control, including, among others, quarterly variations in operating results, including as a result of weather, site conditions, project schedules, bidding and spending patterns and other factors that may affect the timing or productivity on projects; continuing declines in economic and financial conditions, including weakness in the capital markets; trends and growth opportunities in relevant markets; delays, reductions in scope or cancellations of existing or pending projects, including as a result of regulatory processes or capital constraints that may impact our customers; dependence on fixed price contracts and the potential to incur losses with respect to these contracts; estimates relating to the use of percentage-of-completion accounting; the possibility that projects bid are not awarded to Quanta; the successful negotiation, execution, performance and completion of pending and existing contracts; the ability to generate internal growth; the effect of natural gas and oil prices on Quanta's operations and growth opportunities; the ability to effectively compete for new projects and market share; the failure of renewable energy initiatives, the economic stimulus package or other existing or potential legislative actions to result in increased demand for Quanta's services; cancellation provisions within contracts and the risk that contracts are not renewed or are replaced on less favorable terms; the inability of customers to pay for services; the failure to recover on payment claims against project owners or to obtain adequate compensation for customer-requested change orders; risks associated with operating in international markets; the failure to effectively integrate Price Gregory and Valard and their operations or to realize potential synergies, such as cross-selling opportunities, from the acquisitions; the ability to attract skilled labor and retain key personnel and qualified employees; potential shortage of skilled employees; estimates and assumptions in determining financial results and backlog; the ability to realize backlog; the ability to successfully identify, complete and integrate acquisitions; the potential adverse impact resulting from uncertainty surrounding acquisitions, including the ability to retain key personnel from the acquired businesses and the potential increase in risks already existing in Quanta's operations; the adverse impact of goodwill or other intangible asset impairments; growth outpacing infrastructure; unexpected costs or liabilities that may arise from lawsuits or indemnity claims related to the services Quanta performs; liabilities for claims that are self-insured; potential additional risk exposure resulting from any unavailability or cancellation of third party insurance coverage; requirements relating to governmental regulation and changes thereto; inability to enforce our intellectual property rights or the obsolescence of such rights; risks associated with the implementation of an information technology solution; potential liabilities relating to occupational health and safety matters; the potential that participation in joint ventures exposes us to liability and/or harm to our reputation for failures of our partners; risks associated with our dependence on suppliers, subcontractors and equipment manufacturers; risks associated with Quanta's fiber optic licensing business, including regulatory changes and the potential inability to realize a return on capital investments; beliefs and assumptions about the collectability of receivables; the cost of borrowing, availability of credit, fluctuations in the price and volume of Quanta's common stock, debt covenant compliance, interest rate fluctuations and other factors affecting financing and investment activities; the ability to obtain performance bonds; the impact of a unionized workforce on operations and the ability to complete future acquisitions; the ability to continue to meet the requirements of the Sarbanes-Oxley Act of 2002; potential exposure to environmental liabilities; rapid technological and structural changes that could reduce the demand for services; the ability to access sufficient funding to finance desired growth and operations; and other risks detailed in Quanta's Annual Report on Form 10-K for the year ended December 31, 2009, Quanta's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010, and any other documents that Quanta files with the Securities and Exchange Commission (SEC).  Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied in any forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which are current only as of this date. Quanta does not undertake and expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a discussion of these risks, uncertainties and assumptions, investors are urged to refer to Quanta's documents filed with the SEC that are available through the company's Web site at www.quantaservices.com or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at www.sec.gov.


Quanta Services, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2010 and 2009

(In thousands, except per share information)

(Unaudited)

                                  Three Months Ended    Nine Months Ended

                                  September 30,         September 30,

                                  2010        2009      2010        2009

Revenues                          $ 1,206,007 $ 780,794 $ 2,824,792 $ 2,332,703

Cost of services (including
depreciation)                     1,016,013   633,166   2,349,619   1,930,162

Gross profit                      189,994     147,628   475,173     402,541

Selling, general and
administrative expenses           82,037      71,018    245,163     217,591

Amortization of intangible assets 13,396      5,448     28,334      15,260

Operating income                  94,561      71,162    201,676     169,690

Interest expense                  (269)       (2,816)   (4,660)     (8,437)

Interest income                   418         338       1,166       2,047

Loss on early extinguishment of
debt                              --          --        (7,107)     --

Other income (expense), net       479         592       371         826

Income before income taxes        95,189      69,276    191,446     164,126

Provision for income taxes        31,489      5,320     70,323      45,036

Net income                        63,700      63,956    121,123     119,090

Less: Net income attributable to
noncontrolling interest           920         520       1,613       873

Net income attributable to common
stock                             $ 62,780    $ 63,436  $ 119,510   $ 118,217



Earnings per share attributable
to common stock:

Basic earnings per share          $ 0.30      $ 0.32    $ 0.57      $ 0.60

Diluted earnings per share        $ 0.30      $ 0.32    $ 0.57      $ 0.59



Weighted average shares used in
computing earnings per share:

Basic                             209,428     198,608   209,125     198,618

Diluted                           211,096     205,224   210,798     198,815






Quanta Services, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

                                                   September 30, December 31,

                                                   2010          2009

ASSETS

CURRENT ASSETS:

Cash and cash equivalents                          $ 441,247     $ 699,629

Accounts receivable, net                           787,580       688,260

Costs and estimated earnings in excess of billings
on uncompleted contracts                           266,032       61,239

Inventories                                        46,445        33,451

Prepaid expenses and other current assets          79,958        100,213

Total current assets                               1,621,262     1,582,792

PROPERTY AND EQUIPMENT, net                        864,279       854,437

OTHER ASSETS, net                                  39,317        45,345

OTHER INTANGIBLE ASSETS, net                       156,501       184,822

GOODWILL                                           1,449,603     1,449,558

Total assets                                       $ 4,130,962   $ 4,116,954



LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt and notes
payable                                            $ 262         $ 3,426

Accounts payable and accrued expenses              440,877       422,034

Billings in excess of costs and estimated earnings
on uncompleted contracts                           63,258        70,228

Total current liabilities                          504,397       495,688

CONVERTIBLE SUBORDINATED NOTES, net                --            126,608

DEFERRED INCOME TAXES AND OTHER

NON-CURRENT LIABILITIES                            388,490       384,097

Total liabilities                                  892,887       1,006,393

TOTAL STOCKHOLDERS' EQUITY                         3,235,084     3,109,183

NONCONTROLLING INTEREST                            2,991         1,378

TOTAL EQUITY                                       3,238,075     3,110,561

Total liabilities and equity                       $ 4,130,962   $ 4,116,954









Quanta Services, Inc. and Subsidiaries

Supplemental Data

For the Three and Nine Months Ended September 30, 2010 and 2009

(In thousands, except percentages)

(Unaudited)



Segment Results

We report our results under four reporting segments: (1) Electric Power
Infrastructure Services, (2) Natural Gas and Pipeline Infrastructure Services, (3)
Telecommunications Infrastructure Services and (4) Fiber Optic Licensing.

                   Three Months Ended September 30, Nine Months Ended September 30,

                   2010             2009            2010             2009

Revenues:

                                    $               $                $
Electric Power     $ 532,603 44.2%  512,797  65.7%  1,452,774 51.4%  1,551,496 66.5%

Natural Gas and
Pipeline           551,674   45.7   131,628  16.9   1,003,728 35.5   433,138   18.6

Telecommunications 93,618    7.8    113,998  14.6   289,506   10.3   284,024   12.2

Fiber Optic
Licensing          28,112    2.3    22,371   2.8    78,784    2.8    64,045    2.7

Consolidated       $                $               $                $
revenues           1,206,007 100.0% 780,794  100.0% 2,824,792 100.0% 2,332,703 100.0%



Operating income
(loss):

Electric Power     $ 60,361  11.3%  $ 66,778 13.0%  $ 150,567 10.4%  $ 178,768 11.5%

Natural Gas and
Pipeline           53,118    9.6    2,097    1.6    97,388    9.7    8,157     1.9

Telecommunications 5,605     6.0    12,317   10.8   12,499    4.3    18,684    6.6

Fiber Optic
Licensing          13,266    47.2   11,757   52.6   39,265    49.8   32,023    50.0

Corporate and
Non-Allocated
Costs              (37,789)  N/A    (21,787) N/A    (98,043)  N/A    (67,942)  N/A

Consolidated
operating income   $ 94,561  7.8%   $ 71,162 9.1%   $ 201,676 7.1%   $ 169,690 7.3%








Backlog

Backlog represents the amount of revenue that we expect to realize from work
to be performed in the future on uncompleted contracts, including new
contractual arrangements on which work has not yet begun. The backlog
estimates include amounts under long-term maintenance contracts or master
service agreements (MSAs), in addition to construction contracts. We
estimate the amount of work to be disclosed as backlog as the estimate of
future work to be performed by using recurring historical trends inherent in
the current MSAs, factoring in seasonal demand and projecting customer needs
based upon ongoing communications with the customer. In many instances, our
customers are not contractually committed to specific volumes of services
under our MSAs, and many of our contracts may be terminated with notice.
There can be no assurance as to our customers' requirements or that our
estimates are accurate. In addition, many of our MSAs, as well as contracts
for fiber optic licensing, are subject to renewal options. For purposes of
calculating backlog, we have included future renewal options only to the
extent that the renewals can reasonably be expected to occur. We also
included in backlog our share of the work to be performed under contracts
signed by joint ventures in which we have an interest.



The following table presents our total backlog by reportable segment as of
September 30, 2010 and June 30, 2010 along with an estimate of the backlog
amounts expected to be realized within 12 months of each balance sheet date:



                         Backlog as of

                         September 30, 2010      June 30, 2010

                         12 Month    Total       12 Month    Total



Electric Power           $ 1,562,553 $ 4,163,150 $ 1,415,873 $ 3,881,347

Natural Gas and Pipeline 627,697     841,433     981,434     1,288,624

Telecommunications       189,329     315,090     170,166     253,038

Fiber Optic Licensing    95,815      403,957     92,347      412,669

Total                    $ 2,475,394 $ 5,723,630 $ 2,659,820 $ 5,835,678








Quanta Services, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

For the Three and Nine Months Ended September 30, 2010 and 2009

(In thousands, except per share information)

(Unaudited)




The non-GAAP measure of adjusted diluted earnings per share is provided to
enable investors to evaluate performance excluding the effects of items that
management believes impact the comparability of operating results between
periods. More particularly, (i) amortization of intangible assets are impacted
by Quanta's acquisition activity, which can cause these amounts to vary from
period-to-period; (ii) non-cash interest expense varies from period-to-period
depending on the amount of the convertible subordinated notes outstanding
during the period; (iii) non-cash compensation expense may vary due to
acquisition activity, factors influencing the estimated fair value of
performance-based awards, estimated forfeiture rates and amounts granted during
the period; (iv) acquisition costs vary period-to-period depending on the level
of Quanta's acquisition activity ongoing during the period; and (v) the loss on
early extinguishment of debt is a non-recurring expense that occurred as a
result of Quanta's redemption of all of its 3.75% convertible subordinated
notes in the second quarter of 2010.

                                         Three Months Ended Nine Months Ended

                                         September 30,      September 30,

                                         2010     2009      2010      2009

Adjusted diluted earnings per share:

Net income attributable to common stock
(GAAP as reported)                       $ 62,780 $ 63,436  $ 119,510 $ 118,217

Adjustments:

Impact of loss on early extinguishment
of debt, net of tax (1)                  --       --        4,493     --

Impact of tax contingency releases(2)    (9,428)  (22,446)  (9,428)   (22,446)

Acquisition costs                        1,726    1,313     2,524     1,313

Adjusted net income attributable to
common stock before

certain non-cash adjustments             55,078   42,303    117,099   97,084

Non-cash stock-based compensation, net
of tax                                   3,477    3,031     10,652    8,927

Non-cash interest expense, net of tax    --       711       1,107     2,092

Amortization of intangible assets, net
of tax                                   8,172    3,323     17,284    9,309

Adjusted net income attributable to
common stock after certain non-cash
adjustments                              66,727   49,368    146,142   117,412

Effect of convertible subordinated notes
under the "if converted" method -
interest expense addback, net of tax     --       949       1,412     2,846

Adjusted net income attributable to
common stock for adjusted diluted
earnings per share                       $ 66,727 $ 50,317  $ 147,554 $ 120,258



Calculation of weighted average shares
for adjusted diluted earnings per share:

Weighted average shares outstanding for
basic earnings per Share                 209,428  198,608   209,125   198,618

Effect of dilutive stock options         136      201       141       197

Effect of shares held in escrow          1,532    --        1,532     --

Effect of convertible subordinated notes
under the "if converted" method -
weighted convertible shares issuable     --       6,415     3,149     6,415

Weighted average shares outstanding for
adjusted diluted earnings per share      211,096  205,224   213,947   205,230

Adjusted diluted earnings per share      $ 0.32   $ 0.25    $ 0.69    $ 0.59

(1) Reflects the elimination of the loss on early extinguishment of debt
associated with the May 14, 2010 redemption of all of Quanta's outstanding
3.75% convertible subordinated notes.

(2) Reflects the elimination of tax benefits primarily associated with the
expiration of various federal and state tax statutes of limitations during the
third quarters of 2010 and 2009.






Contacts: James Haddox, CFO     Kip Rupp / krupp@drg-l.com

          Reba Reid             Ken Dennard / ksdennard@drg-l.com

          Quanta Services, Inc. DRG&L

          713-629-7600          404-880-9276 / 713-529-6600





SOURCE Quanta Services, Inc.