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Equity
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Jun. 30, 2011
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| EQUITY |
Exchangeable
Shares and Series F Preferred Stock
In connection with acquisition of Valard as discussed in
Note 1, certain former owners of Valard received
exchangeable shares of Quanta Services EC Canada Ltd. (EC
Canada); one of Quanta’s wholly owned Canadian
subsidiaries. The exchangeable shares may be exchanged at the
option of the holder for Quanta common stock on a
one-for-one
basis. The holders of exchangeable shares can make an exchange
only once in any calendar quarter and must exchange a minimum of
either 50,000 shares or if less, the total number of
remaining exchangeable shares
registered in the name of the holder making the request. Quanta
also issued one share of Quanta Series F preferred stock to
a voting trust on behalf of the holders of the exchangeable
shares. The Series F preferred stock provides the holders
of the exchangeable shares voting rights in Quanta common stock
equivalent to the number of exchangeable shares outstanding at
any time. The combination of the exchangeable shares and the
share of Series F preferred stock gives the holders of the
exchangeable shares rights equivalent to Quanta common
stockholders with respect to dividends, voting and other
economic rights.
Limited
Vote Common Stock
Effective May 19, 2011, each outstanding share of
Quanta’s Limited Vote Common Stock was reclassified and
converted into 1.05 shares of Common Stock, as set forth in
a Certificate of Amendment to Restated Certificate of
Incorporation approved by the stockholders of Quanta and filed
with the Secretary of State of the State of Delaware on
May 19, 2011. At June 30, 2011 and December 31,
2010, there were 0 and 432,485 shares of Limited Vote
Common Stock outstanding. The Certificate of Amendment also
eliminated entirely the class of Limited Vote Common Stock. The
shares of Limited Vote Common Stock had rights similar to shares
of common stock, except with respect to voting. Holders of
Limited Vote Common Stock were entitled to vote as a separate
class to elect one director and did not vote in the election of
other directors. Holders of Limited Vote Common Stock were
entitled to one-tenth of one vote for each share held on all
other matters submitted for stockholder action. Shares of
Limited Vote Common Stock were convertible into common stock
upon disposition by the holder of such shares in accordance with
the transfer restrictions applicable to such shares. During the
three and six months ended June 30, 2011, no shares of
Limited Vote Common Stock were converted to common stock upon
transfer, and 432,485 shares of Limited Vote Common Stock
were reclassified and converted into 454,107 shares of
Quanta common stock pursuant to the Certificate of Amendment
approved by stockholders. During the three and six months ended
June 30, 2010, 229,808 shares of Limited Vote Common
Stock were exchanged for 241,300 shares of Quanta common
stock through voluntary exchanges initiated by individual
stockholders.
Treasury
Stock
During the second quarter of 2011, Quanta’s board of
directors approved a stock repurchase program authorizing Quanta
to purchase, from time to time, up to $150.0 million of its
outstanding common stock. These repurchases may be made in open
market transactions, in privately negotiated transactions,
including block purchases, or otherwise, at management’s
discretion based on market and business conditions, applicable
legal requirements and other factors. This program does not
obligate Quanta to acquire any specific amount of common stock
and will continue until it is completed or otherwise modified or
terminated by Quanta’s board of directors at any time in
its sole discretion and without notice. The stock repurchase
program is funded with cash on hand. During the three months
ended June 30, 2011, Quanta repurchased
4,915,225 shares of its common stock under this program at
a cost of $94.5 million. These shares and the related cost
to acquire them were accounted for as an adjustment to the
balance of treasury stock. Under Delaware corporate law,
treasury stock is not entitled to vote or be counted for quorum
purposes.
Under the stock incentive plans described in Note 8,
employees may elect to satisfy their tax withholding obligations
upon vesting of restricted stock by having Quanta make such tax
payments and withhold a number of vested shares having a value
on the date of vesting equal to their tax withholding
obligation. As a result of such employee elections, Quanta
withheld 277,923 and 218,149 shares of Quanta common stock
during the six months ended June 30, 2011 and 2010, with a
total market value of $6.2 million and $4.2 million,
in each case for settlement of employee tax liabilities. These
shares and their related value were accounted for as an
adjustment to the balance of treasury stock.
Noncontrolling
Interests
Quanta holds investments in several joint ventures that provide
infrastructure services under specific customer contracts. Each
joint venture is owned equally by its members. Quanta has
determined that certain of these joint ventures are variable
interest entities, with Quanta providing the majority of the
infrastructure services to the joint venture, which management
believes most significantly influences the economic performance
of the joint venture. Management has concluded that Quanta is
the primary beneficiary of each of these joint ventures and has
accounted for each of these joint ventures on a consolidated
basis. The other parties’ equity interests in these joint
ventures has been accounted for as a noncontrolling interest in
the accompanying condensed consolidated financial statements.
Income attributable to the other joint venture members has been
accounted for as a reduction of reported net income attributable
to common stock in the amount of $2.5 million and
$0.3 million for the three months ended June 30, 2011
and 2010 and $3.8 million and $0.7 million for the six
months ended June 30, 2011 and 2010. Equity in the
consolidated assets and liabilities of these joint ventures that
is attributable to the other joint venture members has been
accounted for as a component of noncontrolling interests within
total equity in the accompanying balance sheets.
The carrying value of the investments held by Quanta in all of
its variable interest entities was approximately
$4.7 million and $1.4 million at June 30, 2011
and December 31, 2010. The carrying value of investments
held by the noncontrolling interests in these variable interest
entities at June 30, 2011 and December 31, 2010 was
$4.7 million and $1.4 million. There were no changes
in equity as a result of transfers to/from the noncontrolling
interests during the period. See Note 9 for further
disclosures related to Quanta’s joint venture arrangements.
Comprehensive
Income
Quanta’s foreign operations are translated into
U.S. dollars, and a translation adjustment is recorded in
other comprehensive income (loss), net of tax, as a result.
Additionally, unrealized gains and losses from certain hedging
activities are recorded in other comprehensive income (loss),
net of tax. The following table presents the components of
comprehensive income for the periods presented (in thousands):
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