Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v2.4.0.8
Acquisitions
6 Months Ended
Jun. 30, 2014
Business Combinations [Abstract]  
Acquisitions
4.

ACQUISITIONS:

2014 Acquisitions

During the first half of 2014, Quanta completed six acquisitions. Four of these six companies are electric power infrastructure services companies located in Canada. The fifth company is a general engineering and construction company, based in California, specializing in hydrant fueling, waterfront and utility construction for the U.S. Department of Defense and is generally included in Quanta’s Oil and Gas Infrastructure Services segment. The sixth company is a geotechnical and geological engineering services company based in the U.S. that is generally included in our Electric Power Infrastructure Services segment. The aggregate consideration paid for these acquisitions consisted of approximately $83.2 million in cash, 459,392 shares of Quanta common stock and 899,858 exchangeable shares of a Canadian subsidiary of Quanta that are substantially equivalent to, and exchangeable on a one-for-one basis for, Quanta common stock. In addition, Quanta issued one share of Series G preferred stock, which generally votes on the same matters as Quanta common stock and is entitled to a number of votes equal to the number of exchangeable shares outstanding at any time. The aggregate value of the above issued securities on the respective closing or settlement dates of the acquisitions totaled approximately $38.6 million. As these transactions were effective during the first half of 2014, the results of each acquired company have been included in Quanta’s consolidated financial statements beginning on the respective dates of acquisition. These acquisitions have enabled Quanta to further enhance its electric power infrastructure service offerings in the U.S. and Canada and its oil and gas infrastructure service offerings in the U.S.

2013 Acquisitions

During 2013, Quanta acquired six businesses, which included electric power infrastructure services companies and oil and gas infrastructure services companies based in the U.S., Canada and Australia. The aggregate consideration paid for these acquisitions consisted of approximately $341.1 million in cash and 3,547,482 shares of Quanta common stock valued, as of the respective dates of issuance, at approximately $88.9 million. The results for each company have been included in Quanta’s consolidated financial statements beginning on the respective dates of acquisition. These acquisitions have enabled Quanta to further enhance its electric power infrastructure service and oil and gas infrastructure service offerings in the United States and select international markets.

The following table summarizes the aggregate consideration paid through June 30, 2014 for the 2014 and 2013 acquisitions and presents the allocation of these amounts to the net tangible and identifiable intangible assets based on their estimated fair values as of the respective acquisition dates. This allocation requires a significant use of estimates and is based on information that was available to management at the time these consolidated financial statements were prepared (in thousands).

 

    2014     2013  

Consideration:

   

Value of Quanta common stock and exchangeable shares issued

  $ 38,641      $ 88,895   

Cash paid

    83,242        341,064   
 

 

 

   

 

 

 

Fair value of total consideration transferred

  $ 121,883      $ 429,959   
 

 

 

   

 

 

 

Current assets

    53,174      $ 193,895   

Property and equipment

    33,445        60,988   

Other assets

    3,374        1,009   

Identifiable intangible assets

    22,368        55,124   

Current liabilities

    (41,283     (127,430

Deferred tax liabilities, net

    (3,604     (4,083

Other long-term liabilities

    (3,935     (5,350
 

 

 

   

 

 

 

Total identifiable net assets

    63,539        174,153   

Goodwill

    58,344        255,806   
 

 

 

   

 

 

 
  $ 121,883      $ 429,959   
 

 

 

   

 

 

 

The fair value of current assets acquired in 2014 included accounts receivable with a fair value of $31.2 million. The fair value of current assets acquired in 2013 included accounts receivable with a fair value of $83.9 million.

 

Goodwill represents the excess of the purchase price over the net amount of the fair values assigned to assets acquired and liabilities assumed. The 2014 and 2013 acquisitions strategically expanded Quanta’s Canadian and Australian service offerings and enhanced its domestic electric power and oil and gas service offerings, which Quanta believes contributes to the recognition of the goodwill. In connection with the 2014 acquisitions, goodwill of $50.8 million was recorded for reporting units included within Quanta’s Electric Power Division and $7.6 million was recorded for reporting units included within Quanta’s Oil and Gas Infrastructure Division on the dates of acquisition. In connection with the 2013 acquisitions, goodwill of $112.5 million was recorded for reporting units included within Quanta’s Electric Power Division and $143.3 million was recorded for reporting units included within Quanta’s Oil and Gas Infrastructure Division on the dates of acquisition. Goodwill of approximately $11.3 million and $213.6 million is expected to be deductible for income tax purposes related to the businesses acquired in 2014 and 2013.

The unaudited supplemental pro forma results of operations have been provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors (in thousands, except per share amounts):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2014      2013      2014      2013  

Revenues

   $ 1,864,550       $ 1,672,112       $ 3,632,181       $ 3,458,655   

Gross profit

   $ 281,448       $ 280,479       $ 553,452       $ 558,385   

Selling, general and administrative expenses

   $ 139,440       $ 133,381       $ 313,994       $ 261,588   

Amortization of intangible assets

   $ 8,615       $ 8,175       $ 16,969       $ 17,456   

Net income

   $ 85,444       $ 88,151       $ 143,127       $ 178,094   

Net income attributable to common stock

   $ 81,082       $ 83,662       $ 134,525       $ 168,829   

Earnings per share attributable to common stock — basic and diluted

   $ 0.37       $ 0.38       $ 0.61       $ 0.77   

The pro forma combined results of operations for the three and six months ended June 30, 2014 and 2013 have been prepared by adjusting the historical results of Quanta to include the historical results of the 2014 acquisitions as if they occurred January 1, 2013. The pro forma combined results of operations for the three and six months ended June 30, 2013 have also been prepared by adjusting the historical results of Quanta to include the historical results of the 2013 acquisitions as if they occurred January 1, 2012. These pro forma combined historical results were then adjusted for the following: a reduction of interest expense and interest income as a result of the repayment of outstanding indebtedness, a reduction of interest income as a result of the cash consideration paid net of cash received, an increase in amortization expense due to the incremental intangible assets recorded related to the 2014 and 2013 acquisitions, an increase or decrease in depreciation expense within cost of services related to the net impact of adjusting acquired property and equipment to the acquisition date fair value and conforming depreciable lives with Quanta’s accounting policies, an increase in the number of outstanding shares of Quanta common stock and certain reclassifications to conform the acquired companies’ presentation to Quanta’s accounting policies. The pro forma results of operations do not include any adjustments to eliminate the impact of acquisition related costs or any cost savings or other synergies that may result from the 2014 and 2013 acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.

 

Revenues of approximately $47.6 million and income (loss) before income taxes of approximately $(2.2) million were included in Quanta’s consolidated results of operations for the three months ended June 30, 2014 related to the 2014 acquisitions following their respective dates of acquisition. Revenues of approximately $84.6 million and income (loss) before income taxes of approximately $(2.3) million, which included $4.3 million of acquisition costs, were included in Quanta’s consolidated results of operations for the six months ended June 30, 2014 related to the 2014 acquisitions following their respective dates of acquisition.