Annual report pursuant to Section 13 and 15(d)

Acquisitions

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Acquisitions
12 Months Ended
Dec. 31, 2011
Acquisitions [Abstract]  
ACQUISITIONS
4. ACQUISITIONS:

2011 Acquisitions

On October 5, 2011, Quanta acquired Utilimap Corporation (Utilimap), which provides geographic information system (GIS) utility asset management and engineering services to the electric utility industry. The aggregate consideration paid for Utilimap consisted of approximately $24.5 million in cash, 553,526 shares of Quanta common stock valued at approximately $9.7 million and the repayment of $0.8 million in debt. As this transaction was effective October 5, 2011, the results of Utilimap have been included in Quanta’s consolidated financial statements beginning on such date. This acquisition enables Quanta to further enhance its Electric Power Infrastructure Services segment offerings. Utilimap’s financial results will generally be included in Quanta’s Electric Power Infrastructure Services segment.

On August 11, 2011, Quanta acquired Coe Drilling Pty. Ltd. (Coe), a horizontal directional drilling company based in Brisbane, Australia. The aggregate consideration paid for Coe consisted of approximately $10.5 million in cash, 396,643 shares of Quanta common stock valued at approximately $6.3 million and the repayment of $1.8 million in debt. As this transaction was effective August 11, 2011, the results of Coe have been included in the consolidated financial statements beginning on such date. This acquisition allows Quanta to further expand its capabilities and scope of services internationally. Coe’s financial results will generally be included in Quanta’s Natural Gas and Pipeline Infrastructure Services segment.

On August 5, 2011, Quanta acquired McGregor Construction 2000 Ltd. and certain of its affiliated entities (McGregor), an electric power infrastructure services company based in Alberta, Canada. The aggregate consideration paid for McGregor consisted of approximately $38.6 million in cash, 898,440 shares of Quanta common stock valued at approximately $14.6 million and the repayment of $0.8 million in debt. As this transaction was effective August 5, 2011, the results of McGregor have been included in the consolidated financial statements beginning on such date. This acquisition allows Quanta to further expand its capabilities and scope of services in Canada. McGregor’s financial results will generally be included in Quanta’s Electric Power Infrastructure Services segment.

In the third quarter of 2011, Quanta acquired two businesses based in British Columbia, Canada that predominantly provide electric power infrastructure services, which have been reflected in Quanta’s consolidated financial statements as of their respective acquisition dates. In connection with these acquisitions, Quanta paid the former owners of the businesses an aggregate of approximately $7.3 million in cash and issued an aggregate of 91,204 shares of Quanta common stock valued at approximately $1.7 million. These acquisitions allow Quanta to further expand its capabilities and scope of services in Canada. The financial results of these two businesses will generally be included in Quanta’s Electric Power Infrastructure Services segment.

2010 Acquisition

On October 25, 2010, Quanta acquired Valard. In connection with the acquisition, Quanta paid the former owners of Valard approximately $118.9 million in cash and issued 623,720 shares of Quanta common stock and 3,909,110 exchangeable shares of a Canadian subsidiary of Quanta. In addition, Quanta 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 exchangeable shares with voting rights in Quanta common stock equivalent to the number of exchangeable shares outstanding at any time. The aggregate value of the common stock and exchangeable shares issued was approximately $83.4 million. The exchangeable shares are substantially equivalent to, and exchangeable on a one-for-one basis for, Quanta common stock. As part of the consideration paid for Valard, Quanta also repaid $12.8 million in Valard debt at the closing of the acquisition. As this transaction was effective October 25, 2010, the results of Valard have been included in the consolidated financial statements beginning on such date. This acquisition allows Quanta to further expand its capabilities and scope of services in Canada. Valard’s financial results are generally included in Quanta’s Electric Power Infrastructure Services segment.

2009 Acquisitions

On October 1, 2009, Quanta acquired Price Gregory in exchange for the issuance of approximately 10.9 million shares of Quanta common stock valued at approximately $231.8 million on the date of closing and the payment of approximately $95.8 million in cash. In connection with the acquisition, $0.5 million in cash and approximately 1.5 million shares of Quanta common stock, valued at approximately $32.5 million, were placed into an escrow account, which was maintained until April 1, 2011 for the settlement of any claims asserted by Quanta against the former stockholders of Price Gregory. Price Gregory provides natural gas and oil transmission pipeline infrastructure services in North America and expands Quanta’s service capabilities in this market. Price Gregory’s results of operations have been included in Quanta’s consolidated results of operations since October 1, 2009.

Also in 2009, Quanta completed three other acquisitions of specialty contractors with operations in the electric power, natural gas and pipeline and telecommunications industries for an aggregate purchase price of approximately $36.0 million, consisting of a total of approximately $25.3 million in cash and approximately 0.5 million shares of Quanta common stock valued in the aggregate at approximately $10.7 million as of the dates of acquisition. These acquisitions enhance Quanta’s electric power, natural gas and pipeline and telecommunications capabilities throughout various regions of the United States and Western Canada.

The following table summarizes the aggregate consideration paid for the 2011 and 2010 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 the 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).

 

                 
    2011     2010  
    All Acquisitions     Valard  

Consideration:

               

Value of Quanta common stock issued

  $ 32,368     $ 11,470  

Value of exchangeable shares issued

          71,885  

Cash paid

    84,208       131,651  
   

 

 

   

 

 

 

Fair value of total consideration transferred

  $ 116,576     $ 215,006  
   

 

 

   

 

 

 

Current assets

  $ 30,198     $ 75,296  

Property and equipment

    19,878       29,307  

Other assets

    379        

Identifiable intangible assets

    40,229       46,224  

Current liabilities

    (10,226     (26,633

Deferred tax liabilities, net

    (7,190     (18,553

Other long-term liabilities

    (450      
   

 

 

   

 

 

 

Total identifiable net assets

    72,818       105,641  

Goodwill

    43,758       109,365  
   

 

 

   

 

 

 
    $ 116,576     $ 215,006  
   

 

 

   

 

 

 

The fair value of current assets acquired in 2011 includes accounts receivable with a fair value of $16.1 million. The fair value of current assets acquired in 2010 included accounts receivable with a fair value of $68.0 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 2011 and 2010 acquisitions strategically expand Quanta’s Canadian service offering, add an Australian service offering and enhance its domestic electric power infrastructure service offerings, which Quanta believes contributes to the recognition of the goodwill. In connection with the 2011 acquisitions, goodwill of $34.9 million was recorded for reporting units included within Quanta’s electric power division and $8.9 million was recorded for the reporting unit included within Quanta’s natural gas and pipeline division at December 31, 2011. In connection with the 2010 acquisition, goodwill of $109.4 million was recorded and included within Quanta’s electric power division at December 31, 2010. None of this goodwill is expected to be deductible for income tax purposes other than $13.1 million recorded in 2011.

The following 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):

 

 

                         
    Year Ended December 31,  
    2011     2010     2009  

Revenues

  $ 4,700,382     $ 4,212,447     $ 4,717,882  

Gross profit

  $ 645,477     $ 701,314     $ 914,737  

Selling, general and administrative expenses

  $ 381,290     $ 367,373     $ 379,210  

Amortization of intangible assets

  $ 34,253     $ 55,756     $ 55,532  

Net income attributable to common stock

  $ 141,123     $ 167,361     $ 304,304  

Earnings per share attributable to common stock:

                       

Basic

  $ 0.66     $ 0.78     $ 1.43  

Diluted

  $ 0.66     $ 0.77     $ 1.41  

The pro forma combined results of operations for the years ended December 31, 2011 and 2010 have been prepared by adjusting the historical results of Quanta to include the historical results of the 2011 acquisitions as if they occurred January 1, 2010. The pro forma combined results of operations for the year ended December 31, 2010 have also been prepared by adjusting the historical results of Quanta to include the historical results of the 2010 acquisition as if it occurred January 1, 2009. The pro forma combined results of operations for the year ended December 31, 2009 have been prepared by adjusting the historical results of Quanta to include the historical results of the 2010 acquisition as if it occurred January 1, 2009 and the historical results of the 2009 acquisitions as if they all occurred January 1, 2008. 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 and the retirement of preferred stock, a reduction of interest income as a result of the cash consideration paid, an increase in amortization expense due to the incremental intangible assets recorded related to the 2011, 2010 and 2009 acquisitions, an increase 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 2011, 2010 and 2009 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 $43.8 million and income before income taxes of approximately $4.4 million are included in Quanta’s consolidated results of operations for the year ended December 31, 2011 related to the five 2011 acquisitions following their respective dates of acquisition. Revenues of $25.7 million and income before income taxes of $3.4 million following Valard’s date of acquisition on October 25, 2010 are included in Quanta’s consolidated results of operations for the year ended December 31, 2010. Revenues of $260.3 million and income before income taxes of $37.8 million related to the four 2009 acquisitions following their respective dates of acquisition are included in Quanta’s consolidated results of operations for the year ended December 31, 2009.