Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

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Acquisitions
6 Months Ended
Jun. 30, 2012
Acquisitions [Abstract]  
ACQUISITIONS
4. ACQUISITIONS:

On April 12, 2012, Quanta acquired Service Electric Company (Service Electric), an electric power infrastructure services company with operations primarily in the Southeastern United States. The aggregate consideration paid consisted of approximately $20.3 million in cash, 662,426 shares of Quanta common stock valued at approximately $12.5 million and the repayment of approximately $5.9 million in debt. As this transaction was effective April 12, 2012, the results of Service Electric have been included in Quanta’s consolidated financial statements beginning on such date. This acquisition enables Quanta to further enhance its electric power infrastructure service offerings. Service Electric’s financial results will generally be included in Quanta’s Electric Power Infrastructure Services segment.

On March 1, 2012, Quanta acquired Phasor Engineering, Inc. (Phasor), which provides engineering, procurement, construction, testing and maintenance services in Western Canada. The aggregate consideration paid consisted of $2.9 million in cash and 87,963 shares of Quanta common stock valued at approximately $1.7 million. As this transaction was effective March 1, 2012, the results of the acquired business have been included in Quanta’s consolidated financial statements beginning on such date. This acquisition enables Quanta to further enhance its engineering service offerings. The financial results of Phasor will generally be included in Quanta’s Electric Power Infrastructure Services segment.

On January 9, 2012, Quanta acquired the assets, operations and business of Crux Subsurface, Inc. (Crux), which is a geotechnical exploration and construction business providing contract drilling, micropile foundation and related services. The aggregate consideration paid consisted of approximately $27.5 million in cash, 856,105 shares of Quanta common stock valued at approximately $16.7 million and the repayment of approximately $4.2 million in debt. As this transaction was effective January 9, 2012, the results of the acquired business have been included in Quanta’s consolidated financial statements beginning on such date. This acquisition enables Quanta to further enhance its electric power infrastructure service offerings. The financial results of Crux will generally be included in Quanta’s Electric Power Infrastructure Services segment.

On January 4, 2012, Quanta acquired Microline Technology Corporation and its affiliates, Inline Devices, LLC and IonEarth, LLC (collectively Microline), an engineering, research and development business that provides natural gas and oil downhole technical and engineering support services and develops and manufactures related inspection tools, along with replacement parts and repair services. The aggregate consideration paid consisted of approximately $6.8 million in cash, 320,619 shares of Quanta common stock valued at approximately $6.4 million and the repayment of approximately $0.9 million in debt. As this transaction was effective January 4, 2012, the results of Microline have been included in Quanta’s consolidated financial statements beginning on such date. This acquisition enables Quanta to further enhance its natural gas and pipeline infrastructure service offerings. Microline’s financial results will generally be included in Quanta’s Natural Gas and Pipeline Infrastructure Services segment.

 

In the third and fourth quarters of 2011, Quanta acquired five businesses, which included three electric power infrastructure services companies based in Canada, one electric power infrastructure services company based in the United States and one natural gas and pipeline infrastructure services company based in Australia. These businesses have been reflected in Quanta’s consolidated financial statements as of their respective acquisition dates. The aggregate consideration for these acquisitions consisted of approximately $80.8 million in cash, 1,939,813 shares of Quanta common stock valued at approximately $32.4 million and the repayment of approximately $3.4 million in debt. These acquisitions allow Quanta to further expand its capabilities and scope of services internationally and in the United States. The financial results of four of these businesses will generally be included in Quanta’s Electric Power Infrastructure Services segment, while the results of one of the businesses will generally be included in Quanta’s Natural Gas and Pipeline Infrastructure Services segment.

The following table summarizes the consideration paid for the 2012 and 2011 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 the information that was available to management at the time these condensed consolidated financial statements were prepared (in thousands).

 

                 
    2012
Acquisitions
    2011
Acquisitions
 

Consideration:

               

Value of Quanta common stock issued

  $ 37,291     $ 32,368  

Cash paid

    68,507       84,208  
   

 

 

   

 

 

 

Fair value of total consideration transferred

  $ 105,798     $ 116,576  
   

 

 

   

 

 

 

Current assets

  $ 20,516     $ 30,198  

Property and equipment

    18,821       19,878  

Other assets

    123       379  

Identifiable intangible assets

    17,931       40,229  

Current liabilities

    (10,008     (10,226

Deferred tax liabilities, net

    (6,173     (7,190

Other long-term liabilities

    (191     (450
   

 

 

   

 

 

 

Total identifiable net assets

    41,019       72,818  

Goodwill

    64,779       43,758  
   

 

 

   

 

 

 
    $ 105,798     $ 116,576  
   

 

 

   

 

 

 

The fair value of current assets acquired in 2012 includes accounts receivable with a fair value of $15.3 million. The fair value of current assets acquired in 2011 included accounts receivable with a fair value of $16.1 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 2012 and 2011 acquisitions strategically expand Quanta’s Canadian service offering, add an Australian service offering and enhance its domestic electric power and natural gas and pipeline services offerings, which Quanta believes contributes to the recognition of the goodwill. In connection with the 2012 acquisitions, goodwill of $57.5 million was recorded for reporting units included within Quanta’s electric power division and $7.3 million was recorded for the reporting unit included within Quanta’s natural gas and pipeline division at June 30, 2012. 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. Goodwill of approximately $52.9 million and $13.1 million is expected to be deductible for income tax purposes related to the businesses acquired in 2012 and 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):

 

                                 
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2012     2011     2012     2011  

Revenues

  $ 1,516,696     $ 1,067,363     $ 2,955,434     $ 1,969,191  

Gross profit

  $ 235,407     $ 172,086     $ 432,878     $ 257,542  

Selling, general and administrative expenses

  $ 114,711     $ 96,319     $ 222,485     $ 194,483  

Amortization of intangible assets

  $ 9,549     $ 10,117     $ 19,032     $ 20,249  

Net income attributable to common stock

  $ 65,533     $ 37,184     $ 111,649     $ 22,499  

Earnings per share attributable to common stock:

                               

Basic

  $ 0.31     $ 0.17     $ 0.52     $ 0.10  

Diluted

  $ 0.31     $ 0.17     $ 0.52     $ 0.10  

The pro forma combined results of operations for the three and six months ended June 30, 2012 and 2011 have been prepared by adjusting the historical results of Quanta to include the historical results of the 2012 acquisitions as if they occurred January 1, 2011. The pro forma combined results of operations for the three and six months ended June 30, 2011 have also 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. 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, an increase in amortization expense due to the incremental intangible assets recorded related to the 2012 and 2011 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 2012 and 2011 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 $19.6 million and income before income taxes of approximately $0.7 million are included in Quanta’s condensed consolidated results of operations for the three months ended June 30, 2012 related to the four 2012 acquisitions following their respective dates of acquisition. Additionally, revenues of approximately $24.7 million and income before income taxes of approximately $0.6 million are included in Quanta’s condensed consolidated results of operations for the six months ended June 30, 2012 related to the four 2012 acquisitions following their respective dates of acquisition.