Gross Margins Continued to Improve HOUSTON, Nov. 4
/PRNewswire-FirstCall/ -- Quanta Services, Inc. (NYSE: PWR) today
announced results for the three and nine months ended September 30,
2009. Revenues in the third quarter of 2009 were $780.8 million
compared to revenues of $1.05 billion in the third quarter of 2008.
For the third quarter of 2009, net income attributable to common
stock was $63.4 million or $0.32 per diluted share, as compared to
$51.9 million or $0.28 per diluted share in the third quarter of
2008. Included in net income attributable to common stock for the
third quarter of 2009 is $22.4 million of income, or a benefit of
$0.11 per diluted share, from the release of income tax
contingencies 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) was $0.25 for the
third quarter of 2009 compared to $0.32 for the third quarter of
2008. Adjusted diluted earnings per share is GAAP diluted earnings
per share before the impact of tax contingency releases 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. "The slow economy continues to
negatively affect the industries we serve and our revenues.
However, our gross margins improved 130 basis points over the third
quarter of 2008, a quarter during which we achieved $110 million
more in higher margin emergency restoration service revenues. This
gross margin improvement reflects our successful strategy of not
pursuing lower margin work for the sake of revenues," said John R.
Colson, chairman and CEO of Quanta Services. "We believe the most
significant effects of the recession are behind us. While the first
quarter of 2010 may be challenging, we expect a meaningful recovery
in the second half of next year as spending by our customers
returns." Revenues for the first nine months of 2009 were $2.33
billion compared to $2.86 billion for the first nine months of
2008. For the first nine months of 2009, Quanta reported net income
attributable to common stock of $118.2 million or $0.59 per diluted
share, compared to $111.1 million or $0.63 per diluted share for
the first nine months of last year. Included in net income
attributable to common stock for the first nine months of 2009 is
the previously discussed release of income tax contingencies in the
third quarter of 2009. Adjusted diluted earnings per share was
$0.59 for the first nine months of 2009 as compared to $0.76 for
the first nine months of 2008. See the attached table for a
reconciliation of non-GAAP measures to the reported GAAP measures.
See Note (a) to the attached Consolidated Statements of Operations
for an explanation of 2008 amounts that have been retrospectively
restated as a result of the adoption of new accounting
pronouncements effective Jan. 1, 2009. RECENT HIGHLIGHTS --
Completed Acquisition of Price Gregory Services, Incorporated - On
Oct. 1, 2009, Quanta acquired, through a merger transaction, all of
the outstanding common stock of Price Gregory Services,
Incorporated. In connection with the merger, Quanta issued
approximately 10.9 million shares of its common stock valued at
$231.8 million and paid approximately $95.8 million in cash to the
stockholders of Price Gregory. As the transaction was effective
Oct. 1, 2009, the results of Price Gregory will be included in
Quanta's consolidated financial statements beginning on such date.
Price Gregory provides natural gas and oil transmission pipeline
infrastructure services in North America, specializing in the
construction of large diameter transmission pipelines. The merger
significantly expands Quanta's existing natural gas and pipeline
services and, when combined with Quanta's electric power services,
positions Quanta as a leader in the North American energy
transmission infrastructure market. -- Secured Contract for
Transmission Services - American Transmission Co. (ATC) awarded a
contract valued at approximately $100 million to Quanta Services as
part of the utility's strategic plan to invest $2.5 billion in
infrastructure improvements over the next ten years. Under the
agreement, MJ Electric, a Quanta operating unit, will provide
transmission line and substation work in the Upper Peninsula of
Michigan and northern Wisconsin. The contract builds on Quanta's
long-standing relationship with ATC, which includes the successful
completion of more than 100 miles of transmission line in this
region. -- Hosted 7th Annual Utility Perspectives Symposium - More
than 150 industry leaders and policy makers from 33 states convened
in Washington, D.C. to participate in Quanta's annual symposium,
which is designed to address the various issues facing utilities
and the energy market overall. Discussions regarding federal and
state regulatory developments, renewable energy, smart grid and
electric transmission infrastructure provided a dynamic forum
during which attendees exchanged ideas and collaborated to
strengthen the future of power delivery. OUTLOOK Quanta and its
customers continue to operate in a challenging business environment
with the economic downturn and weak capital markets. Therefore,
management cannot predict the timing or extent of the impact that
these conditions 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. Quanta expects revenues for the fourth quarter
of 2009 to range between $900 million and $950 million. This
estimate includes a forecast of emergency restoration service
revenues of $11 million versus approximately $47 million in
emergency restoration service revenues being earned in the fourth
quarter of 2008. It also includes an estimate of the results of
Price Gregory for the full quarter. Diluted earnings per share for
the fourth quarter of 2009 are estimated to be between $0.16 and
$0.17. Quanta expects adjusted diluted earnings per share (a
non-GAAP measure calculated on the same basis as the historical
adjusted earnings per diluted share presented in this release) for
the fourth quarter of 2009 to range from $0.26 to $0.27.
Amortization of intangibles, non-cash interest expense and non-cash
stock compensation expenses are forecasted to be approximately $34
million for the fourth quarter of 2009. Quanta Services has
scheduled a conference call for Nov. 4, 2009, at 9:30 a.m. Eastern
time. To participate in the call, dial (480) 629-9644 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 Web site at
http://www.quantaservices.com/. To listen to the call live on the
Web, please visit the Quanta Services Web site 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
Web site at http://www.quantaservices.com/. A replay will also be
available through Nov. 11, 2009, and may be accessed at (303)
590-3030 and using the pass code 4178458#. For more information,
please contact Karen Roan at DRG&E by calling (713) 529-6600 or
email . The non-GAAP measures in this press release and the
attached table are provided to enable investors to evaluate
performance excluding the effects of certain items that management
believes impact the comparability of operating results between
reporting periods. Reconciliations of other GAAP to non-GAAP
measures not included in this press release and certain other items
to be discussed during the conference call can be found on the
company's Web site at http://www.quantaservices.com/ in the
"Financial News" section. Quanta Services is a leading specialized
contracting services company, delivering infrastructure network
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 the Energy Policy Act of 2005, renewable
energy initiatives, the recently enacted economic stimulus package
and other potential legislative actions on future spending by
customers; the potential benefits from acquisitions, including
Price Gregory; 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; statements relating to the
business plans or financial condition of utilities and our other
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; continuing
declines in economic and financial conditions, including volatility
in the capital markets; trends and growth opportunities in relevant
markets; delays, reductions in scope or cancellations of existing
projects, including as a result of 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 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 the Energy Policy Act of 2005, renewable energy initiatives, the
recently enacted economic stimulus package or other 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; the
failure to effectively integrate Price Gregory and its operations
or to realize potential synergies, such as cross-selling
opportunities, from the acquisition; 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; 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 operating in international markets; 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; requirements relating to governmental
regulation and changes thereto; rapid technological and structural
changes that could reduce the demand for services; the ability to
access sufficient funding to finance desired growth and operations;
the potential conversion of Quanta's outstanding convertible
subordinated notes; provisions of our corporate governing documents
could make an acquisition of our company more difficult; and other
risks detailed in Quanta's Annual Report on Form 10-K for the year
ended December 31, 2008, Quanta's Quarterly Reports on Form 10-Q
for each of the quarters in 2009, 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
http://www.quantaservices.com/ or through the SEC's Electronic Data
Gathering and Analysis Retrieval System (EDGAR) at
http://www.sec.gov/. - Tables to follow - Quanta Services, Inc. and
Subsidiaries Consolidated Statements of Operations For the Three
and Nine Months Ended September 30, 2009 and 2008 (In thousands,
except per share information) (Unaudited) Three Months Ended Nine
Months Ended September 30, September 30, -------------------
------------------- 2009 2008 2009 2008 ---- ---- ---- ----
Restated(a) Restated(a) Revenues $780,794 $1,053,355 $2,332,703
$2,858,679 Cost of services (including depreciation) 633,166
867,789 1,930,162 2,390,546 ------- ------- --------- ---------
Gross profit 147,628 185,566 402,541 468,133 Selling, general &
administrative expenses 71,018 80,126 217,591 227,134 Amortization
of intangible assets 5,448 8,998 15,260 29,464 ----- ----- ------
------ Operating income 71,162 96,442 169,690 211,535 Interest
expense (2,816) (9,837) (8,437) (29,153) Interest income 338 2,022
2,047 8,105 Loss on early extinguishment of debt - (2) - (2) Other
income (expense), net 592 (74) 826 408 --- ---- --- --- Income
before income taxes 69,276 88,551 164,126 190,893 Provision for
income taxes 5,320 36,614 45,036 79,817 ----- ------ ------ ------
Net income 63,956 51,937 119,090 111,076 Less: Net income
attributable to noncontrolling 520 - 873 - interest --- --- --- ---
Net income attributable to common stock $63,436 $51,937 $118,217
$111,076 ======= ======= ======== ======== Earnings per share
attributable to common stock: Basic earnings per share $0.32 $0.30
$0.60 $0.65 ===== ===== ===== ===== Diluted earnings per share
$0.32 $0.28 $0.59 $0.63 ===== ===== ===== ===== Weighted average
shares used in computing earnings per share: Basic 198,608 173,007
198,618 172,168 ======= ======= ======= ======= Diluted 205,224
203,930 198,815 196,783 ======= ======= ======= ======= (a)
Effective January 1, 2009, we adopted two new accounting
pronouncements that each required retrospective application. One of
these pronouncements was FASB Staff Position No. APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement)" (FSP APB
14-1) (FASB Accounting Standards Codification (ASC) 470-20,
Debt-Debt with Conversion and Other Options). FSP APB 14-1 (FASB
ASC 470-20) requires us to bifurcate and separately value the debt
and equity components of our convertible subordinated notes on our
balance sheet. The recorded value of the equity component of our
convertible notes is offset by the recognition of an adjustment to
the carrying value of the convertible subordinated notes in the
form of an original issuance discount which is amortized over the
expected life of the convertible subordinated notes as a non-cash
interest charge. As a result of the adoption of FSP APB 14-1 (FASB
ASC 470-20), we recorded non-cash interest expense of $1.1 million
and $3.1 million for the three and nine months ended September 30,
2009 and $4.6 million and $13.5 million for the three and nine
months ended September 30, 2008. The additional non-cash interest
expense in 2008 reduced our previously reported diluted earnings
per share from $0.29 to $0.28 for the three months ended September
30, 2008 and from $0.64 to $0.63 for the nine months ended
September 30, 2008. In addition, we adopted FASB Staff Position No.
EITF 03-6-1, "Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities" (FSP
EITF 03-6-1) (FASB ASC 260, Earnings Per Share). Under FSP EITF
03-6-1 (FASB ASC 260), we are required to treat unvested
share-based payment awards that contain non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) as
participating securities and for such awards to be included in the
computation of both basic and diluted earnings per share. The
adoption of FSP EITF 03-6-1 (FASB ASC 260) did not have a material
impact on basic and diluted earnings per share in the three or nine
months ended September 30, 2009 or 2008. As a result of
retrospectively applying both of these FSPs, our consolidated
balance sheet as of December 31, 2008 and consolidated statements
of operations for the three and nine months ended September 30,
2008 have been retrospectively restated herein to reflect the
impact of the adoption of these standards. Quanta Services, Inc.
and Subsidiaries Calculation of Earnings Per Share For the Three
and Nine Months Ended September 30, 2009 and 2008 (In thousands,
except per share information) (Unaudited) Three Months Ended Nine
Months Ended September 30, September 30, ---------------
---------------- 2009 2008 2009 2008 ---- ---- ---- ----
Restated(1) Restated(1) Income for diluted earnings per share: Net
income attributable to common stock $63,436 $51,937 $118,217
$111,076 Effect of convertible notes under the "if-converted"
method - interest expense addback, net of taxes 1,659 6,180 -
13,579 ----- ----- --- ------ Net income attributable to common
stock for diluted earnings per share $65,095 $58,117 $118,217
$124,655 ======= ======= ======== ======== Calculation of weighted
average shares for diluted earnings per share: Weighted average
shares outstanding for basic earnings per share 198,608 173,007
198,618 172,168 Effect of dilutive stock options 201 286 197 384
Effect of convertible Subordinated notes under the "if-converted"
method - weighted convertible shares issuable 6,415 30,637 - 24,231
------ ----- --- ------ Weighted average shares outstanding for
diluted earnings per share 205,224 203,930 198,815 196,783 =======
======= ======= ======= Diluted earnings per share: Net income
attributable to common stock $0.32 $0.28 $0.59 $0.63 ===== =====
===== ===== (1) See Note (a) to the Consolidated Statements of
Operations. Quanta Services, Inc. and Subsidiaries Non-GAAP
Financial Measures For the Three and Nine Months Ended September
30, 2009 and 2008 (In thousands, except per share information)
(Unaudited) Reconciliation of Non-GAAP Financial Measures Three
Months Ended Nine Months Ended September 30, September 30,
----------------- ----------------- Adjusted diluted earnings per
share: 2009 2008 2009 2008 -------------------- ---- ---- ---- ----
Restated(1) Restated(1) Net income attributable to common stock
(GAAP as reported) $63,436 $51,937 $118,217 $111,076 Adjustments:
Impact of tax contingency releases(2) (22,446) - (22,446) -
Acquisition costs 1,313 - 1,313 - ----- --- ----- --- Adjusted net
income attributable to common stock before certain non-cash
adjustments 42,303 51,937 97,084 111,076 Non-cash stock-based
compensation, net of tax 3,031 2,466 8,927 7,565 Non-cash interest
expense, net of tax(1) 711 3,075 2,092 9,010 Amortization of
intangible assets, net of tax 3,323 5,489 9,309 17,973 ----- -----
----- ------ Adjusted net income attributable to common stock after
certain non-cash adjustments 49,368 62,967 117,412 145,624 Effect
of convertible subordinated notes under the "if-converted" 949
3,105 2,846 9,350 method - interest expense addback, net of tax ---
----- ----- ----- Adjusted net income attributable to common stock
for adjusted diluted earnings $50,317 $66,072 $120,258 $154,974 per
share ======= ======= ======== ======== Calculation of weighted
average shares for adjusted diluted earnings per share: Weighted
average shares outstanding for basic earnings per share 198,608
173,007 198,618 172,168 Effect of dilutive stock options 201 286
197 384 Effect of convertible subordinated notes under the "if
converted" 6,415 30,637 6,415 30,645 method - weighted convertible
shares issuable ----- ------ ----- ------ Weighted average shares
outstanding for adjusted diluted earnings per share 205,224 203,930
205,230 203,197 ======= ======= ======= ======= Adjusted diluted
earnings per share $0.25 $0.32 $0.59 $0.76 ===== ===== ===== =====
(1) See Note (a) to the Consolidated Statements of Operations. (2)
Reflects the elimination of tax benefits primarily associated with
the expiration of various federal and state tax statutes of
limitations during the third quarter of 2009. The non-GAAP measures
in this press release are provided to enable investors to evaluate
quarterly performance excluding the effects of items that
management believes impact the comparability of operating results
between periods. More particularly, in addition to the adjustments
in the third quarter of 2009 relating to certain tax benefits
described in Note (2) above and acquisition costs, (i) amortization
of intangible assets is impacted by Quanta's acquisition activity,
which can cause the amortization expense to vary period-to-period;
(ii) non-cash interest expense results from the requirements of FSP
APB 14-1 (FASB ASC 470-20) (see Note (a) to the Consolidated
Statements of Operations) and varies from period-to-period
depending on the amount of the convertible subordinated notes
outstanding during the period, and (iii) non-cash compensation
expense may vary due to acquisition activity and factors
influencing the estimated fair value of performance-based awards.
Quanta Services, Inc. and Subsidiaries Condensed Consolidated
Balance Sheets (In thousands) (Unaudited) September 30, December
31, 2009 2008 ---- ---- Restated(1) ASSETS CURRENT ASSETS: Cash and
cash equivalents $584,038 $437,901 Accounts receivable, net 663,277
795,251 Costs and estimated earnings in excess of 62,353 54,379
billings on uncompleted contracts Inventories 31,920 25,813 Prepaid
expenses and other current assets 61,372 72,063 ------ ------ Total
current assets 1,402,960 1,385,407 PROPERTY AND EQUIPMENT, net
692,543 635,456 OTHER ASSETS, net 31,647 33,479 OTHER INTANGIBLE
ASSETS, net 131,053 140,717 GOODWILL 1,375,902 1,363,100 ---------
--------- Total assets $3,634,105 $3,558,159 ========== ==========
LIABILITIES AND EQUITY CURRENT LIABILITIES: Current maturities of
long-term debt and notes payable $37 $1,155 Accounts payable and
accrued expenses 338,586 400,253 Billings in excess of costs and
estimated 51,465 50,390 earnings on uncompleted contracts ------
------ Total current liabilities 390,088 451,798 CONVERTIBLE
SUBORDINATED NOTES, NET 125,493 122,275 DEFERRED INCOME TAXES AND
OTHER 294,782 301,712 NON-CURRENT LIABILITIES ------- ------- Total
liabilities 810,363 875,785 ------- ------- TOTAL STOCKHOLDERS'
EQUITY 2,822,869 2,682,374 NONCONTROLLING INTEREST 873 - --- ---
TOTAL EQUITY 2,823,742 2,682,374 --------- --------- Total
liabilities and equity $3,634,105 $3,558,159 ========== ==========
(1) See Note (a) to the Consolidated Statements of Operations.
Contacts: James Haddox, CFO Kip Rupp / Reba Reid Ken Dennard /
Quanta Services Inc. DRG&E 713-629-7600 713-529-6600
DATASOURCE: Quanta Services, Inc. CONTACT: James Haddox, CFO, or
Reba Reid, both of Quanta Services Inc., +1-713-629-7600; or Kip
Rupp, , or Ken Dennard, , both of DRG&E, +1-713-529-6600, for
Quanta Services, Inc. Web Site: http://www.quantaservices.com/
Copyright