Quanta Services Reports 2012 Third Quarter Results Record Quarterly Revenue & Operating Income

Revenues Increase 35% to $1.69 Billion

Raises Full Year 2012 Guidance

HOUSTON, Oct. 31, 2012 /PRNewswire/ -- Quanta Services, Inc. (NYSE: PWR) today announced results for the three and nine months ended Sept. 30, 2012. Revenues in the third quarter of 2012 were $1.69 billion compared to revenues of $1.25 billion in the third quarter of 2011. Net income attributable to common stock was $96.4 million, or $0.45 per diluted share, in the third quarter of 2012, versus $52.0 million, or $0.25 per diluted share, in the third quarter of 2011. Included in net income attributable to common stock for the third quarter of 2012 was $7.1 million of income, or a net benefit of $0.03 per diluted share, from the release of income tax contingencies. Adjusted diluted earnings per share (a non-GAAP measure) were $0.48 for the third quarter of 2012 compared to $0.29 in the third quarter of 2011. Adjusted diluted earnings per share are GAAP diluted earnings per share before the impact of the release of tax contingencies as well as non-cash items such as amortization of intangible assets and non-cash compensation expense, all net of tax, as shown in the detailed reconciliation in the attached table.

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"Our strong results are indicative of sound execution and increasing demand for our services, as well as the confidence our customers continue to have in Quanta," said Jim O'Neil, president and chief executive officer of Quanta Services. "Revenues from our electric power segment grew 32 percent in the third quarter and, as anticipated, the results of our natural gas and pipeline segment continued to improve despite an absence of large-diameter pipeline projects. We are focused on a solid finish to 2012 and looking forward to a strong 2013."

Revenues for the nine months ended Sept. 30, 2012, were $4.63 billion compared to revenues of $3.11 billion in the nine months ended Sept. 30, 2011. For the first nine months of 2012, net income attributable to common stock was $207.6 million, or $0.98 per diluted share.  Included in net income attributable to common stock for the first nine months of 2012 are the previously discussed benefits from the release of income tax contingencies.  The 2012 results compare to net income attributable to common stock of $66.2 million, or $0.31 per diluted share, for the first nine months of last year.  Adjusted diluted earnings per share were $1.10 for the nine months ended Sept. 30, 2012, compared to $0.43 for the nine months ended Sept. 30, 2011. See the attached table for a reconciliation of non-GAAP measures to the reported GAAP measures.

RECENT HIGHLIGHTS

  • Secured Contract for Nation's Longest Energized Transmission Line Reconductor - In September, Quanta announced that American Electric Power (AEP) selected the company to rebuild 66 miles of a 345-kilovolt power line near Corpus Christi, Texas. Quanta is performing this work in an energized state utilizing proprietary processes and equipment to avoid service outages to AEP's customers during construction. This project is the first of five phases of energized transmission upgrades AEP has planned in the area, which are projected for completion by March 2016. Once completed, this first phase will represent the longest span of transmission line in the United States rebuilt in an energized state.
  • Selected for Eldorado-Ivanpah Transmission Project & Red Bluff Substation Project - In August, Quanta announced that Southern California Edison (SCE) selected PAR Electrical Contractors Inc. (PAR), a Quanta Services company, to install transmission infrastructure for SCE's Eldorado-Ivanpah Transmission Project. Quanta's scope of services for the project includes the replacement of a portion of an existing 115-kilovolt electric transmission line with 35 miles of double-circuit, 220-kilovolt electric transmission line. In addition, SCE selected PAR to construct its Red Bluff Substation Project in eastern Riverside County, Calif. Under the contract, PAR is also constructing the two transmission line segments associated with the substation.

OUTLOOK

The overall outlook for Quanta's business is positive. However, the company's customers continue to experience regulatory and permitting challenges on projects, and economic conditions continue to create uncertainty. It is difficult for management to predict the timing or extent of the impact that these issues 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.

As a result of Quanta's strong performance in the third quarter and improved visibility in the fourth quarter, the company is raising its financial forecast for the fourth quarter and full year of 2012. Quanta expects revenues for the fourth quarter of 2012 to range between $1.55 billion and $1.65 billion and diluted earnings per share to be $0.37 to $0.39. Included in our estimate of GAAP diluted earnings per share for the fourth quarter of 2012 is a net tax benefit of approximately $0.02 per share associated with certain tax contingency releases due to the expiration of certain statutes of limitations during the fourth quarter. Quanta expects adjusted diluted earnings per share (a non-GAAP measure) for the fourth quarter of 2012 to be $0.40 to $0.42. This non-GAAP measure is estimated on a similar basis as the calculations of historical adjusted diluted earnings per share presented in this press release. Amortization of intangibles and non-cash stock compensation expense are forecasted to be approximately $9.1 million and $6.9 million for the fourth quarter of 2012.

Quanta expects revenues for the full year 2012 to range between $6.2 billion and $6.3 billion. Diluted earnings per share for the full year 2012 are estimated to be between $1.35 and $1.37. Quanta expects adjusted diluted earnings per share for the full year 2012 to range from $1.50 to $1.52. Quanta's previous full-year 2012 revenues, diluted earnings per share and adjusted diluted earnings per share forecast was $5.9 billion to $6.1 billion, $1.15 to $1.25 and $1.35 to $1.45.

NON-GAAP FINANCIAL MEASURES

The non-GAAP measures in this press release and on Quanta's website are provided to enable investors, analysts and management to evaluate Quanta's performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods. In addition, management believes these measures are useful in comparing Quanta's operating results with those of its competitors. These measures should be used as an addition to, and not in lieu of, results prepared in conformity with GAAP. Reconciliations of other GAAP to non-GAAP measures not included in the table attached to this press release can be found on the company's website at www.quantaservices.com in the "Investors & Media" section.

CONFERENCE CALL INFORMATION

Quanta Services has scheduled a conference call for Oct. 31, 2012, at 9:30 a.m. Eastern Time. To participate in the call, dial 480-629-9866 at least 10 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 website at www.quantaservices.com. To listen to the call live on the Web, please visit the Quanta Services website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live event, an archive will be available shortly after the call on the company's website at www.quantaservices.com. A replay will also be available through Nov. 7, 2012, and may be accessed at 303-590-3030, using the pass code 4572253#. For more information, please contact Kip Rupp, vice president - Investor Relations at Quanta Services, by calling 713-341-7260 or emailing investors@quantaservices.com.

ABOUT QUANTA SERVICES

Quanta Services is a leading specialized contracting services company, delivering infrastructure solutions for the electric power, natural gas and pipeline and telecommunication industries in North American and in certain international markets. Quanta's comprehensive services include designing, installing, repairing and maintaining network infrastructure. Additionally, Quanta licenses point-to-point fiber optic telecommunications infrastructure in certain markets and offers related design, procurement, construction and maintenance services. With operations throughout North America and in certain international markets, 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, earnings per share, margins, capital expenditures and other projections of financial and operating results; expectations regarding our business outlook, growth or opportunities in particular markets; the expected value of contracts or intended contracts with customers; the scope, services, term and results of any projects awarded or expected to be awarded for services to be provided by Quanta; potential opportunities that may be indicated by bidding activity or similar discussions with customers; the potential benefits from acquisitions; the business plans or financial condition of our 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, including as a result of weather, site conditions, project schedules, regulatory and environmental restrictions, bidding and spending patterns and other factors that may affect the timing of or productivity on projects; adverse economic and financial conditions, including weakness in the capital markets; trends and growth opportunities in relevant markets; delays, reductions in scope or cancellations of anticipated, pending or existing projects, including as a result of weather, regulatory or environmental processes, project performance issues or capital constraints that may impact our customers; the successful negotiation, execution, performance and completion of anticipated, pending and existing contracts; the ability to obtain awards of projects on which we bid or are otherwise discussing with customers; the ability to attract skilled labor and retain key personnel and qualified employees; potential shortage of skilled employees; 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 ability to generate internal growth; the ability to effectively compete for new projects and market share; the failure of renewable energy initiatives, the economic stimulus package or other existing or potential legislative actions to result in increased demand for Quanta's services; liabilities associated with multi-employer pension plans, including underfunding of liabilities and termination or withdrawal liabilities; the possibility of an increase in the liability associated with Quanta's partial withdrawal in the fourth quarter of 2011 from a multi-employer pension plan, including as a result of successful legal challenges by the pension plan; 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 or not insured; potential additional risk exposure resulting from any unavailability or cancellation of third party insurance coverage, the exclusion of coverage for certain losses, or potential increases in premiums for coverage deemed beneficial to Quanta; cancellation provisions within contracts and the risk that contracts are not renewed or are replaced on less favorable terms; the potential that participation in joint ventures exposes us to liability and/or harm to our reputation for actions or omissions by our partners; our failure to comply with the terms of our contracts, which may result in unexcused delays, warranty claims, damages or contract terminations; the effect of natural gas, natural gas liquids and oil prices on Quanta's operations and growth opportunities; the future development of natural resources in shale areas; 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 of our customers to comply with regulatory requirements applicable to their projects, including those related to awards of stimulus funds, potentially resulting in project delays or cancellations; budgetary or other constraints that may reduce or eliminate government funding of projects, including stimulus projects, which may result in project delays or cancellations; estimates and assumptions in determining financial results and backlog; the ability to realize backlog; risks associated with operating in international markets, including instability of foreign governments, currency fluctuations, tax and investment strategies and compliance with the laws of foreign jurisdictions as well as the Foreign Corrupt Practices Act; the ability to successfully identify and complete acquisitions, to effectively integrate acquired businesses and their operations, and to realize potential synergies from 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; the adverse impact of impairments of investments in third parties; growth outpacing our decentralized management infrastructure; requirements relating to governmental regulation and changes thereto; inability to enforce our intellectual property rights or the obsolescence of such rights; risks associated with the implementation of an information technology solution; the impact of a unionized workforce on operations and the ability to complete future acquisitions; potential liabilities relating to occupational health and safety matters; our dependence on suppliers, subcontractors and equipment manufacturers and their ability to perform their obligations; 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 access sufficient funding to finance desired growth and operations; the ability to obtain performance bonds; the ability to continue to meet the requirements of the Sarbanes-Oxley Act of 2002; potential exposure to environmental liabilities; rapid technological and structural changes that could reduce the demand for services; the potential impact of incurring additional healthcare costs arising from federal healthcare reform, and other risks detailed in Quanta's Annual Report on Form 10-K for the year ended December 31, 2011 and Quanta's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012 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 website at www.quantaservices.com or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at www.sec.gov.

 

Quanta Services, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2012 and 2011

(In thousands, except per share information)

(Unaudited)

 








Three Months Ended


Nine Months Ended



September 30,


September 30,



2012


2011


2012


2011


Revenues

$

1,685,201



$

1,250,819



$

4,627,074



$

3,110,692



Cost of services (including depreciation)

1,404,767



1,056,129



3,915,718



2,691,021



Gross profit

280,434



194,690



711,356



419,671



Selling, general and administrative expenses

124,276



92,414



345,633



273,444



Amortization of intangible assets

10,504



8,295



29,447



21,432



Operating income

145,654



93,981



336,276



124,795



Interest expense

(967)



(738)



(2,510)



(1,248)



Interest income

384



226



1,179



761



Other income (expense), net

1,138



(528)



993



(394)



Income before income taxes

146,209



92,941



335,938



123,914



Provision for income taxes

45,353



37,341



115,291



50,306



Net income

100,856



55,600



220,647



73,608



Less: Net income attributable to noncontrolling interests

4,458



3,606



13,004



7,407



Net income attributable to common stock

$

96,398



$

51,994



$

207,643



$

66,201












Earnings per share attributable to common stock:









Basic earnings per share

$

0.45



$

0.25



$

0.98



$

0.31



Diluted earnings per share

$

0.45



$

0.25



$

0.98



$

0.31












Weighted average shares used in computing earnings per share:









Basic

213,150



210,583



212,564



213,400



Diluted

213,242



210,692



212,650



214,055




 

Quanta Services, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 






September 30,

           2012         


 December 31,

           2011         

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$

128,210



$

315,349


Accounts receivable, net

1,441,021



1,066,273


Costs and estimated earnings in excess of billings on uncompleted contracts

378,958



206,159


Inventories

55,916



71,416


Prepaid expenses and other current assets

132,322



105,957


Total current assets

2,136,427



1,765,154


PROPERTY AND EQUIPMENT, net

1,057,046



971,696


OTHER ASSETS, net

191,896



153,830


OTHER INTANGIBLE ASSETS, net

199,085



207,224


GOODWILL

1,670,816



1,601,210


Total assets

$

5,255,270



$

4,699,114






LIABILITIES AND EQUITY




CURRENT LIABILITIES:




Notes payable

$

19



$

56


Accounts payable and accrued expenses

771,506



618,925


Billings in excess of costs and estimated earnings on uncompleted contracts

153,827



162,095


Total current liabilities

925,352



781,076


LONG-TERM DEBT

125,000




DEFERRED INCOME TAXES AND OTHER

   NON-CURRENT LIABILITIES                                                                                   

534,674



528,775


Total liabilities

1,585,026



1,309,851


TOTAL STOCKHOLDERS' EQUITY

3,662,899



3,381,952


NONCONTROLLING INTERESTS

7,345



7,311


TOTAL EQUITY

3,670,244



3,389,263


Total liabilities and equity

$

5,255,270



$

4,699,114




 

 

Quanta Services, Inc. and Subsidiaries

Supplemental Data

(Unaudited)

 







Segment Results


Quanta reports its results under four reporting segments: (1) Electric Power Infrastructure Services, (2) Natural Gas and Pipeline Infrastructure Services, (3) Telecommunications Infrastructure Services and (4) Fiber Optic Licensing, as set forth below (in thousands, except percentages).








Three Months Ended September 30,


Nine Months Ended September 30,



2012



2011



2012



2011


Revenues:

























Electric Power

$

1,089,256


64.6

%


$

822,689


65.8

%


$

3,037,000


65.6

%


$

2,056,232


66.1

%


Natural Gas and Pipeline


397,459


23.6




259,014


20.7




1,096,247


23.8




645,495


20.8



Telecommunications


169,858


10.1




140,679


11.2




409,436


8.8




326,494


10.5



Fiber Optic Licensing


28,628


1.7




28,437


2.3




84,391


1.8




82,471


2.6



Consolidated revenues

$

1,685,201


100.0

%


$

1,250,819


100.0

%


$

4,627,074


100.0

%


$

3,110,692


100.0

%



























Operating income (loss):


















































Electric Power

$

136,378


12.5

%


$

100,199


12.2

%


$

356,863


11.8

%


$

198,661


9.7

%


Natural Gas and Pipeline

23,207


5.8



(4,035)


(1.6)



27,498


2.5



(42,263)


(6.5)



Telecommunications

22,224


13.1



15,832


11.3



44,420


10.8



21,238


6.5



Fiber Optic Licensing

14,092


49.2



14,231


50.0



42,919


50.9



39,448


47.8



Corporate and Non-Allocated Costs

(50,247)


  N/A



(32,246)


   N/A



(135,424)


   N/A



(92,289)


  N/A



Consolidated operating income

$

145,654


8.6

%


$

93,981


7.5

%


$

336,276


7.3

%


$

124,795


4.0

%


 

Backlog
Backlog represents the amount of revenue that Quanta expects to realize from work to be performed in the future on uncompleted contracts, including new contractual arrangements on which work has not yet begun. Backlog estimates include amounts under long-term maintenance contracts or master service agreements (MSAs), in addition to construction contracts. Quanta estimates the amount of work to be disclosed as backlog as the estimate of future work to be performed by using recurring historical trends inherent in the current MSAs, factoring in seasonal demand and projecting customer needs based upon ongoing communications with the customer. Generally, Quanta's customers are not contractually committed to specific volumes of services under Quanta's MSAs, and many of the company's contracts may be terminated with notice. There can be no assurance as to Quanta's customers' requirements or that Quanta's estimates are accurate. In addition, many of Quanta's MSAs, as well as contracts for fiber optic licensing, are subject to renewal options. For purposes of calculating backlog, Quanta has included future renewal options only to the extent that the renewals can reasonably be expected to occur.

The following table presents Quanta's total backlog by reportable segment as of Sept. 30, 2012, Sept. 30, 2011, and Dec. 31, 2011 along with an estimate of the backlog amounts expected to be realized within 12 months of each balance sheet date (in millions):

 


Backlog as of


September 30, 2012


September 30, 2011


December 31, 2011



12 Month


Total


12 Month


Total


12 Month


Total















Electric Power

$

2,857.2



$

4,803.9



$

2,321.2



$

4,856.3



$

2,365.5



$

4,960.0



Natural Gas and Pipeline

867.5



1,517.7



687.9



1,366.0



768.2



1,347.2



Telecommunications

349.0



519.4



328.3



530.5



336.0



529.5



Fiber Optic Licensing

97.7



431.5



101.6



418.6



102.8



402.0



Total

$

4,171.4



$

7,272.5



$

3,439.0



$

7,171.4



$

3,572.5



$

7,238.7




 

Quanta Services, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

For the Three and Nine Months Ended September 30, 2012 and 2011

(In thousands, except per share information)
(Unaudited)





 

The non-GAAP measure of adjusted diluted earnings per share is provided to enable investors to evaluate performance excluding the effects of items that management believes impact the comparability of operating results between periods. As to certain of the items below, (i) amortization of intangible assets is impacted by Quanta's acquisition activity, which can cause these amounts to vary from period to period; (ii) non-cash compensation expense may vary due to acquisition activity, factors influencing the estimated fair value of performance-based awards, estimated forfeiture rates and amounts granted during the period, (iii) acquisition costs vary period to period depending on the level of Quanta's acquisition activity ongoing during the period, and (iv) tax contingency releases vary period to period depending on the level of reserves for uncertain tax positions and the expiration dates of various federal and state tax statutes of limitations.






Three Months Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

Adjusted diluted earnings per share:








Net income attributable to common stock (GAAP as reported)

$

96,398



$

51,994



$

207,643



$

66,201


Adjustments:








    Impact of tax contingency releases (a)

(7,139)





(7,139)




    Acquisition costs, net of tax

1,060



632



1,961



632


Adjusted net income attributable to common stock before certain non-cash adjustments

90,319



52,626



202,465



66,833


Non-cash stock-based compensation, net of tax

4,354



2,877



13,245



9,889


Amortization of intangible assets, net of tax

6,871



5,621



19,234



14,311


Adjusted net income attributable to common stock for adjusted diluted earnings per share

$

101,544



$

61,124



$

234,944



$

91,033










Calculation of weighted average shares for adjusted diluted earnings per share:








Weighted average shares outstanding for basic earnings per share

213,150



210,583



212,564



213,400


Effect of dilutive stock options

92



109



86



128


Effect of shares held in escrow







527


Weighted average shares outstanding for adjusted diluted earnings per share

213,242



210,692



212,650



214,055


Adjusted diluted earnings per share

$

0.48



$

0.29



$

1.10



$

0.43


















(a) 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 2012.

 

Contacts:

Derrick Jensen, CFO


Investors - Kip Rupp, CFA


Media - Reba Reid


Quanta Services, Inc.


713-629-7600

SOURCE Quanta Services, Inc.



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