Quanta Services Reports 2010 Third Quarter Results

HOUSTON, Nov. 3, 2010 /PRNewswire-FirstCall/ -- Quanta Services, Inc. (NYSE: PWR) today announced results for the three and nine months ended Sept. 30, 2010. As previously announced, Quanta completed the acquisition of Price Gregory Services, Incorporated on Oct. 1, 2009. Therefore, these reported results of operations include the results of Price Gregory in the three and nine months ended Sept. 30, 2010 and are compared to the pre-acquisition historical results of Quanta for the three and nine months ended Sept. 30, 2009.

Revenues in the third quarter of 2010 were $1.21 billion compared to revenues of $780.8 million in the third quarter of 2009. For the third quarter of 2010, net income attributable to common stock was $62.8 million or $0.30 per diluted share. Included in net income attributable to common stock for the third quarter of 2010 is $9.4 million of income, or a benefit of $0.04 per diluted share, from the release of income tax contingencies. Net income attributable to common stock for the third quarter of 2009 was $63.4 million or $0.32 per diluted share. Included in net income attributable to common stock for the third quarter of 2009 was $22.4 million of income, or a benefit of $0.11 per diluted share, from the release of income tax contingencies. The benefits recorded in both periods are 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) were $0.32 for the third quarter of 2010 compared to $0.25 for the third quarter of 2009. Adjusted diluted earnings per share is GAAP diluted earnings per share before the impact of tax contingency releases, certain acquisition expenses 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.  

"Our third and fourth quarters have been negatively impacted by several project delays and lower than expected margins on two pipeline projects due to above-average rainfall.  We also incurred approximately $5 million in costs associated with acquisition opportunities and losses on disposals of equipment during the third quarter," said John R. Colson, chairman and CEO of Quanta Services.  "We believe the industries we serve are in a transitional period.  Long-awaited telecom stimulus projects are being awarded, CREZ projects are out for bid, distribution spending is showing signs of recovery, and the bidding season for our natural gas and pipeline segment appears to be robust.  In general, we are seeing a breakthrough in the accumulation of delayed projects, postponed bids and deferred infrastructure spending.  We believe this breakthrough will impact us positively beginning in 2011."

Revenues for the first nine months of 2010 were $2.82 billion compared to $2.33 billion for the first nine months of 2009.  For the first nine months of 2010, net income attributable to common stock was $119.5 million or $0.57 per diluted share, which includes a $0.02 per diluted share effect of the loss on early extinguishment of debt resulting from the redemption of all of Quanta's outstanding 3.75% convertible subordinated notes on May 14, 2010. Also included in net income attributable to common stock for the first nine months of 2010 and 2009 are the previously discussed benefits from the third quarter releases of income tax contingencies.  The results for the first nine months of 2010 compare to net income attributable to common stock of $118.2 million or $0.59 per diluted share for the first nine months of 2009.  Adjusted diluted earnings per share were $0.69 for the first nine months of 2010 as compared to $0.59 for the first nine months of 2009.  See the attached table for a reconciliation of non-GAAP measures to the reported GAAP measures.

RECENT HIGHLIGHTS

• Completed Acquisition of Valard Construction – On Oct. 25, 2010, Quanta completed the acquisition of Valard Construction (Valard), based in Edmonton, Alberta. Valard delivers full engineering, procurement and construction services and turnkey solutions to the Canadian power industry. The acquisition strategically expands Quanta's Canadian service offering and provides Valard's diverse customer base with access to Quanta's extensive energy infrastructure resources.
• Secured Contracts for Utility-scale Solar Installations – Quanta has initiated work under two contracts with Avenal Solar Holdings LLC for the construction of two utility-scale solar installations near Avenal, Calif.  Under the contracts, Quanta is providing engineering, procurement and construction services for the 20-megawatt Sun City Project and the 19-megawatt Sand Drag Project. Also, Constellation Energy has awarded Quanta a contract for the construction of a 4.4-megawatt solar facility. Upon completion, this facility will be the third large-scale solar project that Quanta has installed at the Denver International Airport.
• Secured Broadband Projects Funded by the American Recovery and Reinvestment Act – Quanta has been selected to install approximately 200 miles of fiber in the western part of North Carolina for MCNC, an independent, non-profit organization that employs advanced networking technologies and systems to continuously improve learning and collaboration throughout North Carolina's education community. Over the past 60 days, Quanta has received in excess of $50 million in stimulus-related awards.

OUTLOOK

The slow economy and regulatory hurdles continue to create a challenging business environment in the industries Quanta serves.  Management cannot 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.

After taking into consideration delays in the start-up of several large projects and the lower than anticipated margins on certain gas transmission projects due to the unfavorable weather conditions previously discussed, Quanta now expects revenues for the fourth quarter of 2010 to range between $950 million and $1.05 billion and diluted earnings per share to be between $0.15 and $0.17. Quanta expects adjusted diluted earnings per share (a non-GAAP measure) for the fourth quarter of 2010 to range from $0.23 to $0.25. This non-GAAP measure is calculated on the same basis as the historical adjusted diluted earnings per share presented in this release. Fourth quarter estimates include the results of Valard for part of the quarter.  Amortization of intangibles, which is subject to adjustment due to the finalization of the purchase price accounting for the acquisition of Valard, is forecasted to be approximately $10.2 million for the fourth quarter of 2010.  In addition, acquisition costs are expected to be about $7.5 million and non-cash stock compensation expenses are forecasted to be approximately $5.6 million for the fourth quarter of 2010.

Quanta Services has scheduled a conference call for Nov. 3, 2010, at 9:30 a.m. Eastern time. To participate in the call, dial (480) 629-9818 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 website at www.quantaservices.com. To listen to the call live on the Web, please visit the Quanta Services website 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 website at www.quantaservices.com. A replay will also be available through Nov. 10, 2010, and may be accessed at (303) 590-3030, using the pass code 4380675#.  For more information, please contact Kip Rupp at DRG&L by calling (404) 880-9276 or email [email protected].  

The non-GAAP measures in this press release and on the company's Web site 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 this press release can be found on the company's Web site at www.quantaservices.com in the "Investors & Media" section.

Quanta Services is a leading specialized contracting services company, delivering infrastructure 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 renewable energy initiatives, the economic stimulus package and other existing or potential legislative actions on future spending by customers; the potential benefits from acquisitions, including Price Gregory and Valard; 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; potential opportunities that may be indicated by bidding activity; statements relating to 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, bidding and spending patterns and other factors that may affect the timing or productivity on projects; continuing declines in economic and financial conditions, including weakness in the capital markets; trends and growth opportunities in relevant markets; delays, reductions in scope or cancellations of existing or pending projects, including as a result of regulatory processes or 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 possibility that projects bid are not awarded to Quanta; 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 renewable energy initiatives, the economic stimulus package or other existing or 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; risks associated with operating in international markets; the failure to effectively integrate Price Gregory and Valard and their operations or to realize potential synergies, such as cross-selling opportunities, from the acquisitions; 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; potential additional risk exposure resulting from any unavailability or cancellation of third party insurance coverage; 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; 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 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; rapid technological and structural changes that could reduce the demand for services; the ability to access sufficient funding to finance desired growth and operations; and other risks detailed in Quanta's Annual Report on Form 10-K for the year ended December 31, 2009, Quanta's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010, 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 www.quantaservices.com or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at www.sec.gov.

SOURCE Quanta Services, Inc.