QUANTA SERVICES, INC. 
By HOUSTON, May 1, 2014 /PRNewswire/ -- Quanta Services, Inc. (NYSE: PWR) today announced results for the three months ended Mar. 31, 2014. Revenues in the first quarter of 2014 were $1.76 billion compared to revenues of $1.59 billion in the first quarter of 2013. Net income attributable to common stock was $54.4 million, or $0.25 per diluted share, in the first quarter of 2014, versus net income attributable to common stock of $72.1 million, or $0.34 per diluted share, in the first quarter of 2013. Included in net income attributable to common stock for the first quarter of 2014 is $38.8 million ($25.8 million net of tax) of incremental selling, general and administrative expense as a result of an arbitration decision related to a contract dispute on a directional drilling project that occurred in 2010. The net impact of this decision on Quanta's first quarter of 2014 results was a $0.12 reduction in diluted earnings per share. Adjusted diluted earnings per share (a non-GAAP measure), adjusted for the arbitration decision and other items, were $0.44 for the first quarter of 2014 compared to $0.38 for the first quarter of 2013.
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"As projects become larger and more complex, we continue to be the partner of choice for our customers and as a result, our total backlog increased to a record $9.0 billion at the end of the first quarter," said Jim O'Neil, president and chief executive officer of Quanta Services. "We also expect several large contract awards in the coming months which should result in significant backlog growth in both our electric power and oil and gas infrastructure services segments. This further supports our view that opportunities for double-digit growth exist for at least the next two years."
Adjusted diluted earnings per share is calculated as GAAP diluted earnings per share before acquisition costs, as well as non-cash items such as amortization of intangible assets and non-cash compensation expense, and certain other items that affect comparability of results between periods, all net of tax. See the attached table for a reconciliation of non-GAAP measures to the reported GAAP measures.
Quanta completed five acquisitions in the first quarter of 2014 and five acquisitions in the second half of 2013. Therefore, the first quarter 2014 results include these acquisitions from the respective acquisition dates and are compared to the pre-acquisition historical results of Quanta for the three months ended Mar. 31, 2013.
OUTLOOK
The overall outlook for Quanta's business is positive. However, regulatory, permitting and other challenges may impact project timing. Therefore, Quanta's financial outlook for revenues, margins and earnings reflects management's efforts to properly align these uncertainties with the backlog the company is executing on and the opportunities expected to materialize during 2014. The following forward-looking statements are based on current expectations, and actual results may differ materially.
Quanta expects revenues for the second quarter of 2014 to range between $1.7 billion and $1.9 billion and diluted earnings per share to be $0.35 to $0.37. Quanta expects adjusted diluted earnings per share (a non-GAAP measure) for the second quarter of 2014 to be $0.40 to $0.42. This non-GAAP measure is estimated on a basis similar to the calculations of historical adjusted diluted earnings per share presented in this press release. Amortization of intangibles and non-cash stock-based compensation expense are forecasted to be approximately $8.4 million and $8.3 million for the second quarter of 2014.
Quanta expects revenues for the full year 2014 to remain between $7.4 billion and $7.8 billion. Diluted earnings per share for the full year 2014 are estimated to be $1.53 to $1.73 on a GAAP basis, which includes the $0.12 impact of the arbitration decision previously mentioned. Quanta expects adjusted diluted earnings per share (a non-GAAP measure) for the full year 2014 to remain between $1.85 and $2.05. Amortization of intangibles and non-cash stock-based compensation expense are forecasted to be approximately $33.3 million and $35.5 million for the full year 2014.
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 May 1, 2014, at 9:30 a.m. Eastern Time. To participate in the call, dial 480-629-9868 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 Internet, 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. A replay will also be available through May 8, 2014, and may be accessed at 303-590-3030, using the pass code 4680191#. For more information, please contact Kip Rupp, Vice President - Investor Relations at Quanta Services, by calling 713-341-7260 or emailing investors@quantaservices.com.
GET THE QUANTA SERVICES IR APP
The Quanta investor relations app for iPhone, iPad and Android mobile devices is now available for free at Apple's App Store for the iPhone and iPad and at Google Play for Android mobile devices. The Quanta investor relations app allows users to navigate the company's investor relations materials including the latest press releases, SEC filings, presentations, videos, audio cast conference calls and stock price information. Sharing functionality via email, Twitter and Facebook is available, as well as the ability for investors to be notified when new information is posted to Quanta's IR app.
ABOUT QUANTA SERVICES
Quanta Services is a leading specialized contracting services company, delivering infrastructure solutions for the electric power and oil and gas industries. Quanta's comprehensive services include designing, installing, repairing and maintaining energy infrastructure. Additionally, in certain markets Quanta licenses fiber optic telecommunications infrastructure, offers lit network management services and provides 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 safely complete projects that are local, regional, national or international in scope. For more information, visit www.quantaservices.com.
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, statements relating to projected revenues, earnings per share, margins, capital expenditures, and other projections of operating or financial results; expectations regarding the 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; the impact of renewable energy initiatives, including mandated state renewable portfolio standards, the economic stimulus package and other existing or potential energy legislation; 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; Quanta's plans and strategies; and the current economic and regulatory conditions and trends in the industries Quanta serves, 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, the effects of industry, economic or political conditions outside of the control of Quanta; quarterly variations in operating results; 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 our customers' capital constraints; the successful negotiation, execution, performance and completion of anticipated, pending and existing contracts, including 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; adverse impacts from weather; the ability to generate internal growth; competition in Quanta's business, including the ability to effectively compete for new projects and market share; potential 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 further increases in the liability associated with Quanta's withdrawal from a multi-employer pension plan; liabilities for claims that are self-insured or not insured; unexpected costs or liabilities that may arise from lawsuits or indemnity claims asserted against Quanta; risks relating to the potential unavailability or cancellation of third party insurance, the exclusion of coverage for certain losses, and potential increases in premiums for coverage deemed beneficial to Quanta; cancellation provisions within contracts and the risk that contracts expire and are not renewed or are replaced on less favorable terms; loss of customers with whom Quanta has long-standing or significant relationships; the potential that participation in joint ventures exposes us to liability and/or harm to our reputation for acts or omissions by our partners; our inability or failure to comply with the terms of our contracts, which may result in unexcused delays, warranty claims, failure to meet performance guarantees, 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, which may result in project delays and cancellations; budgetary or other constraints that may reduce or eliminate tax incentives for or 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 U.S. Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws; the ability to successfully identify, complete, integrate and realize 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 impairments of goodwill and other intangible assets or investments; growth outpacing our decentralized management and infrastructure; requirements relating to governmental regulation and changes thereto; inability to enforce our intellectual property rights or the obsolescence of such rights; risks related to the implementation of an information technology solution; the impact of a unionized workforce on operations, including labor stoppages or interruptions due to strikes or lockouts; potential liabilities relating to occupational health and safety matters; our dependence on suppliers, subcontractors and equipment manufacturers; risks associated with Quanta's fiber optic licensing business, including regulatory and tax 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 investing activities; the ability to access sufficient funding to finance desired growth and operations; the ability to obtain performance bonds; potential exposure to environmental liabilities; the ability to continue to meet the requirements of the Sarbanes-Oxley Act of 2002; rapid technological and structural changes that could reduce the demand for services; the impact of increased healthcare costs arising from healthcare reform legislation, and other risks and uncertainties detailed in Quanta's Annual Report on Form 10-K for the year ended Dec. 31, 2013 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. Investors 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 Months Ended March 31, 2014 and 2013
(In thousands, except per share information)
(Unaudited)
Three Months Ended
March 31,
---------
2014 2013
---- ----
Revenues $1,762,574 $1,585,710
Cost of services (including
depreciation) 1,490,503 1,347,437
---------
Gross profit 272,071 238,273
Selling, general and
administrative expenses 134,483 113,681
Arbitration expense 38,848 -
Amortization of intangible
assets 8,245 5,301
----- -----
Operating income 90,495 119,291
Interest expense (982) (502)
Interest income 1,545 522
Other income (expense), net 643 (513)
--- ----
Income before income taxes 91,701 118,798
Provision for income taxes 33,053 41,941
------ ------
Net income 58,648 76,857
Less: Net income
attributable to
noncontrolling interests 4,240 4,776
----- -----
Net income attributable to
common stock $54,408 $72,081
======= =======
Earnings per share
attributable to common
stock -basic and diluted $0.25 $0.34
===== =====
Weighted average shares used in
computing earnings per share:
Basic 219,033 213,453
======= =======
Diluted 219,075 213,512
======= =======
Quanta Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31, December
31,
2014 2013
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $273,340 $488,777
Accounts receivable, net 1,501,857 1,439,115
Costs and estimated
earnings in excess of
billings on uncompleted
contracts 274,966 213,478
Inventories 35,604 31,877
Prepaid expenses and other
current assets 128,690 140,071
------- -------
Total current assets 2,214,457 2,313,318
PROPERTY AND EQUIPMENT,
net 1,269,656 1,205,608
OTHER ASSETS, net 290,887 285,725
OTHER INTANGIBLE ASSETS,
net 219,573 207,877
GOODWILL 1,832,047 1,780,717
--------- ---------
Total assets $5,826,620 $5,793,245
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt and notes
payable $1,650 $1,181
Accounts payable and
accrued expenses 772,185 802,180
Billings in excess of
costs and estimated
earnings on uncompleted
contracts 208,640 239,106
------- -------
Total current liabilities 982,475 1,042,467
LONG-TERM DEBT AND NOTES
PAYABLE, net of current
maturities 4,556 1,053
DEFERRED INCOME TAXES AND
OTHER NON-CURRENT
LIABILITIES 522,913 508,406
------- -------
Total liabilities 1,509,944 1,551,926
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 4,305,805 4,234,188
NONCONTROLLING INTERESTS 10,871 7,131
------ -----
TOTAL EQUITY 4,316,676 4,241,319
--------- ---------
Total liabilities and
equity $5,826,620 $5,793,245
======== ========
Quanta Services, Inc. and
Subsidiaries
Supplemental Data
For the Three Months Ended March
31, 2014 and 2013
(Unaudited)
Segment Results
Quanta reports its results under
three reporting segments: (1)
Electric Power Infrastructure
Services, (2) Oil and Gas
Infrastructure Services and (3)
Fiber Optic Licensing and
Other, as set forth below (in
thousands, except percentages).
Three Months Ended March 31,
----------------------------
2014 2013
---- ----
Revenues:
Electric
Power $1,278,168 72.5% $1,180,983 74.5%
Oil
and
Gas
Infrastructure 445,857 25.3 358,932 22.6
Fiber
Optic
Licensing
and
Other 38,549 2.2 45,795 2.9
------ --- ------ ---
Consolidated
revenues $1,762,574 100.0% $1,585,710 100.0%
======== ==== ======== ====
Operating
income
(loss):
Electric
Power $144,412 11.3% $132,550 11.2%
Oil
and
Gas
Infrastructure (21,172) (a) (4.7) 10,357 2.9
Fiber
Optic
Licensing
and
Other 12,109 31.4 16,883 36.9
Corporate
and
Non-
Allocated
Costs (44,854) N/A (40,499) N/A
------- -------
Consolidated
operating
income $90,495 5.1% $119,291 7.5%
======= ========
(a) Included in operating loss
for the Oil and Gas
Infrastructure Services
segment for the first
quarter of 2014 is the
impact of a $38.8 million
expense associated with an
arbitration decision related
to a contract dispute on a
2010 directional drilling
project for the National Gas
Company of Trinidad and
Tobago.
Backlog
Backlog is not a term
recognized under United
States generally accepted
accounting principles
(GAAP); however, it is a
common measurement used in
the industry. Quanta's
methodology for determining
backlog may not be
comparable to the
methodologies used by other
companies. Quanta's backlog
represents the amount of
consolidated revenue that
it expects to realize from
future work under
construction contracts,
long-term maintenance
contracts, master service
agreements and licensing
agreements. These estimates
include revenues from the
remaining portion of firm
orders not yet completed
and on which work has not
yet begun, as well as
revenues from change
orders, renewal options,
and funded and unfunded
portions of government
contracts to the extent
that they are reasonably
expected to occur. For
purposes of calculating
backlog, Quanta includes
100% of estimated revenues
attributable to
consolidated joint ventures
and variable interest
entities. The following
tables present Quanta's
total backlog by reportable
segment as of March 31,
2014, December 31, 2013 and
March 31, 2013, 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
-------------
March 31, 2014 December 31,
2013 March 31, 2013
-------------- ------------- --------------
12 Total 12 Total 12
Month Month Month Total
------ ----- ------ ----- ------ -----
Electric
Power $3,363.5 $6,187.1 $3,346.7 $5,964.1 $2,766.3 $4,836.7
Oil and Gas
Infrastructure 1,509.3 2,281.7 1,515.6 2,218.5 918.8 1,659.0
Fiber Optic
Licensing
and Other 130.1 586.0 137.9 545.5 137.6 544.3
----- ----- ----- ----- ----- -----
Total $5,002.9 $9,054.8 $5,000.2 $8,728.1 $3,822.7 $7,040.0
====== ====== ====== ====== ====== ======
Quanta Services, Inc. and
Subsidiaries
Reconciliation of Non-GAAP
Financial Measures
For the Three Months Ended March
31, 2014 and 2013
(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 stock-based
compensation expense may vary
due to acquisition activity,
factors influencing the
estimated fair value of
performance-based awards,
forfeiture rates, accelerated
vesting 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) the expense
associated with the arbitration
decision is not a regularly
occurring operational item and
can affect comparability of
results between periods.
Three Months
Ended
March 31,
---------
2014 2013
---- ----
Adjusted diluted earnings per
share:
Net income attributable to
common stock (GAAP as
reported) $54,408 $72,081
Adjustments, net of income
taxes:
Arbitration expense (a) 25,822 -
Acquisition costs 3,628 450
----- ---
Adjusted net income
attributable to common stock
before certain non-cash
adjustments 83,858 72,531
Non-cash stock-based
compensation, net of income
taxes 6,282 4,902
Amortization of intangible
assets, net of income taxes 5,195 3,402
----- -----
Adjusted net income
attributable to common stock
for adjusted diluted
earnings per share $95,335 $80,835
===== =====
Calculation of weighted
average shares for adjusted
diluted earnings per share:
Weighted average shares
outstanding for basic
earnings per share 219,033 213,453
Effect of dilutive stock
options 42 59
--- ---
Weighted average shares
outstanding for adjusted
diluted earnings per share 219,075 213,512
------- -------
Adjusted diluted earnings per
share $0.44 $0.38
===== =====
(a) Reflects the
elimination of
expense recorded in
the first quarter of
2014 resulting from
an arbitration
decision associated
with a contract
dispute on a 2010
directional drilling
project for the
National Gas Company
of Trinidad and
Tobago.
Contacts: Derrick Jensen, CFO Media -Deborah Buks and Molly
LeCronier
Kip Rupp, CFA -
Investors Ward Creative Communications
Quanta Services, Inc. 713-629-7600
713-869-0707
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SOURCE Quanta Services, Inc.
