10-KPeriod: FY2006

QUANTA SERVICES, INC. Annual Report, Year Ended Dec 31, 2006

Filed February 28, 2007For Securities:PWR

Summary

Quanta Services, Inc. (PWR) reported its fiscal year results for 2006, demonstrating a revenue increase of 14.7% to $2.13 billion, driven by improved customer spending and pricing across its electric power and gas, telecommunications, and ancillary services segments. The company successfully grew its gross profit by 23.0% to $315.8 million, with gross margins improving to 14.8% from 13.8% in the prior year, attributed to stronger market conditions and margin enhancement initiatives. Despite a significant non-cash goodwill impairment charge of $56.8 million related to the cable television services business, the company reported positive net income. Management highlighted strong operational cash flow and a solid liquidity position with $383.7 million in cash and cash equivalents. The company continues to focus on strategic growth, including potential acquisitions, while managing operational efficiencies and cost controls. Investors should note the company's commitment to retaining earnings for growth, as no dividends are currently planned.

Key Highlights

  • 1Revenue increased by 14.7% to $2.13 billion in 2006, indicating strong demand for services.
  • 2Gross profit rose by 23.0% to $315.8 million, with gross margins improving to 14.8% from 13.8% in 2005, reflecting better pricing and market conditions.
  • 3A significant goodwill impairment of $56.8 million was recorded, impacting net income but recognized as a non-cash charge.
  • 4Operating cash flow remained strong, demonstrating the company's ability to generate cash from its core operations.
  • 5The company ended the year with a healthy cash balance of $383.7 million, suggesting adequate liquidity for operations and growth initiatives.
  • 6No dividends were paid in 2006, as the company prioritizes retaining earnings for business growth and development.
  • 7The company secured an amended and restated senior secured revolving credit facility, providing $300 million in borrowing capacity.

Frequently Asked Questions

Revenue growth in 2006 was primarily driven by increased customer spending across its key segments, particularly in electric power and gas network services, telecommunications and cable television network services, and ancillary services. This was supported by improving customer financial health and better pricing for services.

The $56.8 million goodwill impairment charge in 2006 was a non-cash operating expense related to a decrease in expected future demand for services in the cable television industry. While it reduced net income for the period, it does not affect the company's cash position or its ability to operate. The company maintains a solid balance sheet and operational cash flow.

Quanta Services currently intends to retain its future earnings to finance the growth and expansion of its business. Therefore, the company does not currently plan to declare or pay any cash dividends on its common stock in the immediate future. Any future dividend decisions will be at the discretion of the Board of Directors.

As of December 31, 2006, Quanta Services had $383.7 million in cash and cash equivalents and a $300 million senior secured revolving credit facility, of which $159.6 million was available. The company has several convertible subordinated notes outstanding, and its debt is secured by substantially all of its assets. Management believes its current cash, credit facility, and future operating cash flow are sufficient to meet its obligations and growth plans.