10-KPeriod: FY2014

QUANTA SERVICES, INC. Annual Report, Year Ended Dec 31, 2014

Filed March 2, 2015For Securities:PWR

Summary

Quanta Services, Inc. reported robust revenue growth of 20.4% in 2014, reaching $7.85 billion, driven by strong performance in both its Electric Power and Oil & Gas Infrastructure Services segments. The company saw increased demand across transmission, distribution, and power generation projects, alongside significant contributions from acquired businesses. Despite this revenue growth, gross profit margins slightly decreased to 15.7% from 16.2% in the prior year, attributed to challenging weather conditions, particularly in Canada and northern U.S. regions, and lower margins on certain power generation projects. Selling, general, and administrative expenses saw a notable increase, primarily due to significant charges related to a long-term contract receivable and an arbitration decision, impacting overall profitability. The company ended the year with a strong balance sheet, including working capital of $1.42 billion and $190.5 million in cash and cash equivalents, while also continuing its strategic acquisition and share repurchase programs.

Financial Highlights

53 data points
Beta

Revenue

$7.75B

15.1% Gross Margin

Net Income

$296.71M

3.8% Net Margin

EPS (Diluted)

$1.35

Total Assets

$6.25B

Cash & Equivalents

$190.51M

Free Cash Flow

$526K

Financial Statements
Beta
Revenue$7.75B
Gross Profit$1.17B
SG&A Expenses$705.48M
Operating Income$429.06M
Interest Expense$4.76M
Net Income$296.71M
EPS (Basic)$1.35
EPS (Diluted)$1.35
Shares Outstanding (Basic)219.67M
Shares Outstanding (Diluted)219.69M

Key Highlights

  • 1Reported consolidated revenues of $7.85 billion for the year ended December 31, 2014, a 20.4% increase from $6.52 billion in 2013, driven by growth in both Electric Power and Oil & Gas Infrastructure Services segments.
  • 2Electric Power Infrastructure Services segment revenues increased by 16.9% to $5.24 billion, supported by increased capital spending from customers and contributions from acquisitions.
  • 3Oil & Gas Infrastructure Services segment revenues grew by 30.8% to $2.44 billion, largely due to contributions from acquired companies and increased customer capital spending.
  • 4Gross profit margin declined slightly to 15.7% from 16.2% in the prior year, impacted by adverse weather and lower margins on certain projects.
  • 5Selling, general, and administrative expenses increased significantly by 44.1% to $722.0 million, primarily due to provisions for a long-term contract receivable and an arbitration decision.
  • 6The company reported net income attributable to common stock of $296.7 million, or $1.35 per diluted share, compared to $401.9 million, or $1.87 per diluted share, in the prior year.
  • 7Backlog at December 31, 2014, stood at $9.76 billion, an increase from $8.73 billion in the prior year, indicating strong future revenue potential.

Frequently Asked Questions

Quanta Services experienced significant revenue growth in 2014, primarily driven by its Electric Power Infrastructure Services segment ($5.24 billion, up 16.9%) and its Oil & Gas Infrastructure Services segment ($2.44 billion, up 30.8%). The growth was fueled by increased capital spending from customers on transmission, distribution, and power generation projects, as well as the inclusion of revenues from nine strategic acquisitions completed during the year.

While revenue increased substantially, Quanta's profitability was impacted by a decline in gross profit margin to 15.7% (from 16.2% in 2013) due to adverse weather conditions and lower margins on certain power generation projects. Additionally, Selling, General, and Administrative (SG&A) expenses rose significantly by 44.1% to $722.0 million. This increase was primarily due to a $102.5 million provision for a long-term contract receivable related to an arbitration proceeding and a $38.8 million expense from an arbitration decision on a separate contract dispute.

Quanta completed nine acquisitions in 2014 across its Electric Power and Oil & Gas segments, both domestically and internationally. These acquisitions contributed approximately $225 million in revenues to the Electric Power segment and $500 million to the Oil & Gas segment, playing a key role in the company's overall revenue growth. The company also invested $262.2 million in acquisitions during the year.

The company expects continued growth opportunities, particularly in the Electric Power segment, driven by the aging North American electric grid requiring significant upgrades and maintenance, and by renewable energy mandates. In the Oil & Gas segment, growth is anticipated from the development of unconventional shale formations and oil sands, despite near-term uncertainty due to declining oil prices. The company also sees long-term potential in pipeline integrity services and offshore energy markets.

Quanta Services maintained a strong financial position at the end of 2014. Key figures include $1.42 billion in working capital, $190.5 million in cash and cash equivalents, and $72.5 million in long-term debt, net of current maturities. The company also had $919.5 million available under its $1.325 billion senior secured revolving credit facility.