10-QPeriod: Q2 FY2010

QUANTA SERVICES, INC. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 9, 2010For Securities:PWR

Summary

Quanta Services, Inc. (PWR) reported for the quarter ended June 29, 2010, showing a 7.0% increase in revenue to $870.5 million compared to the same period last year. This growth was primarily driven by a significant 38.4% surge in the Natural Gas and Pipeline Infrastructure Services segment, largely attributed to the acquisition of Price Gregory in late 2009. The Telecommunications Infrastructure Services segment also saw a healthy 21.9% revenue increase. However, the Electric Power Infrastructure Services segment experienced a 8.1% revenue decline, mainly due to customer spending reductions and project timing. Net income attributable to common stock remained relatively stable, slightly decreasing from $33.4 million in Q2 2009 to $33.0 million in Q2 2010. The company highlighted a strong focus on integrating the Price Gregory acquisition, which has bolstered its natural gas and pipeline capabilities. Despite economic headwinds and reduced customer spending, Quanta anticipates a pickup in activity in the latter half of 2010 and into 2011, particularly in electric transmission, gas transmission, telecommunications, and renewable energy projects. The company also redeemed its outstanding 3.75% convertible subordinated notes, impacting the financial statements with a loss on early extinguishment of debt but reducing future interest expenses.

Financial Highlights

49 data points
Beta

Revenue

$870.50M

17.9% Gross Margin

Net Income

$32.99M

3.8% Net Margin

EPS (Diluted)

$0.16

Total Assets

$3.96B

Cash & Equivalents

$519.82M

Free Cash Flow

-$8.82M

Financial Statements
Beta
Revenue$870.50M
Gross Profit$156.04M
SG&A Expenses$82.12M
Operating Income$64.83M
Interest Expense$1.53M
Net Income$32.99M
EPS (Basic)$0.16
EPS (Diluted)$0.16
Shares Outstanding (Basic)209.40M
Shares Outstanding (Diluted)211.08M

Key Highlights

  • 1Revenue increased by 7.0% to $870.5 million for the three months ended June 30, 2010, compared to the prior year period.
  • 2The Natural Gas and Pipeline Infrastructure Services segment showed significant growth (38.4% revenue increase), largely due to the acquisition of Price Gregory.
  • 3Electric Power Infrastructure Services segment revenues decreased by 8.1%, primarily due to reduced customer spending and project timing.
  • 4Gross margin improved to 17.9% from 16.9% in the same quarter last year, benefiting from higher-margin gas transmission services.
  • 5The company redeemed its 3.75% convertible subordinated notes, resulting in a $7.1 million loss on early extinguishment of debt but reducing future interest expenses.
  • 6Backlog stood at $2.66 billion as of June 30, 2010, a decrease from $5.84 billion at the end of 2009, with a significant portion expected within 12 months.
  • 7Cash and cash equivalents were strong at $519.8 million as of June 30, 2010, providing ample liquidity.

Frequently Asked Questions

The primary driver of revenue growth was the Natural Gas and Pipeline Infrastructure Services segment, which saw a 38.4% increase in revenue. This surge was largely attributed to the inclusion of results from the Price Gregory acquisition, which was completed in October 2009.

Revenues for the Electric Power Infrastructure Services segment decreased by 8.1%. This was primarily due to a decrease in electric power transmission services revenue, influenced by the timing of major projects, and a reduction in electric power distribution services revenue stemming from decreased customer spending.

The company redeemed all of its outstanding 3.75% convertible subordinated notes on May 14, 2010. This resulted in a loss on early extinguishment of debt of approximately $7.1 million, including a non-cash loss and a redemption premium. However, it is expected to eliminate approximately $6.7 million in annual interest expense (net of tax) going forward.

Quanta Services anticipates improved economic conditions and increased spending in the second half of 2010 and into 2011 across its key segments, including electric transmission, gas transmission, telecommunications, and renewable energy projects. While challenges remain due to the economy and regulatory environments, the company is optimistic about long-term growth opportunities.