Quanta Services Reports 2017 Second Quarter Results
HOUSTON, Aug. 3, 2017 /PRNewswire/ -- Quanta Services, Inc. (NYSE: PWR) today announced results for the three months ended June 30, 2017. Revenues in the second quarter of 2017 were $2.20 billion, compared to revenues of $1.79 billion in the second quarter of 2016, and net income attributable to common stock was $63.8 million in the second quarter of 2017, or $0.41 per diluted share, compared to net income attributable to common stock of $16.6 million, or $0.11 per diluted share, in the second quarter of 2016. Adjusted diluted earnings per share attributable to common stock (a non-GAAP measure) was $0.50 for the second quarter of 2017 compared to $0.18 for the second quarter of 2016. As described further below, certain items negatively impacted GAAP diluted earnings per share attributable to common stock for the second quarter of 2017 by $0.03 per share.
"We remain on track to achieve our full-year outlook and believe momentum is building for continued growth in 2018. Larger electric transmission and pipeline projects are moving forward, as evidenced by our recent contracts for the Wind Catcher Generation Tie Line powerline project and the Line 3 Replacement Program pipeline project. We also booked approximately $150 million of new communications work during the second quarter, the majority of which is in the United States," said Duke Austin, President and Chief Executive Officer of Quanta Services. "Further, the recent acquisition of Stronghold expands our industrial services solutions for the energy industry, enhances our recurring revenues and provides us with cross-selling opportunities. We continue to believe that our innovative solutions and ability to safely execute projects while providing cost certainty, along with positive end market fundamentals, provide the opportunity for multi-year growth."
Negatively impacting the second quarter of 2017 was a $2.4 million charge to expense ($1.7 million net of tax), or $0.01 per diluted earnings per share attributable to common stock, associated with a charitable contribution made in connection with the formation and funding of a non-profit line school. Also impacting the quarter were acquisition and integration charges of $4.7 million ($3.0 million net of tax), or $0.02 per diluted share attributable to common stock, primarily associated with the acquisitions further discussed below.
RECENT HIGHLIGHTS
-- Chosen for the Wind Catcher Generation Tie Line - In July 2017, American
Electric Power (AEP) chose Quanta to provide engineering, procurement
and construction (EPC) solutions for the Wind Catcher Generation Tie
Line (Wind Catcher Tie Line). The anticipated contract value for this
project makes it the largest project award in Quanta's history. The Wind
Catcher Tie Line consists of approximately 350 miles of a single circuit
765kV power line and two new substations located between Guymon and
Tulsa, Oklahoma. Quanta will provide turnkey EPC services for the entire
project and has begun early-phase project support services. Subject to
AEP obtaining required state and federal regulatory approvals, Quanta
expects construction to begin in the latter part of 2018, with
completion expected in late 2020. Quanta has yet to determine whether
the project will be included in third quarter 2017 backlog.
-- Selected for Line 3 Replacement Program in Canada - In July 2017, Quanta
was selected by Enbridge Pipelines Inc. for two spreads of the Canadian
section of the Line 3 Replacement Program. Quanta's scope of work
includes the construction and installation of approximately 168 miles
(270 kilometers) of new 36-inch diameter crude oil mainline pipe, which
will begin in Hardisty, Alberta and continue into the province of
Saskatchewan, Canada. Quanta's construction of the project is expected
to begin in August 2017 and is anticipated to continue through 2019.
-- Booked Approximately $150 Million of Communications Work - During the
second quarter of 2017, Quanta booked approximately $150 million of new
work for several major North American communications companies, with the
majority of the work to be performed in the United States. Quanta's
scope of work on these projects includes long-haul fiber and
fiber-to-the-home deployments and is expected to be performed over the
next few years.
-- Acquired Stronghold - In July 2017, Quanta acquired Stronghold, Ltd. and
Stronghold Specialty, Ltd. (Stronghold), a leading specialized services
company that provides high pressure and critical path solutions to the
downstream and midstream energy markets. The transaction consideration
consisted of an upfront payment of approximately $450 million, comprised
of $360 million of cash and 2.7 million shares of Quanta common stock,
with a cash and stock earnout that could provide maximum additional
consideration of $100 million if cumulative three-year EBITDA targets
are achieved. Stronghold's financial results will be reflected in
Quanta's Oil and Gas Infrastructure Services segment beginning at the
date of acquisition.
-- Authorized $300 Million Stock Repurchase Program - In May 2017, Quanta's
Board of Directors authorized the company to repurchase up to $300
million in shares of its outstanding common stock through June 30, 2020,
through open market repurchases or privately negotiated transactions, at
management's discretion. Quanta anticipates utilizing this repurchase
program opportunistically from time to time as deemed appropriate, as
well as to potentially offset dilution from future issuances of stock
under its equity compensation programs and as consideration for future
acquisitions.
-- Acquired Communications Infrastructure Services Contractor - In June
2017, Quanta acquired an established communications infrastructure
services contractor that provides construction and maintenance services
in the southeast and other regions of the United States.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
Revenues in the first six months of 2017 were $4.38 billion, compared to revenues of $3.51 billion in the first six months of 2016, and net income attributable to common stock was $112.1 million in the first six months of 2017, or $0.72 per diluted share, compared to net income attributable to common stock of $37.1 million, or $0.23 per diluted share, in the first six months of 2016. Adjusted diluted earnings per share attributable to common stock (a non-GAAP measure) was $0.89 for the first six months of 2017 compared to $0.41 for the first six months of 2016.
In addition to the items affecting second quarter 2017 results previously discussed in this release, negatively impacting the first six months of 2017 were attorneys' fees and related expenses of approximately $4.2 million ($2.7 million net of tax), or $0.02 per diluted share attributable to common stock, associated with the litigation involving the non-compete agreement entered into in connection with Quanta's disposition of certain communications construction operations to Dycom Industries in December 2012, which was resolved during the first quarter of 2017. Also negatively impacting the first quarter of 2017 was a $1.9 million charge to expense ($1.2 million net of tax), or $0.01 per diluted share attributable to common stock, associated with the planned sale of a construction barge.
Quanta completed one acquisition during the first six months of 2017 and five acquisitions during the full year of 2016. Therefore, Quanta's results for the three and six months ended June 30, 2017 included these acquisitions and are compared to the historical results for the three and six months ended June 30, 2016.
OUTLOOK
The long-term outlook for Quanta's business is positive. However, weather, regulatory, permitting, project timing, execution challenges and other factors have impacted the company's historical results, and may impact Quanta's future financial results. Therefore, Quanta's financial outlook for revenues, margins and earnings reflects management's effort to properly align these uncertainties with the backlog that the company is executing on and the opportunities that are expected to materialize during 2017. The following forward-looking statements are based on current expectations, and actual results may differ materially.
Quanta is increasing its full-year 2017 revenue expectation to range between $8.65 billion and $9.05 billion. Quanta expects diluted earnings per share attributable to common stock to be $1.57 to $1.75 and adjusted diluted earnings per share attributable to common stock (a non-GAAP measure) for the full-year 2017 to be $1.92 to $2.10. Included in our outlook is the expectation that for the remainder of 2017, the acquired business of Stronghold is anticipated to generate approximately $240 million to $260 million of revenues and approximately $6.0 million to $7.5 million of net income attributable to common stock and to be accretive to Quanta's GAAP diluted earnings per share attributable to common stock by $0.02 to $0.03 and to non-GAAP adjusted diluted earnings per share attributable to common stock by $0.06 to $0.07. See the attached table for a reconciliation of estimated adjusted diluted earnings per share attributable to common stock to estimated GAAP diluted earnings per share attributable to common stock for the full-year 2017.
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 in addition to, and not in lieu of, results prepared in conformity with GAAP. Reconciliations of other non-GAAP to GAAP measures not included in the tables 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 9:00 a.m. Eastern Time on August 3, 2017, which will also be broadcast live over the Internet. To participate in the call, dial 1-201-689-8345 or 1-877-407-8291 at least 10 minutes before the conference call begins and ask for the Quanta Services Second Quarter 2017 Earnings Conference Call or visit the Investors and Media section of the Quanta Services website at http://investors.quantaservices.com/ to access the Internet broadcast. Please allow at least 15 minutes to register and download and install any necessary audio software. For those who cannot participate live, shortly following the call a digital recording will be available on the company's website and a telephonic replay will be available through August 11, 2017 by dialing 1-877-660-6853 and referencing the conference ID 13666301. For more information, please contact Kip Rupp, Vice President - Investor Relations at Quanta Services, at 713-341-7260 or investors@quantaservices.com.
ABOUT QUANTA SERVICES
Quanta Services is a leading specialized contracting services company, delivering infrastructure solutions for the electric power, oil and gas and communications industries. Quanta's comprehensive services include designing, installing, repairing and maintaining energy and communications infrastructure. With operations throughout the United States, Canada, Latin America, Australia and select other 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.
FOLLOW QUANTA IR ON SOCIAL MEDIA
Investors and others should note that while we announce material financial information and make other public disclosures of information regarding Quanta through SEC filings, press releases and public conference calls, we also utilize social media to communicate this information. It is possible that the information we post on social media could be deemed material. Accordingly, we encourage investors, the media and others interested in our company to follow Quanta, and review the information we post, on the social media channels listed on our website in the "Investors & Media" section.
Forward-Looking Statements
This press release (and oral statements regarding the subject matter of this press 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, net income, earnings per share attributable to common stock, weighted average shares outstanding, margins, capital expenditures, tax rates and other operating or financial results; expectations regarding Quanta's business or financial outlook; growth, trends or opportunities in particular markets; backlog; the potential benefits from acquisitions, including Stronghold, or investments; the expected financial and operational performance of acquired businesses; future capital allocation initiatives; the ability to deliver increased value and return capital to stockholders; the strategic use of Quanta's balance sheet; 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 anticipated commencement and completion dates for any projects awarded; the development of larger electric transmission and oil and natural gas pipeline projects and the level of oil, natural gas and natural gas liquids prices and their impact on Quanta's business or the demand for Quanta's services; the impact of existing or potential energy legislation; potential opportunities that may be indicated by bidding activity or discussions with customers; the expected outcome of pending and threatened litigation; beliefs and assumptions about the collectability of receivables; the business plans or financial condition of Quanta's customers; Quanta's plans and strategies; the current economic and regulatory conditions and trends in the industries Quanta serves; and possible recovery on pending or contemplated change orders or affirmative claims against customers or third parties, 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 known and unknown risks and uncertainties that are difficult to predict or beyond Quanta's control, including, among others, market conditions; the effects of industry, economic, financial or political conditions outside of the control of Quanta, including weakness in capital markets; quarterly variations in operating results; 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 permitting issues, environmental processes, project performance issues, claimed force majeure events, or 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 Quanta bids or is otherwise discussing with customers; the ability to attract and the potential shortage of skilled labor; the ability to retain key personnel and qualified 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; the failure of existing or potential legislative actions to result in increased demand for Quanta's services; liabilities associated with multiemployer pension plans, including underfunding of liabilities and termination or withdrawal liabilities, and the possibility of further increases in the liability associated with Quanta's withdrawal from a multiemployer pension plan; liabilities for claims that are self-insured or not insured; unexpected costs or liabilities that may arise from lawsuits, indemnity obligations or other claims asserted against Quanta, including liabilities and costs for which Quanta is self-insured or uninsured; the outcome of pending or threatened litigation; 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 or similar structures exposes Quanta to liability and/or harm to its reputation for acts or omissions by partners; Quanta's inability or failure to comply with the terms of its contracts, which may result in additional costs, 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 and on Quanta's customers' capital programs and the resulting impact on demand for Quanta's services; the future development of natural resources; the inability or refusal of customers to pay for services, including failure to collect outstanding receivables; the failure to recover on payment claims against project owners or third party contractors or to obtain adequate compensation for customer-requested change orders; the failure of Quanta's customers to comply with regulatory requirements applicable to their projects, which may result in project delays and cancellations; budgetary or other constraints that may reduce or eliminate tax incentives or government funding for 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, as well as compliance with foreign legal systems and cultural practices, 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 investments and acquisitions, including the ability to retain key personnel from an acquired business and the potential increase in risks already existing in Quanta's operations; the adverse impact of impairments of goodwill, receivables, property and equipment and other intangible assets or investments; growth outpacing Quanta's decentralized management and infrastructure; requirements relating to governmental regulation and changes thereto; inability to enforce Quanta's 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 and other adverse effects arising from occupational health and safety matters; Quanta's dependence on suppliers, subcontractors, equipment manufacturers and other third party contractors; the cost of borrowing, availability of credit and cash, 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; fluctuations of prices of certain materials used in our business; 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 certain regulatory requirements applicable to us and our subsidiaries; rapid technological and other structural changes that could reduce the demand for Quanta's services; new or changed tax laws, treaties or regulations; increased healthcare costs arising from healthcare reform legislation and other legislative action; regulatory changes that result in increased labor costs; significant fluctuations in foreign currency exchange rates; and other risks and uncertainties detailed in Quanta's Annual Report on Form 10-K for the year ended Dec. 31, 2016, Quanta's Quarterly Report on Form 10-Q for the quarter ended Mar. 31, 2017 and any other documents that Quanta files with the Securities and Exchange Commission (SEC). 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. 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. Quanta further expressly disclaims any written or oral statements made by any third party regarding the subject matter of this press release.
Contacts: Derrick Jensen, CFO Media -Deborah Buks and
Molly LeCronier
Kip Rupp, CFA - Investors Ward
Quanta Services, Inc. 713-869-0707
713-629-7600
Quanta Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2017 and 2016
(In thousands, except per share information)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenues $2,200,374 $1,792,430 $4,378,544 $3,506,167
Cost of services
(including
depreciation) 1,898,209 1,592,213 3,810,191 3,102,637
--------- --------- ---------
Gross profit 302,165 200,217 568,353 403,530
Selling, general
and administrative
expenses 185,880 156,607 370,432 315,131
Amortization of
intangible assets 6,494 8,141 13,056 15,636
----- ----- ------ ------
Operating income 109,791 35,469 184,865 72,763
Interest expense (4,271) (3,583) (8,236) (7,172)
Interest income 164 641 451 1,157
Other income
(expense), net (1,079) (1,103) (1,443) (1,022)
------ ------ ------ ------
Income before
income taxes 104,605 31,424 175,637 65,726
Provision for
income taxes 40,245 14,695 62,837 28,138
------ ------ ------ ------
Net income 64,360 16,729 112,800 37,588
Less: Net income
attributable to
non-controlling
interests 523 167 696 530
--- --- --- ---
Net income
attributable to
common stock $63,837 $16,562 $112,104 $37,058
======= ======= ======== =======
Earnings per share
attributable to
common stock -
basic and diluted $0.41 $0.11 $0.72 $0.23
===== ===== ===== =====
Weighted average shares used in
computing earnings per share
attributable to common stock:
Basic 155,090 156,128 154,859 159,577
======= ======= ======= =======
Diluted 156,165 156,130 155,745 159,579
======= ======= ======= =======
Quanta Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, December 31,
2017 2016
---- ----
ASSETS
CURRENT ASSETS:
Cash and
cash
equivalents $99,565 $112,183
Accounts
receivable,
net 1,614,113 1,500,115
Costs and
estimated
earnings
in excess
of
billings
on
uncompleted
contracts 630,880 473,308
Inventories 94,152 88,548
Prepaid
expenses
and other
current
assets 178,489 114,591
-------
Total
current
assets 2,617,199 2,288,745
PROPERTY
AND
EQUIPMENT,
net 1,190,333 1,174,094
OTHER
ASSETS,
net 145,120 101,028
OTHER
INTANGIBLE
ASSETS,
net 184,375 187,023
GOODWILL 1,616,317 1,603,169
--------- ---------
Total
assets $5,753,344 $5,354,059
========== ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current
maturities
of long-
term debt
and
short-
term debt $1,375 $7,563
Accounts
payable
and
accrued
expenses 969,654 922,819
Billings
in excess
of costs
and
estimated
earnings
on
uncompleted
contracts 314,987 274,846
------- -------
Total
current
liabilities 1,286,016 1,205,228
LONG-TERM
DEBT AND
NOTES
PAYABLE,
net of
current
maturities 483,638 353,562
DEFERRED
INCOME
TAXES AND
OTHER
NON-
CURRENT
LIABILITIES 474,359 452,567
-------
Total
liabilities 2,244,013 2,011,357
--------- ---------
TOTAL
STOCKHOLDERS'
EQUITY 3,506,723 3,339,427
NON-
CONTROLLING
INTERESTS 2,608 3,275
----- -----
TOTAL
EQUITY 3,509,331 3,342,702
--------- ---------
Total
liabilities
and
equity $5,753,344 $5,354,059
========== ==========
Quanta Services, Inc. and Subsidiaries
Supplemental Segment Data
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
Segment Results
Quanta reports its results under two reportable segments: (1) Electric Power Infrastructure Services and (2) Oil and Gas Infrastructure Services, as set forth below (in thousands, except percentages).
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Revenues:
Electric Power
Infrastructure
Services $1,300,729 59.1% $1,159,087 64.7% $2,520,231 57.6% $2,346,089 66.9%
Oil and Gas
Infrastructure
Services 899,645 40.9 633,343 35.3 1,858,313 42.4 1,160,078 33.1
------- ---- ------- ---- --------- ---- --------- ----
Consolidated
revenues $2,200,374 100.0% $1,792,430 100.0% $4,378,544 100.0% $3,506,167 100.0%
========== ===== ========== ===== ========== ===== ========== =====
Operating income (loss):
Electric Power
Infrastructure
Services (a) $113,043 8.7% $75,934 6.6% $212,715 8.4% $163,258 7.0%
Oil and Gas
Infrastructure
Services (b) 67,751 7.5 11,899 1.9 106,568 5.7 17,740 1.5
Corporate and Non-
Allocated Costs
(c) (71,003) N/A (52,364) N/A (134,418) N/A (108,235) N/A
------- ------- -------- --------
Consolidated
operating income $109,791 5.0% $35,469 2.0% $184,865 4.2% $72,763 2.1%
======== ======= ======== =======
(a) Included in operating income for the Electric Power Infrastructure Services segment for the three and six months ended June 30, 2016 were $30.5 million and $51.8 million of losses related to a power plant construction project in Alaska.
(b) Included in operating income for the Oil and Gas Infrastructure Services segment for the six months ended June 30, 2017 was a $1.9 million charge to expense associated with the planned sale of a construction barge. Included in operating income for the six months ended June 30, 2016 were approximately $2 million in severance and restructuring costs.
(c) Included in Corporate and Non-Allocated Costs for the three and six months ended June 30, 2017 was a $2.4 million charitable contribution made in connection with the formation and funding of a non-profit line school and $4.7 million associated with acquisitions, while included in the three and six months ended June 30, 2016 were $0.8 million and $2.1 million of charges associated with acquisitions. Also included in Corporate and Non-Allocated Costs for the six months ended June 30, 2017 was the $4.2 million associated with the litigation involving the non-compete agreement entered into in connection with Quanta's disposition of certain communications construction operations to Dycom Industries in December 2012, which was resolved in the first quarter of 2017.
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 and master service 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 table presents Quanta's total backlog by reportable segment as of June 30, 2017, December 31, 2016 and June 30, 2016, 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
June 30, 2017 December 31, 2016 June 30, 2016
12 Month Total 12 Month Total 12 Month Total
-------- ----- -------- ----- -------- -----
Electric Power
Infrastructure
Services $3,631.1 $6,759.9 $3,369.3 $6,657.5 $3,270.2 $6,347.2
Oil and Gas
Infrastructure
Services 1,709.0 2,422.9 2,484.0 3,092.3 2,437.6 3,408.5
------- ------- ------- ------- ------- -------
Total $5,340.1 $9,182.8 $5,853.3 $9,749.8 $5,707.8 $9,755.7
======== ======== ======== ======== ======== ========
Quanta Services, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measure
Adjusted Diluted Earnings Per Share Attributable to Common Stock
For the Three and Six Months Ended June 30, 2017 and 2016
(In thousands, except per share information)
(Unaudited)
The non-GAAP measure of adjusted diluted earnings per share attributable to common stock, when used in connection with diluted earnings per share attributable to common stock, is intended to provide useful information to investors and analysts as they evaluate Quanta's performance. Management believes that the exclusion of certain items from net income attributable to common stock enables it to more effectively evaluate Quanta's operations period over period and better identify operating trends that may not otherwise be apparent. 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, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted during the period; (iii) acquisition and integration costs vary period to period depending on the level of Quanta's ongoing acquisition activity; and (iv) severance costs related to the departure of Quanta's former president and chief executive officer and severance and restructuring costs associated with certain operations primarily within Quanta's Oil and Gas Infrastructure segment are not regularly occurring items. Because adjusted diluted earnings per share attributable to common stock, as defined, excludes some, but not all, items that affect net income attributable to common stock, adjusted diluted earnings per share attributable to common stock as presented in this press release may or may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net income attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. Reconciliations of other non-GAAP to GAAP measures not included in the table below can be found on Quanta's website at www.quantaservices.com in the "Investors & Media" section. See table on the following page.
Quanta Services, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measure
Adjusted Diluted Earnings Per Share Attributable to Common Stock
For the Three and Six Months Ended June 30, 2017 and 2016
(In thousands, except per share information)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Reconciliation of adjusted net income
attributable to common stock:
Net income attributable
to common stock (GAAP
as reported) $63,837 $16,562 $112,104 $37,058
Adjustments:
Severance and
restructuring charges
(a) - - - 6,352
Acquisition and
integration costs 4,745 830 4,745 2,083
Income tax impact of
adjustments (b) (1,733) (221) (1,733) (2,835)
------ ---- ------ ------
Adjusted net income
attributable to common
stock before certain
non-cash adjustments 66,849 17,171 115,116 42,658
Non-cash stock-based
compensation 11,557 9,503 23,423 21,513
Amortization of
intangible assets 6,494 8,141 13,056 15,636
Income tax impact of
non-cash adjustments
(b) (6,603) (6,371) (13,347) (13,616)
------ ------ ------- -------
Adjusted net income
attributable to common
stock $78,297 $28,444 $138,248 $66,191
======= ======= ======== =======
Weighted average shares:
Weighted average shares
outstanding for basic
earnings per share
attributable to common
stock 155,090 156,128 154,859 159,577
======= ======= ======= =======
Weighted average shares
outstanding for
diluted and adjusted
diluted earnings per
share attributable to
common stock 156,165 156,130 155,745 159,579
======= ======= ======= =======
Diluted earnings per share and adjusted
diluted earnings per share
attributable to common stock:
Diluted earnings per
share attributable to
common stock (c) $0.41 $0.11 $0.72 $0.23
===== ===== ===== =====
Adjusted diluted
earnings per share
attributable to common
stock (c) $0.50 $0.18 $0.89 $0.41
===== ===== ===== =====
(a) The amount for the six months ended June 30, 2016 reflects the elimination of severance costs associated with the departure of Quanta's former president and chief executive officer and severance and restructuring costs associated with certain operations primarily within the Oil and Gas Infrastructure Services segment.
(b) The income tax impact of adjustments that are subject to tax is determined using the incremental statutory tax rate of the jurisdictions to which each adjustment relates for the respective periods.
(c) Both diluted and adjusted diluted earnings per share attributable to common stock for the three and six months ended June 30, 2017 were impacted by a $2.4 million ($1.7 million net of tax), or $0.01 per share, charitable contribution made in connection with the formation and funding of a non-profit line school. Additionally, both diluted and adjusted diluted earnings per share attributable to common stock for the six months ended June 30, 2017 were impacted by attorneys' fees and related expenses of approximately $4.2 million ($2.7 million net of tax), or $0.02 per share, associated with the Dycom Industries litigation, which was resolved in the first quarter of 2017, and a $1.9 million charge ($1.2 million net of tax), or $0.01 per share, to expense associated with the planned sale of a construction barge in order to record the asset to its estimated fair market value. For the three months ended June 30, 2016, both diluted and adjusted diluted earnings per share attributable to common stock were impacted by $30.5 million ($18.6 million net of tax), or $0.12 per share, of losses related to a power plant construction project in Alaska. For the six months ended June 30, 2016, both diluted and adjusted diluted earnings per share attributable to common stock were impacted by $51.8 million ($31.6 million net of tax), or $0.20 per share, of losses related to the same power plant construction project.
Quanta Services, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measure
Estimated Adjusted Diluted Earnings Per Share Attributable to Common Stock
For the Full Year 2017
(In thousands, except per share information)
The non-GAAP measure of adjusted diluted earnings per share attributable to common stock, when used in connection with diluted earnings per share attributable to common stock, is intended to provide useful information to investors and analysts as they evaluate Quanta's performance. Management believes that the exclusion of certain items from net income attributable to common stock enables it to more effectively evaluate Quanta's operations period over period and better identify operating trends that may not otherwise be apparent. 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, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted during the period; and (iii) acquisition and integration costs vary period to period depending on the level of Quanta's ongoing acquisition activity. Because adjusted diluted earnings per share attributable to common stock, as defined, excludes some, but not all, items that affect net income attributable to common stock, adjusted diluted earnings per share attributable to common stock as presented in this press release may or may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net income attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. Reconciliations of other non-GAAP to GAAP measures not included in the table below can be found on Quanta's website at www.quantaservices.com in the "Investors & Media" section.
Estimated Range
---------------
Full Year Ending
December 31, 2017
Reconciliation of
estimated adjusted
net income
attributable to
common stock:
Net income
attributable to
common stock (as
defined by GAAP) $247,000 $275,300
Acquisition and
integration costs 9,300 9,300
Income tax impact of
adjustments (a) (3,400) (3,400)
------ ------
Adjusted net income
attributable to
common stock before
certain non-cash
adjustments 252,900 281,200
Non-cash stock-based
compensation 47,000 47,000
Amortization of
intangible assets 30,600 30,600
Income tax impact of
non-cash adjustments
(a) (28,500) (28,500)
------- -------
Estimated adjusted net
income attributable
to common stock $302,000 $330,300
======== ========
Estimated weighted
average shares:
Weighted average
shares outstanding
for diluted and
adjusted diluted
earnings per share
attributable to
common stock 157,300 157,300
======= =======
Estimated diluted
earnings per share
and estimated
adjusted diluted
earnings per share
attributable to
common stock:
Estimated diluted
earnings per share
attributable to
common stock $1.57 $1.75
===== =====
Estimated adjusted
diluted earnings per
share attributable to
common stock $1.92 $2.10
===== =====
(a) The income tax impact of adjustments that are subject to tax is determined using the incremental statutory tax rate of the jurisdictions to which each adjustment relates for the respective periods.
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SOURCE Quanta Services, Inc.
