Quanta Services, Inc. (PWR)

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Quanta Services (PWR)

Q3 2010 Earnings Call

November 03, 2010 9:30 am ET


James O'Neil - President and Chief Operating Officer

James Haddox - Chief Financial Officer

Kip Rupp - Managing Partner

John Colson - Chairman, Chief Executive Officer, Chairman of Merger, Acquisition & Disposition Committee and Chairman of Small Merger, Acquisition & Disposition Committee


Stuart Bush - RBC Capital Markets Corporation

Scott Levine - JP Morgan Chase & Co

Alexander Rygiel - FBR Capital Markets & Co.

Stephen Sanders - Stephens Inc.

Craig Irwin - Wedbush Securities Inc.

Tahira Afzal - KeyBanc Capital Markets Inc.

Carter Shoop - Deutsche Bank AG

Adam Thalhimer - BB&T Capital Markets

Sanjay Shrestha - Lazard Capital Markets LLC

John Rogers - D.A. Davidson & Co.

Jeffrey Beach - Stifel, Nicolaus & Co., Inc.

Daniel Mannes - Avondale Partners, LLC

Justin Hauke

David Martin Lowish

Will Gabrielski - Gleacher & Company, Inc.

Jamie Cook - Crédit Suisse AG



Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Quanta Services Third Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kip Rupp of DRG&L. Please go ahead, sir.

Kip Rupp

Okay, thank you, Luke, and welcome, everyone, to Quanta Services conference call for the year 2010 third quarter results. Before I turn the call over to management, I have the normal housekeeping details to run through.

If you would like to be on the e-mail or fax distribution list to receive future press releases for Quanta, or if you had any technical difficulties this morning and did not receive your e-mail or fax, please call our offices at DRG&L at (713) 529-6600. You can also sign up for e-mail information and alerts by going through the Investors & Media section of Quanta's website at quantaservices.com.

If you would like to listen to a replay of today's call, it will be available via webcast by also going to Quanta's website at quantaservices.com. In addition, there's a telephonic recorded instant replay that will be available for the next seven days, 24 hours a day, that can be accessed to set forth in the press release. Please remember that information recorded on this call speaks only as of today, November 3, 2010, and therefore you're advised that any time-sensitive information may no longer be accurate as of the time of any replay of this call. This conference call will include forward-looking statements intended to qualify under the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include any statements reflecting Quanta's expectations, intentions, assumptions or beliefs about future events or performance or that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict or beyond Quanta's control and actual results may differ materially from those expected or implied as forward-looking statements. Management cautions that you should not place undue reliance on Quanta's forward-looking statements, and Quanta does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after this call.

For additional information concerning some of the risks, uncertainties and assumptions that could affect Quanta's forward-looking statements, please refer to the company's annual report on Form 10-K for the year ended December 31, 2009, its quarterly reports on Form 10-Q and its other documents filed with the Securities and Exchange Commission, which may be obtained through the SEC's website at sec.gov.

With that, I would now like to turn the call over to Mr. John Colson, Quanta's Chairman and CEO. John?

John Colson

Good morning, everyone, and welcome to Quanta Services Third Quarter 2010 Conference Call. To start the call this morning, I will provide a summary of the quarter results with added insight on the impact of current industry circumstances and overall economic conditions. My comments will be followed by an operational review by Jim O'Neil, President and Chief Operating Officer; and a review of the financial results by James Haddox, our Chief Financial Officer. As always, we welcome your questions following our remarks.

Revenues for the third quarter increased over 50% to $1.2 billion compared to $780.8 million in the prior year's third quarter. Third quarter revenues for 2010 include revenues for Price Gregory, which was acquired on October 1, 2009. Additional activity in our Electric Power segment was the other main contributor to our revenue increase. Emergency Restoration revenues had no significant effect on the quarterly comparison.

The revenues in our Electric Power and Natural Gas Pipeline segments were about as expected for the quarter, however, various weather and regulatory-related project delays reduced our margins. We believe this is a temporary impact that affected our third quarter and will affect our fourth quarter. But we remain committed to maintaining appropriate margins for our work. This is the first decline in margins that we have had in 12 consecutive quarters. We did achieve notable accomplishments this quarter and are starting to see increased project momentum in certain segments of our business.

During the quarter, we secured contracts for the construction of two solar facilities totaling approximately 39 megawatts near Avenal, California. Work under this contract with Avenal Solar Holdings has already been initiated. We were awarded a 200-mile fiber project in North Carolina. This is the first construction project we have secured under the broadband stimulus program awards. The groundbreaking ceremony on this project was held last month.

Work progressed in our contract with the construction of 200 miles of natural gas pipelines in Wyoming for Bison Pipeline LLC, and we've progressed with construction of two solar parks in Ontario, Canada totaling 18 megawatts under our contract with SunEdison. Subsequent to the third quarter end, we completed the acquisition of Valard construction, one of Canada's largest electric power line contractors. Valard is expected to contribute $225 million to $250 million of revenues in 2011. With an expanded Canadian footprint, we are better positioned to leverage the emerging opportunities in the Canadian energy market.

Although there have been some delays, some projects, such as the Northeast Utilities, New England East-West Solution have begun. We also expect the Sunrise project in California to start soon following several months of delays. Additionally, five of the six utilities charge for building transmission lines in Texas, Competitive Renewable Energy Zone or CREZ, have issued bid request, and we are participating in most of them. Two BC Hydro projects are also out to bid.

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