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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NO. 001-13831
QUANTA SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 74-2851603
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1360 POST OAK BLVD. 3555 TIMMONS LANE
SUITE 2100 SUITE 610
HOUSTON, TEXAS 77056 HOUSTON, TEXAS 77027
(ADDRESS OF PRINCIPAL EXECUTIVE (FORMER ADDRESS)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 629-7600
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
16,594,419 shares of Common Stock were outstanding as of August 13, 1998. As
of the same date, 3,345,333 shares of Limited Vote Common Stock were
outstanding.
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QUANTA SERVICES, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
QUANTA SERVICES, INC. PRO FORMA COMBINED
Supplemental Pro Forma Combined Financial Information................. 1
Supplemental Pro Forma Combined Statements of Operations for the six
months ended
June 30, 1997 and 1998............................................... 2
QUANTA SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets........................................... 4
Consolidated Statements of Operations................................. 5
Consolidated Statements of Cash Flows................................. 6
Notes to Condensed Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 11
PART II. OTHER INFORMATION
Item 2. Use of Proceeds................................................. 16
Item 6. Exhibits and Reports on Form 8-K................................ 17
Signature............................................................... 18
QUANTA SERVICES, INC.
PART I, ITEM 1--FINANCIAL INFORMATION
SUPPLEMENTAL PRO FORMA COMBINED FINANCIAL INFORMATION
OVERVIEW AND BASIS OF PRESENTATION
Quanta Services, Inc., a Delaware corporation ("Quanta" or the "Company"),
was founded in August 1997 to create a leading provider of specialty
electrical contracting and maintenance services primarily related to electric
and telecommunications infrastructure in North America. In February 1998,
Quanta completed its initial public offering (the "Offering"), concurrent with
which Quanta acquired, in separate transactions, four entities (the "Founding
Companies"). From the date of the Offering through June 30, 1998, the Company
has acquired three additional businesses for approximately $23.5 million in
cash and 2,248,685 shares of Common Stock. Of these additional acquired
businesses, one was accounted for as a pooling-of-interests and is referred to
herein as the "Pooled Company." The remaining acquired businesses were
accounted for as purchases and are referred to herein as the "Purchased
Companies." Quanta intends to continue to acquire through merger or purchase
similar companies to expand its national and regional operations.
Pursuant to the Securities and Exchange Commission's Staff Accounting
Bulletin No. 97 (SAB 97), the financial statements of Quanta for periods prior
to February 18, 1998 (the effective closing date of the acquisitions of the
Founding Companies) are the financial statements of PAR Electrical
Contractors, Inc. ("PAR" or the "Accounting Acquiror"). The operations of the
other Founding Companies and Quanta, acquired by the Accounting Acquiror, have
been included in the Company's historical financial statements beginning
February 19, 1998.
The accompanying pro forma combined statements of operations of the Company
for the six months ended June 30, 1997 and 1998, respectively, include the
combined operations of the Pooled Company and the Founding Companies from
January 1, 1997, and the Purchased Companies from the date of their respective
acquisition.
The unaudited pro forma combined statements of operations for the six months
ended June 30, 1997 and 1998 assume that the Offering and related transactions
were closed on January 1, 1997 and present certain data for the Company as
adjusted for: 1) the acquisition of the Founding Companies; 2) the IPO
completed on February 18, 1998; 3) certain reductions in salaries, bonuses and
benefits to former owners of the Founding Companies; 4) amortization of
goodwill resulting from the acquisition of the Founding Companies; 5)
reduction in interest expense, net of interest expense on borrowings to fund S
corporation distributions by certain of the Founding Companies, and 6)
adjustments to the federal and state income tax provision based on pro forma
operating results.
The unaudited pro forma combined statements of operations are presented
herein as the Company believes certain investors find the information useful.
This statement should be read in conjunction with the Company's historical
unaudited financial statements and notes thereto included in this Form 10-Q.
The pro forma adjustments are based on estimates, available information and
certain assumptions which may be revised as additional information becomes
available. The pro forma financial data does not purport to represent what the
Company's combined financial position or results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's financial position or results of
operations for any future period. Since Quanta, the Founding Companies, the
Pooled Company and the Purchased Companies were not under common control or
management for a portion of the periods presented, historical combined results
may not be comparable to, or indicative of, future performance.
Operating results for the interim periods are not necessarily indicative of
the results for full years. The results of the Company have historically been
subject to significant seasonal fluctuations. It is suggested that these pro
forma combined financial statements be read in conjunction with the pro forma
combined financial statements and the notes thereto included in the Company's
Registration Statement on Form S-4, as amended, (Reg. No. 333-47083), which
was filed with the Securities and Exchange Commission ("SEC") on February 27,
1998.
1
QUANTA SERVICES, INC. AND SUBSIDIARIES
SUPPLEMENTAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1998
------- --------
Revenues...................................................... $79,024 $108,253
Cost of services (including depreciation).......................66,039 88,854
------- --------
Gross profit................................................ 12,985 19,399
Selling, general & administrative expenses 6,953 9,845
Merger expenses--pooling...................................... -- 231
Goodwill amortization......................................... 848 967
------- --------
Income from operations...................................... 5,184 8,356
------- --------
Other income (expense):
Interest expense............................................ (657) (1,012)
Other income (expense), net................................. 162 237
------- --------
(495) (775)
------- --------
Income before income tax expense.............................. 4,689 7,581
Provision for income taxes.................................... 2,136 3,477
------- --------
Net income.................................................... $ 2,553 $ 4,104
======= ========
Basic earnings per share...................................... $ .15 $ .23
======= ========
Diluted earnings per share.................................... $ .15 $ .23
======= ========
Diluted earnings per share before merger expenses............. $ .15 $ .24
======= ========
Shares used in computing pro forma earnings per share--
Basic....................................................... 16,995 17,834
======= ========
Diluted..................................................... 16,995 17,942
======= ========
The accompanying notes are an integral part of these pro forma combined
financial statements.
2
(1) Shares Used in Computing Pro Forma Earnings Per Share
The 16,995,056 shares used in the calculation of unaudited pro forma
combined basic and diluted earnings per share for the six months ended June
30, 1997 include (i) 7,527,000 shares of Common Stock issued to the owners of
the Founding Companies, (ii) 951,945 shares issued for the acquisition of the
Pooled Company, (iii) 3,345,333 shares of Limited Vote Common Stock issued to
the initial stockholders and certain management personnel of the Company, and
(iv) 5,750,000 shares of Common Stock, net of 579,222 shares representing net
cash to Quanta, sold in the Offering to pay the cash portion of the
consideration for the Founding Companies, to repay expenses incurred in
connection with the Offering and to retire debt.
The 17,834,154 shares used in the calculation of unaudited pro forma
combined basic earnings per share for the six months ended June 30, 1998
include (i) 7,527,000 shares of Common Stock issued to the owners of the
Founding Companies, (ii) 951,945 shares issued for the acquisition of the
Pooled Company, (iii) the weighted average portion of the shares issued in
acquisitions accounted for as purchases, (iv) 3,345,333 shares of Limited Vote
Common Stock issued to the initial stockholders and certain management
personnel of the Company, and (v) 5,750,000 shares of Common Stock, net of
357,174 shares representing net cash to Quanta, sold in the Offering to pay
the cash portion of the consideration for the Founding Companies, to repay
expenses incurred in connection with the Offering and to retire debt.
Shares used in the calculation of unaudited pro forma combined diluted
earnings per share for the six months ended June 30, 1998 include (i) the
17,834,154 shares described above, and (ii) the dilution attributable to
outstanding options to purchase Common Stock, using the treasury stock method.
3
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents........................... $ 489 $ 1,778
Accounts receivable, net of allowance of $193 and
$972............................................... 12,878 43,856
Costs and profits recognized in excess of billings.. 1,746 18,221
Inventories......................................... 865 1,750
Prepaid expenses and other.......................... 724 1,198
------- --------
Total current assets.............................. 16,702 66,803
PROPERTY AND EQUIPMENT, NET........................... 18,286 44,088
OTHER ASSETS.......................................... 645 1,170
GOODWILL, NET......................................... 114 93,765
------- --------
Total assets...................................... $35,747 $205,826
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................ $ 7,200 $ 3,946
Accounts payable and accrued expenses............... 6,578 33,301
Billings in excess of costs and profits recognized.. 738 2,832
------- --------
Total current liabilities......................... 14,516 40,079
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities........... 7,542 33,112
Deferred income taxes............................... 2,479 3,879
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock..................................... -- --
Common Stock........................................ -- --
Limited Vote Common Stock........................... -- --
Unearned ESOP shares................................ (1,831) (1,831)
Additional paid-in capital.......................... 1,238 115,375
Retained earnings................................... 11,803 15,212
------- --------
Total stockholders' equity........................ 11,210 128,756
------- --------
Total liabilities and stockholders' equity........ $35,747 $205,826
======= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------
1997 1998 1997 1998
--------- --------- -------- --------
Revenues............................. $ 20,226 $ 63,679 $ 34,799 $ 93,717
Cost of services (including
depreciation)....................... 15,973 51,225 28,861 76,681
--------- --------- -------- --------
Gross profit....................... 4,253 12,454 5,938 17,036
Selling, general & administrative
expenses............................ 2,647 5,545 4,855 8,889
Merger expenses pooling.............. -- 231 -- 231
Goodwill amortization................ 14 553 28 749
--------- --------- -------- --------
Income from operations............. 1,592 6,125 1,055 7,167
Other income (expense):..............
Interest expense................... (287) (656) (557) (1,049)
Other income (expense), net........ (54) 116 (94) 191
--------- --------- -------- --------
(341) (540) (651) (858)
--------- --------- -------- --------
Income before income tax expense..... 1,251 5,585 404 6,309
Provision for income taxes........... 513 2,544 136 2,900
--------- --------- -------- --------
Net income......................... $ 738 $ 3,041 $ 268 $ 3,409
========= ========= ======== ========
Basic earnings per share............. $ .19 $ .16 $ .07 $ .24
========= ========= ======== ========
Diluted earnings per share........... $ .19 $ .16 $ .07 $ .24
========= ========= ======== ========
Diluted earnings per share before
merger expenses..................... $ .19 $ .18 $ .07 $ .25
========= ========= ======== ========
Shares used in computing earnings per
share--
Basic.............................. 3,952 18,444 3,952 14,399
========= ========= ======== ========
Diluted............................ 3,952 18,606 3,952 14,506
========= ========= ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
1997 1998 1997 1998
--------- --------- ------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 738 $ 3,041 $ 268 $ 3,409
Adjustments to reconcile net income
to net cash provided by operating
activities--
Depreciation and amortization....... 803 2,217 1,606 3,364
Gain (loss) on sale of property and
equipment.......................... 5 (8) 2 (57)
Deferred income taxes............... (2) 87 15 192
Changes in operating assets and
liabilities--
(Increase) decrease in--
Accounts receivable............... (2,760) (502) (406) (3,163)
Inventories....................... (65) 478 47 (128)
Costs and estimated earnings in
excess of billings on uncompleted
contacts......................... (262) (4,514) (857) (5,643)
Prepaid expenses and other current
assets........................... 58 35 128 41
Increase (decrease) in--
Accounts payable and accrued
expenses......................... 1,605 1,205 1,641 5,768
Billings in excess of costs and
estimated earnings on uncompleted
contracts........................ (445) 1,754 (1,090) 184
Other, net........................ (33) (438) (33) (442)
-------- --------- ------- --------
Net cash provided by (used in)
operating activities............... (358) 3,355 1,321 3,525
-------- --------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of properties and
equipment........................... 68 153 95 969
Additions of property and equipment.. (2,536) (4,342) (3,939) (7,266)
Cash paid for acquisitions, net of
cash acquired....................... -- (22,716) -- (34,773)
-------- --------- ------- --------
Net cash used in investing
activities......................... (2,468) (26,905) (3,844) (41,070)
-------- --------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt......... 292 159 1,692 564
Payments of long-term debt........... (733) (8,795) (1,645) (24,838)
Issuances of Common Stock, net of
offering costs...................... -- -- -- 45,109
Net (payments)/borrowings under lines
of credit........................... 3,143 28,895 1,964 26,369
Distributions to stockholders........ -- -- -- (8,370)
-------- --------- ------- --------
Net cash provided by financing
activities......................... 2,702 20,259 2,011 38,834
-------- --------- ------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................... (124) (3,291) (512) 1,289
-------- --------- ------- --------
CASH AND CASH EQUIVALENTS, beginning of
period................................ 124 5,069 512 489
-------- --------- ------- --------
CASH AND CASH EQUIVALENTS, end of
period................................ $ -- $ 1,778 $ -- $ 1,778
======== ========= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for--
Interest............................. $ 288 $ 577 $ 540 $ 935
======== ========= ======= ========
Income taxes......................... $ 5 $ 536 $ 33 $ 799
======== ========= ======= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND ORGANIZATION:
Quanta Services, Inc., a Delaware corporation ("Quanta" or the "Company"),
was founded in August 1997 to create a leading provider of specialty
electrical contracting and maintenance services primarily related to electric
and telecommunications infrastructure in North America.
In February 1998, Quanta completed its initial public offering (the
"Offering"), concurrent with which Quanta acquired, in separate transactions,
four entities (the "Founding Companies"). Subsequent to the date of the
Offering, and through June 30, 1998, the Company has acquired three additional
businesses for approximately $23.5 million in cash and 2,248,685 shares of
Common Stock. Of these additional acquired businesses, one was accounted for
as a pooling-of-interests and is referred to herein as the "Pooled Company."
The remaining acquired businesses were accounted for as purchases and are
referred to herein as the "Purchased Companies." Quanta intends to continue to
acquire through merger or purchase similar companies to expand its national
and regional operations.
Pursuant to the Securities and Exchange Commission's Staff Accounting
Bulletin No. 97 ("SAB 97"), the financial statements of Quanta for periods
prior to February 18, 1998 (the effective closing date of the acquisitions of
the Founding Companies), are the financial statements of PAR Electrical
Contractors, Inc. ("PAR" or the "Accounting Acquiror") as restated for the
acquisition of the Pooled Company in June 1998. The operations of the other
Founding Companies and Quanta, acquired by the Accounting Acquiror, have been
included in the Company's historical financial statements beginning February
19, 1998.
Interim Condensed Consolidated Financial Information
The unaudited condensed consolidated financial statements have been prepared
pursuant to the rules of the Securities Exchange Commission ("SEC"). Certain
information and footnote disclosures, normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to fairly present the financial position, results of operations and
cash flows with respect to the interim consolidated financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the audited financial statements and notes thereto of
Quanta and the Founding Companies included in the Company's Registration
Statement on Form S-4, as amended, (Reg. No. 333-47083) which was filed with
the SEC on February 27, 1998.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
by management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. BUSINESS COMBINATIONS:
Pooling
During the second quarter of 1998, the Company acquired all of the
outstanding stock of a company in exchange for 951,945 shares of Common Stock.
This Company provides outside and inside fiber optic networks
7
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
and technical services support for the telecommunications industry. This
acquisition has been accounted for as a pooling-of-interests and the results
of its operations are included for all periods presented herein.
Purchases
During the second quarter of 1998, the Company completed two acquisitions
accounted for as purchases. The aggregate consideration paid in these
transactions consisted of $23.5 million in cash and 1,296,740 shares of Common
Stock. The accompanying balance sheet as of June 30, 1998 includes preliminary
allocations of the respective purchase prices and is subject to final
adjustment. Set forth below are unaudited pro forma combined revenue and
income data reflecting the pro forma effect of these acquisitions on the
Companys results of operations for the year ended December 31, 1997 and the
six months ended June 30, 1998. The unaudited data presented below consists of
the income statement data as presented in these condensed consolidated
financial statements plus (i) the income statement data of the Founding
Companies for the periods prior to February 19, 1998, (ii) the effects of the
Pooled Company and (iii) all Purchased Companies as if the acquisitions were
effective on the first day of the year being reported. The revenue and net
income data are in thousands.
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------------
Revenues.......................................... $223,110 $132,555
Net income........................................ $ 13,279 $ 5,542
Earnings per share (basic and diluted)............ $ .73 $ .29
Pro forma adjustments included in the amounts above primarily relate to: (a)
reductions in former owners and certain key employees salaries and benefits;
(b) adjustment to depreciation and amortization expense due to the purchase
price allocations; (c) elimination of historical interest expense related to
certain obligations which were repaid or not assumed by the Company, and to
record interest expense on cash expended in the acquisitions of the Purchased
Companies; (d) elimination of non-recurring acquisition costs associated with
the Pooled Company; and (e) adjustment to the federal and state income tax
provisions based on the combined operations. The pro forma financial data does
not purport to represent what the Company's combined financial position or
results of operations would actually have been if such transactions had in
fact occurred on those dates and are not necessarily representative of the
Company's financial position or results of operations for any future period.
3. PER SHARE INFORMATION:
For financial statement presentation purposes, PAR has been identified as
the accounting acquiror as its shareholders represented the largest
shareholding interest in Quanta as of the Offering. The computation of basic
and diluted earnings per share for the three and six months ended June 30,
1997 is based upon the 3,000,000 shares of Common Stock issued in connection
with PAR and 951,945 shares issued in connection with the acquisition of the
Pooled Company during the quarter ended June 30, 1998.
The computation of basic earnings per share for the three and six months
ended June 30, 1998 is based upon 18,444,423 and 14,398,526 weighted average
shares of Common Stock outstanding which includes (i) 7,527,000 shares of
Common Stock issued to the owners of the Founding Companies, (ii) 3,345,333
shares of Limited Vote Common Stock issued to the initial stockholders and
certain management personnel of the Company, (iii) 5,750,000 shares of Common
Stock sold in the Offering to pay the cash portion of the consideration for
the Founding Companies to repay expenses incurred in connection with the
Offering and to retire debt, (iv) 951,945 shares issued for the acquisition of
the Pooled Company, and (v) the weighted average portion of the 1,296,740
shares issued in acquisitions accounted for as purchases.
8
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Shares used in the calculation of the diluted earnings per share for the
three and six months ended June 30, 1998 include (i) the shares described
above, and (ii) the dilution attributable to outstanding options to purchase
Common Stock, using the treasury stock method.
4. INCOME TAXES:
Certain of the acquisitions were S corporations for income tax purposes and,
accordingly, any income tax liabilities for the periods prior to the
acquisitions are the responsibility of the respective stockholders. Effective
with the acquisitions, the S corporations converted to C corporations.
Accordingly, an estimated deferred tax liability has been recorded to provide
for the estimated future income tax liability as a result of the difference
between the book and tax bases of the net assets of these former S
corporations. For purposes of these consolidated financial statements, federal
and state income taxes have been provided for the post-acquisition periods.
5. STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," allows entities to choose between a new fair value
method of accounting for employee stock options or similar equity instruments
and the current method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, under which compensation expense is recorded to the
extent that the fair market value of the related stock is in excess of the
options' exercise price at date of grant. Entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net income
and earnings per share as if the fair value method of accounting prescribed in
SFAS No. 123 had been applied. The Company will measure compensation expense
attributable to stock options based on the method prescribed in APB Opinion
No. 25 and will provide the required pro forma disclosure of net income and
earnings per share, as applicable, in notes to future consolidated annual
financial statements.
6. COMMITMENTS AND CONTINGENCIES:
The Company issued shares of Common Stock to an Employee Stock Ownership
Plan (the "ESOP") in connection with the acquisition of the Pooled Company.
The ESOP was terminated on July 31, 1998, and pending a favorable
determination letter from the Internal Revenue Service, a portion of the
shares of the Company's Common Stock held by the ESOP will be sold to repay
debt owed by the ESOP to the Company and the remaining portion of the
unallocated shares will be distributed to its participants. The cost of the
unallocated ESOP shares is reflected as a reduction in the Company's
stockholders' equity at June 30, 1998. Upon distribution from the ESOP, the
Company will owe an excise tax equal to 10% of the value of the Company's
Common Stock distributed. In addition, the Company will eliminate the
remaining balance reflected as Unearned ESOP Shares on the Company's balance
sheet and will have to recognize a non-cash non-recurring compensation charge
equal to the value of the unallocated shares held by the ESOP at the time it
allocates and distributes such shares. Although the Company currently cannot
determine the amount of the excise tax that will be owed or the non-cash non-
recurring compensation charge that will be recognized the amount of such
obligations would not be material to the Company's financial condition based
on the market price for the Company's Common Stock on August 13, 1998.
7. NEW PRONOUNCEMENTS:
In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires the display of comprehensive income and
its components in the financial statements. Comprehensive income represents
all changes in equity of an entity during the reporting period, including net
income and charges directly to equity, which are excluded from net income. For
the quarters ended June 30, 1998 and 1997, there are no material differences
between the Company's "traditional" and "comprehensive" net income.
9
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
which establishes standards for the way public enterprises are to report
information about operating segments in annual financial statements and
requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for the
Company for its year ended December 31, 1998, at which time the Company will
adopt the provision. The Company is currently evaluating the impact on the
Company's financial disclosures.
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosures about
Pensions and Other Postretirement Benefits," which becomes effective for
financial statements for the year ended December 31, 1998. SFAS No. 132
requires revised disclosures about pension and other postretirement benefit
plans. The Company is currently assessing the impact of this statement on its
annual financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which becomes effective for financial
statements beginning January 1, 2000. SFAS No. 133 requires a company to
recognize all derivative instruments (including certain derivative instruments
embedded in other contracts) as assets or liabilities in its balance sheet and
measure them at fair value. The statement requires that changes in the
derivatives fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company is evaluating SFAS No. 133 and
the impact on existing accounting policies and financial reporting
disclosures. However, the Company has not to date engaged in activities or
entered into arrangements normally associated with derivative instruments.
In March 1998 the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The SOP provides guidance
with respect to accounting for the various types of costs incurred for
computer software developed or obtained for the Company's use. The Company is
required to, and will adopt SOP 98-1 by the first quarter of fiscal 1999 and
believes that adoption will not have a material effect on its consolidated
financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities," which requires costs of start-up activities to be expensed as
incurred, and upon adoption, previously deferred costs should be charged as a
cumulative effect of a change in accounting principle. The statement is
effective for financial statements beginning after December 15, 1998, and the
Company expects to adopt the new standard in January 1999. The adoption of
this standard is not expected to have a material effect on the Company's
financial position or result of operations.
8. SUBSEQUENT EVENTS:
Business Combinations
Subsequent to June 30, 1998, the Company has acquired four additional
companies for an aggregate consideration of $25.1 million in cash, $2.25
million in notes payable and 1,068,734 shares of Common Stock. The cash
portion of such consideration was provided by borrowings under the Company's
credit facility. The Company has also announced the signing of non-binding
letters of intent to acquire three additional companies having estimated
combined annual revenues of $50 million. The consideration related to these
companies is under negotiation.
Credit Facility
In April 1998, the Company obtained a $50.0 million revolving credit
facility (the "Credit Facility") from two commercial banks. In August 1998,
the Company amended its Credit Facility to increase it to $125.0 million.
10
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
The Credit Facility is secured by a pledge of all of the capital stock of the
Company's material operating subsidiaries and is to provide funds to be used
for working capital, to finance acquisitions and for other general corporate
purposes. Amounts borrowed under the Credit Facility bear interest at a rate
equal to either (a) the London Interbank Offered Rate ("LIBOR") plus 0.75% to
1.75%, as determined by the ratio of the Company's total funded debt to EBITDA
(as defined in the Credit Facility) or (b) the bank's prime rate plus up to
0.25%, as determined by the ratio of the Company's total funded debt to
EBITDA. Commitment fees of 0.175% to 0.30% (based on certain financial ratios)
are due on any unused borrowing capacity under the Credit Facility. The
Company's existing and future subsidiaries will guarantee the repayment of all
amounts due under the facility and the facility restricts pledges on all
material assets. The Credit Facility contains usual and customary covenants
for a credit facility of this nature including the prohibition of the payment
of dividends, certain financial ratio covenants and the consent of the lenders
for acquisitions exceeding a certain level of cash consideration.
Strategic Investment
In August 1998, the Company entered into a non-binding letter of intent with
Enron Capital & Trade Resources Corp. (ECT), a subsidiary of Enron Corp.,
pursuant to which ECT or its affiliated companies will make an investment of
$50 million in Quanta. The investment will take the form of a Convertible
Subordinated Note. Additionally, Quanta and ECT will enter into a strategic
alliance pursuant to which ECT and Quanta will exchange information regarding
the design, construction and maintenance of electric power transmission and
distribution systems and fiber optic communications systems for ECT and its
affiliates. The investment and strategic alliance is subject to approval of
the Boards of Directors of Quanta and Enron, negotiation of definitive
documentation and certain other conditions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q. Except for the historical financial information
contained herein, the matters discussed in this Quarterly Report on Form 10-Q
may be considered "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include
declarations regarding the intent, belief or current expectations of the
Company and its management, statements regarding the future results of
acquired companies, the Company's gross margins and the Company's expectations
regarding Year 2000 issues. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties. Actual results could differ
materially from those indicated by such forward-looking statements. Among the
important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are the risk factors
identified in the Company's Registration Statement on Form S-4, as amended,
which was filed with the Securities and Exchange Commission on February 27,
1998, and which is available at the SEC's Web site at www.sec.gov.
The Company's revenues are derived from providing specialty electrical
contracting and maintenance services related to electric and
telecommunications infrastructure, providing electrical contracting services
to the commercial and industrial markets and installing transportation control
and lighting systems. Costs of services consist primarily of salaries and
benefits to employees, depreciation, fuel and other vehicle expenses,
equipment rentals, subcontracted services, materials, parts and supplies. The
Company's gross margin, which is gross profit expressed as a percentage of
revenues, is typically higher on projects where labor, rather than materials,
constitutes a greater portion of the cost of services. Labor costs can be
predicted with relatively less accuracy than materials costs. Therefore, to
compensate for the potential variability of labor costs, the Company seeks to
11
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
maintain higher margins on its labor-intensive projects. The Company is
subject to a $500,000 deductible for workers compensation insurance on certain
of its operations. Fluctuations in insurance accruals related to this
deductible could have a significant impact on gross margins in the period in
which such adjustments are made. Selling, general and administrative expenses
consist primarily of compensation and related benefits to officers,
administrative salaries and benefits, marketing expenses, office rent and
utilities, communication and professional expenses.
RESULTS OF OPERATIONS--PRO FORMA COMBINED
The unaudited pro forma combined statements of operations for the three and
six months ended June 30, 1997 and 1998 assume that the acquisition of the
Founding Companies, the Offering and related transactions were closed on
January 1, 1997, as restated for the pooling-of-interests acquisition in June
1998, and present certain data for the Company as adjusted for: 1) the
acquisition of the Founding Companies, 2) the IPO completed on February 18,
1998, 3) certain reductions in salaries, bonuses and benefits to former owners
of the Founding Companies, 4) amortization of goodwill resulting from the
acquisition of the Founding Companies, 5) reduction in interest expense, net
of interest expense on borrowings to fund S corporation distributions by
certain of the Founding Companies and 6) adjustments to the federal and state
income tax provision based on pro forma operating results.
The Company has begun to realize savings by consolidating certain general
administrative and purchasing functions and reducing insurance expenses. In
addition, the Company has begun to realize savings from its ability to borrow
at lower interest rates than the Founding Companies and the subsequent
acquisitions. These savings are being partially offset by the costs of being a
public company and the incremental increase in costs related to the Company's
new corporate management. Neither these savings nor the costs associated
therewith for the periods prior to the Offering have been included in the pro
forma financial information discussed below. As a result, pro forma results
may not be comparable to, or indicative of, future performance.
The pro forma adjustments are based on estimates, available information and
certain assumptions which may be revised as additional information becomes
available. The pro forma financial data does not purport to represent what the
Company's combined financial position or results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's financial position or results of
operations for any future period. Since Quanta, the Founding Companies, the
Pooled Company and the Purchased Companies were not under common control or
management, historical combined results may not be comparable to, or
indicative of, future performance.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- -----------------------------
1997 1998 1997 1998
------------- ------------- ------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
Revenues................ $44,677 100.0% $63,679 100.0% $79,024 100.0% $108,253 100.0%
Cost of services........ 36,497 81.7 51,225 80.4 66,039 83.6 88,854 82.1
------- ----- ------- ----- ------- ----- -------- -----
Gross profit............ 8,180 18.3 12,454 19.6 12,985 16.4 19,399 17.9
Selling, general and
administrative
expenses............... 3,565 8.0 5,545 8.7 6,953 8.8 9,845 9.1
Merger expenses-pooling. -- -- 231 0.4 -- -- 231 0.2
Goodwill amortization... 424 0.9 553 0.9 848 1.0 967 0.9
------- ----- ------- ----- ------- ----- -------- -----
Income from operations.. $ 4,191 9.4% $ 6,125 9.6% $ 5,184 6.6% $ 8,356 7.7%
======= ===== ======= ===== ======= ===== ======== =====
12
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Pro Forma Combined Results For The Three and Six Months Ended June 30, 1997,
Compared To The Three and Six Months Ended June 30, 1998
Revenues. Pro forma combined revenues increased $19.0 million and $29.2
million, or 42.5% and 37.0%, to $63.7 million and $108.3 million for the three
and six months ended June 30, 1998, primarily due to higher demand for the
Company's electrical infrastructure services in Nevada, California and the
Midwest as well as significant growth in telecommunication infrastructure
services in the Northwest. Revenues also increased during the three and six
months ended June 30, 1998 as a result of the acquisition of the Purchased
Companies.
Gross profit. Pro forma combined gross profit increased $4.3 million and
$6.4 million, or 52.2% and 49.4%, to $12.5 million and $19.4 million for the
three and six months ended June 30, 1998. As a percentage of pro forma
combined revenues, pro forma combined gross profit increased from 18.3% to
19.6% for the three months ended June 30, 1998 and from 16.4% to 17.9% for the
six months ended June 30, 1998. This increase in pro forma combined gross
margin was a result of improved asset utilization and a higher proportion of
relatively higher margin telecommunication revenues to total revenues.
Selling, general and administrative expenses. Pro forma combined selling
general and administrative expenses increased $2.0 million and $2.9 million,
or 55.5% and 41.6%, to $5.5 million and $9.8 million for the three and six
months ended June 30, 1998, primarily due to increases in selling and
administrative salaries required to support the higher level of revenues
generated from an increased volume of projects, as well as the establishment
of a corporate office and administrative infrastructure during 1998.
RESULTS OF OPERATIONS--HISTORICAL
The unaudited historical combined statements of operations for the three and
six months ended June 30, 1997 and 1998 reflect the historical operations of
PAR and the Pooled Company. The operations of the Founding Companies have been
included in the Company's historical financial statements beginning February
19, 1998 and the operations of the Purchased Companies have been included from
their respective acquisition dates.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1997 1998 1997 1998
------------- ------------- ------------- -------------
(IN THOUSANDS) (IN THOUSANDS)
Revenues................ $20,226 100.0% $63,679 100.0% $34,799 100.0% $93,717 100.0%
Cost of services........ 15,973 79.0 51,225 80.4 28,861 82.9 76,681 81.8
------- ----- ------- ----- ------- ----- ------- -----
Gross profit............ 4,253 21.0 12,454 19.6 5,938 17.1 17,036 18.2
Selling, general and
administrative
expenses............... 2,647 13.1 5,545 8.7 4,855 14.0 8,889 9.5
Merger expenses-pooling. -- -- 231 0.4 -- -- 231 0.2
Goodwill amortization... 14 -- 553 0.9 28 0.1 749 0.8
------- ----- ------- ----- ------- ----- ------- -----
Income from operations.. $ 1,592 7.9% $ 6,125 9.6% $ 1,055 3.0% $ 7,167 7.7%
======= ===== ======= ===== ======= ===== ======= =====
Historical Combined Results For The Three and Six Months Ended June 30, 1997,
Compared To The Three and Six Months Ended June 30, 1998
Revenues. Historical revenues increased $43.5 million and $58.9 million, or
214.8% and 169.3%, to $63.7 million and $93.7 million for the three and six
months ended June 30, 1998, due to the acquisition of the Founding Companies
on February 18, 1998 and subsequent acquisitions of the Purchased Companies.
Gross profit. Gross profit increased $8.2 million and $11.1 million, or
192.8% and 186.9%, to $12.5 million and $17.0 million for the three and six
months ended June 30, 1998. As a percentage of revenues, gross profit
decreased from 21.0% for the three months ended June 30, 1997 to 19.6% for the
three months ended June 30,
13
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
1998. This decrease was due to the acquisition of the Founding Companies in
February 1998 which reflect a greater impact of seasonality which was
partially offset by the increase in the proportionate amount of higher margin
telecommunication service revenues. Gross margins increased from 17.1% for the
six months ended June 30, 1997 to 18.2% for the six months ended June 30,
1998. This increase in gross margin was a result of the acquisition of the
Founding Companies on February 18, 1998, improved asset utilization and a
higher proportion of relatively higher margin telecommunication revenues to
total revenues.
Selling, general and administrative expenses. Selling general and
administrative expenses increased $2.9 million and $4.0 million, or 109.5% and
83.1%, to $5.5 million and $8.9 million for the three and six months ended
June 30, 1998, due to the acquisition of the Founding Companies on February
18, 1998, the acquisition of the Purchased Companies and increases in selling
and administrative salaries required to support the higher level of revenues
generated from an increased volume of projects, as well as the establishment
of a corporate office and administrative infrastructure during 1998.
LIQUIDITY AND CAPITAL RESOURCES
In February 1998, Quanta completed its initial public offering which
involved the issuance of 5,000,000 shares of Common Stock, providing
approximately $38.8 million in net proceeds to the Company, after deducting
underwriter discounts and commissions and expenses related to the Offering.
Concurrent with the closing of its initial public offering, Quanta acquired
the Founding Companies in separate transactions for consideration including
$21.0 million in cash and 7,527,000 shares of Common Stock. Also, in March
1998, the Company's underwriters exercised their over-allotment option to
acquire an additional 750,000 shares of the Company's Common Stock at the
initial public offering price of $9 per share, providing the Company with
approximately $6.3 million (net of underwriting discounts and commissions) of
additional proceeds from the Offering.
In April 1998, the Company obtained a $50.0 million revolving credit
facility (the "Credit Facility") from two commercial banks. In August 1998,
the Company amended its Credit Facility to increase the facility to $125.0
million. The Credit Facility is secured by a pledge of all of the capital
stock of the Company's material operating subsidiaries and is to provide funds
to be used for working capital, to finance acquisitions and for other general
corporate purposes. Amounts borrowed under the Credit Facility bear interest
at a rate equal to either (a) the London Interbank Offered Rate ("LIBOR") plus
0.75% to 1.75%, as determined by the ratio of the Company's total funded debt
to EBITDA (as defined in the Credit Facility) or (b) the bank's prime rate
plus up to 0.25%, as determined by the ratio of the Company's total funded
debt to EBITDA. Commitment fees of 0.175% to 0.30% (based on certain financial
ratios) are due on any unused borrowing capacity under the Credit Facility.
The Company's existing and future subsidiaries will guarantee the repayment of
all amounts due under the facility and the facility restricts pledges on all
material assets. The Credit Facility contains usual and customary covenants
for a credit facility of this nature including the prohibition of the payment
of dividends, certain financial ratio covenants and the consent of the lenders
for acquisitions exceeding a certain level of cash consideration. As of August
13, 1998 the Company had approximately $67.0 million in outstanding borrowings
under its Credit Facility.
Through August 12, 1998, the Company has utilized a combination of cash and
its Common Stock to acquire seven companies in addition to the Founding
Companies with estimated annualized 1997 revenues of $128.1 million. The cash
component of the consideration paid for these companies was funded with
existing cash and borrowings under its Credit Facility.
The Company has announced the signing of non-binding letters of intent to
acquire three additional companies having estimated combined annual revenues
of $50.0 million. The consideration related to these companies is under
negotiation.
14
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
The Company expects to continue its aggressive acquisition program. The
Company intends to continue to use a combination of cash and Common Stock to
finance the principal part of the consideration payable in acquisitions. If
the Common Stock does not maintain a sufficient value, or potential
acquisition candidates are unwilling to accept Common Stock as part of the
consideration for the sale of their businesses, the Company could be required
to utilize more cash to complete acquisitions. If sufficient funds were not
available from operating cash flow or through borrowings under the Company's
Credit Facility, the Company may seek additional financing through the public
or private sale of equity or debt securities. There can be no assurance that
the Company could secure such financing if and when it is needed or on terms
the Company deems acceptable. If the Company is unable to secure acceptable
financing, its acquisition program could be negatively affected.
SEASONALITY; FLUCTUATIONS OF QUARTERLY RESULTS
The Company's results of operations can be subject to seasonal variations.
Generally, during the winter months, demand for new projects and maintenance
services may be lower due to reduced construction activity during such
weather, while demand for electrical service and repairs may be higher due to
damage caused by inclement weather. Additionally, the industry can be highly
cyclical. As a result, the Company's volume of business may be adversely
affected by declines in new projects in various geographic regions in the U.S.
Quarterly results may also be materially affected by the timing of
acquisitions, variations in the margins of projects performed during any
particular quarter, the timing and magnitude of acquisition assimilation costs
and regional economic conditions. Accordingly, the Company's operating results
in any particular quarter may not be indicative of the results that can be
expected for any other quarter or for the entire year.
YEAR 2000
The Company is in the process of identifying and evaluating its potential
issues (information technology and third party relationships) associated with
the date change in the year 2000 (Year 2000). The Company has not yet fully
assessed the Year 2000 compliance costs, but is in the process of developing a
work plan to correct any foreseeable issues. While it is not possible at
present to quantify the cost of corrective actions, management does not expect
that these actions will materially exceed the cost of normal software upgrades
and replacements expected to occur through the Year 2000. While the Company
believes all necessary work will be completed in a timely fashion, there can
be no guarantee that the systems of other companies on which the Company
relies will be converted within the same timeframe. The Company is
communicating with software vendors, business partners, and others with which
it conducts business to provide assurances that their systems will be Year
2000 compliant. The Company will continue to consider the likelihood of a
material business interruption due to the Year 2000 issue, and if necessary
implement an appropriate contingency plan.
15
QUANTA SERVICES, INC.
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) Unregistered Sales of Securities.
Set forth below is certain information concerning all sales of securities by
the Company during the three month period ended June 30, 1998 that were not
registered under the Securities Act of 1933, as amended (the "Securities
Act").
Between April 1, 1998 and June 30, 1998, the Company issued 1,296,740 shares
of Common Stock as part of the consideration for the Purchased Companies.
These shares of Common Stock were issued without registration under the
Securities Act in reliance on the exemption provided by Section 4(2) of the
Securities Act.
(d) Use of Proceeds.
(1) On February 11, 1998 the Company's Registration Statement on Form S-
1, SEC Registration No. 333-42957 (the "IPO Registration
Statement"), was declared effective by oral order of the SEC.
(2) The offering pursuant to the IPO Registration Statement commenced on
February 13, 1998.
(3)(a) The offer terminated after the sale of all securities to be
registered under the IPO Registration Statement.
(b) The managing underwriters of the offering were BT Alex. Brown,
BancAmerica Robertson Stephens, and Sanders Morris Mundy.
(c) The Company's Common Stock was sold in the offering pursuant to
the IPO Registration Statement.
(d) The number of shares of Common Stock registered, the aggregate
price of the offering amount registered, the amount sold and the
aggregate offering price of the amount sold to date relating to
the IPO Registration Statement are indicated in the table below:
AGGREGATE PRICE
OFFEROR SHARES REGISTERED AGGREGATE PRICE AMOUNT SOLD OF SHARES SOLD
- ------- ----------------- --------------- ----------- ---------------
Quanta Services, Inc.... 5,750,000 $51,750,000 5,750,000 $51,750,000
(e) From February 11, 1998 through June 30, 1998, the Company incurred
the following expenses in connection with the issuance and
distribution of the securities registered pursuant to the IPO
Registration Statement, none of which constituted direct or indirect
payments to officers, directors or general partners of the Company
(other expenses represent a reasonable estimate of actual costs
incurred):
EXPENSE PAYMENT
- ------- ----------
Underwriting discounts and Commissions.............................. $3,622,500
Finders Fees........................................................ 0
Expenses paid to or for Underwriters................................ 7,106
Other expenses...................................................... 3,018,667
----------
Total Expenses.................................................... $6,648,273
==========
(vi) The net proceeds to the Company of the offering pursuant to the
IPO Registration Statement, after deducting the expenses listed in (v)
above are $45,101,727.
(vii) From February 11, 1998 through June 30, 1998, the Company has
applied the following amounts of its net proceeds from the offering
pursuant to the IPO Registration Statement:
16
PAYMENT TO OFFICERS, DIRECTORS AND
USE OF PROCEEDS PAYMENT TO OTHERS 10% SHAREHOLDERS
- --------------- ----------------- ----------------------------------
Construction of plant,
building and facilities.. -- --
Purchase and installation
of machinery and
equipment................ -- --
Purchase of real estate... -- --
Acquisitions of other
businesses............... -- $21,000,331
Repayment of indebtedness. $21,830,583 --
Working capital........... $ 2,270,813 --
Temporary investments
(specified below)........ -- --
Other uses of at least
$100,000 (specified
below)................... -- --
Temporary investments consist of money market accounts available on a daily
basis.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.4 Acquisition Agreement and Plan of Reorganization by and among Quanta
Services, Inc., Underground Acquisition Inc., Underground Construction
Co., Inc., Five Points Construction Company and their stockholders
dated as of August 4, 1998.
10.5 Amended and Restated Credit Agreement dated as of August 3, 1998 among
Quanta Services, Inc., as Borrower and Bank One, Texas, National
Association, National City Bank and the other financial institutions
Parties thereto, as Lenders.
Exhibit 27.1 Financial data schedule.
(b) Reports on Form 8-K:
None.
17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Quanta Services, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
QUANTA SERVICES, INC.
Dated: August 14, 1998
By: /s/ James H. Haddox
-----------------------------------
James H. Haddox
Chief Financial Officer
18