UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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.
SUITE 2100
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE 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 [_]
18,275,337 shares of Common Stock were outstanding as of November 13, 1998.
As of the same date, 3,345,333 shares of Limited Vote Common Stock were
outstanding.
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 nine
months ended September 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.................................................. 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities........................................... 17
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 September 30, 1998, the
Company has acquired ten additional businesses for approximately $73.0 million
in cash and notes and 4,338,232 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 nine months ended September 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 nine
months ended September 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)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1998
-------- --------
Revenues.................................................... $128,694 $208,892
Cost of services (including depreciation)................... 103,405 169,391
-------- --------
Gross profit.............................................. 25,289 39,501
Selling, general and administrative expenses.............. 10,772 17,500
Merger expenses--pooling.................................... -- 231
Goodwill amortization....................................... 1,272 1,753
-------- --------
Income from operations.................................... 13,245 20,017
-------- --------
Other income (expense):
Interest expense.......................................... (266) (2,447)
Other income (expense), net............................... (388) 513
-------- --------
Income before income tax expense............................ 12,591 18,083
Provision for income taxes.................................. 5,397 8,019
-------- --------
Net income.................................................. $ 7,194 $ 10,064
======== ========
Basic earnings per share.................................... $ .42 $ .54
======== ========
Diluted earnings per share.................................. $ .42 $ .54
======== ========
Diluted earnings per share before merger expenses........... $ .42 $ .55
======== ========
Shares used in computing pro forma earnings per share--
Basic..................................................... 16,995 18,564
======== ========
Diluted................................................... 16,995 18,680
======== ========
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 nine months ended
September 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 18,564,201 shares used in the calculation of unaudited pro forma
combined basic earnings per share for the nine months ended September 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 nine months ended September 30, 1998 include (i)
the 18,564,201 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, SEPTEMBER 30,
1997 1998
ASSETS ------------ -------------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents......................... $ 489 $ 2,584
Accounts receivable, net of allowance of $193 and
$1,214........................................... 12,878 83,920
Costs and estimated earnings in excess of billings
on uncompleted contracts......................... 1,746 30,111
Inventories....................................... 865 1,913
Prepaid expenses and other........................ 724 3,619
------- --------
Total current assets............................ 16,702 122,147
PROPERTY AND EQUIPMENT, NET......................... 18,286 70,185
OTHER ASSETS........................................ 645 4,062
GOODWILL, NET....................................... 114 134,929
------- --------
Total assets.................................... $35,747 $331,323
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt.............. $ 7,200 $ 2,610
Accounts payable and accrued expenses............. 6,578 48,571
Billings in excess of costs and profits
recognized....................................... 738 6,358
------- --------
Total current liabilities....................... 14,516 57,539
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities......... 7,542 108,297
Deferred income taxes and other non-current
liabilities...................................... 2,479 8,538
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock................................... -- --
Common Stock...................................... -- --
Limited Vote Common Stock......................... -- --
Unearned ESOP shares.............................. (1,831) (1,831)
Additional paid-in capital........................ 1,238 137,608
Retained earnings................................. 11,803 21,172
------- --------
Total stockholders' equity...................... 11,210 156,949
------- --------
Total liabilities and stockholders' equity...... $35,747 $331,323
======= ========
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 NINE MONTHS
ENDED SEPTEMBER ENDED SEPTEMBER
30, 30,
----------------- -----------------
1997 1998 1997 1998
------- -------- ------- --------
Revenues................................ $21,668 $100,639 $56,467 $194,356
Cost of services (including
depreciation).......................... 15,194 80,537 44,055 157,218
------- -------- ------- --------
Gross profit.......................... 6,474 20,102 12,412 37,138
Selling, general and administrative
expenses............................... 3,638 7,655 8,493 16,544
Merger expenses--pooling................ -- -- -- 231
Goodwill amortization................... 14 786 42 1,535
------- -------- ------- --------
Income from operations.................. 2,822 11,661 3,877 18,828
Other income (expense):
Interest expense...................... (325) (1,435) (882) (2,484)
Other income (expense), net........... 16 276 (78) 467
------- -------- ------- --------
Income before income tax expense........ 2,513 10,502 2,917 16,811
Provision for income taxes.............. 1,037 4,542 1,173 7,442
------- -------- ------- --------
Net income.......................... $ 1,476 $ 5,960 $ 1,744 $ 9,369
======= ======== ======= ========
Basic earnings per share................ $ .37 $ .30 $ .44 $ .57
======= ======== ======= ========
Diluted earnings per share.............. $ .37 $ .30 $ .44 $ .57
======= ======== ======= ========
Diluted earnings per share before merger
expenses............................... $ .37 $ .30 $ .44 $ .58
======= ======== ======= ========
Shares used in computing earnings per
share--
Basic................................. 3,952 20,000 3,952 16,340
======= ======== ======= ========
Diluted............................... 3,952 20,116 3,952 16,456
======= ======== ======= ========
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 NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- ---------------
1997 1998 1997 1998
------ ------- ------ -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $1,476 $ 5,960 $1,744 $ 9,369
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization.............. 781 3,265 2,387 6,629
Loss on sale of property and equipment..... (32) (39) (30) (96)
Deferred income taxes...................... (650) (522) (635) (330)
Changes in operating assets and
liabilities--
(Increase) decrease in--
Accounts receivable...................... (1,993) (20,511) (2,399) (23,756)
Inventories.............................. (366) (155) (319) (283)
Costs and estimated earnings in excess of
billings on uncompleted contacts........ (162) (4,800) (1,019) (10,443)
Prepaid expenses and other current
assets.................................. 58 (2,434) 186 (2,311)
Increase (decrease) in--
Accounts payable and accrued expenses.... 3,065 2,797 4,706 8,565
Billings in excess of costs and estimated
earnings on uncompleted contracts....... (41) 1,603 (1,131) 1,787
Other, net............................... (19) (96) (52) (538)
------ ------- ------ -------
Net cash provided by (used in) operating
activities................................ 2,117 (14,932) 3,438 (11,407)
------ ------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment.................................. 134 46 229 1,015
Additions of property and equipment......... (1,560) (6,250) (5,499) (13,516)
Purchase of other assets.................... -- (1,400) -- (1,400)
Cash paid for acquisitions, net of cash
acquired................................... -- (44,482) -- (79,255)
------ ------- ------ -------
Net cash used in investing activities...... (1,426) (52,086) (5,270) (93,156)
------ ------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt................ 105 -- 1,797 564
Payments on long-term debt.................. (985) (6,784) (2,630) (31,622)
Issuances of Common Stock, net of offering
costs...................................... -- (195) -- 44,914
Net borrowings under lines of credit........ 223 74,803 2,187 101,172
Distributions to stockholders............... -- -- -- (8,370)
------ ------- ------ -------
Net cash provided by (used in) financing
activities................................ (657) 67,824 1,354 106,658
------ ------- ------ -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 34 806 (478) 2,095
------ ------- ------ -------
CASH AND CASH EQUIVALENTS, beginning of
period...................................... -- 1,778 512 489
------ ------- ------ -------
CASH AND CASH EQUIVALENTS, end of period..... $ 34 $ 2,584 $ 34 $ 2,584
====== ======= ====== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for--
Interest................................... $ 314 $ 1,202 $ 854 $ 2,137
====== ======= ====== =======
Income taxes............................... $ 183 $ 4,077 $ 216 $ 4,876
====== ======= ====== =======
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 September 30, 1998, the Company has acquired ten
additional businesses for approximately $73.0 million in cash and notes and
4,338,232 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 with
February 19, 1998, and the Purchased Companies beginning their respective
dates of acquisition.
Interim Condensed Consolidated Financial Information
The unaudited condensed consolidated financial statements have been prepared
pursuant to the rules of the Securities and 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.
7
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
2. BUSINESS COMBINATIONS:
Pooling
During the quarter ended June 30, 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 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
Since the Offering, the Company has completed nine acquisitions accounted
for as purchases. The aggregate consideration paid in these transactions
consisted of $73.0 million in cash and notes and 4.3 million shares of Common
Stock. The accompanying balance sheet as of September 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
Company's results of operations for the year ended December 31, 1997 and the
nine months ended September 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.
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
Revenues............................................. $326,809 $293,640
Net income........................................... $ 19,430 $ 13,991
Earnings per share (basic and diluted)............... $ .95 $ .67
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 nine months ended September
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.
8
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
The computation of basic earnings per share for the three and nine months
ended September 30, 1998 is based upon 20,000,489 and 16,339,812 weighted
average shares of Common Stock outstanding which includes the weighted average
portion of (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 3,386,288 shares issued in acquisitions accounted for
as purchases.
Shares used in the calculation of the diluted earnings per share for the
three and nine months ended September 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 September 30, 1998. Upon distribution from the ESOP,
the Company will owe an excise tax equal to 10 percent 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
9
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
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 November 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 September 30, 1998 and 1997, there are no material
differences between the Company's "traditional" and "comprehensive" net
income.
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
10
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
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 September 30, 1998, the Company has acquired one additional
company for an aggregate consideration of $11.3 million in cash and notes and
660,104 shares of Common Stock. The cash portion of such consideration was
provided by borrowings under the Company's credit facility.
Credit Facility
In August 1998, the Company amended its $50.0 million revolving Credit
Facility (the "Credit Facility") to increase it to $125 million. In November
1998, the Company expanded its bank group from two banks to nine banks and
amended its Credit Facility to increase it to $175 million.
The Credit Facility is secured by a pledge of all of the capital stock of
the Company's material operating subsidiaries and the majority of the
Company's assets 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 1.00 percent to 2.00 percent,
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
percent, as determined by the ratio of the Company's total funded debt to
EBITDA. Commitment fees of 0.175 percent to 0.30 percent (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 October 1998, the Company entered into a strategic investment with Enron
Capital & Trade Resources Corp. ("ECT"), a subsidiary of Enron Corp., pursuant
to which ECT or its affiliated companies made an investment of $49.4 million
in Quanta. The investment is in the form of Convertible Subordinated Notes
bearing interest at 6 7/8 percent and convertible into Quanta Common Stock at
a price of $13.75 per share. Additionally, Quanta and ECT entered 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.
Further, the Company paid a fee of approximately $2.0 million to ECT at the
closing date. This will be included in other assets on the Company's balance
sheet and amortized over the original life of the notes. The Convertible
Subordinated Notes require quarterly interest payments and equal semi-annual
principal payments beginning in 2006 until the notes are paid in full in 2010.
The Company has the option to redeem the notes at a premium beginning in 2002.
11
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
maintain higher margins on its labor-intensive projects. Certain of the
Company's subsidiaries have in the past been subject to deductibles ranging
from $250,000 to $500,000 for workers' compensation insurance. 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 management, administrative salaries and benefits,
marketing, office rent and utilities, communications and professional fees.
RESULTS OF OPERATIONS--PRO FORMA COMBINED
The accompanying pro forma combined statements of operations of the Company
for the nine months ended September 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 three and
nine months ended September 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.
12
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 infrastructure. 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 SEPTEMBER NINE MONTHS ENDED SEPTEMBER
30, 30,
----------------------------- ------------------------------
1997 1998 1997 1998
------------- -------------- -------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
Revenues................ $49,670 100.0% $100,639 100.0% $128,694 100.0% $208,892 100.0%
Cost of Services........ 37,366 75.2 80,537 80.0 103,405 80.3 169,391 81.1
------- ----- -------- ----- -------- ----- -------- -----
Gross profit............ 12,304 24.8 20,102 20.0 25,289 19.7 39,501 18.9
Selling, general and
administrative
expenses............... 3,819 7.7 7,655 7.6 10,772 8.4 17,500 8.4
Merger expenses--
pooling................ -- -- -- -- -- -- 231 0.1
Goodwill amortization... 424 0.9 786 0.8 1,272 1.0 1,753 0.8
------- ----- -------- ----- -------- ----- -------- -----
Income from operations.. $ 8,061 16.2% $ 11,661 11.6% $ 13,245 10.3% $ 20,017 9.6%
======= ===== ======== ===== ======== ===== ======== =====
Pro Forma Combined Results For The Three and Nine Months Ended September 30,
1997 Compared To The Three and Nine Months Ended September 30, 1998
Revenues. Pro forma combined revenues increased $51.0 million and $80.2
million, or 102.6 percent and 62.3 percent, to $100.6 million and $208.9
million for the three and nine months ended September 30, 1998. This increase
is primarily due to the acquisition of the Purchased Companies with revenues
of $32.7 million and $41.3 million for the three and nine months ended
September 30, 1998 included in Quanta's results for the periods then ended.
Revenues also increased as a result of 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.
Gross profit. Pro forma combined gross profit increased $7.8 million and
$14.2 million, or 63.4 percent and 56.2 percent, to $20.1 million and $39.5
million for the three and nine months ended September 30, 1998. As a
percentage of pro forma combined revenues, pro forma combined gross profit
decreased from 24.8 percent to 20.0 percent for the three months ended
September 30, 1998 and from 19.7 percent to 18.9 percent for the nine months
ended September 30, 1998. This decrease in pro forma combined gross margin was
a result of a large volume of high margin storm and emergency work being
performed in 1997 versus 1998 partially offset by a higher proportion of
relatively higher margin telecommunication revenues to total revenues in 1998.
Selling, general and administrative expenses. Pro forma combined selling,
general and administrative expenses increased $3.8 million and $6.7 million,
or 100 percent and 62.5 percent, to $7.7 million and $17.5 million for the
three and nine months ended September 30, 1998, primarily due to the
acquisition of the Purchased Companies, increases in selling and
administrative salaries required to support the higher level of revenues
generated from an increased volume of projects, and the establishment of a
corporate office and administrative infrastructure during 1998. As a
percentage of revenues, selling, general and administrative expenses remained
constant.
13
RESULTS OF OPERATIONS--HISTORICAL
The unaudited historical combined statements of operations for the three and
nine months ended September 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 SEPTEMBER NINE MONTHS ENDED SEPTEMBER
30, 30,
----------------------------- -----------------------------
1997 1998 1997 1998
------------- -------------- ------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
Revenues................ $21,668 100.0% $100,639 100.0% $56,467 100.0% $194,356 100.0%
Cost of services........ 15,194 70.1 80,537 80.0 44,055 78.0 157,218 80.9
------- ----- -------- ----- ------- ----- -------- -----
Gross profit............ 6,474 29.9 20,102 20.0 12,412 22.0 37,138 19.1
Selling, general and
administrative
expenses............... 3,638 16.8 7,655 7.6 8,493 15.0 16,544 8.5
Merger expenses--
pooling................ -- -- -- -- -- -- 231 0.1
Goodwill amortization... 14 0.1 786 0.8 42 0.1 1,535 0.8
------- ----- -------- ----- ------- ----- -------- -----
Income from operations.. $ 2,822 13.0% $ 11,661 11.6% $ 3,877 6.9% $ 18,828 9.7%
======= ===== ======== ===== ======= ===== ======== =====
Historical Combined Results For The Three and Nine Months Ended September 30,
1997 Compared To The Three and Nine Months Ended September 30, 1998
Revenues. Historical revenues increased $79.0 million and $137.9 million, or
364.5 percent and 244.2 percent, to $100.6 million and $194.4 million for the
three and nine months ended September 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 $13.6 million and $24.7 million, or
210.5 percent and 199.2 percent, to $20.1 million and $37.1 million for the
three and nine months ended September 30, 1998. As a percentage of revenues,
gross profit decreased from 29.9 percent for the three months ended September
30, 1997 to 20.0 percent for the three months ended September 30, 1998 and
from 22.0 percent for the nine months ended September 30, 1997 to 19.1 percent
for the nine months ended September 30, 1998. This decrease was due to a large
amount of high margin storm and emergency work being performed by PAR in 1997
versus 1998, and the acquisition of the Founding and Purchased Companies which
earned lower margins than those experienced by PAR and the Pooled Company in
1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $4.0 million and $8.0 million, or 110.4
percent and 94.7 percent, to $7.7 million and $16.5 million for the three and
nine months ended September 30, 1998, due to the acquisition of the Founding
Companies on February 18, 1998, the acquisition of the Purchased Companies,
increases in selling and administrative salaries required to support the
higher level of revenues generated from an increased volume of projects, and
the establishment of a corporate office and administrative infrastructure
during 1998. As a percentage of revenues, selling, general and administrative
expenses were higher in 1997 due to the Pooled Company having a higher cost
structure than the Founding and Purchased Companies.
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 $38.6 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
14
approximately $6.3 million (net of underwriting discounts and commissions) of
additional proceeds from the Offering.
In August 1998, the Company amended its $50.0 million revolving Credit
Facility (the "Credit Facility") to increase it to $125 million. In November
1998, the Company expanded its bank group from two banks to nine banks and
amended its Credit Facility to increase it to $175 million. The Credit
Facility is secured by a pledge of all of the capital stock of the Company's
material operating subsidiaries and the majority of the Company's assets 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 1.00 percent to 2.00 percent, 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 percent, as determined
by the ratio of the Company's total funded debt to EBITDA. Commitment fees of
0.175 percent to 0.30 percent (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.
Additionally, the Company has issued $49.4 million of Convertible Subordinated
Notes bearing interest at 6 7/8 percent, the proceeds of which were used to
reduce outstanding borrowings under the Credit Facility and include
restrictive covenants which mirror the Credit Facility. As of November 13,
1998 the Company had approximately $66.8 million in outstanding borrowings
under its Credit Facility.
Through November 13, 1998 the Company has acquired eleven companies in
addition to the Founding Companies for an aggregate consideration of 5.0
million shares of Common Stock and $84.3 million in cash and notes. The cash
portion of such consideration was provided by borrowings under the Company's
Credit Facility.
The Company expects to continue its aggressive acquisition program. The
Company intends to continue to use a combination of cash, notes 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. The Company anticipates that its cash flow from operations and
Credit Facility will provide sufficient cash to enable the Company to meet its
working capital needs, debt service requirements and planned capital
expenditures for property and equipment for at least the next 12 months.
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.
Typically, the Company experiences lower gross margins and operating margins
during the winter months. 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.
15
YEAR 2000
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. Significant uncertainty exists concerning
the potential effects associated with such compliance, but systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company has made a preliminary review of both its information technology
and its non-information technology systems to determine whether they are Year
2000 compliant. Additionally, the Company reviews the systems of all of its
potential acquisitions for Year 2000 compliance. The Company has not
identified any material systems which are not Year 2000 compliant. The Company
is currently preparing a formal questionnaire for all significant suppliers,
customers and service providers to determine the extent to which the Company
is vulnerable to those third parties' failure to remediate the Year 2000
problem. The Company has received oral assurances of Year 2000 compliance from
many of the third parties with whom it has relationships. Unless public
suppliers of water, electricity, natural gas and telecommunications are
disrupted for a substantial period of time (in which case the Company's
business may be materially and adversely affected), the Company believes that
its operations will not be significantly disrupted even if third parties with
whom the Company has relationships are not Year 2000 compliant. Further, the
Company believes that it will not be required to make any material
expenditures to address the Year 2000 problem as it relates to its existing
systems. 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. However, uncertainty exists
concerning the potential costs and effects associated with any Year 2000
compliance, and the Company intends to continue to make efforts to ensure that
third parties with whom it has relationships are Year 2000 compliant.
Therefore, there can be no assurance that unexpected Year 2000 compliance
problems of either the Company or its vendors, customers and service providers
would not materially and adversely affect the Company's business, financial
condition or operating results. The Company will continue to consider the
likelihood of a material business interruption due to the Year 2000 issue,
and, if necessary implement appropriate contingency plans.
16
QUANTA SERVICES, INC.
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(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 September 30, 1998 that were
not registered under the Securities Act of 1933, as amended (the "Securities
Act").
Between July 1, 1998 and September 30, 1998, the Company issued 2,089,548
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.5 --Second Amended and Restated Secured Credit Agreement dated as of
November 12, 1998 among Quanta Services, Inc., and the banks named
therein, as Lenders.
27.1 --Financial data schedule
(b) Reports on Form 8-K:
On August 19, 1998, the Company filed a Current Report on Form 8-K to report
the Company's acquisition of Underground Construction Co., Inc. on August 4,
1998. This acquisition was accounted for as a purchase.
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: November 16, 1998
/s/ James H. Haddox
By:__________________________________
James H. Haddox
Chief Financial Officer
18
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
10.5 --Second Amended and Restated Secured Credit Agreement dated as of
November 12, 1998 among Quanta Services, Inc., and the banks named
therein, as Lenders.
27.1 --Financial data schedule