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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 MARCH 31, 2001

[ ] 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
incorporation or organization) Identification No.)

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 [ ]

58,004,594 shares of Common Stock were outstanding as of May 10, 2001. As
of the same date, 1,704,016 shares of Limited Vote Common Stock were
outstanding.

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2

QUANTA SERVICES, INC. AND SUBSIDIARIES

INDEX

PAGE
----

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
QUANTA SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets............................... 1
Consolidated Statements of Operations..................... 2
Consolidated Statements of Cash Flows..................... 3
Notes to Condensed Consolidated Financial Statements...... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................... 12

PART II. OTHER INFORMATION
Item 2. Changes in Securities............................... 13
Item 6. Exhibits and Reports on Form 8-K.................... 13
Signature................................................... 14

i
3

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

DECEMBER 31, MARCH 31,
2000 2001
------------ -----------
(UNAUDITED)

ASSETS

CURRENT ASSETS:
Cash and cash equivalents................................. $ 17,306 $ 6,562
Accounts receivable, net of allowance of $15,612 and
$18,578................................................ 466,869 465,359
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 71,842 78,395
Inventories............................................... 19,874 22,991
Prepaid expenses and other current assets................. 26,516 27,476
---------- ----------
Total current assets.............................. 602,407 600,783
PROPERTY AND EQUIPMENT, net................................. 341,029 359,912
OTHER ASSETS, net........................................... 24,627 19,676
GOODWILL, net............................................... 906,031 1,003,548
---------- ----------
Total assets...................................... $1,874,094 $1,983,919
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 8,772 $ 8,916
Accounts payable and accrued expenses..................... 215,684 230,009
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 27,981 30,792
---------- ----------
Total current liabilities......................... 252,437 269,717
LONG-TERM DEBT, net of current maturities................... 318,602 344,307
CONVERTIBLE SUBORDINATED NOTES.............................. 172,500 172,500
DEFERRED INCOME TAXES AND OTHER NON-CURRENT LIABILITIES..... 61,599 66,630
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.00001 par value, 10,000,000 shares
authorized:
Series A Convertible Preferred Stock, 3,444,961 shares
issued and outstanding................................. -- --
Common Stock, $.00001 par value, 300,000,000 shares
authorized, 56,400,546 and 57,895,404 shares issued and
outstanding, respectively.............................. -- --
Limited Vote Common Stock, $.00001 par value, 3,345,333
shares authorized, 1,765,912 and 1,704,016 shares
issued and outstanding, respectively................... -- --
Additional paid-in capital................................ 882,344 915,082
Retained earnings......................................... 186,612 215,683
---------- ----------
Total stockholders' equity........................ 1,068,956 1,130,765
---------- ----------
Total liabilities and stockholders' equity........ $1,874,094 $1,983,919
========== ==========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

1
4

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
-------------------
2000 2001
-------- --------

REVENUES.................................................... $333,737 $519,018
COST OF SERVICES (including depreciation)................... 261,056 410,066
-------- --------
Gross profit.............................................. 72,681 108,952
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 29,951 42,033
GOODWILL AMORTIZATION....................................... 4,216 6,304
-------- --------
Income from operations.................................... 38,514 60,615
OTHER INCOME (EXPENSE):
Interest expense.......................................... (4,533) (9,228)
Other, net................................................ 549 22
-------- --------
INCOME BEFORE INCOME TAX PROVISION.......................... 34,530 51,409
PROVISION FOR INCOME TAXES.................................. 14,986 22,106
-------- --------
NET INCOME.................................................. 19,544 29,303
DIVIDENDS ON PREFERRED STOCK................................ 232 232
-------- --------
NET INCOME ATTRIBUTABLE TO COMMON STOCK..................... $ 19,312 $ 29,071
======== ========
BASIC EARNINGS PER SHARE.................................... $ 0.30 $ 0.38
======== ========
DILUTED EARNINGS PER SHARE.................................. $ 0.28 $ 0.38
======== ========
SHARES USED IN COMPUTING EARNINGS PER SHARE:
Basic..................................................... 65,354 76,128
======== ========
Diluted................................................... 72,568 80,802
======== ========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

2
5

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
---------------------
2000 2001
--------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to common stock................... $ 19,312 $ 29,071
Adjustments to reconcile net income attributable to common
stock to net cash provided by operating activities --
Depreciation and amortization.......................... 12,407 18,662
Loss (gain) on sale of property and equipment.......... (219) 100
Deferred income tax provision.......................... 173 900
Preferred stock dividend............................... 232 232
Changes in operating assets and liabilities, net of
non-cash transactions --
(Increase) decrease in --
Accounts receivable, net............................. (26,227) 6,457
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... (5,486) (6,411)
Inventories.......................................... (1,721) (1,642)
Prepaid expenses and other current assets............ (677) 2,614
Increase (decrease) in --
Accounts payable and accrued expenses................ 5,516 8,138
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... (2,221) 2,719
Other, net........................................... -- (226)
--------- ---------
Net cash provided by operating activities......... 1,089 60,614
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.............. 526 1,084
Additions of property and equipment....................... (21,942) (28,602)
Cash paid for acquisitions, net of cash acquired.......... (38,975) (76,870)
Notes receivable.......................................... -- 2,658
Net proceeds from sale of business........................ 2,410 --
--------- ---------
Net cash used in investing activities............. (57,981) (101,730)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under bank lines of credit...... (103,324) 29,290
Proceeds from other long-term debt........................ 150,142 1,469
Payments on other long-term debt.......................... (4,653) (5,339)
Debt issuance costs....................................... (2,104) --
Issuances of stock, net of offering costs................. 4,233 4,098
Exercise of stock options................................. 4,033 854
--------- ---------
Net cash provided by financing activities......... 48,327 30,372
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (8,565) (10,744)
CASH AND CASH EQUIVALENTS, beginning of period.............. 10,775 17,306
--------- ---------
CASH AND CASH EQUIVALENTS, end of period.................... $ 2,210 $ 6,562
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for --
Interest............................................... $ 3,983 $ 14,485
Income taxes........................................... 10,852 514

The accompanying notes are an integral part of these condensed consolidated
financial statements.

3
6

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BUSINESS AND ORGANIZATION:

Quanta Services, Inc. is a leading provider of specialized contracting
services, offering end-to-end network solutions to the telecommunications,
electric power and cable television industries. Our comprehensive services
include designing, installing, repairing and maintaining network infrastructure.
Reference herein to the "Company" includes Quanta and its subsidiaries. The
consolidated financial statements of the Company include the accounts of Quanta
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Since its inception and through 2000, Quanta acquired 77 businesses. The
Company has acquired four additional businesses through March 31, 2001 for an
aggregate consideration of approximately 1.0 million shares of common stock and
$72.9 million in cash. The Company intends to continue to acquire, through
merger or purchase, similar companies to expand its national and regional
operations.

In the course of its operations, the Company is subject to certain risk
factors, including but not limited to: rapid technological and structural
changes in the industries the Company serves, risks related to internal growth
and operating strategies, risks associated with an economic downturn, the
collectibility of receivables, risks related to acquisition financing and
integration, significant fluctuations in quarterly results, risks associated
with contracts, management of growth, dependence on key personnel, availability
of qualified employees, unionized workforce, competition, recoverability of
goodwill, potential exposure to environmental liabilities and anti-takeover
measures.

The board of directors of the Company has authorized a Stock Repurchase
Plan under which up to $75 million of the Company's common stock may be
repurchased. Under the Stock Repurchase Plan, the Company may conduct purchases
through open market transactions in accordance with applicable securities laws.
The Company has not repurchased any shares of common stock under the Stock
Repurchase Plan. The amount of shares purchased and the timing of any purchases
will be based on a number of factors, including the number of shares needed for
replenishment of employee benefit plans, the market price of the stock, market
conditions and as the Company's management deems appropriate. As a result of
these factors, the actual number of shares to be repurchased cannot be
determined at this time.

Interim Condensed Consolidated Financial Information

These unaudited condensed consolidated financial statements have been
prepared pursuant to the rules of the SEC. Certain information and footnote
disclosures, normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States,
have been condensed or omitted pursuant to those rules and regulations. 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. The results of the Company have historically been
subject to significant seasonal fluctuations.

It is suggested that these condensed consolidated financial statements be
read in conjunction with the audited financial statements and notes thereto of
Quanta Services, Inc. and subsidiaries included in the Company's Annual Report
on Form 10-K, which was filed with the SEC on April 2, 2001.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect (i) the reported amounts
4
7
QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of assets and liabilities, (ii) the disclosure of contingent assets and
liabilities known to exist as of the date the financial statements are published
and (iii) the reported amount of net revenues and expenses recognized during the
periods presented. The Company reviews all significant estimates affecting its
consolidated financial statements on a recurring basis and records the effect of
any necessary adjustments prior to their publication. Adjustments made with
respect to the use of estimates often relate to improved information not
previously available. Uncertainties with respect to such estimates and
assumptions are inherent in the preparation of financial statements. The
accompanying consolidated balance sheets include preliminary allocations of the
respective purchase price paid for the companies acquired during the latest 12
months using the "purchase" method of accounting and, accordingly, are subject
to final adjustment.

Self-Insurance

As of August 1, 2000, the Company entered into agreements to insure the
Company for workers' compensation, employer's liability, auto liability and
general liability claims, subject to a deductible of $500,000 per accident or
occurrence. Losses up to the deductible amounts are accrued based upon the
Company's estimates of the ultimate liability for claims incurred and an
estimate of claims incurred but not reported. The accruals are based upon known
facts and historical trends and management believes such accruals to be
adequate.

2. PER SHARE INFORMATION:

Earnings per share amounts are based on the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period. The weighted average number of shares used to compute basic and diluted
earnings per share for the three months ended March 31, 2000 and 2001 is
illustrated below (in thousands):

THREE MONTHS ENDED
MARCH 31,
-------------------
2000 2001
-------- --------

NET INCOME:
Net income attributable to common stock................... $19,312 $29,071
Dividends on Preferred Stock.............................. 232 232
------- -------
Net income for basic earnings per share................... 19,544 29,303
------- -------

Effect of convertible subordinated notes under the "if
converted" method -- interest expense addback, net of
taxes.................................................. 548 1,180
------- -------
Net income for diluted earnings per share................. $20,092 $30,483
======= =======
WEIGHTED AVERAGE SHARES:
Weighted average shares outstanding for basic earnings per
share, including convertible Preferred Stock........... 65,354 76,128
Effect of dilutive stock options.......................... 1,830 1,511
Effect of convertible subordinated notes under the "if
converted" method -- weighted convertible shares
issuable............................................... 5,384 3,163
------- -------
Weighted average shares outstanding for diluted earnings
per share.............................................. 72,568 80,802
======= =======

Pursuant to EITF Topic D-95, "Effect of Participating Convertible
Securities on the Computation of Basic Earnings Per Share," the impact of Series
A Convertible Preferred Stock has been included in the computation of basic
earnings per share and prior period amounts have been restated accordingly. For
the three months ended March 31, 2000, there were no stock options excluded from
the computation of diluted earnings per share and for the three months ended
March 31, 2001, stock options of 1.1 million were excluded

5
8
QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

from the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of the Company's common stock.

3. INCOME TAXES:

Certain of the businesses the Company has acquired 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.

4. DEBT:

Credit Facility

The Company currently has a $350.0 million credit facility with 14
participating banks. The credit facility is secured by a pledge of all of the
capital stock of the Company's 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 (the 30 day LIBOR rate was 5.13% at March 31, 2001) plus
1.00% to 2.00%, 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 (which
was 8.0% at March 31, 2001) plus up to 0.25%, as determined by the ratio of the
Company's total funded debt to EBITDA. Commitment fees of 0.25% to 0.50% (based
on certain financial ratios) are due on any unused borrowing capacity under the
credit facility. The credit facility matures June 14, 2004. The Company's
subsidiaries 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 on common stock, certain
financial ratios and indebtedness covenants and the consent of the lenders for
acquisitions exceeding a certain level of cash consideration. As of March 31,
2001, $122.2 million was borrowed under the credit facility, and the Company had
$26.1 million of letters of credit outstanding, resulting in a borrowing
availability of $201.7 million under the credit facility.

Senior Secured Notes

In March 2000, the Company closed a private placement of $150.0 million
principal amount of senior secured notes primarily with insurance companies. In
September 2000, the Company issued an additional $60.0 million principal amount
of senior secured notes. The resulting $210.0 million of senior secured notes
have maturities ranging from five to ten years with a weighted average interest
rate of 8.41% and, pursuant to an intercreditor agreement, rank equally in right
of repayment with indebtedness under the Company's credit facility. The senior
secured notes have financial covenants similar to the credit facility. Proceeds
from this private placement were used to reduce outstanding borrowings under the
credit facility.

Convertible Subordinated Notes

On July 19, 2000 the Company issued $150.0 million principal amount of
convertible subordinated notes and, on August 7, 2000, the Company issued an
additional $22.5 million principal amount of convertible subordinated notes due
to the exercise of the underwriters' over-allotment option. Net proceeds from
the offering were used to repay outstanding indebtedness under the credit
facility. The convertible subordinated notes bear interest at 4.0% per year and
are convertible into shares of the Company's common stock at a price of $54.53
per share. The convertible subordinated notes require semi-annual interest
payments beginning

6
9
QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 2000, until the notes mature on July 1, 2007. The Company has the
option to redeem the notes beginning July 3, 2003.

5. SERIES A CONVERTIBLE PREFERRED STOCK:

In September 1999, the Company entered into a securities purchase agreement
with UtiliCorp pursuant to which the Company issued 1,860,000 shares of Series A
Convertible Preferred Stock, $.00001 par value per share, for an initial
investment of $186.0 million, before transaction costs. In September 2000,
UtiliCorp converted 7,924,805 shares of common stock into an additional
1,584,961 shares of Series A Convertible Preferred Stock at a rate of one share
of Series A Convertible Preferred Stock for five shares of common stock. The
holders of the Series A Convertible Preferred Stock are entitled to receive
dividends in cash at a rate of 0.5% per annum on an amount equal to $53.99 per
share, plus all unpaid dividends accrued. In addition to the preferred dividend,
the holders are entitled to participate in any cash or non-cash dividends or
distributions declared and paid on the shares of common stock, as if each share
of Series A Convertible Preferred Stock had been converted into common stock at
the applicable conversion price immediately prior to the record date for payment
of such dividends or distributions. However, holders of Series A Convertible
Preferred Stock will not participate in non-cash dividends or distributions if
such dividends or distributions cause an adjustment in the price at which Series
A Convertible Preferred Stock converts into common stock. At any time after the
sixth anniversary of the issuance of the Series A Convertible Preferred Stock,
if the closing price per share of the Company's common stock is greater than
$20.00, then the Company may terminate the preferred dividend. At any time after
the sixth anniversary of the issuance of the Series A Convertible Preferred
Stock, if the closing price per share of the Company's common stock is equal to
or less than $20.00, then the preferred dividend may, at the option of
UtiliCorp, be adjusted to the then "market coupon rate," which shall equal the
Company's after-tax cost of obtaining financing, excluding common stock, to
replace UtiliCorp's investment in the Company.

UtiliCorp is entitled to that number of votes equal to the number of shares
of common stock into which the outstanding shares of Series A Convertible
Preferred Stock are then convertible. Subject to certain limitations, UtiliCorp
is entitled to elect three of the total number of directors of the Company. All
or any portion of the outstanding shares of Series A Convertible Preferred Stock
may, at the option of UtiliCorp, be converted at any time into fully paid and
non-assessable shares of common stock. The conversion price currently is $20.00,
yielding 17,224,805 shares of common stock upon conversion of all outstanding
shares of Series A Convertible Preferred Stock. The conversion price may be
adjusted under certain circumstances. Also in certain circumstances, UtiliCorp
had the right to purchase additional securities from the Company to maintain the
percentage ownership of the Company represented by the Series A Convertible
Preferred Stock. In October 2000, UtiliCorp's right to purchase additional
securities from the Company to maintain a percentage ownership of the Company
represented by the Series A Convertible Preferred Stock terminated.

7
10
QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. SEGMENT INFORMATION:

The Company operates in one reportable segment as a specialty contractor.
The Company provides comprehensive network solutions to the telecommunications,
electric power and cable television industries, including designing, installing,
repairing and maintaining network infrastructure. Each of these services is
provided by various Company subsidiaries and discrete financial information is
not provided to management at the service level. The following table presents
information regarding revenues derived from the industries noted above. Certain
reclassifications have been made to the prior period in order to conform to the
current period.

THREE MONTHS ENDED
MARCH 31,
-------------------
2000 2001
-------- --------
(IN THOUSANDS)

Telecommunications network services......................... $141,838 $185,289
Cable television network services........................... 55,400 73,182
Electric power network services............................. 90,109 188,404
Ancillary services.......................................... 46,390 72,143
-------- --------
$333,737 $519,018
======== ========

The Company does not have significant operations or long-lived assets in
countries outside of the United States.

7. RELATED PARTY TRANSACTIONS:

In September 1999, the Company entered into a strategic alliance agreement
with UtiliCorp. Under the terms of the strategic alliance agreement, UtiliCorp
will use the Company, subject to the Company's ability to perform the required
services, as a preferred contractor in outsourced transmission and distribution
infrastructure installation and maintenance and natural gas distribution
installation and maintenance in all areas serviced by UtiliCorp, provided that
the Company provides such services at a competitive cost. The strategic alliance
agreement has a term of six years.

The Company entered into a management services agreement in September 1999
with UtiliCorp for advice and services including financing activities; corporate
strategic planning; research on the restructuring of the electric power
industry; the development, evaluation and marketing of the Company's products,
services and capabilities; identification of and evaluation of potential U.S.
acquisition candidates and other merger and acquisition advisory services; and
other services that the Company may reasonably request. The management services
agreement required the Company to make quarterly payments to UtiliCorp of
$2,325,000 through September 30, 2005. In December 2000, the Company agreed to
conclude its obligations under the management services agreement with UtiliCorp
in exchange for a one-time payment to UtiliCorp of approximately $28.6 million.

Management believes transactions with related parties were under terms no
less favorable to the Company than those arranged with other parties.

8
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 Condensed
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 and Section 21E of the Securities
Exchange Act of 1934. Such statements include declarations regarding our intent,
belief or current expectations, statements regarding the future results of
acquired companies and our gross margins. 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 our Annual Report on Form 10-K,
which was filed with the SEC on April 2, 2001, which is available at the SEC's
Web site at www.sec.gov.

We derive our revenues from one reportable segment by providing specialized
contracting services and offering comprehensive network solutions. Our customers
include telecommunications, electric power and cable television companies, as
well as commercial, industrial and governmental entities.

We enter into contracts principally on the basis of competitive bids, the
final terms and prices of which we frequently negotiate with the customer.
Although the terms of our contracts vary considerably, most are made on either a
fixed price or unit price basis in which we agree to do the work for a fixed
amount for the entire project (fixed price) or for units of work performed (unit
price). We also perform services on a cost-plus or time and materials basis. We
are generally able to achieve higher margins on fixed price and unit price
contracts than on cost-plus contracts as a result of our experience in bidding
and performance. Our exposure to loss on fixed price contracts has historically
been limited by the high volume and relatively short duration of the fixed price
contracts we undertake. However, as we perform larger projects, our reported
margins may be significantly affected by actual results on these projects.

We complete most installation projects within one year, while we frequently
provide maintenance and repair work under open-ended, unit price master service
agreements which are renewable annually. We generally recognize revenue when
services are performed except when work is being performed under fixed price
contracts. We typically record revenues from fixed price contracts on a
percentage-of-completion basis, using the cost-to-cost method based on the
percentage of total costs incurred to date in proportion to total estimated
costs to complete the contract. Some of our customers require us to post
performance and payment bonds upon execution of the contract, depending upon the
nature of the work to be performed. Our fixed price contracts often include
payment provisions pursuant to which the customer withholds a 5% to 10%
retainage from each progress payment and remits the retainage to us upon
completion and approval of the work.

Cost of services consists primarily of salaries, wages and benefits to
employees, depreciation, fuel and other vehicle expenses, equipment rentals,
subcontracted services, insurance, facilities expenses, materials and parts and
supplies. Our 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. We can predict material
costs more accurately than labor costs. Therefore, to compensate for the
potential variability of labor costs, we seek to maintain higher margins on our
labor-intensive projects. Certain of our subsidiaries were previously subject to
deductibles ranging from $100,000 to $1,000,000 for workers' compensation
insurance and, as of August 1, 2000, we have a deductible of $500,000 per
occurrence related to workers' compensation, automobile and general liability
claims. Fluctuations in insurance accruals related to these deductibles could
have an 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.

9
12

RESULTS OF OPERATIONS

The following table sets forth selected unaudited statements of operations
data and such data as a percentage of revenues for the periods indicated:

THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 2001
---------------- ----------------
(DOLLARS IN THOUSANDS)

Revenues......................................... $333,737 100.0% $519,018 100.0%
Cost of services (including depreciation)........ 261,056 78.2 410,066 79.0
-------- ----- -------- -----
Gross profit................................... 72,681 21.8 108,952 21.0
Selling, general and administrative expenses..... 29,951 9.0 42,033 8.1
Goodwill amortization............................ 4,216 1.3 6,304 1.2
-------- ----- -------- -----
Income from operations......................... 38,514 11.5 60,615 11.7
Interest expense................................. (4,533) (1.4) (9,228) (1.8)
Other income, net................................ 549 0.2 22 0.0
-------- ----- -------- -----
Income before income tax provision............... 34,530 10.3 51,409 9.9
Provision for income taxes....................... 14,986 4.4 22,106 4.3
-------- ----- -------- -----
Net income..................................... $ 19,544 5.9% $ 29,303 5.6%
======== ===== ======== =====

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2000.

Revenues. Revenues increased $185.3 million, or 55.5%, to $519.0 million
for the three months ended March 31, 2001. This increase was primarily
attributable to revenues of $118.0 million from platform companies acquired
subsequent to March 31, 2000 which continued to exist as separate reporting
subsidiaries, as well as a full period of contributed revenues for the three
months ended March 31, 2001 for those companies acquired in the first quarter of
2000. In addition, we have experienced strong growth in key business areas as a
result of greater demand for bandwidth, increased outsourcing, deregulation and
industry convergence.

Gross profit. Gross profit increased $36.3 million, or 49.9%, to $109.0
million for the three months ended March 31, 2001. Gross margin decreased from
21.8% for the three months ended March 31, 2000 to 21.0% for the three months
ended March 31, 2001. This decrease in gross margin resulted from unfavorable
weather conditions experienced during the first quarter of 2001 and lower
margins on work performed for gas transmission customers partially offset by
higher margins received on work performed for utility customers.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $12.1 million, or 40.3%, to $42.0 million for
the three months ended March 31, 2001. Of this increase, $6.9 million was
attributable to the platform companies we acquired subsequent to March 31, 2000.
Selling, general and administrative expenses also included a full three months
of costs in 2001 associated with those companies acquired during the first three
months of 2000. The remainder of the increase was attributable to tuck-in
acquisitions and the continued establishment of infrastructure to facilitate our
growth and to integrate our acquired businesses. As a percentage of revenues,
selling, general and administrative expenses decreased due to better absorption
of the fixed component of overhead costs by the higher level of revenues.

Interest expense. Interest expense increased $4.7 million, or 103.6%, to
$9.2 million for the three months ended March 31, 2001 due to higher levels of
debt resulting from the acquisitions of the companies we purchased subsequent to
March 31, 2000.

Provision for income taxes. The provision for income taxes was $22.1
million for the three months ended March 31, 2001 with an effective tax rate of
43.0% compared to $15.0 million for the three months ended March 31, 2000 and an
effective tax rate of 43.4%. The decrease in the effective rate is primarily due
to better absorption of the non-deductible portion of goodwill amortization.

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Net Income. Net income increased $9.8 million, or 49.9%, to $29.3 million
for the three months ended March 31, 2001 compared to $19.5 million for the
three months ended March 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2001, we had cash and cash equivalents of $6.6 million,
working capital of $331.1 million and long-term debt of $516.8 million, net of
current maturities. Our long-term debt balance at that date included borrowings
of $122.2 million under our credit facility, $210.0 million of senior secured
notes, $172.5 million of convertible subordinated notes and $12.1 million of
other debt. In addition, we had $26.1 million of letters of credit outstanding
under the credit facility.

During the three months ended March 31, 2001, operating activities provided
net cash flow of $60.6 million. Changes in working capital accounts are affected
by the acquisitions throughout the quarter and as such are not comparable to
prior periods. We used net cash in investing activities of $101.7 million,
including $76.9 million used for the purchase of businesses and contingent
consideration issued for an acquisition closed prior to December 31, 2000, net
of cash acquired. Financing activities provided a net cash flow of $30.4
million, resulting primarily from $29.3 million of borrowings from our credit
facility.

We currently have a $350.0 million credit facility with 14 participating
banks. The credit facility is secured by a pledge of all of the capital stock of
our operating subsidiaries and the majority of our assets. We use the credit
facility 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) LIBOR plus 1.00%
to 2.00%, as determined by the ratio of our 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 our total funded debt to EBITDA. We pay commitment
fees of 0.25% to 0.50% (based on total funded debt to EBITDA) on any unused
borrowing capacity under the credit facility. Our subsidiaries guarantee
repayment of all amounts due under the credit facility, and the credit facility
restricts pledges of material assets. We agreed to usual and customary covenants
for a credit facility of this nature, including a prohibition on the payment of
dividends on common stock, certain financial ratios and indebtedness covenants
and a requirement to obtain the consent of the lenders for acquisitions
exceeding a certain level of cash consideration. As of May 10, 2001 we had
approximately $149.2 million in outstanding borrowings under the credit facility
and $32.3 million of letters of credit outstanding, resulting in a borrowing
availability of $168.5 million under the credit facility.

Our board of directors has authorized a Stock Repurchase Plan under which
up to $75 million of our common stock may be repurchased. Under the Stock
Repurchase Plan, we may conduct purchases through open market transactions in
accordance with applicable securities laws. We have not repurchased any shares
of common stock under the Stock Repurchase Plan. The amount of shares purchased
and the timing of any purchases will be based on a number of factors, including
the number of shares needed for replenishment of employee benefit plans, the
market price of the stock, market conditions and as our management deems
appropriate. As a result of these factors, the actual number of shares to be
repurchased cannot be determined at this time.

Between January 1, 2001 and March 31, 2001, we acquired four companies for
an aggregate consideration of 1.0 million shares of common stock and $72.9
million in cash. The cash portion of such consideration was provided by
borrowings under our credit facility. The timing, size or success of any
acquisition effort and the associated potential capital commitments cannot be
predicted.

We anticipate that our cash flow from operations and our credit facility
will provide sufficient cash to enable us to meet our working capital needs,
debt service requirements, and planned capital expenditures for property and
equipment for at least the next 12 months. However, if companies we wish to
acquire are unwilling to accept our common stock as part of the consideration
for the sale of their businesses, we could be required to utilize more cash to
complete acquisitions. If sufficient funds were not available from operating

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cash flow or through borrowings under the credit facility, we may be required to
seek additional financing through the public or private sale of equity or debt
securities. There can be no assurance that we could secure such financing if and
when we need it or on terms we would deem acceptable.

SEASONALITY; FLUCTUATIONS OF QUARTERLY RESULTS

Our results of operations can be subject to seasonal variations. During the
winter months, demand for new projects and new maintenance service arrangements
may be lower due to reduced construction activity. However, demand for repair
and maintenance services attributable to damage caused by inclement weather
during the winter months may partially offset the loss of revenues from lower
demand for new projects and new maintenance service arrangements. Additionally,
our industry can be highly cyclical. As a result, our volume of business may be
adversely affected by declines in new projects in various geographic regions in
the United States. Typically, we experience lower gross and operating margins
during the winter months. 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 may also
materially affect quarterly results. Accordingly, our 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

No material changes have occurred to the information previously provided in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2000.

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PART II -- OTHER INFORMATION

QUANTA SERVICES, INC. AND SUBSIDIARIES

ITEM 2. CHANGES IN SECURITIES.

Between January 1, 2001, and March 31, 2001, the Company completed four
acquisitions in which some or all of the consideration was unregistered
securities of the Company. The aggregate consideration paid in these
transactions was $72.9 million in cash and 1.0 million shares of common stock.
The Company considers the acquisitions of Airlan Telecom Services, L.P. and
Mejia Personnel Services, Inc. to be one acquisition as these companies were all
part of a related business. None of the other acquisitions were affiliated with
each other prior to acquisition by the Company.

All securities listed on the following table were shares of common stock.
The Company relied on Section 4(2) of the Securities Act of 1933, as amended, as
the basis for exemption from registration. For all issuances, the purchasers
were "accredited investors" as defined in Rule 501 promulgated pursuant to the
Securities Act of 1933, as amended. All issuances were to the owners of
businesses acquired in privately negotiated transactions, not pursuant to public
solicitation.

NUMBER OF
DATE SHARES PURCHASERS CONSIDERATION
- ---- --------- ---------- -------------

1/15/01 56,193 Two owners of Maddux Underground Acquisition of Maddux Underground
Construction, Inc. Construction, Inc.
1/15/01 138,838 Two owners of Myers Cable, Inc. Acquisition of Myers Cable, Inc.
2/14/01 366,904 Four owners of Airlan Telecom Acquisition of Airlan Telecom
Services, L.P. Services, L.P.
2/14/01 26,207 One owner of Mejia Personnel Acquisition of Mejia Personnel
Services, Inc. Services, Inc.
2/15/01 413,831 Two owners of Advanced Technologies Acquisition of Advanced
and Installation Corporation Technologies and Installation
Corporation

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits.

None.

(b) Reports on Form 8-K.

None.

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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.

By: /s/ DERRICK A. JENSEN
----------------------------------
Derrick A. Jensen
Vice President, Controller and
Chief Accounting Officer

Dated: May 15, 2001