UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended June 30, 2004 | ||
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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.
| Delaware | 74-2851603 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| Incorporation or organization) | Identification No.) |
1360 Post Oak Blvd.
Registrant’s telephone number, including area code:
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 þ No o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o
116,262,654 shares of Common Stock were outstanding as of July 30, 2004. As of the same date, 1,051,067 shares of Limited Vote Common Stock were outstanding.
QUANTA SERVICES, INC. AND SUBSIDIARIES
INDEX
1
QUANTA SERVICES, INC. AND SUBSIDIARIES
| December 31, | June 30, | |||||||||
| 2003 | 2004 | |||||||||
| ASSETS | ||||||||||
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Current Assets:
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Cash and cash equivalents
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$ | 179,626 | $ | 197,317 | ||||||
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Accounts receivable, net of allowances of $27,306
and $14,074, respectively
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358,698 | 322,031 | ||||||||
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Costs and estimated earnings in excess of
billings on uncompleted contracts
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51,619 | 61,943 | ||||||||
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Inventories
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23,809 | 26,525 | ||||||||
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Prepaid expenses and other current assets
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62,341 | 52,360 | ||||||||
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Total current assets
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676,093 | 660,176 | ||||||||
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Property and equipment, net
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341,542 | 329,703 | ||||||||
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Accounts and notes receivable, net of allowances
of $46,374 and $46,381
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34,327 | 41,896 | ||||||||
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Other assets, net
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25,591 | 24,148 | ||||||||
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Goodwill and other intangibles, net
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388,882 | 388,751 | ||||||||
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Total assets
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$ | 1,466,435 | $ | 1,444,674 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current Liabilities:
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Current maturities of long-term debt
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$ | 5,034 | $ | 2,923 | ||||||
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Accounts payable and accrued expenses
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175,445 | 183,849 | ||||||||
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Billings in excess of costs and estimated
earnings on uncompleted contracts
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18,911 | 17,175 | ||||||||
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Total current liabilities
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199,390 | 203,947 | ||||||||
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Long-term debt, net of current maturities
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58,051 | 46,649 | ||||||||
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Convertible subordinated notes
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442,500 | 442,500 | ||||||||
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Deferred income taxes and other non-current
liabilities
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103,362 | 99,474 | ||||||||
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Total liabilities
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803,303 | 792,570 | ||||||||
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Commitments and Contingencies
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Stockholders’ Equity:
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Common stock, $.00001 par value,
300,000,000 shares authorized, 116,426,215 and
117,263,563 shares issued and 115,499,775 and 115,999,977
outstanding, respectively
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— | — | ||||||||
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Limited Vote Common Stock, $.00001 par
value, 3,345,333 shares authorized, 1,067,750 and
1,051,067 shares issued and outstanding, respectively
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— | — | ||||||||
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Additional paid-in capital
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1,071,701 | 1,081,404 | ||||||||
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Deferred compensation
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(7,359 | ) | (10,013 | ) | ||||||
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Retained deficit
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(389,485 | ) | (404,671 | ) | ||||||
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Treasury stock, 926,440 and 1,263,586 common
shares, at cost
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(11,725 | ) | (14,616 | ) | ||||||
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Total stockholders’ equity
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663,132 | 652,104 | ||||||||
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Total liabilities and stockholders’ equity
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$ | 1,466,435 | $ | 1,444,674 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2003 | 2004 | 2003 | 2004 | ||||||||||||||
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Revenues
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$ | 408,302 | $ | 389,194 | $ | 775,431 | $ | 744,191 | |||||||||
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Cost of services (including depreciation)
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354,784 | 342,853 | 684,156 | 671,126 | |||||||||||||
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Gross profit
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53,518 | 46,341 | 91,275 | 73,065 | |||||||||||||
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Selling, general and administrative expenses
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58,368 | 40,589 | 97,771 | 84,131 | |||||||||||||
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Income (loss) from operations
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(4,850 | ) | 5,752 | (6,496 | ) | (11,066 | ) | ||||||||||
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Other income (expense):
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Interest expense
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(8,138 | ) | (6,228 | ) | (16,102 | ) | (12,594 | ) | |||||||||
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Other, net
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(65 | ) | 249 | 584 | 722 | ||||||||||||
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Income (loss) before income tax provision
(benefit)
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(13,053 | ) | (227 | ) | (22,014 | ) | (22,938 | ) | |||||||||
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Provision (benefit) for income taxes
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(3,218 | ) | 3,265 | (7,336 | ) | (7,752 | ) | ||||||||||
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Net income (loss)
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(9,835 | ) | (3,492 | ) | (14,678 | ) | (15,186 | ) | |||||||||
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Dividends on preferred stock, net of forfeitures
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— | — | (2,109 | ) | — | ||||||||||||
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Net income (loss) attributable to common stock
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$ | (9,835 | ) | $ | (3,492 | ) | $ | (12,569 | ) | $ | (15,186 | ) | |||||
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Earnings (loss) per share:
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Basic and diluted earnings (loss) per share
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$ | (0.08 | ) | $ | (0.03 | ) | $ | (0.11 | ) | $ | (0.13 | ) | |||||
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Shares used in computing basic and diluted
earnings (loss) per share
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115,799 | 114,425 | 110,409 | 114,171 | |||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2003 | 2004 | 2003 | 2004 | |||||||||||||||||
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Cash Flows from Operating Activities:
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Net income (loss) attributable to common stock
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$ | (9,835 | ) | $ | (3,492 | ) | $ | (12,569 | ) | $ | (15,186 | ) | ||||||||
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Adjustments to reconcile net income (loss)
attributable to common stock to net cash provided by operating
activities —
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Depreciation and amortization
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15,307 | 14,791 | 30,208 | 29,767 | ||||||||||||||||
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Loss (gain) on sale of property and equipment
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261 | (1,427 | ) | 694 | (1,255 | ) | ||||||||||||||
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Provision for doubtful accounts
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19,014 | 100 | 19,257 | 183 | ||||||||||||||||
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Deferred income tax provision (benefit)
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30,249 | 1,469 | 32,304 | (11,445 | ) | |||||||||||||||
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Amortization of deferred compensation
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878 | 1,390 | 1,084 | 2,290 | ||||||||||||||||
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Preferred stock dividend, net of forfeitures
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— | — | (2,109 | ) | — | |||||||||||||||
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Changes in operating assets and liabilities, net
of non-cash transactions —
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(Increase) decrease in —
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Accounts receivable
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(34,859 | ) | (10,637 | ) | 9,693 | 28,915 | ||||||||||||||
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Costs and estimated earnings in excess of
billings on uncompleted contracts
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(2,821 | ) | (6,257 | ) | (1,316 | ) | (10,324 | ) | ||||||||||||
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Inventories
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366 | (483 | ) | (1,192 | ) | (2,716 | ) | |||||||||||||
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Prepaid expenses and other current assets
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1,216 | 2,949 | (15 | ) | 4,691 | |||||||||||||||
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Increase (decrease) in —
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Accounts payable and accrued expenses and other
non-current liabilities
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15,510 | 6,140 | (4,274 | ) | 16,019 | |||||||||||||||
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Billings in excess of costs and estimated
earnings on uncompleted contracts
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(1,969 | ) | (434 | ) | (1,114 | ) | (1,736 | ) | ||||||||||||
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Other, net
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2,553 | 872 | 2,511 | 429 | ||||||||||||||||
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Net cash provided by operating activities
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35,870 | 4,981 | 73,162 | 39,632 | ||||||||||||||||
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Cash Flows from Investing Activities:
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Proceeds from sale of property and equipment
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691 | 2,711 | 904 | 3,270 | ||||||||||||||||
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Additions of property and equipment
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(7,624 | ) | (7,901 | ) | (12,477 | ) | (19,492 | ) | ||||||||||||
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Cash (restricted) released for
self-insurance programs
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(7,200 | ) | 2,779 | (7,200 | ) | 6,027 | ||||||||||||||
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Net cash used in investing activities
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(14,133 | ) | (2,411 | ) | (18,773 | ) | (10,195 | ) | ||||||||||||
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Cash Flows from Financing Activities:
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Net borrowings (payments) under bank lines
of credit
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— | — | — | (10,700 | ) | |||||||||||||||
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Proceeds from other long-term debt
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1,224 | 114 | 2,138 | 244 | ||||||||||||||||
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Payments on other long-term debt
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(1,784 | ) | (1,116 | ) | (3,749 | ) | (3,057 | ) | ||||||||||||
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Issuances of stock, net of offering costs
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3,505 | — | 5,436 | 1,650 | ||||||||||||||||
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Exercise of stock options
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— | 69 | — | 117 | ||||||||||||||||
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Net cash provided by (used in) financing
activities
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2,945 | (933 | ) | 3,825 | (11,746 | ) | ||||||||||||||
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Net Increase in Cash and Cash Equivalents
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24,682 | 1,637 | 58,214 | 17,691 | ||||||||||||||||
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Cash and Cash Equivalents, beginning of period
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61,433 | 195,680 | 27,901 | 179,626 | ||||||||||||||||
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Cash and Cash Equivalents, end of period
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$ | 86,115 | $ | 197,317 | $ | 86,115 | $ | 197,317 | ||||||||||||
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Supplemental Disclosure of Cash Flow Information
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Cash paid for —
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Interest
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$ | 5,208 | $ | 6,206 | $ | 10,949 | $ | 7,027 | ||||||||||||
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Income taxes, net of refunds
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$ | (37,491 | ) | $ | (257 | ) | $ | (38,422 | ) | $ | (456 | ) | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
QUANTA SERVICES, INC. AND SUBSIDIARIES
1. Business and Organization:
Quanta Services, Inc. (Quanta) is a leading provider of specialized contracting services, offering end-to-end network solutions to the electric power, gas, telecommunications and cable television industries. Quanta’s comprehensive services include designing, installing, repairing and maintaining network infrastructure.
In the course of its operations, Quanta is subject to certain risk factors, including but not limited to risks related to significant fluctuations in quarterly results, economic downturn, contract terms, competition, occupational health and safety matters, rapid technological and structural changes in the industries Quanta serves, ability to obtain or maintain performance bonds, management of growth, dependence on key personnel, unionized workforce, availability of qualified employees, being self-insured against potential liabilities, potential exposure to environmental liabilities, the pursuit of additional work in the government arena, the requirements of the Sarbanes-Oxley Act of 2002, access to capital, internal growth and operating strategies, recoverability of goodwill, replacing cancelled or completed contracts, acquisition integration and financing and anti-takeover measures.
| Interim Condensed Consolidated Financial Information |
These 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 accounting principles generally accepted in the United States, have been condensed or omitted pursuant to those rules and regulations. Quanta 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 Quanta have historically been subject to significant seasonal fluctuations.
It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto of Quanta Services, Inc. and subsidiaries included in Quanta’s Annual Report on Form 10-K, which was filed with the SEC on March 15, 2004.
| Reclassifications |
Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year.
| Use of Estimat |