QUANTA SERVICES, INC. - FORM 8-K - EX-99.1 - August 10, 2015

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8-K - FORM 8-K - QUANTA SERVICES, INC.d80279d8k.htm

Exhibit 99.1

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On August 4, 2015, Quanta Services, Inc. (Quanta) completed the sale of all of the issued and outstanding equity interests in Quanta Fiber Networks, Inc., a wholly owned subsidiary of Quanta (Sunesys), to CC SCN Fiber LLC, a wholly owned subsidiary of Crown Castle International Corp., for an aggregate purchase price of approximately $1 billion in cash, resulting in estimated after-tax net proceeds of approximately $830 million (the Transaction). Sunesys, along with its wholly owned subsidiaries, owned all of Quanta’s fiber optic licensing operations.

The following unaudited pro forma condensed consolidated financial information was derived from Quanta’s historical consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet gives effect to the Transaction as if it were completed on March 31, 2015. The unaudited pro forma condensed consolidated statements of operations give effect to the Transaction as if it were completed on January 1, 2012. The unaudited pro forma condensed consolidated financial information should be read in conjunction with Quanta’s Annual Reports on Form 10-K for the years ended December 31, 2014, 2013 and 2012 and Quanta’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015.

The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable and directly attributable to the Transaction; however, such adjustments are subject to change. In addition, such adjustments are estimates. The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not intended to reflect what Quanta’s consolidated financial position and results of operations would have been had the Transaction occurred on the dates indicated and is not necessarily indicative of its future consolidated financial position and results of operations.

The pro forma adjustments include:

 

  •   An adjustment to reflect the net cash proceeds and gain from the Transaction;

 

  •   An adjustment to reflect accrued liabilities for estimated taxes payable, professional fees and closing costs related to the Transaction; and

 

  •   An adjustment to remove all of Quanta’s fiber optic licensing assets and liabilities.

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

March 31, 2015

(In thousands, except share information)

 

     Quanta
Historical		     Adjustments
for
Disposition of
Fiber Optic
Licensing
Operations		     Pro Forma  
ASSETS       

Current Assets:

       

Cash and cash equivalents

    $ 135,534      $ 995,708  (a)    $ 1,131,242   

Accounts receivable, net

      1,642,675        (8,870 )(b)      1,633,805   

Costs and estimated earnings in excess of billings on uncompleted contracts

      341,190        —          341,190   

Inventories

      45,824        —          45,824   

Prepaid expenses and other current assets

      222,417        (12,156 )(b)      210,261   
  

 

 

    

 

 

    

 

 

  

Total current assets

      2,387,640        974,682        3,362,322   

Property and equipment, net of accumulated depreciation

      1,480,097        (383,570 )(b)      1,096,527   

Other assets, net

      98,557        (19,319 )(b)      79,238   

Other intangible assets, net of accumulated amortization

      252,055        (16,596 )(b)      235,459   

Goodwill

      1,922,485        (334,791 )(b)      1,587,694   
  

 

 

    

 

 

    

 

 

  

Total assets

    $ 6,140,834      $ 220,406      $ 6,361,240   
  

 

 

    

 

 

    

 

 

  
LIABILITIES AND EQUITY       

Current Liabilities:

       

Current maturities of long-term debt and short-term borrowings

    $ 9,440      $ —        $ 9,440   

Accounts payable and accrued expenses

      874,627        149,448  (c)      1,024,075   

Billings in excess of costs and estimated earnings on uncompleted contracts

      240,243        —          240,243   
  

 

 

    

 

 

    

 

 

  

Total current liabilities

      1,124,310        149,448        1,273,758   

Long-term debt and notes payable, net of current maturities

      115,002        —          115,002   

Deferred income taxes

      299,809        (68,840 )(b)      230,969   

Insurance and other non-current liabilities

      290,960        (49,058 )(b)      241,902   
  

 

 

    

 

 

    

 

 

  

Total liabilities

      1,830,081        31,550        1,861,631   
  

 

 

    

 

 

    

 

 

  

Commitments and Contingencies

       

Equity:

       

Common stock, $.00001 par value, 600,000,000 shares authorized, 226,885,163 shares issued, and 204,495,383 shares outstanding

      2          2   

Exchangeable Shares, no par value, 7,325,971 shares issued and outstanding

      —          —          —     

Series F Preferred Stock, $.00001 par value, 1 share authorized, issued and outstanding

      —          —          —     

Series G Preferred Stock, $.00001 par value, 1 share authorized, issued and outstanding

      —          —          —     

Additional paid-in capital

      3,609,574        —          3,609,574   

Retained earnings

      1,420,275        188,856  (d)      1,609,131   

Accumulated other comprehensive income (loss)

      (212,244 )      —          (212,244 ) 

Treasury stock, 22,389,780 common shares, at cost

      (520,119 )      —          (520,119 ) 
  

 

 

    

 

 

    

 

 

  

Total stockholders’ equity

      4,297,488        188,856        4,486,344   

Non-controlling interests

      13,265        —          13,265   
  

 

 

    

 

 

    

 

 

  

Total equity

      4,310,753        188,856        4,499,609   
  

 

 

    

 

 

    

 

 

  

Total liabilities and equity

    $ 6,140,834      $ 220,406      $ 6,361,240   
  

 

 

    

 

 

    

 

 

  

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2015

(In thousands, except per share information)

 

     Quanta
Historical		     Adjustments
for Disposition
of Fiber Optic
Licensing
Operations (e)		     Pro Forma  

Revenues

    $ 1,886,956      $ (25,570 )    $ 1,861,386   

Cost of services (including depreciation)

      1,634,295        (10,815 )      1,623,480   
  

 

 

    

 

 

    

 

 

  

Gross profit

      252,661        (14,755 )      237,906   

Selling, general and administrative expenses

      150,238        (4,775 )      145,463   

Amortization of intangible assets

      8,706        (413 )      8,293   
  

 

 

    

 

 

    

 

 

  

Operating income

      93,717        (9,567 )      84,150   

Interest expense

      (1,400 )      —          (1,400 ) 

Interest income

      455        (2 )      453   

Other income (expense), net

      (212 )      —          (212 ) 
  

 

 

    

 

 

    

 

 

  

Income before income taxes

      92,560        (9,569 )      82,991   

Provision for income taxes

      34,375        (3,774 )      30,601   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations

      58,185        (5,795 )      52,390   

Less: Net income from continuing operations attributable to non-controlling interests

      4,701          4,701   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations attributable to common stock

    $ 53,484      $ (5,795 )    $ 47,689   
  

 

 

    

 

 

    

 

 

  

Earnings per share from continuing operations attributable to common stock - basic and diluted

    $ 0.25        $ 0.22   
  

 

 

      

 

 

  

Shares used in computing earnings per share:

       

Weighted average basic shares outstanding

      215,473          215,473   
  

 

 

      

 

 

  

Weighted average diluted shares outstanding

      215,490          215,490   
  

 

 

      

 

 

  

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2014

(In thousands, except per share information)

 

     Quanta
Historical		     Adjustments
for Disposition
of Fiber Optic
Licensing
Operations (e)		     Pro Forma  

Revenues

    $ 7,851,250      $ (104,021 )    $ 7,747,229   

Cost of services (including depreciation)

      6,617,730        (39,295 )      6,578,435   
  

 

 

    

 

 

    

 

 

  

Gross profit

      1,233,520        (64,726 )      1,168,794   

Selling, general and administrative expenses

      722,038        (16,561 )      705,477   

Amortization of intangible assets

      35,907        (1,650 )      34,257   
  

 

 

    

 

 

    

 

 

  

Operating income

      475,575        (46,515 )      429,060   

Interest expense

      (4,765 )        (4,765 ) 

Interest income

      3,741        (5 )      3,736   

Equity in earnings (losses) of unconsolidated affiliates

      (332 )        (332 ) 

Other income (expense), net

      (1,102 )      2        (1,100 ) 
  

 

 

    

 

 

    

 

 

  

Income from continuing operations before income taxes

      473,117        (46,518 )      426,599   

Provision for income taxes

      157,408        (18,401 )      139,007   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations

      315,709        (28,117 )      287,592   

Less: Net income from continuing operations attributable to noncontrolling interests

      18,368          18,368   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations attributable to common stock

    $ 297,341      $ (28,117 )    $ 269,224   
  

 

 

    

 

 

    

 

 

  

Earnings per share from continuing operations attributable to common stock - basic and diluted

    $ 1.35        $ 1.23   

Shares used in computing earnings per share:

       

Weighted average basic shares outstanding

      219,668          219,668   
  

 

 

      

 

 

  

Weighted average diluted shares outstanding

      219,690          219,690   
  

 

 

      

 

 

  

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2013

(In thousands, except per share information)

 

     Quanta
Historical		     Adjustments
for Disposition
of Fiber Optic
Licensing
Operations (e)		     Pro Forma  

Revenues

    $ 6,522,842      $ (111,265 )    $ 6,411,577   

Cost of services (including depreciation)

      5,467,389        (42,745 )      5,424,644   
  

 

 

    

 

 

    

 

 

  

Gross profit

      1,055,453        (68,520 )      986,933   

Selling, general and administrative expenses

      501,010        (15,941 )      485,069   

Amortization of intangible assets

      27,515        (1,650 )      25,865   
  

 

 

    

 

 

    

 

 

  

Operating income

      526,928        (50,929 )      475,999   

Interest expense

      (2,668 )        (2,668 ) 

Interest income

      3,380        (2 )      3,378   

Equity in earnings of unconsolidated affiliates, including gain on sale of investment

      112,744          112,744   

Other income (expense), net

      (1,135 )      2        (1,133 ) 
  

 

 

    

 

 

    

 

 

  

Income before income taxes

      639,249        (50,929 )      588,320   

Provision for income taxes

      217,940        (21,065 )      196,875   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations

      421,309        (29,864 )      391,445   

Less: Net income from continuing operations attributable to noncontrolling interests

      19,388          19,388   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations attributable to common stock

    $ 401,921      $ (29,864 )    $ 372,057   
  

 

 

    

 

 

    

 

 

  

Earnings per share from continuing operations attributable to common stock - basic and diluted

    $ 1.87        $ 1.73   
  

 

 

      

 

 

  

Shares used in computing earnings per share:

       

Weighted average basic shares outstanding

      214,929          214,929   
  

 

 

      

 

 

  

Weighted average diluted shares outstanding

      214,978          214,978   
  

 

 

      

 

 

  

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2012

(In thousands, except per share information)

 

     Quanta
Historical		     Adjustments
for Disposition
of Fiber Optic
Licensing
Operations (e)		     Pro Forma  

Revenues

    $ 5,920,269      $ (95,184 )    $ 5,825,085   

Cost of services (including depreciation)

      4,982,562        (29,386 )      4,953,176   
  

 

 

    

 

 

    

 

 

  

Gross profit

      937,707        (65,798 )      871,909   

Selling, general and administrative expenses

      434,894        (13,168 )      421,726   

Amortization of intangible assets

      37,691        (3,642 )      34,049   
  

 

 

    

 

 

    

 

 

  

Operating income

      465,122        (48,988 )      416,134   

Interest expense

      (3,746 )        (3,746 ) 

Interest income

      1,471          1,471   

Equity in earnings (losses) of unconsolidated affiliates

      2,084          2,084   

Other income (expense), net

      (351 )      2        (349 ) 
  

 

 

    

 

 

    

 

 

  

Income before income taxes

      464,580        (48,986 )      415,594   

Provision for income taxes

      158,859        (18,872 )      139,987   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations

      305,721        30,114        275,607   

Less: Net income from continuing operations attributable to noncontrolling interests

      16,027          16,027   
  

 

 

    

 

 

    

 

 

  

Net income from continuing operations attributable to common stock

    $ 289,694      $ 30,114      $ 259,580   
  

 

 

    

 

 

    

 

 

  

Earnings per share from continuing operations attributable to common stock - basic and diluted

    $ 1.36        $ 1.22   
  

 

 

      

 

 

  

Shares used in computing earnings per share:

       

Weighted average basic shares outstanding

      212,777          212,777   
  

 

 

      

 

 

  

Weighted average diluted shares outstanding

      212,835          212,835   
  

 

 

      

 

 

  

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(a) Represents the adjustment to cash and cash equivalents for the receipt of proceeds from the sale of Quanta’s fiber optic licensing operations.
(b) Represents the adjustments for the disposition of assets and liabilities related to Quanta’s fiber optic licensing operations.
(c) Represents adjustments for the disposition of accrued liabilities related to Quanta’s fiber optic licensing operations of $16.4 million, offset by accrued liabilities for estimated taxes payable related to the gain on the sale of $154.4 million, at a statutory rate of 37%, and accrued liabilities for professional fees and closing costs of $11.4 million.
(d) Represents the gain on sale that would have been recorded as of March 31, 2015 had the transaction occurred on such date.
(e) Represents the adjustments to eliminate the operating results of the fiber optics licensing operations as if the Transaction were completed on January 1, 2012. For purposes of these unaudited pro forma condensed consolidated financial statements, estimated income tax rates of 39.4%, 39.6%, 41.4% and 38.5% have been used for the three months ended March 31, 2015 and the years ended December 31, 2014, 2013 and 2012, respectively.

QUANTA SERVICES, INC. Reports