QUANTA SERVICES INC, 424B2, 1998-10-30

QUANTA SERVICES INC
424B2, 1998-10-30
ELECTRICAL WORK

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Filed pursuant to Rule 424(b)(2)
Registration No. 333-66079

508,436 SHARES

[LOGO OF QUANTA SERVICES, INC. APPEARS HERE]
COMMON STOCK

The Selling Stockholders identified in this Prospectus may offer from time
to time 508,436 shares of Common Stock of Quanta Services, Inc. We will not
receive any proceeds from this offering.

The shares of Common Stock may be offered by the Selling Stockholders in one
or more transactions on the New York Stock Exchange at prices then prevailing,
in negotiated prices or otherwise. The price at which any of the shares of
Common Stock may be sold, and the commissions, if any, paid in connection with
any sale and may vary from transaction to transaction. We will pay certain
expenses of this offering which are estimated to be approximately $10,000.

----------------

CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 7 IN THIS PROSPECTUS.

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TRADING SYMBOL
New York Stock Exchange -- PWR

QUANTA SERVICES, INC.
1360 POST OAK BOULEVARD, SUITE 2100
HOUSTON, TEXAS 77056
(713) 629-7600

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.

The date of this Prospectus is October 29, 1998.
<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and our financial statements and notes
thereto appearing elsewhere in this Prospectus.

THE COMPANY

Our goal is to become a leading provider of specialty electrical contracting
and maintenance services primarily for electric and telecommunications
infrastructure in North America. We also provide electrical contracting
services to commercial and industrial customers and install transportation
control and lighting systems. Our services include:

. installation, repair and maintenance of electric power transmission and
distribution lines, telecommunications lines and cable television lines;

. construction of electric substations;

. installation of highway lighting and traffic control systems;

. specialized underground construction including underground fueling
systems;

. erection of cellular telephone, PCS(R) and microwave towers;

. design and engineering services; and

. specialty contracting services for electric, video, security, fire, voice
and data systems.

We provide these services to electric utilities, telecommunication and cable
television operators, governmental entities, general contractors and builders,
and owners and managers of commercial and industrial properties.

Our company was formed through the combination of four separate businesses in
February, 1998. These companies, which we refer to as the Founding Companies,
are PAR Electrical Contractors, Inc., Union Power Construction Company, TRANS
TECH Electric, Inc. and Potelco, Inc. Since our initial public offering in
February, 1998, we have acquired 11 other businesses. As a result of these
acquisitions, we have become one of the largest providers of specialty electric
and telecommunications infrastructure contracting services in the markets we
serve. We currently have offices in 19 states, and in 1998 have performed work
in 32 states. Our competitive strengths, we believe, include our large size,
our geographical diversity, our industry relationships, our expertise in
specialty services, our design and engineering capability and the number of
skilled personnel that we employ. Our combined pro forma results were as
follows:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
<S> <C> <C>
Revenues $338.0 million $184.2 million
Operating income $ 37.7 million $ 16.2 million
Net income $ 17.8 million $ 7.1 million
</TABLE>

We estimate that the electrical and telecommunications contracting industry
generates annual revenue in excess of $40 billion. Deregulation of utilities,
upgrades and expansion of existing infrastructure and increased outsourcing of
services are changing the way companies conduct business in the electrical and
telecommunications industry. We believe that our strategy of consolidating the
providers of specialty electrical contracting services to the electrical and
telecommunications industry will position us well to capitalize on these
trends.

According to the U.S. Census Bureau, there are more than 50,000 electrical
and telecommunications contracting businesses. These businesses include a small
number of regional or national providers and a large number of relatively
small, owner-operated businesses. These smaller businesses have limited access
to capital

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and usually can offer only a limited range of services. Therefore, we believe
that we have substantial consolidation and growth opportunities as long as we
maintain a disciplined acquisition program, a decentralized operating structure
and access to financial resources required to complete acquisitions and
capitalize on other opportunities.

GROWTH STRATEGY

Our growth strategy has three components:

. Operating Strategy. We intend to operate on a decentralized basis while
maintaining operating and financial controls. The operators of the
businesses we acquire will remain responsible for the operations,
profitability and growth of their individual business. We will centralize
certain administrative functions such as corporate strategy and
acquisitions, financing, insurance, investor relations and employee
benefit plans. We further intend to realize certain cost savings by
combining overlapping operations of the businesses we acquire. We believe
that we have a competitive advantage when seeking new contracts for
infrastructure projects because of our operating efficiency, financial
strength, technical expertise, presence in key geographic areas and our
reputation for quality and reliability.

. Internal Growth. All of the businesses that we have acquired, on a
combined pro forma basis, have experienced internal revenue growth at a
compound annual rate of 21.5 percent between 1995 and 1997. Our efforts
to continue this trend of internal growth include increasing current
services to our existing customers, selling new services to our existing
customers, seeking new customers and geographically expanding our service
area.

. Acquisitions. We believe that the trend towards outsourcing by electric
utilities and telecommunications providers favors companies that can
provide a broad range of services on a regional or national basis. Small
and mid-size companies that do not have access to capital for growth will
be at a competitive disadvantage. We intend to actively pursue
acquisitions of well-established companies to enter new geographic
markets and expand the range of services we offer, as well as leverage
current operations within existing markets. We expect that there will
continue to be a large number of attractive acquisition candidates due to
the highly fragmented nature of the industry, the desire of the owners of
businesses for liquidity and their need for access to capital for growth.

We believe that our prominence and operating strength combined with the
experience of our executive management will provide us with significant
competitive advantages as we pursue our growth strategy.

3
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THE OFFERING

Common Stock being offered.......... 508,436(1)

Common Stock to be outstanding
after the offering.................. 21,620,670 shares(2)

Listing............................. The shares of Common Stock are listed
on the NYSE.
- --------
(1) The Common Stock being offered by this Prospectus (the "Shares") were
issued to the selling stockholders identified herein (the "Selling
Stockholders") in connection with the acquisition of Spalj Construction
Company ("Spalj").
(2) Includes 3,345,333 shares of a special class of Common Stock ("Limited Vote
Common Stock") issued to the initial stockholders and certain management
personnel of the Company. Excludes options to purchase approximately
1,155,150 shares of Common Stock that have been granted pursuant to the
Company's 1997 Stock Option Plan. See "Management--1997 Stock Option Plan",
"Certain Transactions--Organization of the Company" and "Description of
Capital Stock--Common Stock and Limited Vote Common Stock".

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<PAGE>

SUMMARY FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

For periods prior to our initial public offering, our historical financials
reflect the results of PAR, the "accounting acquiror", restated for the results
of NorAm Telecommunications, Inc. ("Noram"), which we acquired in a transaction
accounted for as a pooling-of-interests. Our historical financial statements
for periods subsequent to our initial public offering reflect the results of
the Founding Companies and each of the ten other businesses we acquired from
the date we acquired such businesses.

The unaudited pro forma combined financial information presented below is
intended to give you a better understanding of what the results of operations
and financial position of all of our businesses might have looked like had they
always been combined. We prepared the pro forma income statement and balance
sheet by adding or combining our restated historical financial statements to
the historical results of each acquired company as if they had been acquired on
January 1, 1997. We then adjusted the combined amounts for the effects of
certain other pro forma adjustments to the historical financial statements
discussed in the footnotes below and the consummation of our initial public
offering in February 1998. The companies may have performed differently if they
had been combined as of January 1, 1997. You should not rely on the pro forma
information as being indicative of the historical results that we would have
had or the future results that we will experience.

You should read the summary financial data presented below along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the Unaudited Pro Forma Combined Financial Statements and the
Consolidated Financial Statements of our company and the related notes all
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA COMBINED
---------------------------------------------- -----------------------------
YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1997 1997 1998 1997(7) 1998(7)
------------ ---------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues............... $76,204 $34,799 $93,717 $337,965 $184,182
Cost of services
(including
depreciation)......... 58,896 28,861 76,681 269,081 149,807
------- ------- ------- -------- --------
Gross profit........... 17,308 5,938 17,036 68,884 34,375
Selling, general and
administrative
expenses(1)........... 11,589 4,855 8,889 27,112 15,937
Merger expenses--
pooling............... -- -- 231 -- 231
Goodwill
amortization(2)....... 56 28 749 4,089 2,021
------- ------- ------- -------- --------
Income from operations. 5,663 1,055 7,167 37,683 16,186
Other income (expense),
net(3)................ (1,350) (651) (858) (6,125) (3,130)
------- ------- ------- -------- --------
Income before income
tax expense........... 4,313 404 6,309 31,558 13,056
Provision for income
taxes(4).............. 1,786 136 2,900 13,727 5,917
------- ------- ------- -------- --------
Net income............. $ 2,527 $ 268 $ 3,409 $ 17,831 $ 7,139
======= ======= ======= ======== ========
Basic earnings per
share................. $ 0.64 $ 0.07 $ 0.24 $ 0.85 $ 0.34
======= ======= ======= ======== ========
Diluted earnings per
share................. $ 0.64 $ 0.07 $ 0.24 $ 0.85 $ 0.33
======= ======= ======= ======== ========
Shares used in computing
pro forma earnings per
share(5)
Basic.................. 3,952 3,952 14,399 21,041 21,263
======= ======= ======= ======== ========
Diluted................ 3,952 3,952 14,506 21,041 21,370
======= ======= ======= ======== ========
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA COMBINED(6)
JUNE 30, 1998 JUNE 30, 1998
------------- ---------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital ........ $26,724 $42,059
Total assets............ 205,826 319,182
Long-term debt, net of
current maturities..... 33,112 98,410(8)
Total stockholders' eq-
uity................... 128,756 157,535
</TABLE>
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(1) The unaudited pro forma combined statement of operations data reflect an
aggregate of approximately $8.0 million and $2.4 million for the year ended
December 31, 1997 and for the six months ended June 30, 1998, respectively,
in pro forma reductions in salaries, bonuses and benefits of the previous
owners and management of the businesses acquired by us. These amounts are
intended to show you the difference between the historical compensation
costs for the owners and management and the amounts they have agreed with
us on a prospective basis. Additionally, the pro forma information excludes
the $13.0 million non-recurring non-cash charge recognized by Quanta
related to the issuance of stock to an initial stockholder and management,
as a result of the issuance of such shares for nominal consideration. See
Note 2 of Notes to Financial Statements of Quanta Services, Inc.
(2) Reflects amortization of the goodwill to be recorded over a 40-year period
as a result of our acquisition of the Founding Companies and the ten other
businesses acquired using the purchase method of accounting.
(3) Reflects the reduction for interest expense of $1.4 million and $0.2
million for the year ended December 31, 1997 and for the six months ended
June 30, 1998, respectively, attributable to the repayment of $19.0 million
and $18.5 million, respectively, of historical debt of the Founding
Companies with proceeds from the initial public offering, net of increases
in interest expense of $6.0 million and $2.4 million, respectively, on
borrowings under the Company's credit facility for acquisition of the ten
companies acquired using the purchase method of accounting. The reduction
in interest expense is further offset by interest expense of $0.8 and $0.2
for the year ended December 31, 1997 and for the six months ended June 30,
1998, respectively, for borrowings made by the Company to fund S
Corporation Distributions made by two of the Founding Companies.
Additionally, reflects reductions in expenses associated with certain non-
operating assets transferred to the stockholders of the Founding Companies
prior to their acquisition.
(4) Assumes all pretax income before non-deductible goodwill and other
permanent items is subject to an estimated 39.0% combined tax rate.
(5) The shares used in computing earnings per share for the following periods
include:
(a) Year ended December 31, 1997 and six months ended June 30, 1997
(historical)--the 3,000,000 shares issued in connection with PAR and
the 951,945 shares issued in connection with acquisition of the Pooled
Company.
(b) Year ended December 31, 1997 (pro-forma)--(i) the shares described
above in (a), (ii) 5,750,000 shares of Common Stock, net of 579,222
shares representing net cash to Quanta, sold in the IPO to pay the
cash portion of the consideration for the Founding Companies, to repay
expenses incurred in connection with the IPO and to retire debt, (iii)
8,573,392 shares issued to the owners of the other Founding Companies
and to the other ten businesses acquired subsequent to the IPO and
(iv) 3,345,333 shares of Limited Vote Common Stock issued to the
initial stockholders and certain management personnel of the Company.
(c) Six months ended June 30, 1998 (historical)--basic earnings per
share information 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 IPO to pay
the cash portion of the consideration for the Founding Companies to
repay expenses incurred in connection with the Offering and to retire
debt, (iv) 951,945 shares issued for the acquisition of the Pooled
Company, and (v) the weighted average portion of the 1,296,740 shares
issued in acquisitions accounted for as purchases.

(d) Six months ended June 30, 1998 (pro-forma)--basic earnings per share
information includes the shares used in the computation described in
(c) above computed as if those shares had been issued as of January 1,
1998, net of 357,174 shares representing net cash to Quanta, and
2,749,652 shares issued in acquisitions accounted for as purchases
subsequent to June 30, 1998, as if the shares had been issued as of
January 1, 1998.

Shares used in the calculation of the pro forma diluted earnings per
share for the six months ended June 30, 1998 include (i) the shares
described above, and (ii) the dilution attributable to outstanding
options to purchase Common Stock, using the treasury stock method.
(6) Reflects the acquisition of the eight businesses which occurred subsequent
to June 30, 1998 as if they had occurred on June 30, 1998 as described in
the notes to the Unaudited Pro Forma Combined Financial Statements. The
unaudited pro forma combined balance sheet data should be read in
conjunction with the other financial information and historical financial
statements and notes thereto included elsewhere in this Prospectus.
(7) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.
(8) Includes approximately $61.5 million borrowed under a combination of our
credit facility and notes issued in connection with the eight business
acquisitions which occurred subsequent to June 30, 1998.

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RISK FACTORS

You should carefully consider the following risks before making an
investment decision. The risks described below are not the only ones that we
face. Additional risks about which we do not yet know or that we currently
think are immaterial may also impair our business operations. Our business,
operating results or financial condition could be materially adversely
affected by any of the following risks. The trading price of our Common Stock
could decline due to any of these risks, and you may lose all or part of your
investment. You should also refer to the other information set forth in this
Prospectus, including our financial statements and the related notes.

This Prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "will",
"should", "could", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" and other comparable terminology. These
statements are only predictions. Actual events or results may differ
materially. In evaluating these statements, you should specifically consider
various factors, including the risks outlined below. These factors may cause
our actual results to differ materially from any forward looking statement.

Absence of Combined Operating History. Quanta was founded in August 1997 but
conducted no operations and generated no revenues prior to acquiring the
Founding Companies in February 1998. The businesses we acquire have been
operating and will continue to operate as separate independent entities, and
we cannot be sure that we will be able to integrate the operations of these
businesses successfully. To manage the combined enterprise on a profitable
basis we must institute certain necessary common systems and procedures. To
better integrate the companies we acquire, we intend to integrate their
computer, accounting and financial reporting systems, and certain of their
operational, administrative, banking and insurance procedures. However, we
cannot be certain that we will successfully institute these common systems and
procedures. In addition, we cannot be certain that our recently assembled
management group will be able to successfully manage the businesses we acquire
as a combined entity and effectively implement our operating or growth
strategies. If we are unable to integrate or successfully manage the companies
we have acquired or acquire in the future, our business, financial condition
and results of operations could be materially and adversely affected.

The pro forma combined financial results included in this prospectus cover
periods during which the businesses we have acquired were not under common
control or management. Therefore, these pro forma financial statements may not
be indicative of our future financial or operating results.

Risks Related to Acquisition Strategy. One of our principal growth
strategies is to increase our revenues and the markets we serve through the
acquisition of additional electric and telecommunications infrastructure
contracting companies. We expect to face competition for acquisition
candidates, which may limit the number of acquisition opportunities and may
lead to higher acquisition prices. We cannot be sure that we will be able to
identify, acquire or profitably manage additional businesses. We also cannot
be sure that we can integrate successfully any acquired businesses with our
other operations without substantial costs, delays or other operational or
financial problems. Further, acquisitions involve a number of special risks
which could materially and adversely affect our business, financial condition
and results of operations. These special risks include:

. failure of the acquired business to achieve the results we expect;

. diversion of our management's attention from operational matters;

. our inability to retain key personnel of the acquired business; and

. risks associated with unanticipated events or liabilities.

If one of our acquired businesses suffers customer dissatisfaction or
performance problems, then the reputation of our whole company could be
materially and adversely affected.

Risks Related to Acquisition Financing. We cannot readily predict the
timing, size and success of our acquisition efforts or the capital we will
need for these efforts. We intend to use our Common Stock for all or a

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portion of the consideration for future acquisitions. If our Common Stock does
not maintain a sufficient market value or potential acquisition candidates are
unwilling to accept our Common Stock as part of the consideration for the sale
of their businesses, we may be required to utilize more of our cash resources
to pursue our acquisition program. Using cash for acquisitions limits our
financial flexibility and makes us more likely to seek additional capital
through future debt or equity financings. If we seek more debt, we may have to
agree to financial covenants that limit our operational and financial
flexibility. If we seek more equity, we may dilute the ownership interests of
our then-existing stockholders. When we seek additional debt or equity
financings, we cannot be certain that additional debt or equity will be
available to us on terms acceptable to us. If we cannot secure additional
financing on acceptable terms, we may be unable to pursue our acquisition
strategy.

We have entered into a credit facility with two commercial banks. We will
use the credit facility for acquisitions, working capital and other general
corporate purposes. The credit facility requires us to comply with certain
financial covenants that may limit our operations and financial flexibility.

Risks Related to Operating and Internal Growth Strategies. A key element of
our strategy is to increase the profitability and revenues of the businesses
we acquire. Although we intend to implement this strategy by various means, we
cannot be certain that we will be able to do so successfully. Another key
component of our strategy is to operate the businesses we acquire on a
decentralized basis, with local management retaining responsibility for day-
to-day operations, profitability and the internal growth of the individual
business. If we do not implement proper overall business controls, this
decentralized operating strategy could result in inconsistent operating and
financial practices at the businesses we acquire, and our overall
profitability could be adversely affected. Our ability to generate internal
earnings growth will be affected by, among other factors, our ability to:

. expand the range of services we offer to customers;

. attract new customers;

. increase the number of projects performed for existing customers;

. hire and retain employees;

. open additional facilities; and

. reduce operating and overhead expenses.

Many of these factors are beyond our control, and we cannot be certain that
our strategies will be successful or that we will be able to generate cash
flow sufficient to fund our operations and to support internal growth. Our
inability to achieve internal earnings growth could materially and adversely
affect our business, financial condition and results of operations.

Management of Growth. We expect to grow both internally and through
acquisitions. Our management expects to expend significant time and effort in
evaluating, completing and integrating acquisitions and opening new
facilities. We cannot be certain that our systems, procedures and controls
will be adequate to support our operations as they expand. Any future growth
also will impose significant additional responsibilities on members of our
senior management, including the need to identify, recruit and integrate new
senior level managers and executives. We cannot be certain that we can
identify and retain such additional managers and executives. To the extent
that we are unable to manage our growth efficiently and effectively, or are
unable to attract and retain additional qualified management, our financial
condition and results of operations could be materially and adversely
affected.

Availability of Qualified Employees. Our ability to provide high-quality
services on a timely basis requires that we employ an adequate number of
skilled electricians, journeymen linemen and project managers. Accordingly,
our ability to increase our productivity and profitability will be limited by
our ability to employ, train and retain skilled personnel necessary to meet
our requirements. Many of our competitors are currently experiencing shortages
of qualified personnel. We cannot be certain that we will be able to maintain
an adequate skilled labor force necessary to operate efficiently or that our
labor expenses will not increase as a result of a

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shortage in the supply of skilled personnel. If we experience acute labor
shortages, we may have to curtail our planned internal growth.

Unionized Workforce. As of June 30, 1998, approximately forty-five percent
of our employees are covered by collective bargaining agreements. Although the
majority of these agreements prohibit strikes and work stoppages, we cannot be
certain that strikes or work stoppages will not occur in the future. Strikes
or work stoppages would adversely impact our relationship with our customers
and could materially and adversely affect our business, financial condition
and results of operations. In addition, our acquisition strategy could be
adversely affected because of our union status for a variety of reasons. For
instance, our union agreements may be incompatible with the union agreements
of a business we want to acquire and some businesses may not want to become
affiliated with a union based company.

Competition. The electric and telecommunications infrastructure contracting
industry is highly competitive and is served by numerous small, owner-operated
private companies, public companies and several large regional companies. In
addition, relatively few, if any, barriers prevent entry into our market. As a
result, any organization that has adequate financial resources and access to
technical expertise may become one of our competitors. Competition in the
industry depends on a number of factors, including price. Certain of our
competitors may have lower overhead cost structures and may, therefore, be
able to provide their services at lower rates than we can provide such
services. In addition, some of our competitors are larger and have greater
resources than us. We cannot be certain that our competitors will not develop
the expertise, experience and resources to provide services that are equal or
superior in both price and quality to our services. Similarly, we cannot be
certain that we will be able to maintain or enhance our competitive position.

We may also face competition from the in-house service organizations of our
existing or prospective customers. Electric utility and telecommunications
services providers employ personnel who perform some of the same types of
services as those provided by us. We cannot be certain that our existing or
prospective customers will continue to outsource services in the future.

Contract Bidding Risks. We currently generate, and expect to continue to
generate, a significant portion of our revenues under fixed price contracts.
We must estimate the costs of completing a particular project to bid for such
fixed price contracts. The cost of labor and materials, however, may vary from
the costs we originally estimated. These variations along with other risks
inherent in performing fixed price contracts may result in actual revenue and
gross profits for a project differing from those we originally estimated and
could result in losses on projects. Depending upon the size of a particular
project, variations from estimated contract costs can have a significant
impact on our operating results for any fiscal quarter or year.

Certain of our contracts are master service agreements pursuant to which
work is assigned to us by our customer on a project by project basis. Under
master service agreements our customer generally has no obligation to assign
work to us. We cannot be certain that customers with whom we have master
service agreements will continue to assign work to us. A significant decline
in work assigned to us pursuant to these contracts could materially and
adversely affect our results of operations.

Seasonality; Fluctuations of Quarterly Results. The electric and
telecommunications infrastructure contracting business can be subject to
seasonal variations. Generally, during the winter months, demand for new
projects and maintenance services may be lower due to inclement weather, while
demand for electrical service and repairs may be higher due to damage caused
by such weather. Additionally, the 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 of the U.S. Our 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.

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Accordingly, our operating results in any particular quarter may not be
indicative of the results that you can expect for any other quarter or for the
entire year.

Potential Exposure to Environmental Liabilities. Our operations are subject
to various environmental laws and regulations, including those dealing with
handling and disposal of waste products, PCBs, fuel storage and air quality.
As a result of past and future operations at our facilities, we may be
required to incur environmental remediation costs and other cleanup expenses.
In addition, although we intend to conduct appropriate due diligence with
respect to environmental matters in connection with our future acquisitions,
we cannot be certain that we will be able to identify or be indemnified for
all potential environmental liabilities relating to any acquired business.

Control by Existing Management and Stockholders. The Company's executive
officers and directors, former stockholders of the Founding Companies and
their affiliates beneficially own approximately 8.2 million shares of Common
Stock and Limited Vote Common Stock, representing approximately 38.0 percent
of the aggregate outstanding shares of Common Stock and Limited Vote Common
Stock. The initial stockholders of the Company, certain members of management
and others own 3,345,333 shares of Limited Vote Common Stock. Holders of
shares of Limited Vote Common Stock are entitled to elect one member of our
Board of Directors and are entitled to one-tenth of one vote for each share
held on all other matters on which holders of Common Stock are entitled to
vote. Holders of Limited Vote Common Stock are not entitled to vote on the
election of any other directors. Our executive officers and directors and
former stockholders of the Founding Companies control in the aggregate
approximately 41.6 percent of all shares of Common Stock (which percentage
excludes shares of Limited Vote Common Stock) and, if acting in concert, are
able to exert significant control on our affairs and the outcome of any matter
submitted to a vote of stockholders.

Dependence on Key Personnel. We depend on the continued efforts of our
executive officers and on senior management of the businesses we acquire.
Although we will intend to enter into an employment agreement with each of our
executive officers and other key employees, we cannot be certain that any
individual will continue in such capacity for any particular period of time.
The loss of key personnel, or the inability to hire and retain qualified
employees could adversely effect our business, financial condition and results
of operations. We do not intend to carry key-person life insurance on any of
our employees.

Shares Eligible for Future Sale. Certain of our directors, executive
officers and stockholders who beneficially own in the aggregate 10,872,333
shares of Common Stock and Limited Vote Common Stock have agreed not to sell
or otherwise dispose of their shares until February 18, 2000 without the prior
written consent of BT Alex. Brown Incorporated, the lead underwriter of our
initial public offiering. These shares and an additional 4,998,337 shares of
Common Stock issued in acquisitions are "restricted securities" under the
rules of the Securities and Exchange Commission. Therefore, holders of the
shares may publicly sell them only if the sale is registered under the
Securities Act or sold in accordance with an applicable exemption from
registration. Prior to our initial public offering there had been no market
for the Common Stock and no prediction can be made as to the effect, if any,
that the sale of shares or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock in the public market could adversely
affect prevailing market prices and our ability to raise equity capital in the
future.

The 5,000,000 shares of Common Stock registered pursuant to this Prospectus
which are issuable in business combination transactions will generally be
freely tradable by persons who are not otherwise affiliated with us or the
business we acquire. We may require purchasers of Common Stock in this
offering to agree to hold all or a portion of the shares they acquire for a
period of up to two years.

Certain Anti-Takeover Provisions. Certain provisions of our Certificate of
Incorporation and Bylaws, as currently in effect, as well as Delaware law,
could discourage potential acquisition proposals, delay or prevent a change in
control of the Company or limit the price that certain investors may be
willing to pay in the future for

10
<PAGE>

shares of the Common Stock. Our Certificate of Incorporation permits our Board
of Directors to issue "blank check" preferred stock and to adopt amendments to
our Bylaws. Our Bylaws contain restrictions regarding the right of
stockholders to nominate directors and to submit proposals to be considered at
stockholder meetings. Also, our Certificate of Incorporation and Bylaws
restrict the right of stockholders to call a special meeting of stockholders
and to act by written consent. We are also subject to certain provisions of
Delaware law which prohibit us from engaging in any of a broad range of
business transactions with an "interested stockholder" for a period of three
years following the date such stockholder became classified as an interested
stockholder

Absence of Dividends. We have never paid any cash dividends and do not
anticipate paying cash dividends on our Common Stock in the immediate future.

Possible Volatility of Stock Price. Our initial public offering of Common
Stock was completed in February 1998, and we cannot be certain that a viable
public market for the Common Stock will be sustained. The trading price of the
Common Stock could be subject to significant fluctuations in response to
variations in our quarterly operating results, general trends in the company's
industry and other factors

Forward-Looking Statements. There are a number of statements in this
Prospectus that address activities, events or developments which we anticipate
may occur in the future, including such matters as our strategy for internal
growth and improved profitability, the nature and amount of additional capital
expenditures, acquisitions of assets and businesses, industry trends and other
such matters. These statements are based on certain assumptions and analyses
we make in light of our perception of historical trends, current business and
economic conditions and expected future developments as well as other factors
we believe are reasonable or appropriate. However, whether actual results and
developments will conform with our expectations is subject to a number of
risks and uncertainties, including:

. the risk factors discussed in this Prospectus;

. general economic, market or business conditions;

. the business opportunities (or lack thereof) that may be presented to and
pursued by us;

. changes in laws or regulations and other factors.

Most of these are beyond the control of the Company. Consequently, we cannot
be certain that the actual results or developments that we anticipate will be
realized or, even if substantially realized, that they will have the expected
effects on our business or operations.

11
<PAGE>

THE COMPANY

Quanta Services, Inc. (together with its subsidiaries, the "Company" or
"Quanta") was founded in August 1997 to create a leading provider of specialty
electric and telecommunications infrastructure contracting services. In
February 1998, the Company acquired in separate transactions four businesses:
PAR Electrical Contractors, Inc, ("PAR"), Union Power Construction Company
("Union Power"), TRANS TECH Electric, Inc. ("TRANS TECH") and Potelco, Inc.
("Potelco" and together with PAR, Union Power and TRANS TECH, the "Founding
Companies"). For the year ended December 31, 1997, the Founding Companies,
which have been in business an average of 36 years, had pro forma combined
annual revenues of approximately $152.3 million. A brief description of each
of the Founding Companies is set forth below.

PAR. PAR was founded in 1954 and is headquartered in North Kansas City,
Missouri. PAR maintains additional offices in Topeka and Wichita, Kansas;
Clinton, Missouri; Des Moines, Iowa; Aurora, Colorado; and Fontana and
Escondido, California and so far in 1998 provided services to customers in
Missouri, Iowa, Colorado, Kansas, Nebraska, California, Montana, Oklahoma and
Texas. PAR had revenues of approximately $49.1 million for the year ended
December 31, 1997. PAR provides full electric infrastructure contracting
services, including installation of electrical transmission lines, both
underground and above ground, and distribution lines and construction of
electric substations. In addition, PAR provides emergency electrical
restoration services and other routine electrical system maintenance services.

UNION POWER. Union Power was founded in 1946 and is headquartered in
Englewood, Colorado. Union Power maintains additional offices in Las Vegas and
Reno, Nevada, and Vacaville, Susanville and Litchfield California and so far
in 1998 provided services to customers in Colorado, Nevada, California and
Arizona. Union Power had revenues of approximately $42.8 million for the year
ended August 31, 1997. Union Power provides electric infrastructure
contracting services, including installation of electrical transmission lines,
both underground and above ground, and distribution lines and construction of
electric substations. In addition, Union Power provides electrical repair and
maintenance services.

TRANS TECH. TRANS TECH was founded in 1983, is headquartered in South Bend,
Indiana and so far in 1998 provided services to customers in Indiana, Michigan
and Ohio. TRANS TECH had revenues of approximately $32.8 million for the year
ended December 31, 1997. TRANS TECH installs, maintains and repairs traffic
signals, signage, highway control systems components, highway and airport
lighting and fiber optics for states and other governmental entities. The
company also performs traditional electrical contracting services for private
and public entities in the commercial and industrial markets.

POTELCO. Potelco was founded in 1965 and is headquartered near Seattle,
Washington. Potelco maintains additional offices in Spokane, Washington and
Gresham, Oregon, and so far in 1998 provided services to customers in
Washington. Potelco had revenues of approximately $19.2 million for the year
ended December 31, 1997. Potelco provides electric and telecommunication
infrastructure contracting services, including installation of overhead and
underground lines and facilities for the power, telecommunications and cable
television industries. In addition, Potelco provides electrical and
telecommunication installation, maintenance and repair services to the
commercial and industrial markets.

Since the Company's initial public offering (the "IPO") of shares of its
Common Stock, par value $.00001 per share (the "Common Stock") in February
1998, the Company has acquired eleven other businesses which when combined
with the Founding Companies resulted in pro forma combined revenues for the
twelve months ended December 31, 1997 and for the six months ended June 30,
1998 of approximately $338.0 million and $184.2 million, respectively, for a
combined consideration of $85.0 million of cash and notes and 5.0 million
shares of Common Stock. See "Business--Acquisition Program."

Quanta was incorporated in Delaware in August 1997 under the name Fabal
Construction, Inc. and changed its name to Quanta Services, Inc. in November
1997. See "Certain Transactions--Organization of the

12
<PAGE>

Company." Its executive offices are located at 1360 Post Oak Blvd., Suite
2100, Houston, Texas 77056, and its telephone number at that address is (713)
629-7600.

USE OF PROCEEDS

The Shares are offered by the Selling Stockholders for their own benefit.
The Company will not receive any proceeds from this offering.

PRICE RANGE OF COMMON STOCK

The Common Stock was initially offered to the public on February 12, 1998 at
a price of $9.00 per share and is listed on the NYSE under the symbol "PWR."
The following table sets forth the high and low sales prices by quarter as
reported by the NYSE.

<TABLE>
<CAPTION>
HIGH LOW
------ -------
<S> <C> <C>
Fiscal Year ended December 31, 1998
1st Quarter (from February 12, 1998).................... $16.75 $11.00
2nd Quarter............................................. $17.75 $12.625
3rd Quarter............................................. $14.81 $12.25
</TABLE>

On October 21, 1998, the last sale price for the Common Stock as reported by
the NYSE was $13.00 per share. On October 21, 1998, there were 100 holders of
record of Common Stock.

DIVIDEND POLICY

The Company currently intends to retain its future earnings, if any, to
finance the growth, development and expansion of its business and,
accordingly, does not currently intend to declare or pay any cash dividends on
the Common Stock in the immediate future. The declaration, payment and amount
of future cash dividends, if any, will be at the discretion of the Company's
Board of Directors after taking into account various factors, including, among
others, the Company's financial condition, results of operations, cash flows
from operations, current and anticipated capital requirements and expansion
plans, the income tax laws then in effect and the requirements of Delaware
law. In addition, the terms of the Company's $125.0 million credit facility
(the "Credit Facility") and $49.4 million Convertible Subordinated Notes
include restrictions on payment of cash dividends by the Company without the
consent of the respective lenders.

13
<PAGE>

SELECTED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

For financial statement presentation purposes, PAR has been identified as
the "accounting acquiror." Subsequent to the IPO, the Company acquired eleven
additional businesses. Of these eleven acquired businesses, ten were accounted
for using the purchase method of accounting (the "Purchased Companies") and
one was accounted for using the pooling-of-interests method of accounting (the
"Pooled Company"). As such, Quanta's consolidated historical statements as of
December 31, 1996, 1997 and June 30, 1998, and for each of the three years in
the period ended December 31, 1997 and for the six months ended June 30, 1997
and 1998, included elsewhere in this Prospectus, and the related selected
historical financial data derived from them represent the financial position
and results of operations of (i) PAR as restated to include the financial
position and results of operations of the Pooled Company and (ii) the
remaining Founding Companies and the Purchased Companies beginning on their
respective dates of acquisition. The following selected historical financial
data for the Company as of December 31, 1993, 1994 and 1995 and for each of
the two years in the period ended December 31, 1994, have been derived from
the unaudited financial statements of the Company, which have been prepared on
the same basis as the audited financial statements and, in the opinion of the
Company management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such data. The
Founding Companies, the Purchased Companies and the Pooled Company are
collectively referred to as the "Acquired Businesses."

The following selected unaudited pro forma combined financial data present
certain data for the Company, adjusted for (i) the Acquired Businesses, (ii)
the effects of certain other pro forma adjustments to the historical financial
statements and (iii) the consummation of the Company's IPO in February 1998
and the application of the net proceeds therefrom. The unaudited pro forma
combined income statement data assume that the acquisition of the Acquired
Businesses and the IPO and related transactions were closed on January l, 1997
and are not necessarily indicative of the results that the Company would have
obtained had these events actually then occurred or of the Company's future
results. During the periods presented below, the Acquired Businesses were not
under common control or management and, therefore, the data presented may not
be comparable to or indicative of post combination results to be achieved by
the Company. The unaudited pro forma combined financial statements should be
read in conjunction with the other financial information included elsewhere in
this Prospectus. See the Unaudited Pro Forma Combined Financial Statements and
notes thereto and the historical financial statements and the notes thereto of
Quanta, the Founding Companies, and certain other acquired company financial
statements included elsewhere in this Prospectus.

14
<PAGE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENTS OF
OPERATIONS DATA:
Quanta Services, Inc. and
Subsidiaries
Revenues.............. $35,319 $57,020 $53,224 $71,294 $76,204 $ 34,799 $ 93,717
Costs of services
(including
depreciation)........ 29,000 47,216 44,608 57,164 58,896 28,861 76,681
------- ------- ------- ------- ------- -------- --------
Gross profit.......... 6,319 9,804 8,616 14,130 17,308 5,938 17,036
Selling, general and
administrative
expenses............. 5,055 6,870 6,488 9,931 11,645 4,883 9,869
------- ------- ------- ------- ------- -------- --------
Income from
operations........... 1,264 2,934 2,128 4,199 5,663 1,055 7,167
Other income
(expense), net....... (399) (598) (712) (1,020) (1,350) (651) (858)
------- ------- ------- ------- ------- -------- --------
Income before
provision for income
taxes................ 865 2,336 1,416 3,179 4,313 404 6,309
Provision for income
taxes................ 152 867 353 1,389 1,786 136 2,900
------- ------- ------- ------- ------- -------- --------
Net income............ $ 713 $ 1,469 $ 1,063 $ 1,790 $ 2,527 $ 268 $ 3,409
======= ======= ======= ======= ======= ======== ========
Basic and diluted
earnings per share... $ 0.18 $ 0.37 $ 0.27 $ 0.45 $ 0.64 $ 0.07 $ 0.24
======= ======= ======= ======= ======= ======== ========
Shares used in
computing earnings
per share(5)
Basic............... 3,952 3,952 3,952 3,952 3,952 3,952 14,399
======= ======= ======= ======= ======= ======== ========
Diluted............. 3,952 3,952 3,952 3,952 3,952 3,952 14,506
======= ======= ======= ======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997(7) 1998(7)
------------ ----------------
<S> <C> <C>
PRO FORMA COMBINED:
Revenues....................................... $337,965 $184,182
Cost of services (including depreciation)...... 269,081 149,807
-------- --------
Gross profit................................... 68,884 34,375
Selling, general and administrative expenses(1) 27,112 15,937
Merger expenses--pooling....................... -- 231
Goodwill amortization(2)....................... 4,089 2,021
-------- --------
Income from operations......................... 37,683 16,186
Other income (expense), net(3)................. (6,125) (3,130)
-------- --------
Income before income tax expense............... 31,558 13,056
Provision for income taxes(4).................. 13,727 5,917
-------- --------
Net income..................................... $ 17,831 $ 7,139
======== ========
Basic earnings per share....................... $ 0.85 $ 0.34
======== ========
Diluted earnings per share..................... $ 0.85 $ 0.33
======== ========
Shares used in computing pro forma earnings per
share(5)
Basic........................................ 21,041 21,263
======== ========
Diluted...................................... 21,041 21,370
======== ========
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------- PRO FORMA
DECEMBER 31, COMBINED(6)
---------------------------------- JUNE 30, JUNE 30,
1993 1994 1995 1996 1997 1998 1998
------ ------ ------ ------ ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........ $1,151 $1,794 $ 871 $1,792 $2,186 $26,724 $42,059
Total assets........... 15,806 22,713 24,761 29,734 35,747 205,826 319,182
Long-term debt, net of
current maturities.... 2,350 4,512 4,291 6,478 7,542 33,112 98,410(8)
Total stockholders' eq-
uity.................. 6,264 7,921 8,709 8,460 11,210 128,756 157,535
</TABLE>
- --------
(1) The unaudited pro forma combined statement of operations data reflect an
aggregate of approximately $8.0 million and $2.4 million for the year
ended December 31, 1997, and for the six months ended June 30, 1998,
respectively, in pro forma reductions in salaries and bonuses and benefits
of the previous owners and management of the Acquired Businesses to which
they have agreed prospectively. Additionally, it excludes the $13.0
million non-recurring non-cash charge recognized by Quanta related to the
issuance of stock to an initial stockholder and management, as a result of
the issuance of such shares for nominal consideration. See Note 2 of Notes
to Financial Statements of Quanta Services, Inc.
(2) Reflects amortization of the goodwill to be recorded as a result of the
Founding Companies and the Purchased Companies over a 40-year period and
computed on the basis described in the notes to the Unaudited Pro Forma
Combined Financial Statements.
(3) Reflects the reduction for interest expense of $1.4 million and $0.2
million for the year ended December 31, 1997 and for the six months ended
June 30, 1998, respectively, attributable to the repayment of $19.0
million and $18.5 million, respectively, of historical debt of the
Founding Companies with proceeds from the IPO, net of increases in
interest expense of $6.8 million and $2.6 million, respectively, on
borrowings under the Company's credit facility for the Purchased
Companies. Additionally, reflects reductions in expenses associated with
certain non-operating assets transferred to the Founding Companies prior
to their acquisition.
(4) Assumes all pretax income before non-deductible goodwill and other
permanent items is subject to an estimated 39.0% combined tax rate.
(5) The shares used in computing earnings per share for the following periods
include:
(a) Five years ended December 31, 1997 and six months ended June 30,
1997 (historical)--the 3,000,000 shares issued in connection with
PAR and the 951,945 shares issued in connection with acquisition of
the Pooled Company.
(b) Year ended December 31, 1997 (pro-forma)--(i) the shares described
above in (a), (ii) 5,750,000 shares of Common Stock, net of 579,222
shares representing net cash to Quanta, sold in the IPO to pay the
cash portion of the consideration for the Founding Companies, to
repay expenses incurred in connection with the IPO and to retire
debt, (iii) 8,573,392 shares issued to the owners of the other
Founding Companies and to the other ten businesses acquired
subsequent to the IPO and (iv) 3,345,333 shares of Limited Vote
Common Stock issued to the initial stockholders and certain
management personnel of the Company.
(c) Six months ended June 30, 1998 (historical)--basic earnings per
share information 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 1,296,740 shares issued in acquisitions
accounted for as purchases.

Shares used in the calculation of the diluted earnings per share for
the six months ended June 30, 1998 include (i) the shares described
above, and (ii) the dilution attributable to outstanding options to
purchase Common Stock, using the treasury stock method; and
(d) Six months ended June 30, 1998 (pro-forma)--basic earnings per
share information includes the shares used in the computation
described in (c) above computed as if those shares had been issued
as of January 1, 1998, net of 357,174 shares representing net cash
to Quanta, and 2,749,652 shares issued in acquisitions accounted
for as purchases subsequent to June 30, 1998, as if the shares had
been issued as of January 1, 1998.

Shares used in the calculation of the pro forma diluted earnings per
share for the six months ended June 30, 1998 include (i) the shares
described above, and (ii) the dilution attributable to outstanding
options to purchase Common Stock, using the treasury stock method.
(6) Reflects the acquisition of the Purchased Companies which occurred
subsequent to June 30, 1998 and related transactions as if they had
occurred on June 30, 1998 as described in the Notes to the Unaudited Pro
Forma Combined Financial Statements. The unaudited pro forma combined
balance sheet data should be read in conjunction with the other financial
information and historical financial statements and notes thereto included
elsewhere in this Prospectus.
(7) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.
(8) Includes approximately $61.5 million borrowed under a combination of the
Company's credit facility and notes issued in connection with the
acquisition of the Purchased Companies which occurred subsequent to June
30, 1998.

16
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion should be read in conjunction with the Quanta
Services, Inc. and subsidiaries Consolidated Financial Statements and related
notes thereto included elsewhere in this Prospectus. Except for the historical
financial information contained herein, the matters discussed in this
Prospectus 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 elsewhere in this Prospectus. See "Risk Factors".

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. The Company's services include the installation, repair
and maintenance of electric power transmission and distribution lines,
telecommunication lines and cable television lines, the construction of
electric substations, the erection of cellular telephone, PCS(R) and microwave
towers, the installation of highway lighting and traffic control systems,
specialized underground construction including underground fueling systems,
design and engineering services, as well as the provision of specialty
contracting services for electric, video, security, fire, voice and data
systems. The Company's customers include electric utilities, telecommunication
and cable television system operators, governmental entities, general
contractors and owners and managers of commercial and industrial properties.
The Company had pro forma combined revenues for the year ended December 31,
1997 of $338.0 million, of which 43.2 percent was attributable to electric
utility infrastructure services, 38.6 percent was attributable to
telecommunications infrastructure services, 7.6 percent was attributable to
commercial and industrial services and 10.6 percent was attributable to
transportation control and lighting systems services.

The Company enters into contracts principally on the basis of competitive
bids, the final terms and prices of which are frequently negotiated with the
customer. Although the terms of the contracts undertaken by the Company vary
considerably, the contracts are usually on either a lump sum or unit price
basis in which the Company agrees to do the work for a fixed amount for the
entire project (lump sum) or for units of work performed (unit price). Most
installation projects are completed within one year, while maintenance and
repair work is frequently provided under open-ended, unit price master service
agreements which are renewable annually. Revenues from lump sum contracts are
generally recorded 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. The Company recognizes
revenue when services are performed except when work is being performed under
a fixed price or cost-plus-fee contract. Such contracts generally provide that
the customer accept completion of progress to date and compensate the Company
for services which have been rendered, measured typically in terms of units
installed, hours expended or some other measure of progress. Certain of the
company's customers require the Company to post performance and payment bonds
upon execution of the contract, depending upon the nature of the work to be
performed. The Company's fixed price contracts often include payment
provisions pursuant to which the customer withholds a 5 percent to 10 percent
retainage from each progress payment and forwards the retainage to the Company
upon completion and approval of the work.

17
<PAGE>

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
are subject to a $500,000 deductible 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.

The Acquired Businesses have operated throughout the periods presented as
independent, privately-owned entities, and their results of operations reflect
varying tax structures (S corporations or C corporations) which have
influenced the historical level of owners' compensation. Gross profits and
selling, general and administrative expenses as a percentage of revenues may
not be comparable among the individual Acquired Businesses. In connection with
the Company's acquisitions, certain owners of the Acquired Businesses have
agreed to reductions in their compensation and related benefits totaling $8.0
million lower than 1997 levels. Such reductions have been reflected as a pro
forma adjustment in the Unaudited Pro Forma Combined Statement of Operations
and in the terms of the employment agreements entered into between these
persons and the Company.

The Company believes that it will realize savings from (i) consolidation of
insurance and bonding programs, (ii) reduction in other general and
administrative expenses such as training, marketing, communications and
professional fees, (iii) the Company's ability to borrow at lower interest
rates than most, if not all, of the Acquired Businesses, (iv) consolidation of
operations in certain locations and (v) greater volume discounts from
suppliers of materials, parts and supplies. It is anticipated that costs
related to the Company's new corporate infrastructure, being a public company
and integrating the Acquired Businesses will partially offset these savings.
The Company believes that neither these savings nor the costs associated
therewith can be quantified as there have been limited combined operating
results upon which to base any assumptions. As a result, these savings and
associated costs have not been included in the pro forma financial information
included herein.

In November 1997, the Company sold 1.7 million shares of Limited Vote Common
Stock to management and an initial stockholder. As a result, the Company has
recorded a non-recurring, non-cash compensation charge of $13.0 million,
representing the difference between the amount paid for the shares and the
estimated fair value of the shares on the date of sale (the "Compensation
Charge"). The Compensation Charge has been estimated based on a fair value
that is discounted from the initial public offering price. This non-recurring,
non-cash Compensation Charge is not included in the Unaudited Pro Forma
Combined Financial Statements.

The Founding Companies, excluding PAR, and the Purchased Companies have been
accounted for using the purchase method of accounting. Accordingly, the excess
of the fair value of the consideration paid for the Acquired Businesses,
excluding the Pooled Company, of $134.4 million over the fair value of the net
assets acquired from the Acquired Businesses will be recorded as "goodwill."
In addition, goodwill of $25.6 million has been recorded attributable to the
3,345,333 shares of Limited Vote Common Stock issued to initial stockholders
and management. Together, this goodwill, totaling $160.0 million, will be
amortized over its estimated useful life of 40 years as a non-cash charge to
operating income. The pro forma effect of this amortization expense, the
majority of which is not deductible for tax purposes, is expected to be
approximately $4.1 million per year.

18
<PAGE>

RECENT DEVELOPMENTS

Strategic Investment

In October 1998, the Company entered into a strategic investment agreement
with Enron Capital & Trade Resources Corp. ("ECT"), a subsidiary of Enron
Corp., pursuant to which ECT and an affiliate 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 commitment fee of approximately $2.0
million to an affiliate of 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.

REGULATORY MATTERS

The Company's operations are subject to the authority of various state and
municipal regulatory bodies concerned with the licensing of contractors. The
Company has experienced no material difficulty in complying with the
requirements imposed on it by such regulatory bodies. See "Business--
Regulation."

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 result in any particular quarter may not be indicative of
the results that can be expected for any other quarter or for the entire year.

LIQUIDITY AND CAPITAL RESOURCES

In February 1998, Quanta completed the IPO, which involved the issuance of
5,000,000 shares of Common Stock at a price of $9.00 per share (before
deducting underwriter discounts and commissions). In March 1998, Quanta sold
an additional 750,000 shares of Common Stock at a price of $9.00 per share
(before deducting underwriter discounts and commissions) pursuant to the
underwriter's overallotment option. The proceeds from these transactions, net
of the discounts and after deducting the expenses of the IPO, were
approximately $45.1 million. Of this amount, $21.0 million was used to fund
the cash portion of the purchase price relating to the acquisition of the
Founding Companies.

As of June 30, 1998, the Company had pro forma cash and cash equivalents of
$5.2 million, pro forma working capital of $42.1 million and long-term debt of
$98.4 million net of current maturities, after giving consideration to the
consummation of the transactions with the Acquired Businesses and the
application of the net proceeds of the IPO.

19
<PAGE>

capital, to finance acquisitions and for other general corporate purposes.
Amounts borrowed under the Credit Facility bear interest at a rate equal to
either (a) the London Interbank Offered Rate ("LIBOR") plus 0.75 percent to
1.75 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
October 16, 1998, outstanding borrowings under the Credit Facility totaled
approximately $69.3 million.

Through October 16, 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 $85.0 million in cash and notes. The cash
portion of such consideration was provided by borrowings under the Company's
credit facility. The timing, size or success of any acquisition effort and the
associated potential capital commitments cannot be predicted. See "Risk
Factors--Risks Related to Acquisition Strategy" and "Risks Related to
Acquisition Financing".

The Company expects to continue its aggressive acquisition program. The
Company intends to continue to use a combination of cash and Common Stock to
finance the principal part of the consideration payable in acquisitions. If
the Common Stock does not maintain a sufficient value, or potential
acquisition candidates are unwilling to accept Common Stock as part of the
consideration for the sale of their businesses, the Company could be required
to utilize more cash to complete acquisitions. If sufficient funds were not
available from operating cash flow or through borrowings under the Company's
Credit Facility, the Company may seek additional financing through the public
or private sale of equity or debt securities. There can be no assurance that
the Company could secure such financing if and when it is needed or on terms
the Company deems acceptable. If the Company is unable to secure acceptable
financing, its acquisition program could be negatively affected. 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.

INFLATION

Due to relatively low levels of inflation experienced during the years ended
December 31, 1995, 1996 and 1997, inflation did not have a significant effect
on the results of the combined Founding Companies in those periods.

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

20
<PAGE>

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.

INDIVIDUAL FOUNDING COMPANIES

The selected historical financial information presented in the tables below
is derived from the respective audited financial statements of the Founding
Companies included elsewhere herein. The following discussion should be read
in conjunction with the Financial Statements of the Founding Companies and the
notes thereto appearing elsewhere in this Prospectus.

For financial statement presentation purposes, as required by the rules and
regulations of the Securities Act, PAR has been identified as the accounting
acquiror. As such, the financial statements of Quanta for periods prior to
February 18, 1998 are the financial statements of PAR as restated for the
acquisition of the Pooled Company.

QUANTA SERVICES, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS

The unaudited historical combined statements of operations for the six
months ended June 30, 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.

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ----------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $53,224 100.0% $71,294 100.0% $76,204 100.0% $34,799 100.0% $93,717 100.0%
Cost of services........ 44,608 83.8 57,164 80.2 58,896 77.3 28,861 82.9 76,681 81.8
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit.......... 8,616 16.2 14,130 19.8 17,308 22.7 5,938 17.1 17,036 18.2
Selling, general and
administrative
expenses............... 6,488 12.2 9,931 13.9 11,645 15.3 4,883 14.0 9,869 10.5
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations.. $ 2,128 4.0% $ 4,199 5.9% $ 5,663 7.4% $ 1,055 3.1% $ 7,167 7.7%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Quanta results for the six months ended June 30, 1998 compared to the six
months ended June 30, 1997

Revenues. Historical revenues increased $58.9 million, or 169.3 percent, to
$93.7 million for the six months ended June 30, 1998, due to the acquisition
of the Founding Companies on February 18, 1998 and subsequent acquisitions of
the Purchased Companies.

21
<PAGE>

Gross profit. Gross profit increased $11.1 million, or 186.9 percent, to
$17.0 million for the six months ended June 30, 1998. Gross margins increased
from 17.1 percent for the six months ended June 30, 1997 to 18.2 percent for
the six months ended June 30, 1998. This increase in gross margin was
primarily the result of the acquisition of the Founding Companies on February
18, 1998, which had higher gross margins than PAR as restated for the Pooled
Company, improved asset utilization and a higher proportion of relatively
higher margin telecommunication revenues to total revenues.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $5.0 million, or 102.0 percent, to $9.9
million for the six months ended June 30, 1998, due to the acquisition of the
Founding Companies on February 18, 1998, the acquisition of the Purchased
Companies and increases in selling and administrative salaries required to
support the higher level of revenues generated from an increased volume of
projects, as well as the establishment of a corporate office and
administrative infrastructure during 1998.

Quanta results for the year ended December 31, 1997 compared to the year
ended December 31, 1996

Revenues. Revenues increased $4.9 million, or 6.9 percent, from $71.3
million for the year ended December 31, 1996 to $76.2 million for the year
ended December 31, 1997, primarily as a result of an increased demand for the
company's services in Missouri, California and Colorado, partially offset by a
decrease in activity in Oregon.

Gross profit. Gross profit increased $3.2 million, or 22.7 percent , from
$14.1 million for the year ended December 31, 1996 to $17.3 million for the
year ended December 31, 1997. As a percentage of revenues, gross profit
increased from 19.8 percent to 22.7 percent. The increase in gross profit and
gross margin is primarily due to increased labor productivity, renegotiated
unit pricing on certain long-term contracts and lower equipment rental expense
as PAR replaced rental equipment on certain projects with company-owned
equipment, partially offset by lower gross profit from operations in Oregon
due to the completion of a significant telecommunications contract.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.7 million, or 17.2 percent, from $9.9
million for the year ended December 31, 1996 to $11.6 million for the year
ended December 31, 1997, primarily due to increased administrative support
required by the higher level of revenues and increases in owner compensation,
partially offset by decreased commissions paid to salesmen. As a percentage of
revenues, selling, general and administrative expenses increased from 13.9
percent to 15.3 percent.

Results for the year ended December 31, 1996 compared to the year ended
December 31, 1995

Revenues. Revenues increased $18.1 million, or 34.0 percent, from $53.2
million for the year ended December 31, 1995 to $71.3 million for the year
ended December 31, 1996, primarily as a result the acquisition of a company by
the Pooled Company and increased demand for the company's services in
Colorado, Oregon and, to a lesser extent, in California, but were partially
offset by decreased activity in Missouri.

Gross profit. Gross profit increased $5.5 million, or 64.0 percent, from
$8.6 million for the year ended December 31, 1995 to $14.1 million for the
year ended December 31, 1996. As a percentage of revenues, gross profit
increased from 16.2 percent to 19.8 percent. This increase in gross profit was
a result of the acquisition of a company by the Pooled Company, the awarding
of a significant telecommunications contract, improved labor productivity and
asset utilization but was partially offset by increases in insurance costs and
higher costs than anticipated on certain contracts.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $3.4 million, or 52.3 percent, from $6.5
million for the year ended December 31, 1995 to $9.9 million for the year
ended December 31, 1996, primarily due to the acquisition of a company by the
Pooled Company, increased commissions paid to salesmen responsible for the
awarding of the telecommunications contract and increases in

22
<PAGE>

administrative salaries required to support the higher level of revenues
generated from an increased volume of projects and increases in owner
compensation. As a percentage of revenues, selling, general, and
administrative expenses increased from 12.2 percent to 13.9 percent.

UNION POWER RESULTS OF OPERATIONS

Union Power was founded in 1946, and is headquartered in Englewood,
Colorado. It operates primarily west of the Mississippi River and in 1997
provided services to customers in Colorado, Nevada, California and Oregon.
Union Power is primarily involved in providing electric infrastructure
contracting services, including installation of electrical transmission lines,
both underground and above ground, and distribution lines and construction of
electric substations. In addition, Union Power provides electrical repair and
maintenance services.

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

<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31, THREE MONTHS ENDED NOVEMBER 30,
------------------------------------------- -----------------------------------
1995 1996 1997 1996 1997
------------- ------------- ------------- ---------------- -----------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $12,614 100.0% $25,636 100.0% $42,792 100.0% $ 7,211 100.0% $ 15,357 100.0%
Cost of services........ 10,240 81.2 22,319 87.1 37,766 88.3 6,037 83.7 13,474 87.7
------- ----- ------- ----- ------- ----- -------- ------- --------- -------
Gross profit............ 2,374 18.8 3,317 12.9 5,026 11.7 1,174 16.3 1,883 12.3
Selling, general and
administrative
expenses............... 1,896 15.0 1,563 6.1 1,966 4.6 491 6.8 677 4.4
------- ----- ------- ----- ------- ----- -------- ------- --------- -------
Income from operations.. $ 478 3.8% $ 1,754 6.8% $ 3,060 7.1% $ 683 9.5% $ 1,206 7.9%
======= ===== ======= ===== ======= ===== ======== ======= ========= =======
</TABLE>

Union Power results for the three months ended November 30, 1997 compared to
the three months ended November 30, 1996

Revenues. Revenues increased $8.2 million, or 113.0 percent, from $7.2
million for the three months ended November 30, 1996 to $15.4 million for the
three months ended November 30, 1997, primarily due to increased demand for
Union Power's services in Nevada, a higher volume of work in California and
increased outsourcing of required services by utility customers, which
resulted in a higher component of subcontracted work.

Gross profit. Gross profit increased $0.7 million, or 60.4 percent, from
$1.2 million for the three months ended November 30, 1996 to $1.9 million for
the three months ended November 30, 1997, primarily as a result of the
increase in sales. As a percentage of revenues, gross profit decreased to 12.3
percent from 16.3 percent primarily as a result of a higher proportion of
subcontract work and low margin material costs.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 37.9 percent, from $0.5
million for the three months ended November 30, 1996 to $0.7 million for the
three months ended November 30, 1997, due primarily to growth in the Company's
office staff needed to support the increased sales. As a percentage of
revenues, selling, general and administrative expenses decreased from 6.8
percent to 4.4 percent primarily due to economies of scale.

Union Power results for the year ended August 31, 1997 compared to the year
ended August 31, 1996

Revenues. Revenues increased $17.2 million, or 67.2 percent, from $25.6
million for the year ended August 31, 1996 to $42.8 million for the year ended
August 31,1997, primarily due to increased demand for the Company's services
in Nevada, a higher volume of work in California and increased outsourcing of
required services by utility customers, which resulted in a higher component
of subcontracted work.

Gross profit. Gross profit increased $1.7 million, or 51.5 percent, from
$3.3 million for the year ended August 31, 1996 to $5.0 million for the year
ended August 31, 1997. As a percentage of revenues, gross profit

23
<PAGE>

decreased to 11.7 percent from 12.9 percent primarily as a result of a higher
percentage of work being subcontracted at lower margins and higher costs than
anticipated on certain projects.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.4 million, or 25.0 percent, from $1.6
million for the year ended August 31, 1996 to $2.0 million for the year ended
August 31, 1997 due to the continued expansion into the California and Nevada
markets. As a percentage of revenues, selling, general and administrative
expenses decreased from 6.1 percent to 4.6 percent primarily due to economies
of scale.

Union Power results for the year ended August 31, 1996 compared to the year
ended August 31, 1995

Revenues. Revenues increased $13.0 million, or 103.2 percent, from $12.6
million for the year ended August 31, 1995 to $25.6 million for the year ended
August 31, 1996, primarily as a result of an increase in the overall demand
for the company's services in Nevada and California.

Gross profit. Gross profit increased $0.9 million, or 37.5 percent, from
$2.4 million for the year ended August 31, 1995 to $3.3 million for the year
ended August 31, 1996. As a percentage of revenues, gross profit decreased to
12.9 percent from 18.8 percent primarily as a result of higher costs than
anticipated on a specific contract in 1996.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $0.3 million, or 15.8 percent, from $1.9
million for the year ended August 31, 1995 to $1.6 million for the year ended
December 31, 1996 due to lower owner compensation and employee bonuses in
1996. As a percentage of revenues, selling, general and administrative
expenses decreased from 15.0 percent to 6.1 percent.

Union Power liquidity and capital resources

Union Power generated $.2 million of net cash from operating activities for
the three months ended November 30, 1997. Net cash used in investing
activities was approximately $1.3 million, primarily for the purchase of
operating equipment. Net cash provided by financing activities of $1.7 million
resulted from advances under the Company's line of credit and additional
borrowings.

At November 30, 1997, Union Power had $3.0 million of working capital and
$1.5 million of total long-term debt outstanding.

Union Power generated $1.0 million of net cash from operating activities for
the year ended August 31, 1997. Net cash used in investing activities was
approximately $1.5 million, primarily for the purchase of operating equipment.
Net cash provided by financing activities of $0.2 million resulted from
advances on the company's line of credit.

At August 31, 1997, Union Power had working capital of $2.8 million and $1.0
million of total long-term debt outstanding.

TRANS TECH RESULTS OF OPERATIONS

TRANS TECH was founded in 1983, is headquartered in South Bend, Indiana and
in 1997 provided services to customers in Indiana, Kentucky, Michigan and
Ohio. TRANS TECH installs, maintains and repairs traffic signals, signage,
highway control systems components, highway and airport lighting and fiber
optics for states and other governmental entities, and also performs
traditional electrical contracting services for private and public entities in
the commercial and industrial markets.

24
<PAGE>

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $21,397 100.0% $24,414 100.0% $32,817 100.0%
Cost of services.................. 18,934 88.5 20,426 83.7 26,519 80.8
------- ----- ------- ----- ------- -----
Gross profit.................... 2,463 11.5 3,988 16.3 6,298 19.2
Selling, general and
administrative expenses.......... 1,639 7.7 1,848 7.6 2,015 6.1
------- ----- ------- ----- ------- -----
Income from operations............ $ 824 3.8% $ 2,140 8.7% $ 4,283 13.1%
======= ===== ======= ===== ======= =====
</TABLE>

TRANS TECH results for the year ended December 31, 1997 compared to the year
ended December 31, 1996.

Revenues. Revenues increased $8.4 million, or 34.4 percent, from $24.4
million for the year ended December 31, 1996 to $32.8 million for the year
ended December 31, 1997, primarily as a result of an increase in demand for
services provided by commercial and industrial customers and, to a lesser
extent, by transportation control and lighting systems customers.

Gross profit. Gross profit increased $2.3 million, or 57.5 percent, from
$4.0 million for the year ended December 31, 1996 to $6.3 million for the year
ended December 31, 1997. As a percentage of total revenue, gross margin
increased from 16.3 percent for the year ended December 31, 1996 to 19.2
percent for the year ended December 31, 1997 primarily as a result of improved
labor productivity and asset utilization.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 11.1 percent, from $1.8
million for the year ended December 31, 1996 to $2.0 million for the year
ended December 31, 1997, primarily due to increased administrative salaries
required by the higher level of revenues and increases in owner compensation.
As a percentage of revenues, selling, general and administrative expenses
decreased from 7.6 percent to 6.1 percent due to economies of scale.

TRANS TECH results for the year ended December 31, 1996 compared to the year
ended December 31, 1995

Revenues. Revenues increased $3.0 million, or 14.0 percent, from $21.4
million for the year ended December 31, 1995 to $24.4 million for the year
ended December 31, 1996, primarily as a result of increased volume of work for
commercial and industrial customers offset partially by a decrease in activity
in the transportation control and lighting systems market.

Gross profit. Gross profit increased $1.5 million, or 60.0 percent, from
$2.5 million for the year ended December 31, 1995 to $4.0 million for the year
ended December 31, 1996. As a percentage of total revenue, gross margin
increased from 11.5 percent for the year ended December 31, 1995 to 16.3
percent for the year ended December 31, 1996 as a result of increased labor
productivity and a decrease in materials cost as a percentage of revenues.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 12.5 percent, from $1.6
million for the year ended December 31, 1995 to $1.8 million for the year
ended December 31, 1996, primarily due to the addition of administrative
positions and increased marketing expenses. As a percentage of revenues,
selling, general and administrative expenses remained relatively constant.

25
<PAGE>

TRANS TECH LIQUIDITY AND CAPITAL RESOURCES

TRANS TECH generated $1.1 million of net cash from operating activities for
the year ended December 31, 1997. Net cash used in investing activities was
approximately $0.9 million, primarily for the purchase of operating equipment.
Net cash used in financing activities of $0.4 million resulted primarily from
distributions to shareholders of $6.7 million, which were mostly offset by
borrowings to fund the distributions.

At December 31, 1997, TRANS TECH had working capital of $4.8 million and
$5.6 million of total long-term debt outstanding.

TRANS TECH generated $2.9 million in net cash from operating activities for
the year ended December 31, 1996. Net cash used in investing activities was
approximately $0.9 million, principally for purchases of operating equipment.
Net cash used in financing activities of $2.1 million resulted from repayments
of debt and distributions to shareholders.

At December 31, 1996, TRANS TECH had working capital of $2.8 million and
$0.6 million of total long-term debt outstanding.

POTELCO RESULTS OF OPERATIONS

Potelco, founded in 1965, is headquartered near Seattle, Washington and
operates primarily in Washington, Oregon and Idaho. Potelco provides electric
and telecommunications infrastructure contracting services, including
installation of overhead and underground lines and facilities for the power,
telecommunications and cable television industries. In addition, Potelco
provides electrical and telecommunications installation, maintenance and
repair services to the commercial and industrial markets.

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.......................................... $14,549 100.0% $19,220 100.0%
Cost of services.................................. 12,946 89.0 15,563 81.0
------- ----- ------- -----
Gross profit.................................... 1,603 11.0 3,657 19.0
Selling, general and administrative expenses...... 971 6.7 1,478 7.7
------- ----- ------- -----
Income from operations............................ $ 632 4.3% $ 2,179 11.3%
======= ===== ======= =====
</TABLE>

Potelco results for the year ended December 31, 1997 compared to the year
ended December 31, 1996

Revenues. Revenues increased $4.7 million, or 32.4 percent, from $14.5
million for the year ended December 31, 1996 to $19.2 million for the year
ended December 31, 1997, primarily as a result of an increase in the demand
for services by telecommunications infrastructure and commercial and
industrial customers to either upgrade their telecommunication systems from
cable to fiber optic or to install new systems.

Gross profit. Gross profit increased $2.1 million, or 131.3 percent, from
$1.6 million for the year ended December 31, 1996 to $3.7 million for the year
ended December 31, 1997. As a percentage of revenues, Potelco's gross margins
improved from 11.0 percent to 19.0 percent due to the projects performed
during 1997 having a relatively higher labor component and therefore resulting
in higher gross margins, as compared to the projects performed during 1996
which had a relatively higher proportion of low margin materials costs.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.5 million, or 50.0 percent, from $1.0
million for the year ended December 31, 1996 to $1.5 million for the year

26
<PAGE>

ended December 31, 1997, primarily due to increases in office salaries and
profit sharing contributions. As a percentage of revenues, these selling,
general and administrative expenses increased from 6.7 percent to 7.7 percent.

POTELCO LIQUIDITY AND CAPITAL RESOURCES

Potelco generated $0.8 million of net cash from operating activities for the
year ended December 31, 1997. Net cash used in investing activities was
approximately $1.6 million, primarily for the purchase of property and
equipment. Net cash provided by financing activities of $0.9 million resulted
primarily from additional proceeds received from a note payable to a bank and
borrowing of other long-term debt.

At December 31, 1997, Potelco had working capital of $1.2 million and $0.9
million of total long-term debt outstanding.

27
<PAGE>

BUSINESS

GENERAL

Quanta 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 addition, the
company provides electrical contracting services to the commercial and
industrial markets and installs transportation control and lighting systems.
The Company's services include the installation, repair and maintenance of
electric power transmission and distribution lines and telecommunication and
cable television lines, the construction of electric substations, the erection
of cellular telephone, PCS(R) and microwave towers, the installation of
highway lighting and traffic control systems, specialized underground
construction including underground fueling systems, design and engineering
services and the provision of specialty contracting services for electric,
video, security, fire, voice and data systems. The Company's customers include
electric utilities, telecommunication and cable television system operators,
governmental entities, general contractors and owners and managers of
commercial and industrial properties.

The Company is one of the largest providers of electric and
telecommunications infrastructure contracting services in its markets. The
Company maintains offices in 19 states and during 1998, the Acquired
Businesses performed work in 32 states. The Company believes that its size,
geographical diversity of operations, industry relationships, design and
engineering capability, expertise in specialty services and number of skilled
personnel provide the Company significant competitive advantages. During 1997,
the Company generated pro forma combined revenues, operating income and net
income of $338.0 million, $37.7 million and $17.8 million, respectively. For
the six months ended June 30, 1998, the Company generated pro forma combined
revenues, operating income and net income of $184.2 million, $16.2 million and
$7.1 million, respectively.

INDUSTRY OVERVIEW

The Company estimates that the electrical and telecommunications contracting
industry generates annual revenues in excess of $40 billion. The Company
believes that growth in this industry is being positively affected by the
following trends:

Deregulation. The wholesale electricity market, including sales of
electricity between utilities and other generators, is regulated by the
Federal Energy Regulatory Commission ("FERC"). In 1996, FERC accelerated the
deregulation of the electric power industry by issuing Order nos. 888 and 889,
which require shareholder-owned utilities (of which there were approximately
223 in 1997) to provide non-utility electricity suppliers with access to
transmission services. Management expects the deregulation of the electric
power industry to increase competition among suppliers of electricity, which
will lead utilities to lower their costs by outsourcing non-core functions
such as the installation, construction, maintenance and repair of electric
transmission and distribution systems and electric substations, services that
have traditionally been performed by the utilities themselves.

The Telecommunications Act of 1996 preempted state and local government
control over access to the telecommunications market, eliminating barriers to
entry and opening the markets to new entrants. Management expects the
elimination of such barriers to lead to increased construction of competing
telecommunications networks as competitive telecommunications providers,
existing as well as new, expand into new markets and offer services that once
were reserved for incumbents.

Upgrading and Expanding Existing Infrastructure. As access to electric
transmission services increases, the Company believes that financial penalties
will be imposed upon electric utilities in the event of transmission and
distribution system downtime attributable to the utilities. As a result, the
company expects that utilities will modernize existing transmission systems,
which will increase the amount of upgrading and repair work available to
outside contractors. The Company also expects commercial and industrial
companies to continue to upgrade and expand their existing electrical
infrastructure as a result of (i) increasing levels of modernization activity,
(ii) the effects of more stringent electric codes, which establish minimum
power and safety requirements, (iii) revised

28
<PAGE>

national energy standards, (iv) increases in use of electric power and (v)
increased installation of electrical capacity in excess of minimum code
requirements in order to facilitate marketing of properties.

The amount of traditional voice and data traffic has increased steadily, and
growth in the use of personal computers and modems has created significant
data traffic from a wide variety of sources. Because of the physical
limitations of the existing communications network facilities, the Company
believes there is an immediate need to upgrade and expand facilities with new
and innovative technology, expanding, and in many cases, replacing existing
telecommunications and cable television infrastructure to allow for increases
in the volume of traffic. The need to upgrade and expand telecommunications
infrastructure as a result of deregulation and the growth in consumer demand
for enhanced telecommunications services is expected to continue to prompt
telecommunications providers to increase the current level of outsourcing to
independent contractors who serve the industry.

Increased Outsourcing. The outsourcing trend has largely been driven by the
efforts of electric utilities and telecommunications providers to reduce costs
and focus on their core competencies. The Company believes that electric
utilities and telecommunications providers will increasingly seek
comprehensive solutions to their infrastructure needs by utilizing fewer
qualified contractors that can provide the full range of new construction,
installation, repair, maintenance and emergency services.

The Company believes that its industry is highly fragmented. According to
the U.S. Census Bureau, there are more than 50,000 electrical and
telecommunications contracting businesses, consisting of a small number of
regional or national providers and a large number of relatively small, owner-
operated businesses that have limited access to capital and that offer a
limited range of services. The Company believes that the fragmented nature of
the industry presents substantial consolidation and growth opportunities for
companies with a disciplined acquisition program, a decentralized operating
strategy and access to financial resources. The Company also believes that the
prominence and operating strength of the Acquired Businesses and the
experience of its executive management will provide the Company with
significant competitive advantages to capitalize on these opportunities.

STRATEGY

The Company plans to achieve its goal of becoming a leading provider of
electric and telecommunications infrastructure contracting services by
implementing its operating strategy, emphasizing continued internal growth and
expanding through acquisitions.

OPERATING STRATEGY. The key elements of the Company's operating strategy
are:

Operate on a Decentralized Basis. The Company intends to manage its
operations on a decentralized basis while maintaining operating and
financial controls. Local management will retain responsibility for the
operations, profitability and growth of its individual business. The
Company believes that, while maintaining operating and financial controls,
a decentralized operating structure will retain the entrepreneurial spirit
of each of the Acquired Businesses and will permit the Company to
capitalize on the Acquired Businesses' local and regional market knowledge,
specialized skills and customer relationships. In addition, the Company
believes that its operating efficiency, financial strength, technical
expertise, presence in key geographic areas and reputation for quality and
reliability provide competitive advantages in bidding for, winning and
executing new contracts for infrastructure projects. While local management
will retain control of the operations of its individual business, the
Company's executive management will have responsibility for corporate
strategy and acquisitions, financing, insurance, investor relations and
employee benefit plans.

Achieve Operating Efficiencies. Certain administrative functions are
being centralized. In addition, by combining overlapping operations of
certain of the Acquired Businesses, the Company expects to achieve more
efficient asset utilization and realize savings in overhead and other
expenses. The Company intends to use its increased purchasing power to gain
volume discounts in areas such as vehicles and equipment,

29
<PAGE>

electrical materials, marketing, bonding, employee benefits and insurance.
The Company will seek to realize cost savings and other benefits by the
sharing of purchasing, pricing, bidding and other business practices and
the sharing of licenses. The Company intends to further develop and expand
the use of management information systems to facilitate financial control,
project costing and asset utilization. At some locations, the larger
combined workforce will provide additional staffing flexibility.

INTERNAL GROWTH. The Company is focused on continuing its strong internal
growth by (i) increasing the volume of services provided to existing
customers, (ii) expanding the scope of services provided to existing
customers, (iii) broadening its customer base and (iv) geographically
expanding its service area. The Company believes it will be able to expand the
services it offers in its markets by leveraging the specialized strengths of
individual Acquired Businesses. Such services include design and engineering,
where the contractor applies in-house engineering expertise to design the most
cost-effective system, and the application of new technologies, such as a
robotic arm that can be used to facilitate the repair of high voltage power
transmission lines without taking them out of service. The Company further
believes that strategic agreements with large electric and telecommunications
infrastructure owners will provide opportunities for future internal growth.
For instance, the Company consummated a strategic investment by ECT and an
affiliate pursuant to which ECT and Quanta agreed to exchange information
regarding the design, installation and maintenance of electric power
transmission and distribution systems and fiber optic communications systems.

ACQUISITIONS. The Company believes that the increasing trend toward the
outsourcing of services to the electric and telecommunications infrastructure
contracting industry will result in a competitive disadvantage for small and
mid-sized companies that do not have access to capital and cannot provide a
broad range of specialty contracting services on a national basis. In
addition, the Company expects that there will continue to be a large number of
attractive acquisition candidates due to the highly fragmented nature of the
industry, the inability of many companies to expand and modernize due to
capital constraints and the desire of owners for liquidity. The Company
believes that its financial strength and experienced management will be
attractive to acquisition candidates. The key elements of the Company's
acquisition strategy are:

Enter New Geographic Markets. The Company intends to expand into
geographic markets not currently served by the Company by selectively
acquiring well-established specialty electrical and telecommunications
contractors that, like the Founding Companies, are leaders in their
regional markets, are financially stable, have a strong customer base, have
senior management committed to participating in the future growth of the
Company and can serve as "platforms" for the future growth of the Company.

Expand Within Existing Markets. The Company intends to explore
acquisition opportunities in the geographic markets it already serves as
well as geographic markets served by businesses the Company acquires in the
future. Once the Company has entered a specific geographic market, it will
seek to acquire other well-established companies in that particular market
to deepen its market penetration and expand the range of services offered
to its customers. The Company will also pursue "tuck-in" acquisitions of
smaller companies whose operations can be integrated into and leveraged
with an existing operation.

30
<PAGE>

ACQUISITION PROGRAM

Since the Company's IPO, the Company has acquired 11 other businesses which
when combined with the Founding Companies and the Pooled Company resulted in
pro forma combined revenues for the year ended December 31, 1997 and the six
months ended June 30, 1998, of approximately $338.0 million and $184.2
million, respectively, for a combined consideration of $85.0 million in cash
and notes and 5.0 million shares of Common Stock. The following table
describes the businesses we have acquired since the IPO:

<TABLE>
<CAPTION>
CLOSING
BUSINESS ACQUIRED DATE BUSINESS DESCRIPTION HEADQUARTERS
----------------- -------- -------------------- ----------------
<S> <C> <C> <C>
Golden State Utility
Company................ 04/15/98 Underground, aerial and underwater Turlock, CA
installation, maintenance and
splicing of telecommunications
cable, including fiber optic
cable, and construction and
maintenance of cellular sites
Spalj Construction
Company................ 05/05/98 Installation of underground fiber- Deerwood, MN
optic networks
NorAm
Telecommunications,
Inc. .................. 06/23/98 Outside and inside fiber-optic Portland, OR
networks and technical services
support for the telecommunications
industry
Environmental
Professional
Associates, Ltd........ 07/02/98 Electric utility line clearance Marysville, CA
services
Underground Construction
Co., Inc............... 08/04/98 Construction and maintenance of Benicia, CA
utility and industrial conduits,
pipelines, airport fueling systems
and other specialized heavy
engineering projects
North Pacific
Construction Co. ...... 08/11/98 Underground construction to the Woodland, CA
telecommunications industry
Sumter Builders, Inc. .. 08/14/98 Construction and maintenance of Sumter, SC
distribution systems, transmission
systems, and substations for
electric utilities
Telecom Network
Services, Inc.......... 08/20/98 Engineering and design/build Kirkland, WA
services for telecommunications
providers
Harker & Harker, Inc. .. 09/15/98 Construction and maintenance of Reno, NV
distribution systems, transmission
systems, and substations for
electric utilities
Smith Contracting....... 09/21/98 Fiber optic technical services for Fergus Falls, MN
the telecommunications industry
Manuel Bros., Inc. ..... 10/15/98 Installation, removal and Grass Valley, CA
maintenance of underground conduit
for the telecommunications
industry
</TABLE>

The Company believes it will be regarded by acquisition candidates as an
attractive acquiror because of (i) the Company's strategy for creating a
national, comprehensive and professionally managed specialty electric and
telecommunications infrastructure contracting business, (ii) the Company's
decentralized operating strategy and opportunities to participate in a larger
organization, (iii) the Company's access to financial resources as a public
company, (iv) the potential for increased profitability due to centralizing
certain administrative functions,

31
<PAGE>

enhanced systems capabilities and economies of scale and (v) the potential for
owners of the businesses being acquired to participate in the Company's
planned growth while realizing liquidity. The Company believes that the
management of the Acquired Businesses will be instrumental in identifying and
assisting in the completion of future acquisitions.

The Company has developed a set of financial, geographic and management
criteria designed to assist management in the evaluation of acquisition
candidates. These criteria evaluate a variety of factors, including, but not
limited to (i) historical and projected financial performance, (ii) internal
rate of return, return on assets and return on revenue, (iii) experience and
reputation of the candidate's management and operations, (iv) composition and
size of the candidate's customer base, (v) whether the geographic location of
the candidate will enhance or expand the Company's market area or ability to
attract other acquisition candidates, (vi) whether the acquisition will
augment or increase the Company's market share or services offered or help
protect the Company's existing customer base, (vii) potential synergies gained
by combining the acquisition candidate with the Company's existing operations
and (viii) liabilities, contingent or otherwise, of the candidate. The Company
anticipates that acquisition candidates in the target markets and industries
will have annual revenues ranging from $10 million to $100 million.

As consideration for future acquisitions, the Company expects to utilize a
combination of cash, Common Stock and debt. The purchase price for each future
acquisition will vary. The major factors in establishing the purchase price
will be historical earnings, strength of management, future prospects of the
acquiree and the ability of the acquiree to complement or leverage the
services already offered by the Company.

SERVICES

The Company provides a broad range of services, including the installation,
repair and maintenance of electric power transmission and distribution lines
and telecommunications and cable television lines, the construction of
electric substations, the erection of cellular telephone, PCS(R) and microwave
towers, the installation of highway lighting and traffic control systems,
specialized underground construction including underground fueling systems,
design and engineering services and the provision of specialty contracting
services for electric, video, security, fire, voice and data systems. The
Company currently provides four broad business services: electric utility
infrastructure services; telecommunications infrastructure services;
commercial and industrial services; and transportation control and lighting
systems services. The Company had pro forma combined revenues for the year
ended December 31, 1997 of $338.0 million, of which 43.2 percent was
attributable to electric utility infrastructure services, 38.6 percent was
attributable to telecommunications infrastructure services, 7.6 percent was
attributable to commercial and industrial services and 10.6 percent was
attributable to transportation control and lighting systems services.

Electric Utility Infrastructure Services. The Company performs specialty
electrical contracting services for electric utilities. These services include
installing, repairing and maintaining electric transmission and distribution
lines, principally above ground, maintaining street lights and other system
components, constructing electric substations and erecting transmission
towers. The work performed often involves the splicing of high voltage lines
and, on occasion, the installation of underground high voltage distribution
systems. The Company also repairs and replaces lines which have been damaged
or destroyed as a result of adverse weather conditions.

Telecommunications Infrastructure Services. The Company provides a variety
of services in connection with telecommunications, cable television and other
data transmission. The Company installs fiber optic, coaxial and copper cable
both above and below ground on behalf of telecommunications and cable service
providers. The services provided by the Company include design/build
consulting, the placing and splicing of cable, excavation of trenches in which
to place the cable, placement of related structures such as poles, anchors,
conduits, manholes, cabinets and closures, placement of drop lines from the
main distribution lines to an individual residence or business and maintenance
and removal of these fiber optic, coaxial and copper lines and

32
<PAGE>

related structures. The Company has the ability to directionally bore and
place cables, a highly specialized method of positioning buried cable which is
often required in congested urban and suburban markets where trenching may be
impractical. In addition, the Company is involved in the engineering, design
and erection of communications towers, including cellular telephone, PCS(R)
and microwave towers.

Commercial and Industrial Services. The Company designs, installs, maintains
and repairs electrical wiring, telephone and data copper wiring, fiber optic
cabling and building control and automation systems for commercial and
industrial customers.

Transportation Control and Lighting Systems Services. The Company installs,
maintains and repairs traffic and highway control systems, such as signals,
signage, lighting and freeway management systems components. In addition, the
Company installs overhead cable and control systems for light rail lines,
"smart" highway control systems and airport lighting and designs, and
constructs and maintains airport fueling systems.

CUSTOMERS

The Company's customers include electric utilities, telecommunications and
cable television system operators, governmental entities, general contractors
and builders, owners and managers of commercial and industrial properties. The
Company's customer base is highly concentrated. Electric utilities, in the
aggregate, represent the largest customer base of the Company. General
contractors, as a group, account for a significant portion of customers for
the Company's commercial and industrial work. The Company believes that a
substantial portion of its total revenues and operating income will continue
to be derived from a concentrated group of customers. The loss of any of these
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.

Management at each of the Acquired Businesses has been responsible for
developing and maintaining successful long-term relationships with key
customers. The Company relies heavily on repeat customers and uses both the
written and verbal referrals of its satisfied customers to help generate new
business. Many of the Company's customers or prospective customers have a
qualification procedure for becoming an approved bidder or vendor based upon
the satisfaction of particular performance and safety standards set by the
customer. Such customers often maintain a list of vendors meeting such
standards and award contracts for individual jobs only to such vendors. The
Company strives to maintain its status as a preferred or qualified vendor to
such customers.

EMPLOYEES

As of June 30, 1998, the Company had approximately 340 salaried employees,
including executive officers, project managers or engineers, job
superintendents, staff and clerical personnel and approximately 2,525 hourly
employees, the number of which fluctuates depending upon the number and size
of the projects undertaken by the Company at any particular time. The Company
does not anticipate any overall reductions in staff as a result of the
consolidation of the Acquired Businesses, although there may be some job
realignments and new assignments in an effort to eliminate overlapping and
redundant positions.

Three of the Founding Companies are signatories to master collective
bargaining agreements with the International Brotherhood of Electrical Workers
(the "IBEW"). The other Founding Company is a signatory to various local IBEW
agreements as well as local agreements with the Laborers International Union
("LIU") and the Operating Engineers Union ("OEU"). One of the Purchased
Companies is a signatory to various local IBEW agreements as well as local
agreements with the LIU, OEU, the Operative Plasters and Cement Masons
International Association and the United Brotherhood of Carpenters and Joiners
of America. Another of the Purchased Companies has voluntarily entered
negotiations with a local affiliate of the IBEW in order to qualify for
additional work. Under these agreements, the Founding Companies agree to pay
specified wages to its union employees, observe certain workplace rules and
make employee benefit payments to multi-employer pension plans and employee
benefit trusts rather than administering the funds on behalf of their
employees. IBEW covered employees are represented by numerous local unions
under various agreements with varying terms and

33
<PAGE>

expiration dates. Such local agreements are entered into by and between the
IBEW local and the National Electrical Contractors Association ("NECA"), of
which the Company is a member. The majority of the collective bargaining
agreements contain provisions that prohibit work stoppages or strikes, even
during specified negotiation periods relating to agreement renewal, and
provide for binding arbitration dispute resolution in the event of prolonged
disagreement; however, there can be no assurance that work stoppages or
strikes will not occur at any given time.

Each of the Acquired Businesses provides a variety of health, welfare and
benefit plans for their employees who are not covered by collective bargaining
agreements. It is anticipated that these various employee benefit plans will
be replaced by a single plan covering all of the Company's non-bargaining
employees.

The electric and telecommunications infrastructure contracting industry is
experiencing a shortage of skilled craftsmen. In response to the shortage, the
Company seeks to take advantage of various IBEW and NECA referral programs and
hire graduates of the joint IBEW/NECA apprenticeship program for training
qualified electricians. As a union employer, the Company believes that its
access to qualified personnel through these and other union sources will
afford it a distinct advantage over non-union employers in attracting much
needed skilled craftsmen in an ever-tightening labor market. None of the
Acquired Businesses has experienced any strikes or work stoppages in the past
20 years. The Company believes its relationships with its employees and union
representatives is satisfactory.

TRAINING, QUALITY ASSURANCE AND SAFETY

Performance of the Company's services requires the use of equipment and
exposure to conditions that can be dangerous. Although the Company is
committed to a policy of operating safely and prudently, the Company has been
and is subject to claims by employees, customers and third parties for
property damage and personal injuries resulting from performance of the
Company's services. The Company performs on-site services using employees who
have completed applicable Company safety and training programs. The Company's
policies require that employees complete a prescribed training and service
program with the Company in addition to those required by NECA and the IBEW
prior to performing more sophisticated and technical jobs. For example, all
journeymen linemen are required by the IBEW and NECA to complete a minimum of
8,000 hours of on-the-job training, approximately 200 hours of classroom
education and extensive testing and certification. The Company requires
additional training, depending upon the sophistication and technical
requirements of each particular job. The Company intends to establish Company-
wide training and educational programs, as well as comprehensive safety
policies and regulations, by sharing "best practices" throughout its
operations.

EQUIPMENT AND FACILITIES

The Company operates a fleet of owned and leased trucks and trailers,
support vehicles and specialty construction equipment, such as backhoes,
excavators, trenchers, generators, boring machines, cranes and wire pullers
and tensioners. The total size of the rolling-stock fleet approximates 4,700
units. Most of this fleet is serviced by the Company's own mechanics who work
at various maintenance sites and facilities. The Company believes that these
vehicles generally are well-maintained and adequate for its present
operations. Management believes that in the future it will be able to lease or
purchase this equipment at lower prices due to its larger size and the volume
of its leasing and purchasing activity.

The Company leases its corporate headquarters in Houston, Texas. The Company
maintains offices in North Kansas City and Clinton, Missouri; Austin, Texas;
South Bend, Indiana; Las Vegas and Reno, Nevada; Topeka and Wichita, Kansas;
Salt Lake City, Utah; Honolulu, Hawaii; Des Moines, Iowa; Rathrum, Idaho;
Kingman and Chino Valley, Arizona; Aurora and Englewood, Colorado; Clackamas
and Portland, Oregon; Anchorage, Alaska; Chico, Escondido, Fontana, Benicia,
San Francisco, El Cajon, Grass Valley, Marysville, Redwood City, Sacramento,
Selma, Turlock, Woodland, and Vacaville, California; Deerwood, Minnesota;
Sumter and Florence, South Carolina; and Sumner, Seattle, Kirkland, Everett
and Spokane, Washington. This space is used for offices, equipment yards,
warehousing, storage and vehicle shops. The Company owns some of the
facilities it occupies and leases others. The Company believes that its
facilities are sufficient for its current needs. See "Certain Transactions."

34
<PAGE>

REGULATION

The Company's operations are subject to various federal, state and local
laws and regulations including (i) licensing requirements applicable to
electricians and engineers, (ii) building and electrical codes, (iii)
permitting and inspection requirements applicable to construction projects,
(iv) regulations relating to worker safety and environmental protection and
(v) special bidding and procurement requirements on government projects.

The Company believes that it has all the required licenses to conduct its
operations and is in substantial compliance with applicable regulatory
requirements. Failure of the Company to comply with applicable regulations
could result in substantial fines and/or revocation of the Company's operating
licenses. Many state and local regulations governing electrical construction
require permits and licenses to be held by individuals who typically have
passed an examination or met other requirements. The Company intends to
implement a policy to ensure that, where possible, any such permits or
licenses that may be material to the Company's operations are held by at least
two Company employees.

COMPETITION

The markets in which the Company operates are highly competitive, requiring
substantial resources and skilled and experienced personnel. The Company
competes with other independent contractors in most of the markets in which it
operates, several of which are large domestic companies that have greater
financial, technical and marketing resources than the Company. In addition,
there are relatively few, if any, barriers to entry into the markets in which
the Company operates and, as a result, any organization that has adequate
financial resources and access to technical expertise may become a competitor
to the Company. A significant portion of the Company's revenues are currently
derived from fixed price agreements and price is often an important factor in
the award of such agreements. Accordingly, the Company could be outbid by its
competitors in an effort to procure such business. There can be no assurance
that the Company's competitors will not develop the expertise, experience and
resources to provide services that are equal or superior in both price and
quality to the Company's services, or that the Company will be able to
maintain or enhance its competitive position. The Company may also face
competition from the in-house service organizations of its existing or
prospective customers, including electric utility and telecommunications
providers, which employ personnel who perform some of the same types of
services as those provided by the Company. Although a significant portion of
these services is currently outsourced, there can be no assurance that
existing or prospective customers of the Company will continue to outsource
services in the future.

RISK MANAGEMENT, INSURANCE AND PERFORMANCE BONDS

The primary risks in the Company's operations are bodily injury, property
damage and injured workers' compensation. The Company maintains automobile and
general liability insurance for third party bodily injury and property damage
and workers' compensation coverage which it considers sufficient to insure
against these risks, subject to self-insured amounts. Accruals for outstanding
claims are estimated based on known facts and the Company's prior experience.
Actual experience and claims could differ from the Company's estimates. The
Company consolidated the purchase of insurance, which resulted in savings from
the amounts paid by the Acquired Businesses.

Contracts in the electrical contracting industry may require performance
bonds or other means of financial assurance to secure contractual performance.
If the Company were unable to obtain surety bonds or letters of credit in
sufficient amounts or at acceptable rates, it may be precluded from entering
into additional contracts with certain of its customers.

LEGAL PROCEEDINGS

The Company is, from time to time, a party to litigation or administrative
proceedings that arise in the normal course of its business. The Company does
not have pending any litigation that, separately or in the aggregate, that in
the opinion of management, would have a material adverse effect on the
Company's results of operations or financial condition.

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<PAGE>

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information concerning the Company's
directors, executive officers and key employees:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John R. Colson....................... 51 Chief Executive Officer, Director
James H. Haddox...................... 50 Chief Financial Officer, Secretary
Gary A. Tucci........................ 42 Vice President Western Region,
President of Potelco, Director
Brad Eastman......................... 31 Vice President and General Counsel
Derrick A. Jensen.................... 27 Vice President and Controller
John R. Wilson....................... 48 President of PAR, Director
Vice President of Union Power,
Timothy A. Soule..................... 51 Director
John A. Martell...................... 43 Vice President of TRANS TECH, Director
James R. Ball........................ 55 Director
Vincent D. Foster.................... 42 Chairman of the Board of Directors
Rodney R. Proto...................... 50 Director
Michael T. Willis.................... 54 Director
Ronald W. Soule...................... 54 President of Union Power
Robert J. Urbanski................... 47 President of TRANS TECH
</TABLE>

John R. Colson was elected Chief Executive Officer of the Company in
December 1997 and became a director of the Company effective upon the
consummation of the IPO in February 1998. He joined PAR in 1971 and became
President in 1991. He is currently a member of the Council of Industrial
Relations, governor of the Missouri Valley chapter of NECA and a director of
the Missouri Valley Line Apprenticeship Program.

James H. Haddox has been Chief Financial Officer of the Company since
November 1997 and Secretary since December 1997. From March 1996 until joining
the Company, Mr. Haddox was Senior Vice President--Finance of Corporate
Express Delivery Systems, Inc., a national provider of same day delivery
services. From January 1994 to March 1996, Mr. Haddox held various positions,
including Chief Accounting Officer and Vice President--Finance, with U.S.
Delivery Systems, Inc., a NYSE listed company which was the largest provider
of same day delivery services in the U.S. prior to its merger with Corporate
Express, Inc. in March 1996. From 1991 to 1994 Mr. Haddox was an independent
business consultant providing management services. From 1987 to 1991, Mr.
Haddox held various financial positions, including Chief Financial Officer and
Chief Accounting Officer, at Allwaste, Inc., a NYSE listed national
environmental services company. Mr. Haddox is a Certified Public Accountant.

Gary A. Tucci has been Vice President Western Region of the Company since
August 1998. Mr. Tucci joined Potelco in 1975 and became President in 1988. He
is a member of the Joint NECA/IBEW Apprenticeship and Training Committee as
well as the labor relations board. Mr. Tucci became a director of the Company
effective upon the consummation of the IPO.

Brad Eastman has been Vice President and General Counsel of the Company
since July 1998. From March 1996 until joining the Company, Mr. Eastman was an
associate in the law firm of Brobeck, Phleger & Harrison LLP focusing on
clients in high growth industries. From October 1994 until March 1996 Mr.
Eastman was an associate in the law frim of Sullivan & Cromwell focusing on
clients in the financial services industry. Mr. Eastman holds a J.D. degree.

Derrick A. Jensen has been Vice President and Controller of the Company
since December 1997. Prior to joining the Company, he was employed by Arthur
Andersen LLP ("Arthur Andersen"), serving most recently as audit manager
focusing on clients in consolidating industries. Mr. Jensen is a Certified
Public Accountant.

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<PAGE>

John R. Wilson was elected President of PAR in 1997. He joined PAR in 1977
and became an Executive Vice President in 1991. Mr. Wilson became a director
of the Company effective upon the consummation of the IPO.

Timothy A. Soule joined Union Power in 1972 and became Vice President in
1975. He is also a member of the Board of Trustees for the joint NECA/IBEW
Line Construction Benefit Fund, Union Power's representative to the Rocky
Mountain Electrical League and a member of the Board of Directors of Power and
Communication Contractors Association. Mr. Soule became a director of the
Company effective upon the consummation of the IPO.

John A. Martell founded TRANS TECH in 1983 and serves as Vice President. He
is currently a member of the National Fire Protection Association and the
Illuminating Engineering Society. Mr. Martell is a Registered Professional
Engineer. Mr. Martell became a director of the Company effective upon the
consummation of the IPO.

James R. Ball is a private investor, a consultant to Koch Industries, Inc.
and a member of the board of directors of Carbide/Graphite Group, Inc., a
producer of graphite electrode specialties products. From 1969 to 1994, he
held several positions with Vista Chemical Company ("Vista") and its
predecessor, Conoco, Inc. Vista was sold in 1991 to RWE-DEA, a unit of RWE AG,
a German energy and chemicals concern, and Mr. Ball served on the board of
directors of Vista and was its President and Chief Executive Officer from 1992
through 1994. Mr. Ball became a director of the Company effective upon the
consummation of the IPO.

Vincent D. Foster has been a director of the Company since November 1997 and
became non-executive Chairman of the Board upon consummation of the IPO. Mr.
Foster is a Managing Director of Main Street Merchant Partners II, L.P., a
merchant banking firm. From September 1988 through October 1997, Mr. Foster
was a partner of Andersen Worldwide and Arthur Andersen. Mr. Foster was the
Director of the Corporate Finance and Mergers and Acquisitions practices of
Arthur Andersen for the southwestern U.S., specializing in structuring and
executing "roll-up" transactions and in providing merger and acquisition and
corporate finance advisory services to clients in consolidating industries.
Mr. Foster holds a J.D. degree and is a Certified Public Accountant.

Rodney R. Proto has been President, Chief Operating Officer and a director
of Waste Management, Inc., (formerly known as USA Waste Services, Inc. "WMI"),
a solid waste services company, since August 1996. Prior thereto, he was
President, Chief Operating Officer and a director of Sanifill, Inc.
("Sanifill"), a solid waste management company acquired by WMI in August 1996.
Mr. Proto joined Sanifill in February 1992. Before joining Sanifill, he was
employed by Browning-Ferris Industries, Inc. for 12 years where he served,
among other positions, as Chairman of BFI Overseas from 1985 to 1987 and
President of Browning-Ferris Industries Europe, Inc. from 1987 through 1991.
Mr. Proto became a director of the Company effective upon the consummation of
the IPO.

Michael T. Willis is Chairman of the Board, Chief Executive Officer and
President of Metamor Worldwide, formerly CoreStaff, Inc. ("Metamor"), one of
the largest information technology and staffing companies in the U.S. Prior to
founding Metamor in 1993, Mr. Willis served as Chief Executive Officer and
President of The Talent Tree Corporation ("Talent Tree"), which he founded in
1976 and built into one of the largest temporary services companies in the
U.S. Mr. Willis sold Talent Tree to Hestair plc in 1987 and then continued as
President and Chief Executive Officer until April 1993. Mr. Willis is also a
director of the Southwest Bank of Texas, a publicly-traded financial
institution. Mr. Willis became a director of the Company effective upon the
consummation of the IPO.

Ronald W. Soule joined Union Power in 1963 and became President in 1987. He
is a member of the Board of Directors of the Colorado NECA/IBEW Negotiation
Committee, the Western Line Constructors Chapter of NECA and the Mountain
States Joint Apprenticeship and Training Committee. He is also Union Power's
representative to NECA and the past President of Western Line Constructors
Chapter of NECA.

37
<PAGE>

Robert J. Urbanski founded TRANS TECH in 1983 and serves as President. He is
a member of the Institute of Transportation Engineers and the International
Municipal Sign Association.

The Amended and Restated Bylaws of the Company permit the Board of Directors
to increase the size of the Board. Each director serves a one-year term. At
each annual meeting of stockholders, all except one of the directors will be
elected by the holders of the Common Stock and one director will be elected by
the holders of the Limited Vote Common Stock. Mr. Foster has been designated
as the director elected by holders of Limited Vote Common Stock.

The Board of Directors has established an Audit Committee, an Acquisitions
Committee and a Compensation Committee.

DIRECTORS' COMPENSATION

Directors who also are employees of the Company or any of its subsidiaries
will not receive additional compensation for serving as directors. Each
director who is not an employee of the Company or any of its subsidiaries will
receive a fee of $1,000 for attendance at each meeting of the Board of
Directors or any committee thereof (unless held on the same day as a Board of
Directors meeting). Directors of the Company will be reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings of the Board of
Directors or the committees thereof, and for other expenses reasonably
incurred in their capacity as directors of the Company. Each non-employee
director will receive an option to purchase 10,000 shares of Common Stock upon
such person's initial election to the Board of Directors and an annual grant
of an option to purchase 5,000 shares of Common Stock at each annual meeting
of the Company's stockholders thereafter at which such director is re-elected
or remains a director. See "--1997 Stock Option Plan." In addition, each of
Messrs. Ball, Proto and Willis purchased 20,000 shares of Limited Vote Common
Stock from the Company for nominal consideration.

EXECUTIVE COMPENSATION

The Company anticipates that during 1998 the annualized base salaries of its
most highly compensated executive officers will be $150,000. As part of Mr.
Haddox's employment arrangement with the Company, he purchased 100,000 shares
of Limited Vote Common Stock for nominal consideration and received an option
under the 1997 Stock Option Plan to purchase 125,000 shares of Common Stock at
the IPO price. As part of Mr. Jensen's employment arrangement with the
Company, he purchased 37,500 shares of Limited Vote Common Stock for nominal
consideration and received an option under the 1997 Stock Option Plan to
purchase 62,500 shares of Common Stock at the IPO price. Mr. Eastman received
an option under the 1997 Stock Option Plan to purchase 50,000 shares of Common
Stock at $13.0625 per share.

EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement with Messrs. Colson and
Haddox and certain other key employees of the Company that prohibits such
individual from disclosing the Company's confidential information and trade
secrets and generally restricts these individuals from competing with the
Company for a period of five years after the date of the individual's
employment agreement. Each of these agreements has an initial term of two to
three years, provides for an automatic annual extension at the end of its
initial term and is terminable by the Company for "good cause" upon ten days'
written notice and without "good cause" by either party upon thirty days'
written notice. All employment agreements provide that if the officer's
employment is terminated by the Company without "good cause," such officer
will be entitled to receive a lump-sum severance payment at the effective time
of termination equal to the officer's base salary at the rate then in effect
for the greater of (i) the time period remaining under the initial term of the
agreement or (ii) one year. In addition, all employment agreements provide
that in the event of termination without "good cause," the non-competition
provision will not apply for any time period in which the employee is not
receiving or has not received severance compensation.

Some of the employment agreements contain certain provisions concerning a
change-in-control of the Company, including the following: (i) in the event
five days' advance notice of the transaction giving rise to the

38
<PAGE>

change-in-control is not received by the Company and such officer, the change-
in-control will be deemed a termination of the employment agreement by the
Company without "good cause," and the provisions of the employment agreement
governing the same will apply, except that the severance amount otherwise
payable (discussed in the preceding paragraph) shall be tripled and the
provisions which restrict competition with the Company shall not apply and
(ii) the officer must be given sufficient time and opportunity to elect
whether to exercise all or any of his or her options to purchase Common Stock,
including any options with accelerated vesting under the provisions of the
1997 Stock Option Plan, such that the officer may acquire the Common Stock at
or prior to the closing of the transaction giving rise to the change-in-
control, if he or she so desires.

1997 STOCK OPTION PLAN

In December 1997, the Board of Directors adopted, and the stockholders of
the Company approved, the 1997 Stock Option Plan. The purpose of the 1997
Stock Option Plan is to provide directors, key employees, officers and certain
advisors with additional incentives by increasing their proprietary interest
in the Company. The aggregate amount of Common Stock of the Company with
respect to which options may be granted may not exceed the greater of
2,380,850 shares or 15% of the outstanding shares of Common Stock. On February
27, 1998, the Company filed a Registration Statement on Form S-8 with respect
to 2,380,850 shares of Common Stock issuable in connection with the 1997 Stock
Option Plan.

The 1997 Stock Option Plan provides for the grant of incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and nonqualified stock options (collectively, the
"Awards"). The amount of ISOs that may be granted under the 1997 Stock Option
Plan is limited to 2,380,850 shares. The 1997 Stock Option Plan is
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee has, subject to the terms of the 1997 Stock Option
Plan, the sole authority to grant Awards under the 1997 Stock Option Plan, to
construe and interpret the 1997 Stock Option Plan and to make all other
determinations and take any and all actions necessary or advisable for the
administration of the 1997 Stock Option Plan.

All of the Company's employees, non-employee directors, officers and
advisors are eligible to receive Awards under the 1997 Stock Option Plan, but
only employees of the Company are eligible to receive ISOs. Options will be
exercisable during the period specified in each option agreement and will
generally become exercisable in installments pursuant to a vesting schedule
designated by the Compensation Committee. In the discretion of the
Compensation Committee, option agreements may provide that options will become
immediately exercisable in the event of a "change in control" (as defined in
the 1997 Stock Option Plan) of the Company. No ISO will remain exercisable
later than ten years after the date of grant (or five years in the case of
ISOs granted to employees owning more than 10% of the voting capital stock).

The Company has outstanding options to purchase approximately 1,555,150
shares of Common Stock issued pursuant to the 1997 Stock Option Plan.

The 1997 Stock Option Plan also provides for automatic option grants to
directors who are not otherwise employed by the Company or its subsidiaries.
Upon commencement of service, a non-employee director will receive a non-
qualified option to purchase 10,000 shares of Common Stock, and each
continuing or re-elected non-employee director annually will receive an option
to purchase 5,000 shares of Common Stock. Options granted to non-employee
directors are fully exercisable following the expiration of six months from
the date of grant.

The exercise price for ISOs granted under the 1997 Stock Option Plan may be
no less than the fair market value of a share of the Common Stock on the date
of grant (or 110% in the case of ISOs granted to employees owning more than
10% of the voting capital stock).

39
<PAGE>

CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

Quanta was initially capitalized in August 1997 by several independent
investors, including Midwest Acquisition Support, LLC (an entity controlled by
Bernard J. Gram), Kevin D. Miller, Steven P. Colmar and William G. Parkhouse,
who acted as co-founders of Quanta and paid nominal cash consideration for
1,620,625 shares of Limited Vote Common Stock. In September 1997, Fabal
Funding Corp., a corporation affiliated with this group, agreed to advance up
to $125,000 to the Company in consideration for receiving, at the closing of
the IPO, 41,665 shares of Limited Vote Common Stock. These shares were
distributed to five individuals who each individually advanced $25,000 to
Fabal Funding Corp. In addition, in November 1997 Main Street purchased
1,484,543 shares of Limited Vote Common Stock for nominal cash consideration
(both Main Street and the group of investors described above, the "Initial
Stockholders"). Main Street advanced funds to Quanta to enable Quanta to pay
various expenses incurred in connection with its efforts to complete the
acquisitions of the Founding Companies, and consummate the IPO, which advances
were repaid from the net proceeds of the IPO.

Quanta acquired all of the issued and outstanding capital stock and other
equity interests of the Founding Companies for consideration of (i)
approximately $21.0 million in cash and (ii) 7,527,000 shares of Common Stock.

The following table sets forth for each Founding Company the consideration
paid by Quanta to the stockholders of the Founding Companies (i) in cash and
(ii) in shares of Common Stock.

<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
----------- ------------
<S> <C> <C>
PAR............................................. $ 8,370,000 3,000,000
Union Power..................................... 5,348,430 1,917,000
TRANS TECH...................................... 4,362,862 1,563,750
Potelco......................................... 2,919,038 1,046,250
----------- ---------
Total......................................... $21,000,330 7,527,000
=========== =========
</TABLE>

TRANSACTIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS

Certain stockholders of certain of the Founding Companies who are directors,
executive officers or key employees of the Company had guaranteed
indebtedness, performance bonds and other obligations of each of their
respective Founding Companies. These guarantees were terminated following the
completion of the IPO.

Prior to consummation of the IPO, the stockholders of Union Power purchased
certain non-operating assets from that company at a price equal to the book
value of such assets, estimated to be $126,000 in the aggregate.

Prior to consummation of the IPO, the stockholders of PAR purchased certain
non-operating assets from that company at a price equal to the book value of
such assets, estimated to be $731,000 in the aggregate.

Union Power leases its main office facilities located in Englewood, Colorado
from Soule Trusts Partnership, which is controlled by affiliates of Ronald W.
and Timothy A. Soule, and a branch facility located in North Las Vegas, Nevada
from RTS Partnership, which is owned by Ronald W. and Timothy A. Soule. Ronald
W. and Timothy A. Soule are President and Vice President of Union Power,
respectively, and Timothy Soule is a director of the Company. The Englewood
office lease provides for a five-year term that will terminate in the year
2002 with an option to renew the lease for an additional five-year term, and
covers approximately 3,500 square feet of office space on 4.8 acres, at a
monthly rental rate of $3,500. The North Las Vegas office lease will terminate
on May 31, 2006 with provision for automatic one-year renewal periods. Such
lease covers 2.69 acres and the leasehold improvements located on such land
for a monthly rental rate of $4,700. In addition, Union Power will lease two
directional drilling rigs from Mountain Drilling Equipment Co., which is owned
by Ronald W. and Timothy A. Soule. The equipment lease with Mountain Drilling
Equipment Co. provided for a one-year term

40
<PAGE>

which ended on August 1, 1998, and a monthly rental rate of $8,000. Title to
these rigs was transferred to Union Power at the end of the lease term for no
additional consideration. The Company believes that the economic terms of
these leases do not exceed fair market value.

Potelco has entered into leases for its main office with the father of Gary
A. Tucci and for another office in Washington with Gary A. Tucci, who is
President of Potelco and Vice President Western Region and a director of the
Company. Currently, both leases are oral and on a month to month basis. The
main office lease is for a 15,000 square foot building on five acres, at a
rent of $2,000 per month. The other lease is for a 2,200 square foot office
with a 6,000 square foot maintenance facility on 1.5 acres, at a rent of
$2,800 per month. The Company believes that the economic terms of these leases
do not exceed fair market value.

TRANS TECH leases its main office from TRANS TECH Properties, which is
partially owned by Robert J. Urbanski and John A. Martell, who are President
and Vice President of TRANS TECH, respectively. Additionally, Mr. Martell is a
director of the Company. The main office of TRANS TECH is located in South
Bend, Indiana, and the facilities consist of approximately 7.5 acres of real
property, a 4,350 square foot office attached to a 10,560 square foot heated
warehouse, a 3,480 square foot detached unheated warehouse and a 3,000 square
foot detached vehicle maintenance facility. The initial lease term is for five
years at a rent of $5,900 per month, plus the payment of all taxes, insurance
and maintenance on the property. TRANS TECH has the option to renew the lease
for an additional five year term at a rental rate equal to the then current
market rate. The Company believes that the economic terms of this lease do not
exceed fair market value.

Union Power had notes outstanding to various affiliates in the aggregate
amount of approximately $460,000, which the Company used a portion of the
proceeds of the IPO to repay these notes.

Potelco owed approximately $1.1 million to its sole stockholder and his
father pursuant to a promissory note and other arrangements. The Company used
a portion of the proceeds of the IPO to repay this indebtedness.

ECT and an affiliate invested $49,350,000 in convertible subordinated notes
of the Company. These notes are convertible at the holders option into an
aggregate of 3,589,091 shares of Common Stock. As part of the investment, ECT
and the Company agreed to exchange information regarding the design,
installation and maintenance of electric power transmission and distribution
systems and fiber optic communications systems. The Company has agreed, at the
option of the holders of the convertible subordinated notes, to appoint a
director selected by such holders to the Company's board of directors.

COMPANY POLICY

In the future, any transactions with directors, officers, employees or
affiliates of the Company are anticipated to be minimal and will, in any case,
be approved by a majority of the Board of Directors, including a majority of
disinterested members of the Board of Directors.

41
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's voting capital stock by (i) each person
known by the Company to be a beneficial owner of more than 5% of any class of
the Company's voting capital stock, (ii) each director and executive officer
of the Company and (iii) all directors and executive officers of the Company
as a group. Except as otherwise indicated below, the persons named in the
table have advised the Company that they have sole voting and investment power
with respect to the shares of capital stock shown as beneficially owned by
them. Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all such shares. Unless otherwise indicated,
the number of shares and percentage of ownership of Common Stock for each of
the named stockholders, directors and executive officers assumes that shares
of Common Stock that the stockholders directors and executive officers may
acquire within 60 days are outstanding.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME OWNED OWNED
---- ------------ ------------
<S> <C> <C>
Enron Capital Trade & Resources Corp.(1)............ 3,589,090 14.2%
Joint Energy Development Investments II
Partnership(1)..................................... 2,691,818 11.1
John R. Colson(2)................................... 2,100,000 9.7
Gary A. Tucci(3).................................... 1,046,250 4.8
John R. Wilson(4)................................... 900,000 4.2
John A. Martell(5).................................. 781,875 3.6
Timothy A. Soule(6)................................. 337,392 1.6
Vincent D. Foster(7)(a)............................. 274,499 1.3
James H. Haddox(2).................................. 100,000(b) *
Brad Eastman(2)..................................... * *
Derrick A. Jensen(2)................................ 37,500(b) *
James R. Ball(2)(8)................................. 45,000 *
Rodney R. Proto(2)(8)............................... 45,000 *
Michael T. Willis(2)(9)............................. 123,573 *
Kevin D. Miller(a)(10).............................. 334,022(b) 1.5
Midwest Acquisition Support, LLC(a)(11)............. 334,022(b) 1.5
Stephen P. Colmar(a)(12)............................ 208,764(b) 1.0
William G. Parkhouse(b)(13)......................... 179,382(b) *
Sam W. Humphreys(a)(14)............................. 261,398(b) 1.2
All directors and executive officers as a group (12
persons)(15)....................................... 5,791,089 26.7
</TABLE>
- -------
* Less than 1%.
(a) Owns more than 5% of the outstanding shares of Limited Vote Common Stock.
(b) Consists entirely of Limited Vote Common Stock. See "Description of
Capital Stock" for a description of the Limited Vote Common Stock.
(1) The address for Enron Capital & Trade Resources Corp. ("ECT") and Joint
Energy Development Investments II Limited Partnership ("JEDI-II") is 1400
Smith Street, Houston, Texas 77002. ECT holds directly 897,272 shares of
Common Stock issuable upon conversion of the Convertible Promissory Note
dated September 29, 1998, made by Quanta in favor of ECT. A subsidiary of
ECT is the general partner of Enron Capital Management II Limited
Partnership which is the general partner of JEDI-II which may result in
ECT being deemed to be the beneficial owner of the shares owned by JEDI-
II; but ECT disclaims such beneficial ownership interest of the shares
issuable to JEDI-II. ECT is a wholly-owned subsidiary of Enron Corp.
which may be deemed to be the beneficial owner of all shares owned by
ECT; Enron Corp. disclaims any beneficial ownership of any shares
issuable to either ECT or JEDI-II.
(2) The address for Messrs. Ball, Colson, Eastman, Haddox, Jensen, Proto and
Willis is 1360 Post Oak Boulevard, Suite 2100, Houston, Texas 77056.
(3) The address for Mr. Tucci is 14103 Eight Street East, Sumner, Washington
98390.
(4) The address for Mr. Wilson is 1440 Iron Street, P.O. Box 12520, North
Kansas City, Missouri 64116.
(5) The address for Mr. Martell is 4601 Cleveland Road, P.O. Box 3915, South
Bend, Indiana 46619. Includes 174,310 shares owned by trusts for the
benefit of minor children of Mr. Martell, of which he disclaims
beneficial ownership.
(6) The address for Mr. Soule is 2045 W. Union Avenue, Englewood, Colorado
80110.
(7) The address for Mr. Foster is 1360 Post Oak Boulevard, Suite 800,
Houston, Texas 77056. Includes 100 shares of Common Stock, options to
purchase 10,000 shares of Common Stock and 261,399 shares of Limited Vote
Common Stock as well as 3,000 shares of Common Stock owned by Mainstreet
Merchant Partners, L.P., of which Mr. Foster disclaims beneficial
ownership.
(8) Consists of 20,000 shares of Limited Vote Common Stock, 15,000 shares of
Common Stock and options to purchase 10,000 shares of Common Stock.
(9) Includes 98,573 shares of Limited Vote Common Stock, 15,000 shares of
Common Stock and options to purchase 10,000 shares of Common Stock.
(10) The address for Mr. Miller is 109 E. 5th Street, Suite E, Auburn, Indiana
46706.
(11) The address for Midwest Acquisition Support, LLC is 4040 San Felipe,
Suite 155, Houston, Texas 77027. Midwest Acquisition Support, LLC is a
limited liability company controlled by Bernard J. Gram.
(12) The address for Mr. Colmar is 603 W. 13th, Suite 1A-247, Austin, Texas
78701. Does not include 117,526 shares of Limited Vote Common Stock owned
by members of Mr. Colmar's family, for which he disclaims beneficial
ownership.
(13) The address for Mr. Parkhouse is 5901 Fox Chapel Road, Austin, Texas
78746. Does not include 154,640 shares of Limited Vote Common Stock held
in trust for members of Mr. Parkhouse's family, for which he disclaims
beneficial ownership.
(14) The address for Mr. Humphreys is 1360 Post Oak Boulevard, Suite 800,
Houston, Texas 77056.
(15) Includes 537,472 shares of Limited Vote Common Stock and options to
purchase 40,000 shares of Common Stock.

42
<PAGE>

SELLING STOCKHOLDERS

This Prospectus relates to the sale by the Selling Stockholders named below
from time to time of up to 508,436 shares of Common Stock. The Shares were
acquired by the Selling Stockholders in connection with the acquisition of
Spalj.

The following table provides certain information with respect to the number
of shares of Common Stock currently owned, offered hereby and to be owned by
the Selling Stockholders after this offering assuming all offered shares are
sold in this offering.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OWNED NUMBER OF SHARES TO BE
BEFORE THE SHARES BEING OWNED AFTER
NAME OF SELLING STOCKHOLDER OFFERING OFFERED(1) THE OFFERING
--------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
J. R. Spalj.............................. 358,910 179,504 179,406
Jane Spalj............................... 59,818 29,917 29,901
Luke Spalj............................... 418,728 209,422 209,306
Mark Anderson............................ 82,826 41,424 41,402
Goldsmith, Agio, Helms, Lynner & Ltd..... 48,169 48,169 *
</TABLE>
- --------
(1) There is no assurance that the Selling Stockholders will sell any or all
of the offered Shares.

43
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock, par value $.00001 per share, including 3,345,333 shares of
Limited Vote Common Stock. The Company has also authorized the issuance of
10,000,000 shares of Preferred Stock, par value $.00001 per share ("Preferred
Stock").

COMMON STOCK AND LIMITED VOTE COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors. Such
holders are not entitled to vote cumulatively for the election of directors.
Holders of a majority of the shares of Common Stock entitled to vote in any
election of directors may elect all of the directors standing for election.

Holders of Limited Vote Common Stock, voting together as a single class, are
entitled to elect one director. Holders of Limited Vote Common Stock are not
entitled to vote on the election of any other directors. Only the holders of
the Limited Vote Common Stock may remove the director such holders are
entitled to elect. Holders of Limited Vote Common Stock are entitled to 0.10
of one vote for each share held on all other matters on which they are
entitled to vote.

Subject to the rights of any then outstanding shares of Preferred Stock,
holders of Common Stock and Limited Vote Common Stock are together entitled to
participate pro rata in such dividends as may be declared in the discretion of
the Board of Directors out of funds legally available therefor. Holders of
Common Stock and Limited Vote Common Stock together are entitled to share
ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
Preferred Stock then outstanding. Holders of Common Stock and holders of
Limited Vote Common Stock have no preemptive rights to purchase shares of
stock of the Company. Shares of Common Stock are not subject to any redemption
provisions and are not convertible into any other securities of the Company.
Shares of Limited Vote Common Stock are not subject to any redemption
provisions and are convertible into Common Stock as described below.

Each share of Limited Vote Common Stock will automatically convert to Common
Stock on a share-for-share basis in the event of a permitted disposition of
such share of Limited Vote Common Stock by the holder thereof (other than a
distribution by a holder to its partners or beneficial owners or a transfer to
a related party of such holder or to another holder of Limited Vote Common
Stock or a related party thereto (whether a party is a "related party" shall
be determined in accordance with Sections 267, 707, 318 and/or 4946 of the
Code)). The holders of Limited Vote Common Stock have no rights to convert
Limited Vote Common Stock into Common Stock and the only conversion feature of
the Limited Vote Common Stock is the automatic conversion upon a permitted
disposition.

The Common Stock is listed on the NYSE.

PREFERRED STOCK

The Preferred Stock may be issued from time to time by the Board of
Directors in one or more series. Subject to the provisions of the Amended and
Restated Certificate of Incorporation and limitations prescribed by law, the
Board of Directors is expressly authorized to adopt resolutions to issue the
shares, to fix the number of shares and to change the number of shares
constituting any series and to provide for or change the voting powers,
designations, preferences and relative, participating, optional, exchange or
other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative),
dividend rates, terms of redemption (including sinking fund provisions),
redemption prices, conversion rights and liquidation preferences of the shares
constituting any class or series of the Preferred Stock, in each case without
any further action or vote by the holders of Common Stock.

44
<PAGE>

Although the Company has no present intention to issue shares of Preferred
Stock, the issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For example, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holders to block such a transaction; or such issuance might
facilitate a business combination by including voting rights that would
provide a required percentage vote of the stockholders. In addition, under
certain circumstances, the issuance of Preferred Stock could adversely affect
the voting power of the holders of the Common Stock. Although the Board of
Directors is required to make any determination to issue such stock based on
its judgment as to the best interests of the stockholders of the Company, the
Board of Directors could act in a manner that would discourage an acquisition
attempt or other transaction that some or a majority of the stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then-market price of such stock. The Board of
Directors does not at present intend to seek stockholder approval prior to any
issuance of currently authorized stock, unless otherwise required by law or
the rules of any market on which the Company's securities are traded.

STATUTORY BUSINESS COMBINATION PROVISION

The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents a Delaware corporation from engaging in
a "business combination" (as defined) with an "interested stockholder"
(defined generally as a person owning 15% or more of a corporation's
outstanding voting stock or affiliate or associate) for three years following
the time such stockholder became an interested stockholder unless (i) before
such person became an interested stockholder, the board of directors of the
corporation approved the business combination or the transaction in which the
interested stockholder became an interested stockholder, (ii) upon
consummation of the transaction which resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock plans that do not provide employees
with the rights to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer) or (iii) at or subsequent
to the time such person became an interested stockholder, the business
combination was approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of 66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder. Under Section 203, the restrictions described above
also do not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became
an interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.

LIMITATION ON DIRECTORS' LIABILITY

Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by Delaware
law, directors are accountable to corporations and their stockholders for
monetary damages for conduct constituting gross negligence in the exercise of
their duty of care. Delaware law enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Amended and
Restated Certificate of Incorporation limits the liability of directors of the
Company to the Company or its stockholders to the fullest extent permitted by
Delaware law. Specifically, directors of the Company will not be personally
liable to the Company or its stockholders for monetary damages for breach of a
director's fiduciary duty as a director, except for liability for breach of
the duty of loyalty, for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, for unlawful payments of
dividends or unlawful stock repurchases or

45
<PAGE>

redemptions as provided in Section 174 of the DGCL or for any transaction in
which a director has derived an improper personal benefit.

The Amended and Restated Certificate of Incorporation provides that each
officer and director of the Company will be indemnified and held harmless, to
the fullest extent permitted by Delaware law (as amended from time to time),
against all expenses, liabilities and losses reasonably suffered in connection
with any action, suit or proceeding by reason of the fact that he or she is or
was a director or officer of the Company or, while being at the time a
director or officer of the Company, is or was serving at the request of the
Company as a director, trustee, officer, employee or agent of another entity.
The Company is not, however, permitted to indemnify any person in connection
with a proceeding initiated by that person unless such proceeding was
authorized by the Board of Directors. The Amended and Restated Bylaws also
provide for mandatory advancement of expenses of officers and directors
incurred in defending any covered proceeding in advance of its final
disposition. The Company also carries directors' and officers' liability
insurance.

The inclusion of these provisions in the Amended and Restated Certificate of
Incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty
of care, even though such an action, if successful, might otherwise have
benefitted the Company and its stockholders. The Company's Amended and
Restated Bylaws provide indemnification to the Company's officers and
directors and certain other persons with respect to certain matters.

OTHER MATTERS

The Amended and Restated Certificate of Incorporation provides that the
number of directors shall be as determined by the Board of Directors from time
to time, but shall be at least one and not more than nineteen. It also
provides that directors may be removed only for cause, and then only by the
affirmative vote of the holders of at least a majority of all outstanding
voting stock entitled to vote. This provision, in conjunction with the
provision of the Amended and Restated Bylaws authorizing the Board of
Directors to fill vacant directorships, will prevent stockholders from
removing incumbent directors without cause and filling the resulting vacancies
with their own nominees.

The Amended and Restated Certificate of Incorporation provides that
stockholders may act only at an annual or special meeting of stockholders and
may not act by written consent. The Amended and Restated Certificate of
Incorporation provides that special meetings of the stockholders can be called
only by the Chairman of the Board pursuant to a resolution approved by a
majority of the whole Board of Directors.

STOCKHOLDER PROPOSALS

The Company's Amended and Restated Bylaws contain provisions (i) requiring
that advance notice be delivered to the Company of any business to be brought
by a stockholder before an annual meeting of stockholders and (ii)
establishing certain procedures to be followed by stockholders in nominating
persons for election to the Board of Directors. Generally, such advance notice
provisions provide that written notice must be given to the Secretary of the
Company by a stockholder (a) in the event of business to be brought by a
stockholder before, (i) an annual meeting, not less than 90 nor more than 180
days prior to the earlier of the date of the meeting or the anniversary date
of the immediately preceding annual meeting of stockholders and (ii) a special
meeting, not less than 40 nor more than 60 days prior to the date of such
meeting of stockholders (with certain exceptions if less than 50 days notice
or prior public disclosure of the date of the special meeting is given to
stockholders) and (b) in the event of nominations of persons for election to
the Board of Directors by any stockholder, (i) with respect to an election to
be held at the annual meeting of stockholders, not less than 90 days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, not later than the
close of business on the 10th day following the day on which notice of the
date of the special meeting was mailed to stockholders or public disclosure of
the date of the special meeting was made, whichever first occurs.

46
<PAGE>

Such notice must set forth specific information regarding such stockholder and
such business or director nominee, as described in the Company's Amended and
Restated Bylaws. The foregoing summary is qualified in its entirety by
reference to the Company's Amended and Restated Bylaws.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

The Company has outstanding 21,620,670 shares of Common Stock, of which
6,701,945 shares are freely tradable without restriction or further
registration under the Securities Act, except for those held by "affiliates"
(as defined in the Securities Act) of the Company, which shares will be
subject to the resale limitations of Rule 144 under the Securities Act. The
remaining 14,918,725 shares of Common Stock are deemed "restricted securities"
under Rule 144 in that they were originally issued and sold by the Company in
private transactions in reliance upon exemptions under the Securities Act, and
may be publicly sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as those
provided by Rule 144 promulgated under the Securities Act as described below.

In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of restricted
securities from the issuer or from any affiliate of the issuer, the acquiror
or subsequent holder would be entitled to sell within any three-month period a
number of those shares that does not exceed the greater of one percent of the
number of shares of such class of stock then outstanding or the average weekly
trading volume of the shares of such class of stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information
about the issuer. In addition, if a period of at least two years has elapsed
since the later of the date of acquisition of restricted securities from the
issuer or from any affiliate of the issuer, and the acquiror or subsequent
holder thereof is deemed not to have been an affiliate of the issuer of such
restricted securities at any time during the 90 days preceding a sale, such
person would be entitled to sell such restricted securities under Rule 144(k)
without regard to the requirements described above. Rule 144 does not require
the same person to have held the securities for the applicable periods. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof. The Securities and Exchange Commission (the "Commission") has
proposed certain amendments to Rule 144 that would, among other things,
eliminate the manner of sale requirements and revise the notice provisions of
that rule. The Commission has also solicited comments on other possible
changes to Rule 144, including possible revisions to the one- and two-year
holding periods and the volume limitations referred to above.

Options to purchase approximately 1,555,150 shares of Common Stock have been
issued under the 1997 Stock Option Plan. In general, pursuant to Rule 701
under the Securities Act, any employee, officer or director of, or consultant
to, the Company who purchased his or her shares pursuant to a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701, which permit non-affiliates to sell such shares without compliance
with the public information, holding period, volume limitation or notice
provisions of Rule 144, and permit affiliates to sell such shares without
compliance with the holding period provisions of Rule 144. In addition, the
Company has filed a Registration Statement on Form S-8 covering the shares
issuable upon exercise of stock options that may be granted in the future
under the 1997 Stock Option Plan, in which case such shares of Common Stock
generally will be freely tradable by non-affiliates in the public market
without restriction under the Securities Act.

The Company, its executive officers, directors, stockholders at the time of
the IPO and persons acquiring shares of Common Stock in connection with the
acquisitions of the Founding Companies have agreed not to offer, sell,
contract to sell, grant any option or other right for the sale of, or
otherwise dispose of any shares of Common Stock or any securities,
indebtedness or other rights exercisable for or convertible or exchangeable
into

47
<PAGE>

Common Stock owned or acquired in the future in any manner until February 18,
2000 (the "Lockup Period") without the prior written consent of BT Alex. Brown
Incorporated, except that the Company may, subject to certain conditions,
issue Common Stock in connection with acquisitions, upon conversion of Limited
Vote Common Stock into Common Stock and may grant awards (or Common Stock upon
exercise of awards) under the 1997 Stock Option Plan. These restrictions will
be applicable to any shares acquired by any of those persons during the Lockup
Period. The Company has granted registration rights to stockholders of the
Founding Companies in connection with registrations of sales of Common Stock
by the Company following the Lockup Period (other than registrations in
connection with acquisitions and pursuant to employee benefit plans). The
Company has also granted registration rights to the former stockholders of
Spalj Construction Company and the holders of its convertible subordinated
promissory notes issued to ECT and an affiliate. Additionally, the Company has
agreed that the holders of such convertible subordinated promissory notes or
the shares of Common Stock issuable upon conversion thereof may purchase their
pro rata portion of certain future issuances of the Company's Common Stock or
securities exercisable for or convertible into Common Stock.

Prior to the IPO, there was no established public market for the Common
Stock. No prediction can be made of the effect, if any, that sales of shares
under Rule 144, or otherwise, or the availability of shares for sale will have
on the market price of the Common Stock prevailing from time to time. The
Company is unable to estimate the number of shares that may be sold in the
public market under Rule 144, or otherwise, because such amount will depend on
the trading volume in, and market price for, the Common Stock and other
factors. Nevertheless, sales of substantial amounts of the Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock of the Company and the Company's
future ability to raise equity capital and complete any additional
acquisitions for Common Stock.

PLAN OF DISTRIBUTION

The Company will receive no proceeds from this offering. The Shares offered
hereby may be sold by the Selling Stockholders from time to time in
transactions on the New York Stock Exchange, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Stockholders may effect
such transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Stockholders and/or the purchasers of the
Shares for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).

In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.

Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), any person engaged in the distribution
of the Shares may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during a period beginning one or
five business days prior to the commencement of such distribution. In addition
and without limiting the foregoing, each Selling Stockholder will be subject
to applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales of
shares of Common Stock by the Selling Stockholders.

48
<PAGE>

The Company has agreed to pay all costs and expenses incurred in connection
with the registration under the Securities Act of the Shares, including,
without limitation, all registration and filing fees, printing expenses and
fees and disbursements of counsel and accountants for the Company. The Selling
Stockholders will pay any brokerage fees and commissions, fees and
disbursements of legal counsel for the Selling Stockholders and stock transfer
and other taxes attributable to the sale of the Shares.

There is no assurance that the Selling Stockholders will sell any of all of
the Shares.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Brad Eastman, Vice President and General Counsel of
the Company. Mr. Eastman holds options to purchase 50,000 shares of Common
Stock, none of which are exercisable as of the date of this Prospectus or will
become exercisable within 60 days of such date.

49
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all exhibits, schedules and amendments relating thereto,
the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, filed as part of the
Registration Statement, does not contain all the information contained in the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other document filed as an
exhibit to the Registration Statement are qualified in their entirety by
reference to such exhibits for complete statements of their provisions. All of
these documents may be inspected without charge at the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the following regional offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies can also be obtained from the Public Reference Section of the
Commission at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission.

The Company is subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities and other regional offices referred to above. In
addition, the shares of Common Stock are traded on the NYSE, and such reports,
proxy statements and other information may be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York, 10005.

50
<PAGE>

INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Quanta Services, Inc. Unaudited Pro Forma Combined Financial Statements
Introduction to Unaudited Pro Forma Combined Financial Statements...... F-2
Unaudited Pro Forma Combined Balance Sheet............................. F-3
Unaudited Pro Forma Combined Statements of Operations.................. F-4
Notes to Unaudited Pro Forma Combined Financial Statements............. F-6
Quanta Services, Inc. and Subsidiaries
Report of Independent Public Accountants............................... F-10
Consolidated Balance Sheets............................................ F-11
Consolidated Statements of Operations.................................. F-12
Consolidated Statements of Cash Flows.................................. F-13
Consolidated Statements of Stockholders' Equity........................ F-14
Notes to Consolidated Financial Statements............................. F-15
Quanta Services, Inc.
Report of Independent Public Accountants............................... F-29
Balance Sheet.......................................................... F-30
Statement of Operations................................................ F-31
Statement of Stockholders' Equity...................................... F-32
Notes to Financial Statements.......................................... F-33

FOUNDING COMPANIES

Union Power Construction Company
Report of Independent Public Accountants............................... F-38
Balance Sheets......................................................... F-39
Statements of Operations............................................... F-40
Statements of Cash Flows............................................... F-41
Statements of Stockholders' Equity..................................... F-42
Notes to Financial Statements.......................................... F-43
Trans Tech Electric, Inc.
Report of Independent Public Accountants............................... F-51
Balance Sheets......................................................... F-52
Statements of Operations............................................... F-53
Statements of Cash Flows............................................... F-54
Statements of Shareholders' Equity..................................... F-55
Notes to Financial Statements.......................................... F-56
Potelco, Inc.
Report of Independent Public Accountants............................... F-62
Balance Sheets......................................................... F-63
Statements of Operations............................................... F-64
Statements of Cash Flows............................................... F-65
Statements of Stockholder's Equity..................................... F-66
Notes to Financial Statements.......................................... F-67

SUBSEQUENT ACQUISITIONS

Spalj Construction Company
Report of Independent Public Accountants............................... F-74
Balance Sheet.......................................................... F-75
Statement of Operations................................................ F-76
Statement of Cash Flows................................................ F-77
Statement of Shareholders' Equity...................................... F-78
Notes to Financial Statements.......................................... F-79
Underground Construction Co., Inc.
Report of Independent Public Accountants............................... F-84
Balance Sheets......................................................... F-85
Statements of Operations............................................... F-86
Statements of Cash Flows............................................... F-87
Statements of Shareholders' Equity..................................... F-88
Notes to Financial Statements.......................................... F-89
Sumter Builders, Inc.
Report of Independent Public Accountants............................... F-96
Balance Sheets......................................................... F-97
Statements of Operations............................................... F-98
Statements of Cash Flows............................................... F-99
Statements of Stockholders' Equity..................................... F-100
Notes to Financial Statements.......................................... F-101
Manuel Brothers
Report of Independent Public Accountants............................... F-106
Balance Sheets......................................................... F-107
Statements of Operations............................................... F-108
Statements of Stockholders' Equity..................................... F-109
Statements of Cash Flows............................................... F-110
Notes to Financial Statements.......................................... F-111
</TABLE>

F-1
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The following unaudited pro forma combined financial statements give effect
to (i) the acquisitions by Quanta Services, Inc. ("Quanta"), of the
outstanding capital stock of PAR, TRANS TECH, Union Power and Potelco
(together, the "Founding Companies"), and related transactions, (ii) Quanta's
initial public offering ("IPO") and (iii) the subsequent acquisitions of
eleven additional businesses from February 19, 1998 through October 16, 1998.
Of these eleven acquired businesses, ten were accounted for using the purchase
method of accounting (the "Purchased Companies") and one was accounted for
using the pooling-of-interests method of accounting (the "Pooled Company").
The acquisitions of the Founding Companies occurred simultaneously with the
closing of Quanta's initial public offering and were accounted for using the
purchase method of accounting. The Founding Companies, the Purchased Companies
and the Pooled Company are collectively referred to as the "Acquired
Businesses". PAR has been identified as the accounting acquiror for financial
statement presentation purposes. As such, Quanta's consolidated historical
financial statements represent the financial position and results of
operations of (i) PAR as restated to include the financial position and
results of operations of the Pooled Company, and (ii) the remaining Founding
Companies and the Purchased Companies beginning on their respective dates of
acquisition.

The unaudited pro forma combined balance sheet gives effect to eight of the
Purchased Companies (included as "Other Individually Insignificant
Acquisitions" in the Unaudited Pro Forma Combined Balance Sheet) which were
acquired subsequent to June 30, 1998 and related transactions as if they had
occurred on June 30, 1998. The unaudited pro forma combined statements of
operations give effect to these transactions as if they had occurred on
January 1, 1997. The unaudited pro forma combined statements of operations
also give effect to the pre-acquisition results of the Other Founding
Companies (which includes Quanta Services, Inc., TRANS TECH, Union and Potelco
from January 1, 1997 through February 18, 1998) and the results of the two
Purchased Companies acquired prior to June 30, 1998.

Quanta has preliminarily analyzed the savings that it expects to realize
from reductions in salaries, bonuses and certain benefits to the owners. To
the extent the owners of the Companies have contractually agreed to
prospective reductions in salaries, bonuses, benefits and lease payments,
these reductions have been reflected in the unaudited pro forma combined
statements of operations. With respect to other potential cost savings, Quanta
has not and cannot quantify these savings until a period subsequent to the
acquisitions. It is anticipated that these savings will be partially offset by
costs related to Quanta's new corporate infrastructure and by the costs
associated with being a public company. However, because these costs cannot be
accurately quantified at this time, they have not been included in the pro
forma financial information of Quanta.

The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that Company management deems appropriate
and may be revised as additional information becomes available. The pro forma
financial data do not purport to represent what Quanta's financial position or
results of operations would actually have been if such transactions in fact
had occurred on those dates and are not necessarily representative of Quanta's
financial position or results of operations for any future period. Since the
Acquired Businesses were not under common control or management during the
entire period covered by the pro-formas, historical combined results may not
be comparable to, or indicative of, future performance. The unaudited pro
forma combined financial statements should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus. See also "Risk Factors" included elsewhere herein.

F-2
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

JUNE 30, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
QUANTA OTHER
SERVICES, INC. INDIVIDUALLY
AND INSIGNIFICANT PRO FORMA PRO FORMA
SUBSIDIARIES ACQUISITIONS ADJUSTMENTS TOTAL
-------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. $ 1,778 $ 3,418 $ -- $ 5,196
Accounts receivable, net.. 43,856 21,596 320 65,772
Cost and estimated
earnings in excess of
billings on uncompleted
contracts................ 18,221 6,415 -- 24,636
Inventories............... 1,750 74 -- 1,824
Prepaid expenses and other
current assets .......... 1,198 685 -- 1,883
-------- ------- ------- --------
Total current assets.... 66,803 32,188 320 99,311
PROPERTY AND EQUIPMENT, net. 44,088 13,992 (796) 57,284
OTHER ASSETS................ 1,170 2,138 -- 3,308
GOODWILL, net............... 93,765 33 65,481 159,279
-------- ------- ------- --------
Total assets............ $205,826 $48,351 $65,005 $319,182
======== ======= ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt........... $ 3,946 $ 3,889 $ -- $ 7,835
Accounts payable and
accrued expenses......... 33,301 11,495 -- 44,796
Billings in excess of
costs and estimated
earnings on uncompleted
contracts................ 2,832 1,789 -- 4,621
-------- ------- ------- --------
Total current
liabilities............ 40,079 17,173 -- 57,252
LONG-TERM DEBT, net of
current maturities......... 33,112 4,285 61,013 98,410
DEFERRED INCOME TAXES....... 3,879 -- 1,275 5,154
OTHER NON-CURRENT
LIABILITIES................ -- 831 -- 831
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock........... -- -- -- --
Common Stock.............. -- 561 (561) --
Limited Vote Common Stock. -- -- -- --
Unearned ESOP shares...... (1,831) -- -- (1,831)
Additional paid-in
capital.................. 115,375 3,770 25,009 144,154
Retained earnings......... 15,212 21,731 (21,731) 15,212
-------- ------- ------- --------
Total stockholders'
equity................. 128,756 26,062 2,717 157,535
-------- ------- ------- --------
Total liabilities and
stockholders' equity... $205,826 $48,351 $65,005 $319,182
======== ======= ======= ========
</TABLE>

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

F-3
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<TABLE>
<CAPTION>
QUANTA OTHER
SERVICES, INC. OTHER INDIVIDUALLY
AND FOUNDING INSIGNIFICANT PRO FORMA PRO FORMA
SUBSIDIARIES COMPANIES(3) ACQUISITIONS ADJUSTMENTS TOTAL
-------------- ------------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES................ $93,717 $14,849 $77,017 $(1,401) $184,182
COST OF SERVICES
(including
depreciation).......... 76,681 12,486 61,830 (1,190) 149,807
------- ------- ------- ------- --------
Gross Profit.......... 17,036 2,363 15,187 (211) 34,375
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 8,889 956 8,642 (2,550) 15,937
MERGER EXPENSES-Pooling. 231 -- -- -- 231
GOODWILL AMORTIZATION... 749 -- 2 1,270 2,021
------- ------- ------- ------- --------
Income from
Operations........... 7,167 1,407 6,543 1,069 16,186
OTHER INCOME (EXPENSE)
Interest Expense...... (1,049) (192) (286) (2,438) (3,965)
Other, net............ 191 68 597 (21) 835
------- ------- ------- ------- --------
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE..... 6,309 1,283 6,854 (1,390) 13,056
PROVISION FOR INCOME
TAXES.................. 2,900 65 261 2,691 5,917
------- ------- ------- ------- --------
NET INCOME (LOSS)....... $ 3,409 $ 1,218 $ 6,593 $(4,081) $ 7,139
======= ======= ======= ======= ========
BASIC EARNINGS PER
SHARE.................. $ 0.34
========
DILUTED EARNINGS PER
SHARE.................. $ 0.33
========
DILUTED EARNINGS PER
SHARE BEFORE MERGER
EXPENSES-Pooling....... $ 0.34
========
SHARES USED IN COMPUTING
PRO FORMA COMBINED
EARNINGS PER SHARE--
BASIC (1)............. 21,263
========
DILUTED (2)........... 21,370
========
</TABLE>
- --------
(1) Includes (i) 7,527,000 shares of Common Stock issued to the owners of the
Founding Companies, (ii) the issuance of 4,998,337 shares related to the
Purchased Companies and 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 357,174 shares representing net cash to Quanta, sold in the
IPO to pay the cash portion of the consideration for the Founding
Companies, to repay expenses incurred in connection with the IPO and to
retire debt.
(2) Includes (i) the 21,263,496 shares described above, and (ii) the dilution
attributable to outstanding options to purchase Common Stock, using the
treasury stock method.
(3) Represents pre-acquisition results of Quanta Services, Inc., TRANS TECH,
Union and Potelco.

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

F-4
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<TABLE>
<CAPTION>
QUANTA OTHER
SERVICES, INC. OTHER INDIVIDUALLY
AND FOUNDING INSIGNIFICANT PRO FORMA PRO FORMA
SUBSIDIARIES COMPANIES ACQUISITIONS ADJUSTMENTS TOTAL
-------------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES................ $76,204 $106,288 $160,892 $ (5,419) $337,965
COST OF SERVICES
(including
depreciation).......... 58,896 88,696 126,523 (5,034) 269,081
------- -------- -------- -------- --------
Gross Profit.......... 17,308 17,592 34,369 (385) 68,884
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 11,589 18,997 18,041 (21,515) 27,112
GOODWILL AMORTIZATION... 56 -- -- 4,033 4,089
------- -------- -------- -------- --------
Income (loss) from
Operations........... 5,663 (1,405) 16,328 17,097 37,683
OTHER INCOME (EXPENSE)
Interest Expense...... (1,219) (702) (312) (5,390) (7,623)
Other, net............ (131) 270 1,229 130 1,498
------- -------- -------- -------- --------
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE..... 4,313 (1,837) 17,245 11,837 31,558
PROVISION FOR INCOME
TAXES.................. 1,786 1,461 1,864 8,616 13,727
------- -------- -------- -------- --------
NET INCOME (LOSS)....... $ 2,527 $ (3,298) $ 15,381 $ 3,221 $ 17,831
======= ======== ======== ======== ========
BASIC AND DILUTED
EARNINGS PER SHARE..... $ 0.85
========
SHARES USED IN COMPUTING
PRO FORMA COMBINED
BASIC AND DILUTED
EARNINGS PER SHARE(1).. 21,041
========
</TABLE>
- --------
(1) Includes (i) 7,527,000 shares of Common Stock issued to the owners of the
Founding Companies, (ii) the issuance of 4,998,337 shares related to the
Purchased Companies and 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
IPO to pay the cash portion of the consideration for the Founding
Companies, to repay expenses incurred in connection with the IPO and to
retire debt.

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

F-5
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

1. GENERAL:

Quanta was founded to create a leading provider of specialty electrical
contracting and maintenance services primarily related to electric and
telecommunications infrastructure in North America. Quanta conducted no
operations prior to its initial public offering ("IPO") and acquired the
Founding Companies concurrently with and as a condition of the closing of the
IPO.

The historical financial statements of the Other Founding Companies
(excluding PAR) included in the accompanying pro forma financial statements
reflect the results of operations of those Other Founding Companies for
periods prior to February 18, 1998, and were derived from the respective
Founding Companies' financial statements. The periods included in these
financial statements for the individual Founding Companies are for the year
ended December 31, 1997, and the period from January 1, 1998 to February 18,
1998. The audited historical financial statements for the Founding Companies
included elsewhere herein have been included in accordance with Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 80.

The historical financial information of the Other Individually Insignificant
Acquisitions reflect the financial position of the eight Companies which were
acquired subsequent to June 30, 1998, and the results of their operations
accounted for using the purchase method of accounting for the year ended
December 31, 1997 and for the six months ended June 30, 1998 and the pre-
acquisition results of the two companies acquired in purchase acquisitions
prior to June 30, 1998 as though these acquisitions had occurred on January 1,
1997.

2. ACQUISITION OF COMPANIES:

In February 1998, Quanta completed its IPO which involved the issuance of
5,000,000 shares of common stock, providing approximately $38.8 million in net
proceeds to the Company, after deducting underwriter discounts and commissions
and expenses related to the IPO. Concurrent with the closing of its initial
public offering, Quanta acquired in separate transactions, for consideration
including $21.0 million of cash and 7,527,000 shares of Common Stock, the
following four entities (the "Founding Companies"): PAR Electrical
Contractors, Inc., Potelco Inc., TRANS TECH Electric, Inc. and Union Power
Construction Company. Also, in March 1998, the Company's underwriters
exercised their over-allotment option to acquire an additional 750,000 shares
of the Company's Common Stock at the initial public offering price of $9 per
share, providing the Company with approximately $6.3 million (net of
underwriting discounts and commissions) of additional proceeds from the IPO.

Subsequent to its IPO, and through June 30, 1998, the Company has acquired
three additional businesses for approximately $23.5 million of cash and 2.2
million shares of Common Stock. Of these three, two were accounted for using
the purchase method of accounting and one was accounted for using the pooling-
of-interests method of accounting. Accordingly, the Company's historical
financial statements have been restated to include the historical financial
statements of the Pooled Company.

Subsequent to June 30, 1998, and through October 16, 1998, the Company has
acquired eight businesses for approximately $61.5 million of cash (funded
through borrowings under the Company's credit facility or issued as notes
payable) and 2.7 million shares of Common Stock. All of those acquisitions
were accounted for using the purchase method of accounting.

In connection with the acquisitions of the Founding Companies and the
Purchased Companies, the Company has recorded approximately $160.0 million of
excess total consideration paid over the net tangible assets acquired as
goodwill in the accompanying consolidated financial statements. The
accompanying balance sheets include allocations of the respective purchase
prices initially assigned to the assets acquired and liabilities assumed based
on preliminary estimates of fair value and may be revised as additional
information concerning the valuation of such assets and liabilities becomes
available.

F-6
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)

3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:

(a) Records the effect of the purchase of eight Purchased Companies closed
subsequent to June 30, 1998 by Quanta consisting of cash consideration of
$61.5 million (funded through borrowings under the Company's bank Credit
Facility or issued as notes payable and recorded as long-term debt) and
approximately 2.7 million shares of Common Stock for a total estimated
purchase price of $90.3 million resulting in excess purchase price of $65.5
million over the net assets acquired.

(b) Records the elimination of the assets and related liabilities for a
division of one of the Purchased Companies which was not acquired by the
Company.

The following table summarizes unaudited pro forma combined balance sheet
adjustments (in thousands):

<TABLE>
<CAPTION>
ADJUSTMENT
-------------- PRO FORMA
(A) (B) ADJUSTMENTS
ASSETS ------- ----- -----------
<S> <C> <C> <C>
Current Assets--
Cash and cash equivalents........................ $ -- $ -- $ --
Accounts receivable.............................. -- 320 320
Prepaid expenses and other....................... -- -- --
------- ----- -------
Total current assets........................... -- 320 320
Property and equipment, net........................ -- (796) (796)
Goodwill........................................... 65,481 -- 65,481
------- ----- -------
Total Assets....................................... $65,481 $(476) $65,005
======= ===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities--
Current maturities of long-term debt............. $ -- $ -- $ --
Accounts payable and accrued expenses............ -- -- --
Billing in excess of costs and profits
recognized...................................... -- -- --
------- ----- -------
Total current liabilities...................... -- -- --
Long-term debt, net of current maturities.......... 61,489 (476) 61,013
Deferred income taxes.............................. 1,275 -- 1,275
------- ----- -------
Total liabilities.............................. 62,764 (476) 62,288
Stockholders' equity--
Common Stock..................................... (561) -- (561)
Unearned ESOP shares............................. -- -- --
Limited Vote Common Stock........................ -- -- --
Additional paid-in capital....................... 25,009 -- 25,009
Retained earnings................................ (21,731) -- (21,731)
------- ----- -------
Total stockholders' equity..................... 2,717 -- 2,717
------- ----- -------
Total liabilities and stockholders' equity..... $65,481 $(476) $65,005
======= ===== =======
</TABLE>

F-7
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)

4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:

Six Months Ended June 30, 1998

(a) Reflects the $2.4 million reduction in salaries, bonuses and benefits to
the owners of the Acquired Businesses. These reductions in salaries, bonuses
and benefits have been agreed to prospectively in accordance with the terms of
employment agreements. Such employment agreements are primarily for three
years, contain restrictions related to competition and provide severance for
termination of employment in certain circumstances. Additionally, reflects
reductions in expenses associated with certain non-operating assets that have
been or will be transferred from the Acquired Businesses prior to their
acquisition.

(b) Reflects the amortization of goodwill to be recorded as a result of the
acquisition of the Founding Companies and the Purchased Companies over a 40-
year estimated life.

(c) Reflects interest expense of $2.6 million on borrowings and notes
payable issued of $85.0 million to fund the cash portion of consideration paid
for the Purchased Companies, net of interest savings of $0.2 million on $18.5
million of historical debt repaid using proceeds from the IPO or distributed
prior to the acquisition of the Founding Companies. The additional $2.6
million of interest expense was calculated utilizing an annual effective
interest rate of approximately 7.0 percent.

(d) Reflects the elimination of revenues between certain of the Acquired
Businesses.

(e) Reflects the incremental provision for federal and state income taxes at
an approximate 39.0 percent overall tax rate before non-deductible goodwill
and other permanent items, relating to the above adjustments to the statements
of operations and for income taxes on S corporation income not provided for in
the historical financial statements.

(f) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.

The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):

<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------------ PRO FORMA
(A) (B) (C) (D) (E) (F) ADJUSTMENTS
------- ------- ------- ----- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ -- $ -- $(914) $ -- $(487) $(1,401)
Cost of services........ -- -- -- (914) -- (276) (1,190)
------- ------- ------- ----- ------- ----- -------
Gross profit.......... -- -- -- -- -- (211) (211)
Selling, general and
administrative
expenses............... (2,352) -- -- -- -- (198) (2,550)
Goodwill amortization... -- 1,270 -- -- -- -- 1,270
------- ------- ------- ----- ------- ----- -------
Income (loss) from
operations........... 2,352 (1,270) -- -- -- (13) 1,069
Other income (expense)--
Interest expense...... -- -- (2,438) -- -- -- (2,438)
Other, net............ -- -- (21) -- -- -- (21)
------- ------- ------- ----- ------- ----- -------
Income (loss) before
income taxes......... 2,352 (1,270) (2,459) -- -- (13) (1,390)
Provision for income
taxes.................. -- -- -- -- 2,691 -- 2,691
------- ------- ------- ----- ------- ----- -------
Net income (loss)..... $ 2,352 $(1,270) $(2,459) $ -- $(2,691) $ (13) $(4,081)
======= ======= ======= ===== ======= ===== =======
</TABLE>

F-8
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Year Ended December 31, 1997

(a) Reflects the $8.0 million reduction in salaries, bonuses and benefits to
the owners of the Acquired Businesses. These reductions in salaries, bonuses
and benefits have been agreed to prospectively in accordance with the terms of
employment agreements. Such employment agreements are primarily for three
years, contain restrictions related to competition and provide severance for
termination of employment in certain circumstances. Additionally, reflects
reductions in expenses associated with certain non-operating assets that have
been or will be transferred from the Acquired Businesses prior to their
acquisition.

(b) Reflects the amortization of goodwill to be recorded as a result of the
acquisition of the Companies over a 40-year estimated life.

(c) Reflects interest expense of $.8 million on borrowings of $8.7 million
necessary to fund the S Corporation Distributions and $6.0 million on
borrowings and notes payable issued of $85.0 million to fund the cash portion
of consideration paid for the Purchased Companies, net of interest savings of
$1.4 million on $19.0 million of historical debt repaid using proceeds from
the IPO or distributed prior to the acquisition of the Founding Companies. The
additional $6.8 million of interest expense was calculated utilizing an annual
weighted average effective interest rate of approximately 7.14 percent.

(d) Reflects the elimination of revenues between certain of the Acquired
Businesses.

(e) Reflects the elimination of the non-recurring non-cash charge of $13.0
million, which was based on the fair value of shares issued to an initial
stockholder and management in December 1997.

(f) Reflects the incremental provision for federal and state income taxes at
an approximate 39.0 percent overall tax rate before non-deductible goodwill
and other permanent items, relating to the above adjustments to the statements
of operations and for income taxes on S corporation income not provided for in
the historical financial statements.

(g) Reflects the elimination of the revenues and related expenses for a
division of one of the Purchased Companies which was not acquired by the
Company.

The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):

<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------------------------ PRO FORMA
(A) (B) (C) (D) (E) (F) (G) ADJUSTMENTS
------- ------- ------- ------- -------- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ -- $ -- $(4,480) $ -- $ -- $(939) $(5,419)
Cost of services........ -- -- -- (4,480) -- -- (554) (5,034)
------- ------- ------- ------- -------- ------- ----- -------
Gross profit............ -- -- -- -- -- -- (385) (385)
Selling, general and
administrative ex-
penses................. (8,004) -- -- -- (13,003) -- (508) (21,515)
Goodwill amortization... -- 4,033 -- -- -- -- -- 4,033
------- ------- ------- ------- -------- ------- ----- -------
Income (loss) from
operations............. 8,004 (4,033) -- -- 13,003 -- 123 17,097
Other income (expense)--
Interest expense...... -- -- (5,390) -- -- -- -- (5,390)
Other, net............ 130 -- -- -- -- -- -- 130
------- ------- ------- ------- -------- ------- ----- -------
Income (loss) before
income taxes......... 8,134 (4,033) (5,390) -- 13,003 -- 123 11,837
Provision for income
taxes.................. -- -- -- -- -- 8,616 -- 8,616
------- ------- ------- ------- -------- ------- ----- -------
Net income (loss)....... $ 8,134 $(4,033) $(5,390) $ -- $ 13,003 $(8,616) $ 123 $ 3,221
======= ======= ======= ======= ======== ======= ===== =======
</TABLE>

F-9
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Quanta Services, Inc.:

We have audited the accompanying consolidated balance sheets of Quanta
Services, Inc. (a Delaware corporation), and subsidiaries as of December 31,
1996 and 1997, and the related consolidated statements of operations, cash
flows and stockholders' equity for the three years ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quanta Services, Inc. and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the three years ended December 31, 1997,
in conformity with generally accepted accounting principles.

As discussed in Note 1, the accompanying consolidated financial statements
reflect the Company on a historical basis including PAR Electrical
Contractors, Inc., as the accounting acquiror restated for the effect of a
pooling-of-interests transaction.

ARTHUR ANDERSEN LLP

Houston, Texas
October 16, 1998

F-10
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 512 $ 489 $ 1,778
Accounts receivable, net of allowance of $174,
$193 and $972 (unaudited)..................... 11,794 12,878 43,856
Costs and estimated earnings in excess of
billings on uncompleted contracts............. 799 1,746 18,221
Inventories.................................... 579 865 1,750
Prepaid expenses and other current assets...... 623 724 1,198
------- ------- --------
Total current assets......................... 14,307 16,702 66,803
PROPERTY AND EQUIPMENT, net...................... 14,752 18,286 44,088
OTHER ASSETS..................................... 507 645 1,170
GOODWILL, net.................................... 168 114 93,765
------- ------- --------
Total assets................................. $29,734 $35,747 $205,826
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........... $ 6,427 $ 7,200 $ 3,946
Accounts payable and accrued expenses.......... 4,872 6,578 33,301
Billings in excess of costs and estimated
earnings on uncompleted contracts............. 1,216 738 2,832
------- ------- --------
Total current liabilities.................... 12,515 14,516 40,079
LONG TERM DEBT, net of current maturities........ 6,478 7,542 33,112
DEFERRED INCOME TAXES............................ 2,281 2,479 3,879
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.00001 par value, 10,000,000
shares authorized, none issued and
outstanding................................... -- -- --
Common Stock, $.00001 par value, 40,000,000
shares authorized, 3,951,945, 3,951,945 and
15,525,685 (unaudited) shares issued and
outstanding................................... -- -- --
Limited Vote Common Stock, $.00001 par value,
3,345,333 shares authorized, 3,345,333 shares
issued and outstanding at June 30, 1998....... -- -- --
Unearned ESOP shares........................... (2,085) (1,831) (1,831)
Additional paid-in capital..................... 1,269 1,238 115,375
Retained earnings.............................. 9,276 11,803 15,212
------- ------- --------
Total stockholders' equity................... 8,460 11,210 128,756
------- ------- --------
Total liabilities and stockholders' equity... $29,734 $35,747 $205,826
======= ======= ========
</TABLE>

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

F-11
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES.......................... $53,224 $71,294 $76,204 $34,799 $93,717
COST OF SERVICES (including
depreciation).................... 44,608 57,164 58,896 28,861 76,681
------- ------- ------- ------- -------
Gross profit.................... 8,616 14,130 17,308 5,938 17,036
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.......... 6,438 9,876 11,589 4,855 8,889
MERGER EXPENSES--Pooling.......... -- -- -- -- 231
GOODWILL AMORTIZATION............. 50 55 56 28 749
------- ------- ------- ------- -------
Income from operations.......... 2,128 4,199 5,663 1,055 7,167
OTHER INCOME (EXPENSE):
Interest expense................ (787) (989) (1,219) (557) (1,049)
Other, net...................... 75 (31) (131) (94) 191
------- ------- ------- ------- -------
Other income (expense), net... (712) (1,020) (1,350) (651) (858)
------- ------- ------- ------- -------
INCOME BEFORE INCOME TAX EXPENSE.. 1,416 3,179 4,313 404 6,309
PROVISION FOR INCOME TAXES........ 353 1,389 1,786 136 2,900
------- ------- ------- ------- -------
NET INCOME........................ $ 1,063 $ 1,790 $ 2,527 $ 268 $ 3,409
======= ======= ======= ======= =======
BASIC EARNINGS PER SHARE.......... $ .27 $ .45 $ .64 $ .07 $ .24
======= ======= ======= ======= =======
DILUTED EARNINGS PER SHARE........ $ .27 $ .45 $ .64 $ .07 $ .24
======= ======= ======= ======= =======
DILUTED EARNINGS PER SHARE BEFORE
MERGER EXPENSES.................. $ .27 $ .45 $ .64 $ .07 $ .25
======= ======= ======= ======= =======
SHARES USED IN COMPUTING EARNINGS
PER SHARE:
Basic........................... 3,952 3,952 3,952 3,952 14,399
======= ======= ======= ======= =======
Diluted......................... 3,952 3,952 3,952 3,952 14,506
======= ======= ======= ======= =======
</TABLE>

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

F-12
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income...................... $ 1,063 $ 1,790 $ 2,527 $ 268 $ 3,409
Adjustments to reconcile net
income to net cash provided by
operating activities--
Depreciation and amortization.. 2,592 2,814 3,323 1,606 3,364
Loss (gain) on sale of
property and equipment........ 10 (96) 49 2 (57)
Non-cash compensation charge
for issuance of Common Stock
(ESOP)........................ -- 720 254 -- --
Deferred income taxes.......... 166 364 5 15 192
Changes in operating assets
and liabilities--
(Increase) decrease in--
Accounts receivable......... (767) (2,532) (1,084) (406) (3,163)
Inventories................. -- (579) (286) 47 (128)
Costs and profits recognized
in excess of billings...... 36 (233) (947) (857) (5,643)
Prepaid expenses and other
current assets............. 153 (63) 42 128 41
Increase (decrease) in--
Accounts payable and accrued
expenses.................... 210 1,150 1,706 1,641 5,768
Billings in excess of costs
and profits recognized...... (490) 1,026 (478) (1,090) 184
Other, net................... (23) (100) (88) (33) (442)
------- ------- ------- ------- --------
Net cash provided by
operating activities........ 2,950 4,261 5,023 1,321 3,525
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of property
and equipment.................. 100 172 268 95 969
Additions of property and
equipment...................... (4,184) (3,981) (6,429) (3,939) (7,266)
Cash paid for acquisitions, net
of cash acquired............... (128) -- -- -- (34,773)
------- ------- ------- ------- --------
Net cash used in investing
activities.................. (4,212) (3,809) (6,161) (3,844) (41,070)
------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt.... 3,491 7,152 4,714 1,692 564
Payments of long-term debt...... (2,419) (5,400) (4,063) (1,645) (24,838)
Redemptions of Common Stock..... (97) (2,805) (31) -- --
Issuances of Common Stock, net
of offering costs.............. -- -- -- -- 45,109
Net borrowings under bank lines
of credit...................... 163 843 495 1,964 26,369
Distributions to stockholders... (80) (375) -- -- (8,370)
Other........................... 43 280 -- -- --
------- ------- ------- ------- --------
Net cash provided by (used
in) financing activities.... 1,101 (305) 1,115 2,011 38,834
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............ (161) 147 (23) (512) 1,289
CASH AND CASH EQUIVALENTS,
beginning of period............. 526 365 512 512 489
------- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, end of
period.......................... $ 365 $ 512 $ 489 $ -- $ 1,778
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for--
Interest........................ $ 801 $ 637 $ 679 $ 540 $ 935
Income taxes, net of refunds.... 553 870 1,518 33 799
</TABLE>

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

F-13
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
LIMITED VOTE
COMMON STOCK COMMON STOCK ADDITIONAL TOTAL
----------------- ---------------- UNEARNED PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT ESOP SHARES CAPITAL EARNINGS EQUITY
---------- ------ --------- ------ ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 3,951,945 $ -- -- $ -- $ -- $ 904 $ 7,017 $ 7,921
Distribution to
stockholders.......... -- -- -- -- -- -- (219) (219)
Other.................. -- -- -- -- -- (56) -- (56)
Net income............. -- -- -- -- -- -- 1,063 1,063
---------- ----- --------- ----- ------- -------- ------- --------
Balance, December 31,
1995................... 3,951,945 -- -- -- -- 848 7,861 8,709
Distribution to
stockholders.......... -- -- -- -- -- -- (375) (375)
Purchase of stock from
stockholders.......... -- -- -- -- (2,805) -- -- (2,805)
Distribution of stock
via ESOP.............. -- -- -- -- 720 -- -- 720
Other.................. -- -- -- -- -- 421 -- 421
Net income............. -- -- -- -- -- -- 1,790 1,790
---------- ----- --------- ----- ------- -------- ------- --------
Balance, December 31,
1996................... 3,951,945 -- -- -- (2,085) 1,269 9,276 8,460
Distribution of stock
via ESOP.............. -- -- -- -- 254 -- -- 254
Other.................. -- -- -- -- -- (31) -- (31)
Net income............. -- -- -- -- -- -- 2,527 2,527
---------- ----- --------- ----- ------- -------- ------- --------
Balance, December 31,
1997................... 3,951,945 -- -- -- (1,831) 1,238 11,803 11,210
Issuances of stock
(unaudited)........... -- -- 3,345,333 -- -- -- -- --
Initial public
offering, net of
offering costs
(unaudited)........... 5,750,000 -- -- -- -- 45,109 -- 45,109
Acquisition of Founding
Companies (unaudited). 4,527,000 -- -- -- -- 53,890 -- 53,890
Acquisition of
purchased companies
(unaudited)........... 1,296,740 -- -- -- -- 15,138 -- 15,138
Net income (unaudited). -- -- -- -- -- -- 3,409 3,409
---------- ----- --------- ----- ------- -------- ------- --------
Balance, June 30, 1998
(unaudited)............ 15,525,685 $ -- 3,345,333 $ -- $(1,831) $115,375 $15,212 $128,756
========== ===== ========= ===== ======= ======== ======= ========
</TABLE>

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

F-14
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

In February 1998, Quanta completed its initial public offering (the
"Offering" or "IPO"), concurrent with which Quanta acquired, in separate
transactions, four entities (the "Founding Companies"). Subsequent to the date
of the Offering, and through June 30, 1998, the Company has acquired three
additional businesses for approximately $23.5 million in cash and 2.2 million
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.

The financial statements of Quanta for periods prior to February 18, 1998
(the effective closing date of the acquisitions of the Founding Companies),
are the financial statements of PAR Electrical Contractors, Inc. ("PAR" or the
"Accounting Acquiror") as restated for the acquisition of the Pooled Company
in June 1998. The operations of the other Founding Companies and Quanta,
acquired by the Accounting Acquiror, have been included in the Company's
historical financial statements beginning February 19, 1998, and the Purchased
Companies beginning on their respective dates of acquisition.

In the course of its operations, the Company is subject to certain risk
factors, including but not limited to: absence of combined operating history,
risks related to acquisition strategy, risks related to acquisition financing,
risks related to operating and internal growth strategies, management of
growth, availability of qualified employees, unionized workforce, competition,
contract bidding risks, seasonality, exposure to environmental liabilities and
dependence on key personnel.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The accompanying consolidated financial statements after February 18, 1998,
include the accounts of Quanta and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Interim Consolidated Financial Information

The unaudited interim 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.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Supplemental Cash Flow Information

The Company had non-cash investing and financing activities related to
capital leases of approximately $112,000, $111,000 and $692,000 during the
years ended December 31, 1995, 1996 and 1997, respectively.

F-15
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts when collection is
considered doubtful.

Inventories

Inventories consist of parts and supplies held for use in the ordinary
course of business and are valued by the Company at the lower of cost or
market using the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset. Depreciation and
amortization expense, excluding amortization of goodwill, was approximately
$2,542,000, $2,759,000 and $3,269,000 for the years ended December 31, 1995,
1996 and 1997, respectively.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is recognized in the statements of operations.

Debt Issue Costs

Debt issue costs related to the Company's credit facility are included in
other assets and are amortized to interest expense over the scheduled maturity
of the debt.

Goodwill

Goodwill represents the excess of the aggregate purchase price paid by the
Company in the acquisition of businesses accounted for as purchases over the
fair market value of the net assets acquired. Goodwill is amortized on a
straight-line basis over 40 years.

The Company applies Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". Management continually evaluates whether events or
circumstances have occurred that indicate that the remaining estimated useful
lives of property and equipment, other identifiable intangible assets and
goodwill may warrant revision or that the remaining balances may not be
recoverable.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under a fixed price or cost-plus-fee contract. Such
contracts generally provide that the customer accept completion of progress to
date and compensate the Company for services rendered, measured typically in
terms of units installed, hours expended or some other measure of progress.
Revenues from fixed price or cost-plus-fee contracts are recognized on the
percentage-of-completion method measured by the percentage of costs incurred
to date to total estimated costs for each contract. Contract costs include all
direct material, labor and subcontract costs and those indirect costs related
to contract performance, such as indirect labor, supplies, tools, repairs and
depreciation costs. Provisions for the total estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes
in job performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined.

F-16
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price or cost-plus-fee contacts will be due upon
completion of the contracts and acceptance by the customer. Based on the
Company's experience with similar contracts in recent years, the retention
balance at each balance sheet date will be collected within the subsequent
fiscal year.

The current asset "Cost and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The current liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.

Warranty Costs

For certain contracts, the Company generally warrants labor for the
installation of new electrical systems and servicing of existing electrical
systems. An accrual for warranty costs is recorded based upon the historical
level of warranty claims and management's estimate of future costs.

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 the notes
to future consolidated annual financial statements.

Income Taxes

The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes". Under this method, deferred assets and
liabilities are recorded for future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities, and
are measured using the enacted tax rates and laws that will be in effect when
the underlying assets or liabilities are recovered or settled.

Prior to January 1, 1996, the Pooled Company had elected to be treated as an
S Corporation under provisions of the Internal Revenue Code. As such, federal
and state income tax regulations provided that the income or losses of the
Pooled Company were attributable to its stockholders in their individual tax
returns. Effective January 1, 1996, the Pooled Company terminated its S
Corporation status and simultaneously adopted SFAS No. 109.

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.

F-17
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Earnings per Share

The Company has adopted SFAS No. 128, "Earnings Per Share", which requires
restatement of all comparative per share amounts. Under the provisions of SFAS
No. 128, the presentation of primary earnings per share has been replaced with
earnings per share for potentially dilutive securities such as outstanding
options. All prior period earnings per share data have been restated.

For financial statement purposes, as required by the rules and regulations
of the Securities Act, PAR has been identified as the accounting acquiror in
the transaction with Quanta and its initial public offering. As such the
shares of Quanta Common Stock beneficially owned by the stockholders of PAR
and the shares issued in connection with the acquisition of the Pooled Company
have been issued in the calculation of basic and diluted earnings per share of
the Company, for all periods prior to the IPO.

Collective Bargaining Agreements

Certain of the subsidiaries are party to various collective bargaining
agreements with certain of its employees. The agreements require the Company
to pay specified wages and provide certain benefits to its union employees.
These agreements expire at various times.

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. Reference is made to the
"Revenue Recognition" section of this footnote and Note 12 for discussion of
certain estimates reflected in the Company's financial statements.

New Accounting 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 six months ended June 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 stockholders. 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 does not believe the adoption of this standard will have a
material effect on its annual financial statements.

F-18
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company is evaluating SFAS No. 133 and the
impact on existing accounting policies and financial reporting disclosures.
However, the Company has not to date engaged in activities or entered into
arrangements normally associated with derivative instruments.

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The SOP provides
guidance with respect to accounting for the various types of costs incurred
for computer software developed or obtained for the Company's use. The Company
is required to, and will adopt SOP 98-1 by the first quarter of fiscal 1999
and believes that adoption will not have a material effect on its consolidated
financial statements.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities", which requires costs of start-up activities to be expensed as
incurred, and upon adoption, previously deferred costs should be charged as a
cumulative effect of a change in accounting principle. The statement is
effective for financial statements beginning after December 15, 1998, and the
Company expects to adopt the new standard in January 1999. The adoption of
this standard is not expected to have a material effect on the Company's
financial position or result of operations.

3. PER SHARE INFORMATION:

The computation of basic and diluted earnings per share for the three years
ended December 31, 1997 and the six months ended June 30, 1997 (unaudited) is
based upon the 3,000,000 shares of Common Stock issued in connection with PAR
and 951,945 shares issued in connection with the acquisition of the Pooled
Company during the quarter ended June 30, 1998.

The computation of basic earnings per share for the six months ended June
30, 1998 (unaudited) is based upon 14,398,526 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 1,296,740 shares issued
in acquisitions accounted for as purchases.

Shares used in the calculation of the diluted earnings per share for the six
months ended June 30, 1998 (unaudited) include (i) the shares described above,
and (ii) the dilution attributable to outstanding options to purchase Common
Stock, using the treasury stock method.

4. BUSINESS COMBINATIONS:

In February 1998, Quanta completed its initial public offering (the
"Offering"), concurrent with which, Quanta acquired, in separate transactions,
four entities (the "Founding Companies"). Subsequent to the date of the
Offering, and through June 30, 1998, the Company has acquired three additional
businesses for approximately $23.5 million of cash and 2.2 million shares of
Common Stock. Of these additional businesses acquired, one

F-19
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

was accounted for as a pooling-of-interests and is referred to herein as the
"Pooled Company". The remaining businesses acquired 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.

Pooling

During the second quarter of 1998, Quanta completed the acquisition of all
the common stock of NorAm Telecommunications, Inc. ("NorAm" or the "Pooled
Company"), in a business combination accounted for as a "pooling-of-interests"
transaction in accordance with the requirements of APB No. 16. NorAm,
headquartered in Oregon, provides outside and inside fiberoptic networks and
technical support for the telecommunications industry. Quanta issued 951,945
shares of Common Stock in exchange for all the common stock of NorAm. There
were no transactions between Quanta and NorAm during the periods prior to the
business combination.

The following table summarizes the unaudited restated revenues, net income
and per share data of the Company after giving effect to the Pooled Company
(in thousands, except per share data).

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997
--------------- --------------- ---------------
NET NET NET
REVENUES INCOME REVENUES INCOME REVENUES INCOME
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues and net income--
As previously reported.. $38,915 $ 515 $42,684 $ 750 $49,132 $2,294
Pooled Company.......... 14,309 548 28,610 1,040 27,073 233
------- ------ ------- ------ ------- ------
As restated........... $53,224 $1,063 $71,294 $1,790 $76,205 $2,527
======= ====== ======= ====== ======= ======
Earnings per share basic
and diluted--
As previously reported.. $ 0.17 $ 0.25 $ 0.76
Pooled Company.......... 0.10 0.20 (0.12)
------ ------ ------
As restated........... $ 0.27 $ 0.45 $ 0.64
====== ====== ======
</TABLE>

Purchases

During the second quarter of 1998, the Company completed two acquisitions
accounted for as purchases. The aggregate consideration paid in these
transactions consisted of $23.5 million in cash and 1.3 million shares of
Common Stock. The accompanying balance sheet as of June 30, 1998 includes
preliminary allocations of the respective purchase prices and is subject to
final adjustment. Set forth below are unaudited pro forma combined revenue and
income data reflecting the pro forma effect of these acquisitions on the
Company's results of operations for the year ended December 31, 1997 and the
six months ended June 30, 1998. The unaudited data presented below consists of
the income statement data as presented in these consolidated financial
statements plus (i) the income statement data of the Founding Companies for
the periods prior to February 19, 1998 and (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.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------------
<S> <C> <C>
Revenues....................................... $223,110 $132,555
Net income..................................... $ 13,279 $ 5,542
Earnings per share basic and diluted........... $ 0.73 $ 0.29
</TABLE>

F-20
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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.

5. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ------------------
IN YEARS 1996 1997
------------ -------- --------
<S> <C> <C> <C>
Land....................................... -- $ 1,652 $ 1,861
Buildings and leasehold improvements....... 5-31 1,780 1,927
Operating equipment and vehicles........... 5-10 27,618 32,768
Office equipment, furniture and fixtures... 5 828 955
-------- --------
31,878 37,511
Less--Accumulated depreciation and
amortization.............................. (17,126) (19,225)
-------- --------
Property and equipment, net.............. $ 14,752 $ 18,286
======== ========
</TABLE>

6. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade....................................... $2,478 $3,196
Accrued compensation and other expenses....................... 2,394 3,382
------ ------
$4,872 $6,578
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Costs incurred on contracts in progress................. $ 12,395 $ 11,578
Estimated earnings, net of losses....................... 3,067 3,017
-------- --------
15,462 14,595
Less--Billings to date.................................. (15,879) (13,587)
-------- --------
$ (417) $ 1,008
======== ========
Costs and profits recognized in excess of billings...... $ 799 $ 1,746
Less--Billings in excess of costs and profits
recognized............................................. (1,216) (738)
-------- --------
$ (417) $ 1,008
======== ========
</TABLE>

F-21
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. DEBT:

The Company's long-term debt obligations consisted of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit facility..................... $ -- $ -- $28,400
Bank lines of credit, with total borrowing
capacity of $2,000,000, interest at bank's
prime rate plus 1%, secured by accounts
receivable and guaranteed by NorAm's
stockholders................................. 605 968 1,447
Bank lines of credit, with total borrowing
capacity of $8,000,000, interest at bank's
prime rate, secured by equipment, receivables
and other assets............................. 2,378 2,510 --
Notes payable to bank, interest ranging from
9.08% to 10%, payments due monthly from
$9,313 to $36,613 including interest, secured
by equipment................................. 1,729 1,578 1,466
Note payable to bank, prime interest rate, due
$250,000 annually including interest, secured
by stock..................................... 2,105 1,831 1,831
Notes payable to various banks, interest
ranging from 7.0% to 15.35%, secured by
certain equipment, receivables and other
assets....................................... 1,434 1,658 1,949
Notes payable to various banks, interest
ranging from 6.50% to 9.75%, secured by
certain equipment, receivables and other
assets....................................... 4,555 5,642 --
Capital lease obligations..................... 99 555 1,965
------- ------- -------
12,905 14,742 37,058
Less--Current maturities...................... (6,427) (7,200) (3,946)
------- ------- -------
Total long-term debt........................ $ 6,478 $ 7,542 $33,112
======= ======= =======
</TABLE>

Credit Facility

In April 1998, the Company obtained a $50.0 million revolving credit
facility (the "Credit Facility") from two commercial banks. In August 1998,
the Company amended its Credit Facility to increase the facility to $125.0
million. The Credit Facility is secured by a pledge of all of the capital
stock of the Company's material operating subsidiaries and by certain assets
of the Company and is to provide funds to be used for working capital, to
finance acquisitions and for other general corporate purposes. Amounts
borrowed under the Credit Facility bear interest at a rate equal to either (a)
the London Interbank Offered Rate ("LIBOR") plus 0.75% to 1.75%, as determined
by the ratio of the Company's total funded debt to EBITDA (as defined in the
Credit Facility) or (b) the bank's prime rate plus up to 0.25%, as determined
by the ratio of the Company's total funded debt to EBITDA. Commitment fees of
0.175% to 0.30% (based on certain financial ratios) are due on any unused
borrowing capacity under the Credit Facility. The Company's existing and
future subsidiaries will guarantee the repayment of all amounts due under the
facility and the facility restricts pledges on all material assets. The Credit
Facility contains usual and customary covenants for a credit facility of this
nature including the prohibition of the payment of dividends, certain
financial ratio covenants and the consent of the lenders for acquisitions
exceeding a certain level of cash consideration. As of October 16, 1998, $69.3
million was borrowed under the credit facility.

F-22
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The maturities of long-term debt (excluding capital leases) as of December
31, 1997, are as follows (in thousands):

<TABLE>
<S> <C>
Year ending December 31--
1998............................................................ $ 7,001
1999............................................................ 4,002
2000............................................................ 1,983
2001............................................................ 1,171
2002............................................................ 30
-------
$14,187
=======
</TABLE>

The Company leases certain buildings and equipment under non-cancellable
lease agreements. The following schedule shows the future minimum lease
payments under these leases as of December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31--
1998..................................................... $ 233 $ 553
1999..................................................... 233 258
2000..................................................... 134 134
2001..................................................... 12 117
2002..................................................... -- 89
----- ------
Total minimum lease payments........................... 612 $1,151
======
Less--Amounts representing interest........................ (57)
-----
Present value of minimum lease payments................. 555
Less--Current portion...................................... (199)
-----
Long-term obligation.................................... $ 356
=====
</TABLE>

Rent expense related to operating leases was approximately $21,000, $205,000
and $462,000 for the years ended December 31, 1995, 1996 and 1997,
respectively. Assets under capital leases are included as part of property and
equipment.

8. INCOME TAXES:

Federal and state income taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
--------------- --------
<S> <C> <C> <C>
Federal--
Current.......................................... $ 154 $ 840 $ 1,475
Deferred......................................... 138 299 10
State--
Current.......................................... 33 185 306
Deferred......................................... 28 65 (5)
------ -------- --------
$ 353 $ 1,389 $ 1,786
====== ======== ========
</TABLE>

F-23
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate to income (loss) before
provision for income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
--------------- --------
<S> <C> <C> <C>
Provision at the statutory rate.................... $ 304 $ 1,093 $ 1,504
Increase resulting from--
State income tax, net of related tax effect...... 40 166 187
Nondeductible expenses........................... 9 -- 29
Permanent differences............................ -- 57 42
FAS 109 adoption................................. -- 93 --
Other............................................ -- (20) 24
------ -------- --------
$ 353 $ 1,389 $ 1,786
====== ======== ========
</TABLE>

Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for
tax purposes. The tax effects of these temporary differences, representing
deferred tax assets and liabilities, result principally from the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Deferred income tax liabilities--
Property and equipment.................................. $(2,281) $(2,500)
State taxes............................................. 9 10
Other................................................... (156) (172)
------- -------
Total deferred income tax liabilities................. (2,428) (2,662)
------- -------
Deferred income tax assets--
Bad debt reserves....................................... 42 42
Accounts receivable..................................... 28 35
Goodwill................................................ 27 41
Inventory............................................... -- 29
State taxes............................................. (18) (29)
Other accruals not currently deductible................. 283 473
------- -------
Total deferred income tax assets...................... 362 591
------- -------
Total net deferred income tax liabilities............. $(2,066) $(2,071)
======= =======
</TABLE>

F-24
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The net deferred tax assets and liabilities are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets--
Current................................................. $ 362 $ 591
Long-term............................................... -- --
------- -------
Total................................................. 362 591
------- -------
Deferred tax liabilities--
Current................................................. (147) (183)
Long-term............................................... (2,281) (2,479)
------- -------
Total................................................. (2,428) (2,662)
------- -------
Net deferred income tax liabilities................... $(2,066) $(2,071)
======= =======
</TABLE>

9. STOCKHOLDERS' EQUITY:

Limited Vote Common Stock

The shares of Limited Vote Common Stock have rights similar to shares of
Common Stock, except that such shares are entitled to elect one member of the
board of directors and are entitled to one-tenth of one vote for each share
held on all other matters. Each share of Limited Vote Common Stock will
convert into Common Stock upon disposition by the holder of such shares in
accordance with the transfer restrictions applicable to such shares.

Stock Plan

F-25
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

immediately exercisable in the event of a "change in control" (as defined in
the 1997 Stock Option Plan) of the Company. No ISO will remain exercisable
later than ten years after the date of grant (or five years in the case of
ISOs granted to employees owning more than 10% of the voting capital stock).

As of October 16, 1998, the Company has outstanding options to purchase
approximately 1,555,150 shares of Common Stock issued pursuant to the 1997
Stock Option Plan.

Initial Public Offering

In February, 1998, Quanta completed its initial public offering, which
involved the issuance of 5.0 million shares of its Common Stock at a price of
$9.00 per share, resulting in net proceeds to the Company of $38.8 million
after deducting underwriting discounts and commissions and expenses related to
the IPO. In March 1998, the Company sold 750,000 shares of Common Stock
pursuant to the over-allotment granted to the underwriters. The Company
realized net proceeds from the sale of $6.3 million.

Employee Stock Ownership Plan.

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. Upon distribution from the ESOP, the Company will owe an
excise tax equal to 10% of the value of the Company's Common Stock
distributed. In addition, the Company will eliminate the remaining balance
reflected as Unearned ESOP Shares on the Company's balance sheet and will have
to recognize a non-cash non-recurring compensation charge equal to the value
of the unallocated shares held by the ESOP at the time it allocates and
distributes such shares. Although the Company currently cannot determine the
amount of the excise tax that will be owed or the non-cash non-recurring
compensation charge that will be recognized, the amount of such obligations
would not be material to the Company's financial condition based on the market
price for the Company's Common Stock on October 16, 1998.

10. EMPLOYEE BENEFIT PLAN:

In connection with its collective bargaining agreements with various
electrical unions, the Company participates with other companies in the
unions' multi-employer pension plans. These plans cover all of the Company's
employees who are members of such unions. The Employee Retirement Income
Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments
Act of 1980, imposes certain liabilities upon employers who are contributors
to a multi-employer plan in the event of the employer's withdrawal from, or
upon termination of such plan. The Company has no plans to withdraw from these
plans. The plans do not

F-26
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

maintain information on net assets and actuarial present value of the
accumulated share of the plans' unfunded vested benefits allocable to the
Company, and amounts, if any, for which the Company may be contingently liable
is not ascertainable at this time.

Certain subsidiaries of the Company provide various defined contribution
plans to their employees. The plans cover substantially all full time
employees of the Company. Contributions to the plans by the Company vary from
plan to plan. Contributions to the plan were approximately $230,000, $214,000
and $217,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

In addition to certain defined contribution plans noted above, the financial
statements include discretionary bonuses to employees of $564,000, $1,087,000
and $2,300,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

11. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, lines of credit, accounts payable, notes payable and
debt. The Company believes that the carrying value of these instruments on the
accompanying balance sheets approximates their fair value.

12. COMMITMENTS AND CONTINGENCIES:

Litigation

Subsidiaries of the Company are involved in disputes or legal actions
arising in the ordinary course of business. Management does not believe the
outcome of such legal actions will have a material adverse effect on the
Company's financial position or results of operations.

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, business property liability, workers' compensation, general
liability and an umbrella policy. Effective January 1, 1996, the Company began
self-insuring for certain workers' compensation risks up to $1,000,000 per
occurrence. In October 1997, the Company reduced the deductible to $500,000
per occurrence. The Company has accrued for the estimated probable claims
costs in satisfying the deductible provisions of the insurance policies for
claims occurring through December 31, 1997. The accrual is based on known
facts and historical trends, and management believes such accrual to be
adequate.

In August 1998, the Company consolidated the casualty insurance program for
all subsidiaries of Quanta. This program has no self-insurance provisions.
Self-insured claims under previous policies are monitored to ensure that such
remaining accruals are adequate.

Product Rights

In May 1997, the Company entered into an agreement with a third party which
gives the Company exclusive rights for 30 months to the use of a patented
product used in the construction, maintenance, repair and improvement of
energized transmission and distribution lines in all states west of the
Mississippi River.

The product is a telescoping robotic arm for temporarily supporting
energized power lines to enable repair or replacement of transmission poles,
cross-arms, insulators and the like while maintaining an energized connection.
In exchange for the exclusive rights, the Company agreed to pay the third
party a fixed fee and a percentage of gross profits generated from the use of
the product. As of December 31, 1997, the Company had made payments totaling
$225,000 related to fees for the use of such product.

F-27
<PAGE>

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments.

13. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company grants credit, generally without collateral, to its customers,
which include utility companies, municipalities and commercial companies
located primarily in the United States. Consequently, the Company is subject
to potential credit risk related to changes in business and economic factors
throughout the United States. However, the Company generally is entitled to
payment for work performed and has certain lien rights in that work. Further,
management believes that its contract acceptance, billing and collection
policies are adequate to minimize the potential credit risk.

14. SUBSEQUENT EVENTS:

Business Combinations

Subsequent to June 30, 1998, the Company has acquired eight additional
companies for an aggregate consideration of $61.5 million in cash and notes
and 2.7 million shares of Common Stock. The cash portion of such consideration
was provided by borrowings under the Company's credit facility.

Strategic Investment

In October 1998, the Company entered a strategic investment agreement 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 commitment 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
must make 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.

F-28
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Quanta Services, Inc.:

We have audited the accompanying balance sheet of Quanta Services, Inc. (a
Delaware corporation), as of December 31, 1997, and the related statement of
operations, and stockholders' equity for the period from inception (August 19,
1997) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quanta Services, Inc., as of
December 31, 1997, and the results of its operations for the period from
inception (August 19, 1997) through December 31, 1997, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 18, 1998

F-29
<PAGE>

QUANTA SERVICES, INC.

BALANCE SHEET--DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
ASSETS
<S> <C>
CASH AND CASH EQUIVALENTS............................................ $ --
DEFERRED OFFERING COSTS.............................................. 1,306
--------
Total assets..................................................... $ 1,306
========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
ACCRUED LIABILITIES AND AMOUNTS DUE TO STOCKHOLDER................... $ 1,306
STOCKHOLDERS' EQUITY:
Preferred stock, $.00001 par value, 10,000,000 authorized, none
issued and outstanding............................................ --
Common stock, $.00001 par value, 40,000,000 shares authorized, none
issued and outstanding............................................ --
Limited Vote Common Stock, $.00001 par value, 3,345,333 shares
authorized, issued and outstanding................................ --
Additional paid-in capital......................................... 13,003
Retained deficit................................................... (13,003)
--------
Total stockholders' equity....................................... --
--------
Total liabilities and stockholders' equity....................... $ 1,306
========
</TABLE>

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

F-30
<PAGE>

QUANTA SERVICES, INC.

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM INCEPTION (AUGUST 19, 1997)

THROUGH DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<TABLE>
<S> <C>
REVENUES............................................................. $ --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......................... 13,003
--------
LOSS BEFORE INCOME TAXES............................................. (13,003)
PROVISION FOR INCOME TAXES........................................... --
--------
NET LOSS............................................................. $(13,003)
========
BASIC AND DILUTED EARNINGS PER SHARE................................. $ (18.92)
========
WEIGHTED AVERAGE SHARES USED IN THE COMPUTATION OF BASIC AND DILUTED
EARNINGS PER SHARE.................................................. 687,336
========
</TABLE>

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

F-31
<PAGE>

QUANTA SERVICES, INC.

STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM INCEPTION (AUGUST 19, 1997)

THROUGH DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION,
August 19, 1997........... 1,693,779 $ -- $ -- $ -- $ --
ISSUANCE OF SHARES TO AN
INITIAL STOCKHOLDER AND
MANAGEMENT................ 1,651,554 -- 13,003 -- 13,003
NET LOSS................... -- -- -- (13,003) (13,003)
--------- ----- ------- -------- --------
BALANCE, December 31, 1997. 3,345,333 $ -- $13,003 $(13,003) $ --
========= ===== ======= ======== ========
</TABLE>

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

F-32
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS

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 "IPO") which involved the
issuance of 5,000,000 shares of common stock, providing approximately $38.9
million in net proceeds to the Company, after deducting underwriter discounts
and commissions and expenses related to the IPO. Concurrent with the closing
of its initial public offering, Quanta acquired, in separate transactions (the
"Acquisitions"), for consideration including $21.0 million of cash and
7,527,000 shares of Common Stock, the following four entities (the "Founding
Companies"): PAR Electrical Contractors, Inc., Potelco, Inc., TRANS TECH
Electric, Inc. and Union Power Construction Company. Also, in March 1998, the
Company's underwriters exercised their over-allotment option to acquire an
additional 750,000 shares of the Company's Common Stock at the initial public
offering price of $9 per share, providing the Company with approximately $6.3
million (net of underwriting discounts and commissions) of additional proceeds
from the IPO. Quanta intends to continue to acquire through merger or purchase
similar companies to expand its national and regional operations.

Quanta has not conducted any operations, and all activities through December
31, 1997 were related to the IPO and the Acquisitions. All expenditures of the
Company through December 31, 1997 were funded by the primary stockholders, on
behalf of the Company. The primary stockholders have also committed to fund
future organization expenses and offering costs. As of March 18, 1998, costs
of approximately $2.9 million have been incurred in connection with the IPO,
and such costs will be treated as a reduction of the proceeds from the IPO.
Quanta has treated costs incurred through December 31, 1997, as deferred
offering costs in the accompanying balance sheet.

2. STOCKHOLDERS' EQUITY:

Common Stock and Preferred Stock

In connection with the organization and initial capitalization of Quanta,
the Company issued 1,693,779 shares (as restated for the 1,613.6016 for-one
stock split discussed below) of Common Stock at $.00001 par value ("Common
Stock") for $10.48. In November, 1997 Quanta issued approximately 1.5 million
shares and 0.2 million shares, respectively (as restated for the 1,613.6016
for-one stock split discussed below) of Common Stock at $.00001 par value to
an initial stockholder and management of Quanta. As a result of the issuance
of shares to Main Street Merchant Partners II, L.P. ("Main Street") and
management for nominal consideration, the Company recorded in November 1997,
for financial statement presentation purposes, a non-recurring, non-cash
charge of $13.0 million, which has been based on a fair value of such shares
which has been determined to be $7.65 per share (a discount of 15% from the
initial public offering price). The shares issued to Main Street and members
of management were issued to engage such parties in providing services related
primarily to the Company's public offering activities, including financial
advisory and other consulting services. The fair value of such shares was
based on specific factors related to the Company and the transactions
including restrictions on transferability and sale of the shares issued and
the limited vote provisions of such shares.

F-33
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Quanta effected a 1,613.6016 for-one stock split in December 1997 for each
share of Common Stock of the Company then outstanding. In addition, the
Company increased the number of authorized shares of Common Stock to 40.0
million and increased the number of authorized shares of $.00001 par value
preferred stock to 10.0 million.

In December 1997, the 3.3 million shares of Common Stock held by certain
primary stockholders of Quanta were converted into 3.3 million shares of
Limited Vote Common Stock. The shares of Limited Vote Common Stock have rights
similar to shares of Common Stock, except that such shares are entitled to
elect one member of the board of directors and are entitled to one-tenth of
one vote for each share held on all other matters. Each share of Limited Vote
Common Stock will convert into Common Stock upon disposition by the holder of
such shares in accordance with the transfer restrictions applicable to such
shares.

Shares used in the Calculation of Basic and Diluted Earnings Per Share

Shares used in the calculation of basic and diluted earnings per share
include the weighted average portion of the 3,345,333 shares issued from the
period from inception through December 31, 1997.

Stock Plan

In December 1997, the Company's board of directors and stockholders approved
the Company's 1997 Stock Option Plan (the "Plan"), which provides for the
granting or awarding of incentive or nonqualified stock options to directors,
officers, key employees and consultants of the Company. The aggregate amount
of Common Stock of the Company with respect to which options may be granted
may not exceed the greater of 2.38 million shares or 15 percent of the
aggregate number of shares of Common Stock outstanding. The Plan will be
administered by the compensation committee (the "Committee") of the Company's
board of directors. The Company has filed a registration statement on Form S-8
under the Securities Act of 1933 registering the issuance of shares upon
exercise of options granted under this Plan. In February 1998, concurrent with
the IPO, the Company granted approximately 627,500 options to management and
various key employees of the Founding Companies. Options will be exercisable
during the period specified in each option agreement and will generally become
exercisable in installments over four years beginning on the first year
anniversary of the grant date. No options will remain exercisable later than
ten years after the date of grant. The exercise price of options may be no
less than the fair market value of the Common Stock on the date of grant (or
110 percent in the case of options granted to employees owning more than 10
percent of the voting capital stock).

The Plan also provides for automatic option grants to directors who are not
otherwise employed by the Company or its subsidiaries. Upon commencement of
service, a nonemployee director will receive a nonqualified option to purchase
10,000 shares of Common Stock and continuing or re-elected nonemployee
directors annually will receive options to purchase 5,000 shares of Common
Stock. Options granted to nonemployee directors are fully exercisable
following the expiration of six months from the date of grant.

S-4 Registration Statement

In February 1998, the Company filed a Form S-4 Registration Statement in
order to register an additional 5.0 million shares of Common Stock which the
Company may issue from time to time in connection with future acquisitions of
other businesses, properties or securities in business combination
transactions. The Company expects that the terms upon which it may issue the
shares will be determined through negotiations with the shareholders or
principal owners of the businesses whose securities or assets are to be
acquired.

F-34
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. 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 the notes to future consolidated annual
financial statements.

4. NEW ACCOUNTING PRONOUNCEMENTS:

SFAS No. 128 requires the presentation of basic earnings per share and
diluted earnings per share in financial statements of public enterprises
rather than primary and fully diluted earnings per share as previously
required. Under the provisions of this statement, basic earnings per share are
computed based on weighted average shares outstanding and excludes dilutive
securities such as options and warrants. Diluted earnings per share are
computed including the impact of all potentially dilutive securities.
Supplementally, basic and diluted earnings per share are presented in Note 5
below for 1997 on a pro forma basis.

5. BUSINESS COMBINATIONS:

As discussed in Note 1, Quanta acquired the Founding Companies in February
1998. 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), are the
financial statements of PAR Electrical Contractors, Inc. (PAR) (the
"Accounting Acquiror"). The operations of the other Founding Companies and
Quanta, acquired by the Accounting Acquiror, will be included in the Company's
historical financial statements beginning February 19, 1998.

The following summary unaudited pro forma combined balance sheet information
presented below, gives effect to the Acquisitions, the IPO and related
transactions, including the repayment of historical debt of the Founding
Companies, as if they had occurred on December 31, 1997 (in thousands).

<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
COMBINED
DECEMBER 31,
1997
------------
<S> <C>
Current Assets............................................... $ 47,021
Property and Equipment, Net.................................. 26,965
Goodwill..................................................... 65,747
Other Assets................................................. 244
--------
Total Assets............................................... $139,977
========
Current Liabilities.......................................... $ 19,846
Long-term debt, net of current maturities.................... 6,723
Deferred income taxes........................................ 4,301
Stockholders' Equity......................................... 109,107
--------
Total Liabilities and Stockholders' Equity................. $139,977
========
</TABLE>

F-35
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The unaudited pro forma combined statement of operations for the year ended
December 31, 1997 presented below assumes that the Acquisitions, the IPO and
related transactions were closed on January 1, 1997 and present certain data
for the Company as adjusted for: i) the acquisition of the Founding Companies,
ii) the IPO completed on February 18, 1998 (including the exercise of the
underwriter's over-allotment option), iii) certain reductions in salaries,
bonuses and benefits to former owners of the Founding Companies, iv)
amortization of goodwill resulting from the acquisitions, v) reduction in
interest expense, net of interest expense on borrowings to fund S corporation
distributions by certain of the Founding Companies and vi) adjustments to the
federal and state income tax provision based on pro forma operating results.

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 do 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 and the Founding Companies were
not under common control or management, historical combined results may not be
comparable to, or indicative of, future performance.

<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
COMBINED
-----------------
YEAR ENDED
DECEMBER 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
Revenues.................................................... $152,303
Cost of services (including depreciation)................... 123,270
--------
Gross profit................................................ 29,033
Selling, general and administrative expenses................ 10,166
Goodwill amortization....................................... 1,640
--------
Income from operations...................................... 17,227
--------
Other income (expense):
Interest expense.......................................... (767)
Other, net................................................ 311
--------
Other income (expense), net............................... (456)
--------
Income before income tax expense............................ 16,771
Provision for income taxes.................................. 7,181
--------
Net income.................................................. $ 9,590
========
Basic earnings per share.................................... $ 0.60
========
Diluted earnings per share.................................. $ 0.60
========
Shares used in the pro forma computation of earnings per
share--
Basic..................................................... 16,043
========
Diluted................................................... 16,043
========
</TABLE>

F-36
<PAGE>

QUANTA SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Shares Used in Calculation of Pro Forma Combined Earnings Per Share

Shares used in the calculation of the unaudited pro forma combined basic and
diluted earnings per share include (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) 5,000,000 shares of Common Stock sold in the
IPO to pay the cash portion of the Acquisition consideration, to repay
expenses incurred in connection with the Offering and to retire debt, and (iv)
170,778 of the 750,000 shares of Common Stock issued as part of the exercise
of the underwriter's over-allotment option, as discussed in Note 1. The
579,222 shares excluded reflect net cash to Quanta.

The Company has entered into employment agreements with certain key
executives of the Founding Companies and the executive officers of Quanta.
These employment agreements generally prohibit such individuals from
disclosing confidential information and trade secrets, and restrict such
individuals from competing with the Company for a period of five years from
the date of the employment agreement. The initial term of these employment
agreements is three years with provisions for annual extensions at the end of
the initial term.

F-37
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Union Power Construction Company:

We have audited the accompanying balance sheets of Union Power Construction
Company, a Colorado corporation, as of August 31, 1996 and 1997, and the
related statements of operations, cash flows and stockholders' equity for the
three years ended August 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Union Power Construction
Company as of August 31, 1996 and 1997, and the results of its operations and
its cash flows for the three years ended August 31, 1997, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
December 5, 1997

F-38
<PAGE>

UNION POWER CONSTRUCTION COMPANY

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
AUGUST 31,
------------------- NOVEMBER 30,
1996 1997 1997
ASSETS ------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................... $ 612 $ 404 $ 951
Marketable securities....................... 101 110 123
Accounts receivable--
Trade, net of allowance for doubtful
accounts of $84,000...................... 3,902 8,822 12,259
Retainage................................. 204 498 601
Related-party receivables................... 65 32 --
Costs and estimated earnings in excess of
billings on uncompleted contracts.......... -- 77 113
Deferred income taxes....................... 30 115 --
Prepaid expenses and other current assets... 44 95 46
------ ------- -------
Total current assets.......................... 4,958 10,153 14,093
PROPERTY AND EQUIPMENT, net................... 4,810 5,868 6,836
------ ------- -------
Total assets.................................. $9,768 $16,021 $20,929
====== ======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt........ $ 249 $ 663 $ 1,916
Current maturities of related-party debt.... 238 128 200
Accounts payable and accrued expenses....... 2,878 6,209 8,239
Related-party payable....................... 22 -- --
Billings in excess of costs and estimated
earnings on uncompleted contracts.......... -- 322 700
------ ------- -------
Total current liabilities..................... 3,387 7,322 11,055
LONG-TERM DEBT, net of current maturities..... 1,065 748 1,234
RELATED-PARTY DEBT, net of current maturities. 38 328 237
DEFERRED INCOME TAXES......................... 843 1,257 1,311
OTHER LONG-TERM LIABILITIES................... 20 22 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 25,000 shares
authorized, 25,000 shares issued and
outstanding................................ 25 25 25
Unrealized loss on securities............... (62) (56) (44)
Retained earnings........................... 4,452 6,375 7,111
------ ------- -------
Total stockholders' equity.................... 4,415 6,344 7,092
------ ------- -------
Total liabilities and stockholders' equity.... $9,768 $16,021 $20,929
====== ======= =======
</TABLE>

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

F-39
<PAGE>

UNION POWER CONSTRUCTION COMPANY

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
------------------------- ---------------
1995 1996 1997 1996 1997
------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES........................... $12,614 $25,636 $42,792 $7,211 $15,357
COST OF SERVICES (including
depreciation)..................... 10,240 22,319 37,766 6,037 13,474
------- ------- ------- ------ -------
Gross profit..................... 2,374 3,317 5,026 1,174 1,883
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.......................... 1,896 1,563 1,966 491 677
------- ------- ------- ------ -------
Income from operations........... 478 1,754 3,060 683 1,206
------- ------- ------- ------ -------
OTHER INCOME (EXPENSE):
Interest expense................. (7) (84) (110) (36) (39)
Related-party interest expense... (10) (6) (22) (2) (7)
Other, net....................... 142 166 229 7 45
------- ------- ------- ------ -------
Other income, net.............. 125 76 97 (31) (1)
------- ------- ------- ------ -------
INCOME BEFORE PROVISION FOR INCOME
TAXES............................. 603 1,830 3,157 652 1,205
PROVISION FOR INCOME TAXES......... 239 718 1,234 254 469
------- ------- ------- ------ -------
NET INCOME......................... $ 364 $ 1,112 $ 1,923 $ 398 $ 736
======= ======= ======= ====== =======
</TABLE>

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

F-40
<PAGE>

UNION POWER CONSTRUCTION COMPANY

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED AUGUST NOVEMBER
31, 30,
--------------------- ------------
1995 1996 1997 1996 1997
----- ------ ------ ---- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 364 $1,112 $1,923 $398 $ 736
Adjustments to reconcile net income to
net cash provided by operating
activities--
Depreciation and amortization........... 217 486 577 156 362
Deferred taxes.......................... 137 296 329 132 172
Changes in operating assets and
liabilities--
(Increase) decrease in--
Accounts receivable.................... 249 (2,523) (5,180) (381) (3,540)
Costs and estimated earnings in excess
of billings on uncompleted contracts.. (226) 237 (77) -- (36)
Prepaid expenses and other current
assets................................ 12 15 (51) 22 47
Increase (decrease) in--
Accounts payable and accrued expenses.. 280 1,578 3,331 222 2,030
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................. (28) -- 322 65 378
Other, net............................. 80 84 (132) 7 8
----- ------ ------ ---- ------
Net cash provided by operating
activities........................... 1,085 1,285 1,042 621 157
----- ------ ------ ---- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment............................... 41 27 105 -- --
Additions of property and equipment...... (605) (2,771) (1,634) (283) (1,330)
----- ------ ------ ---- ------
Net cash used in investing activities.... (564) (2,744) (1,529) (283) (1,330)
----- ------ ------ ---- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt............. 300 1,432 786 -- 2,450
Payments of long-term debt............... (272) (239) (507) (101) (730)
----- ------ ------ ---- ------
Net cash provided by financing
activities.............................. 28 1,193 279 (101) 1,720
----- ------ ------ ---- ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................. 549 (266) (208) 237 547
CASH AND CASH EQUIVALENTS, beginning of
year..................................... 329 878 612 612 404
----- ------ ------ ---- ------
CASH AND CASH EQUIVALENTS, end of year.... $ 878 $ 612 $ 404 $849 $ 951
===== ====== ====== ==== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for--
Interest................................ $ 17 $ 90 $ 161 $ 27 $ 50
Income taxes............................ 55 340 831 290 532
</TABLE>

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

F-41
<PAGE>

UNION POWER CONSTRUCTION COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED TOTAL
------------- RETAINED HOLDING STOCKHOLDERS'
SHARES AMOUNT EARNINGS GAIN (LOSS) EQUITY
------ ------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, August 31, 1994...... 25 $25 $2,976 $ -- $3,001
Change in market value of
securities................. -- -- -- (70) (70)
Net income.................. -- -- 364 -- 364
--- --- ------ ---- ------
BALANCE, August 31, 1995...... 25 25 3,340 (70) 3,295
Change in market value of
securities................. -- -- -- 8 8
Net income.................. -- -- 1,112 -- 1,112
--- --- ------ ---- ------
BALANCE, August 31, 1996...... 25 25 4,452 (62) 4,415
Change in market value of
securities................. -- -- -- 6 6
Net income.................. -- -- 1,923 -- 1,923
--- --- ------ ---- ------
BALANCE, August 31, 1997...... 25 25 6,375 (56) 6,344
--- --- ------ ---- ------
Change in market value of
securities (unaudited)..... -- -- -- 12 12
Net income (unaudited)...... -- -- 736 -- 736
--- --- ------ ---- ------
BALANCE, November 30, 1997
(unaudited).................. 25 $25 $7,111 $(44) $7,092
=== === ====== ==== ======
</TABLE>

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

F-42
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Union Power Construction Company, a Colorado corporation (the Company or
Union), provides electrical power line installation, repair and maintenance
services for utilities throughout the western United States. The Company
performs the majority of its contract work under time and equipment contracts,
fixed price contracts and unit cost contracts with contract terms generally
ranging from one month to two years. The Company performs the majority of its
work in Colorado, Nevada and California.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

The interim financial statements for the three months ended November 30,
1996 and 1997 are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnote disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the
results for the entire fiscal year.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset. Depreciation
expense was $217,000, $486,000 and $577,000 for the years ended August 31,
1995, 1996 and 1997, respectively.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under a fixed price or cost-plus-fee contract. Such
contracts generally provide that the customer accept completion of progress to
date and compensate the Company for services which have been rendered,
measured typically in terms of units installed, hours expended or some other
measure of progress. Revenues from fixed price or cost-plus-fee contracts are
recognized on the percentage-of-completion method measured by the percentage
of costs incurred to date to total estimated costs for each contract. Contract
costs include all direct material, subcontractor and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Provisions for the total
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, estimated
profitability and final contract settlements may result in revisions to costs
and income, and their effects are recognized in the period in which the
revisions are determined.

F-43
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price or cost-plus-fee contracts will be due upon
completion of the contracts and acceptance by the customer. Based on the
Company's experience with similar contracts in recent years, the retention
balance at each balance sheet date will be collected within the subsequent
fiscal year.

The current asset "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The current liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.

Warranty Costs

For certain contracts, the Company generally warrants labor for one to two
years after project completion. An accrual for warranty costs is recorded
based upon the historical level of warranty claims and management's estimate
of future costs.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is deemed no
longer probable and an allowance based upon the level of accounts receivable
balances.

Income Taxes

The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes". Under this method, deferred assets and
liabilities are recorded for future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when
the underlying assets or liabilities are recovered or settled.

Collective Bargaining Agreement

The Company is a party to various collective bargaining agreements with
certain of its employees. The agreements require the Company to pay specified
wages and provide certain benefits to its union employees. These agreements
will expire at various times through 2005.

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. Reference is made to the
"Revenue Recognition" section of this footnote for discussion of significant
estimates reflected in the Company's financial statements.

New Accounting Pronouncements

Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Accordingly, in the event that facts and circumstances indicate that
property and equipment or other assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the estimated
future undiscounted cash flows

F-44
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

associated with the asset are compared to the asset's carrying amount to
determine if an impairment of such property is necessary. Adoption of this
standard did not have a material effect on the financial position or results
of operations of the Company.

SFAS No. 130, "Reporting Comprehensive Income", requires the presentation of
comprehensive income in an entity's 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. This statement will be adopted by the Company during fiscal year
1998.

3. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
ESTIMATED USEFUL --------------
LIVES IN YEARS 1996 1997
---------------- ------ -------
<S> <C> <C> <C>
Land..................................... -- $ 126 $ 126
Operating equipment and vehicles......... 5-10 9,440 10,497
Leasehold improvements................... 10 88 113
Office furniture and equipment........... 5 110 145
------ -------
9,764 10,881
Less--Accumulated depreciation and
amortization............................ 4,954 5,013
------ -------
Property and equipment, net.............. $4,810 $ 5,868
====== =======
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following (in
thousands):

<TABLE>
<CAPTION>
AUGUST 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade..................................... $1,750 $3,840
Accrued compensation and benefits........................... 456 1,300
Other accrued expenses...................................... 672 1,069
------ ------
$2,878 $6,209
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Costs incurred on contracts in progress.................. $15,529 $45,025
Estimated earnings, net of losses........................ 603 4,183
------- -------
16,132 49,208
Less--Billings to date................................... 16,132 49,453
------- -------
$ -- $ (245)
======= =======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... $ -- $ 77
Less--Billings in excess of costs and estimated earnings
on uncompleted contracts................................ -- (322)
------- -------
$ -- $ (245)
======= =======
</TABLE>

F-45
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. LONG-TERM DEBT:

In August 1995, the Company entered into a $300,000 secured installment loan
with a bank. The loan is due August 1999 and bears interest at 8.27 percent
with monthly payments of $7,400. Amounts outstanding under this loan were
$221,000 and $149,000 at August 31, 1996 and 1997, respectively. In November
1995, the Company entered into a $200,000 secured installment loan with a bank
for the purchase of construction equipment. This loan is due November 1999 and
bears interest at 8.22 percent with monthly payments of $5,000. At August 31,
1996 and 1997, $163,000 and $116,000, respectively, were outstanding under
this agreement.

The Company entered into a $1 million secured installment loan with a bank
in August 1996. The loan matures in April 2000 and bears interest at a rate of
8 percent with monthly payments due of $24,000. Amounts outstanding under this
agreement were $929,000 and $682,000 at August 31, 1996 and 1997,
respectively. In April 1997, the Company entered into a $360,000 installment
loan with a bank. This loan matures February 2001 with monthly payments of
$8,800 and an interest rate of 8.25 percent. There was $314,000 outstanding
under this arrangement at August 31, 1997.

The Company has established a $2 million secured revolving line of credit
with a bank effective August 1997. Borrowings under this facility bear
interest at a rate of prime, as defined, minus 1 percent for the first $1
million in borrowings and at prime for any balance over $1 million and are due
February 1998. Outstanding indebtedness under this facility was $150,000 and
$1,500,000 at August 31, 1997 and November 30, 1997, respectively.

The Company also has loans outstanding from certain stockholders or other
related parties totaling $277,000 and $456,000 at August 31, 1996 and 1997,
respectively. These loans bear interest at rates ranging from 7 percent to 9
percent and are due at various times from November 1997 to June 2001.

The loan agreement covering the bank line of credit contains various
covenants, including a minimum tangible net worth requirement, a minimum
working capital requirement and various financial ratios.

All of the Company's debt is secured by property and equipment. Two of the
Company's stockholders have personally guaranteed substantially all debt with
banks.

The maturities of long-term debt as of August 31, 1997, are as follows (in
thousands):

<TABLE>
<S> <C>
Year ending August 31--
1998............................................................. $ 791
1999............................................................. 588
2000............................................................. 406
2001............................................................. 82
------
$1,867
======
</TABLE>

6. LEASES:

Union leases its Denver office and facility from a company which is owned by
the Company's stockholders. The lease is renewable on a monthly basis at
Union's election. Rent paid under this related-party lease was approximately
$42,000 for each of the years ended August 31, 1995, 1996 and 1997.

The Company also leases its Las Vegas, Nevada, office and yard from two of
the Company's stockholders. The lease terminates in June 2006 and rent paid
was $19,000 and $56,000 for each of the years ended August 31, 1996 and 1997,
respectively.

F-46
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company also enters into various vehicle and construction equipment
operating leases. Vehicle lease terms are typically five years or less, and
construction equipment leases typically are short-term (one year or less).
Payments made for vehicle leases were $11,000, $19,000 and $149,000 for the
years ended August 31, 1995, 1996 and 1997, respectively.

Union rents various construction equipment under a one-year operating lease
from a company owned by two of Union's stockholders. Total related-party
equipment rental expense was $96,000 for the year ended August 31, 1997.

Future minimum lease payments under these noncancelable operating leases are
as follows (in thousands):

<TABLE>
<S> <C>
Year ending August 31--
1998............................................................. $ 343
1999............................................................. 248
2000............................................................. 240
2001............................................................. 188
2002............................................................. 56
Thereafter....................................................... 215
------
$1,290
======
</TABLE>

7. INCOME TAXES:

Federal and state income taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
----------------
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Federal--
Current................................................ $ 87 $358 $ 745
Deferred............................................... 116 251 303
State--
Current................................................ 15 64 160
Deferred............................................... 21 45 26
---- ---- ------
$239 $718 $1,234
==== ==== ======
</TABLE>

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 35 percent to income
(loss) before provision for income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
----------------
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Provision at the statutory rate......................... $211 $641 $1,106
Increase resulting from--
Permanent differences, mainly meals and entertainment. 5 7 7
State income tax, net of benefit for federal
deduction............................................ 23 70 121
---- ---- ------
$239 $718 $1,234
==== ==== ======
</TABLE>

F-47
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
AUGUST 31,
---------------
1996 1997
------ -------
<S> <C> <C>
Deferred income tax liabilities--
Property and equipment $ (843) $(1,257)
Other................................................. (347) (14)
------ -------
Total deferred income tax liabilities............... (1,190) (1,271)
Deferred income tax assets--
Property and equipment................................ 5 5
Other accruals not currently deductible............... 377 129
------ -------
Total deferred income tax assets.................... 382 134
Valuation allowance..................................... (5) (5)
------ -------
Total deferred income tax liabilities............... $ (813) $(1,142)
====== =======
</TABLE>

The net deferred tax assets and liabilities are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
---------------
1996 1997
------ -------
<S> <C> <C>
Deferred tax assets--
Current............................................... $ 377 $ 129
Long-term............................................. -- --
------ -------
Total............................................... 377 129
------ -------
Deferred tax liabilities--
Current............................................... (347) (14)
Long-term............................................. (843) (1,257)
------ -------
Total............................................... (1,190) (1,271)
------ -------
Net deferred income tax liabilities................. $ (813) $(1,142)
====== =======
</TABLE>

8. RELATED-PARTY TRANSACTIONS:

Note Receivable

The Company has loaned funds to various entities owned by the Company's
stockholders. Interest income under this arrangement was $15,000, $13,000 and
$3,000 for the years ended August 31, 1995, 1996 and 1997, respectively.

Rental Income

Union has from time to time leased or rented construction equipment on a
short-term basis to various related parties. Total rental revenue under these
arrangements was $4,000 for the year ended August 31, 1996.

F-48
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Management Fee Income

The Company also receives management fee income from a related-party owned
by two of Union's stockholders for financial and management services rendered.
Total payments received were $7,000, $13,000 and $9,000 for the years ended
August 31, 1995, 1996 and 1997.

9. EMPLOYEE BENEFIT PLAN:

In connection with its collective bargaining agreements with various
electrical, labor and operating engineer unions, the Company participates with
other companies in the various multiemployer pension plans. These plans cover
all of the Company's employees who are members of such unions. The Employee
Retirement Income Security Act of 1974, as amended by the Multi-Employer
Pension Plan Amendments Act of 1980, imposes certain liabilities upon
employers who are contributors to a multiemployer plan in the event of the
employer's withdrawal from, or upon termination of, such plan. The Company has
no plan to withdraw from these plans. The plans do not maintain information on
net assets and actuarial present value of the accumulated share of the plans'
unfunded vested benefits allocable to the Company, and amounts, if any, for
which the Company may be contingently liable are not ascertainable at this
time. Total contributions to these plans were approximately $1.2 million, $2.3
million and $2.9 million at August 31, 1995, 1996 and 1997, respectively.

The Company has a defined contribution profit-sharing plan for employees not
covered by a union bargaining agreement. The plan provides for the Company to
make discretionary contributions of up to 15 percent of an employee's salary.
Total contributions by the Company under the plan were approximately $127,000,
$130,000 and $155,000 for the years ended August 31, 1995, 1996 and 1997,
respectively.

10. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, available for sale securities, a line of credit, accounts
payable, notes payable and debt. The Company believes that the carrying value
of these instruments on the accompanying balance sheets approximates their
fair value.

11. COMMITMENTS AND CONTINGENCIES:

Litigation

The Company is involved in disputes or legal actions arising in the ordinary
course of business. Management does not believe the outcome of such legal
actions will have a material adverse effect on the Company's financial
position or results of operations.

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments which are personally
guaranteed by certain stockholders of the Company.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to three major
customers (comprising approximately 27 percent, 17 percent and 16 percent of
total sales), three major customers (comprising approximately 39 percent, 27
percent and 11 percent of total sales) and two major customers (comprising
approximately 40 percent and 34 percent of total sales) during the years ended
August 31, 1995, 1996 and 1997, respectively.

F-49
<PAGE>

UNION POWER CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company grants credit, generally without collateral, to its customers,
which are major public utilities, located primarily in the western United
States. Consequently, the Company is subject to potential credit risk related
to changes in business and economic factors within the region it operates.
However, management believes that its contract acceptance, billing and
collection policies are adequate to minimize the potential credit risk.

13. CONTRACT CLAIM:

In 1995, the Company received a $970,000 settlement from the Western Area
Power Administrator (WAPA). During the course of the project, the job was shut
down by WAPA for a protracted length of time due to an accident by an
unrelated contractor working on the same project. As a result, the Company
incurred significant idle crew time. The Company presented WAPA with a claim
for costs incurred by the Company for WAPA's actions and received the
settlement, which is included in 1995 revenues.

14. SUBSEQUENT EVENTS:

Construction Contract

In October 1997, the Company was awarded a major contract for construction
of 164 miles of electrical transmission lines and two substation facilities.
The contract requires substantial completion by December 1, 1998, and carries
significant penalties for work not being completed by the substantial
completion date. Work began in December 1997.

Debt

In November 1997, the Company entered into a $500,000 term loan agreement
due November 2001 with a bank for the purchase of construction equipment. The
loan bears interest at a rate of 8.5 percent and monthly principal and
interest payments of $12,300. The loan is secured by the equipment purchased.

15. SUBSEQUENT EVENTS TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

In December 1997, the Company amended its $2 million secured revolving line
of credit to increase total available borrowings under the facility to $3
million. The terms of the facility, including interest and maturity date,
remain unchanged. See discussion of the facility in Note 5.

In December 1997, the Company and its stockholders entered into a definitive
agreement with Quanta Services, Inc. ("Quanta"), providing for all outstanding
shares of the Company's common stock to be exchanged for cash and shares of
Quanta common stock concurrent with an initial public offering of additional
common stock by Quanta which closed in February 1998. In addition, the key
executives of the Company entered into employment agreements with the Company
and Quanta which have an initial term of three years and generally restricts
the disclosure of confidential information as well as competition with the
Company and Quanta for a period of five years following from the date of the
employment agreement. Reference is made to Note 1 of Quanta Services, Inc.
financial statements included elsewhere herein.

In connection with the acquisition, two of Company's stockholders purchased
certain nonoperating assets not used in the business at a price equal to the
net book value of such assets (approximately $183,000 at August 31, 1997).

F-50
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TRANS TECH Electric, Inc.:

We have audited the accompanying balance sheets of TRANS TECH Electric, Inc.,
an Indiana Subchapter S corporation, as of December 31, 1996 and 1997, and the
related statements of operations, cash flows and shareholders' equity for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TRANS TECH Electric, Inc., as
of December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 18, 1998

F-51
<PAGE>

TRANS TECH ELECTRIC, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997(1)
ASSETS ------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ 389 $ 155 $ 155
Accounts receivable--
Trade, net of allowance of $130 and
$199, respectively................. 4,484 5,744 5,744
Retainage........................... 1,822 1,554 1,554
Inventories........................... 610 808 808
Costs and estimated earnings in excess
of billings on uncompleted contracts. 1,853 3,619 3,619
Prepaid expenses and other current
assets............................... 66 63 63
------- ------- -------
Total current assets................ 9,224 11,943 11,943
PROPERTY AND EQUIPMENT, net............. 2,642 2,905 2,905
OTHER ASSETS............................ 3 3 3
------- ------- -------
Total assets........................ $11,869 $14,851 $14,851
======= ======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Note payable.......................... $ 797 $ 1,976 $ 1,976
Current maturities of long-term debt.. 107 80 80
Current portion of capital lease
obligations.......................... 285 415 415
Accounts payable and accrued expenses. 4,465 4,567 4,567
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ 728 96 96
------- ------- -------
Total current liabilities........... 6,382 7,134 7,134
LONG-TERM DEBT, net of current
maturities............................. 607 5,575 7,180
LONG-TERM CAPITAL LEASE OBLIGATIONS, net
of current obligations................. 467 474 474
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 1,000
shares authorized, 926 shares issued
and outstanding...................... 125 125 125
Retained earnings..................... 4,350 1,605 --
Treasury stock, 150 shares, at cost... (62) (62) (62)
------- ------- -------
Total shareholders' equity.......... 4,413 1,668 63
------- ------- -------
Total liabilities and shareholders'
equity............................. $11,869 $14,851 $14,851
======= ======= =======
</TABLE>
- --------
(1) The pro forma balance sheet column presented reflects the impact of Sub S
distributions. See Note 11 for further discussion.

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

F-52
<PAGE>

TRANS TECH ELECTRIC, INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES............................................. $21,397 $24,414 $32,817
COST OF SERVICES (including depreciation)............ 18,934 20,426 26,519
------- ------- -------
Gross profit....................................... 2,463 3,988 6,298
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......... 1,639 1,848 2,015
------- ------- -------
Income from operations............................. 824 2,140 4,283
------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense................................... (297) (313) (405)
Other, net......................................... 34 45 51
------- ------- -------
Other income (expense), net...................... (263) (268) (354)
------- ------- -------
NET INCOME........................................... $ 561 $ 1,872 $ 3,929
======= ======= =======
</TABLE>

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

F-53
<PAGE>

TRANS TECH ELECTRIC, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 561 $ 1,872 $ 3,929
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization................... 442 574 674
Gain on sale of property and equipment.......... (19) (31) (19)
Bad debt expense................................ 83 34 79
Changes in operating assets and liabilities-
(Increase) decrease in--
Accounts receivable............................ 827 (2,134) (1,071)
Inventories.................................... (254) 256 (198)
Costs and estimated earnings in excess of
billings on uncompleted contracts............. (241) 377 (1,766)
Prepaid expenses and other current assets...... (33) (7) 3
Increase (decrease) in--
Accounts payable and accrued expenses.......... (878) 1,359 103
Billings in excess of costs and estimated
earnings on uncompleted contracts............. (141) 583 (632)
-------- ------- --------
Net cash provided by operating activities..... 347 2,883 1,102
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.... 46 69 105
Additions of property and equipment............. (1,180) (923) (1,023)
-------- ------- --------
Net cash used in investing activities......... (1,134) (854) (918)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on line of credit... 1,139 (2,283) 1,178
Proceeds from long-term debt.................... 537 1,185 5,507
Payments of long-term debt...................... (148) (477) (429)
Distributions to shareholders................... (457) (542) (6,674)
-------- ------- --------
Net cash provided by (used in) financing
activities................................... 1,071 (2,117) (418)
-------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 284 (88) (234)
CASH AND CASH EQUIVALENTS, beginning of period.... 193 477 389
-------- ------- --------
CASH AND CASH EQUIVALENTS, end of period.......... $ 477 $ 389 $ 155
======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 310 $ 297 $ 405
</TABLE>

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

F-54
<PAGE>

TRANS TECH ELECTRIC, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------- RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT EARNINGS STOCK EQUITY
------ ------ -------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994........ 926 $125 $ 2,916 $(62) $ 2,979
Distributions to shareholders... -- -- (457) -- (457)
Net income...................... -- -- 561 -- 561
--- ---- ------- ---- -------
BALANCE, December 31, 1995........ 926 125 3,020 (62) 3,083
Distributions to shareholders... -- -- (542) -- (542)
Net income...................... -- -- 1,872 -- 1,872
--- ---- ------- ---- -------
BALANCE, December 31, 1996........ 926 125 4,350 (62) 4,413
Distributions to shareholders... -- -- (6,674) -- (6,674)
Net income...................... -- -- 3,929 -- 3,929
--- ---- ------- ---- -------
BALANCE, December 31, 1997........ 926 $125 $ 1,605 $(62) $ 1,668
=== ==== ======= ==== =======
</TABLE>

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

F-55
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

TRANS TECH Electric, Inc., an Indiana Subchapter S corporation (the
Company), focuses on providing traffic signals, street and sign lighting
installation and general commercial and industrial electrical construction
primarily for commercial, state and regulatory entities. The Company performs
the majority of its contract work under fixed price contracts, unit-price and
fixed price contracts modified by penalty provisions, with contract terms
generally ranging from six to 18 months. The Company performs the majority of
its work in Indiana and Michigan.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Supplemental Cash Flow Information

The Company had noncash investing and financing activities related to
capital leases and equipment acquired by seller financing of approximately
$621,000, $485,000 and $457,000 for the years ended December 31, 1995, 1996
and 1997, respectively.

Inventories

Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
last-in, first-out (LIFO) method. The excess of current costs over the
carrying value of LIFO inventories was $105,000 and $146,000 at December 31,
1996 and 1997, respectively.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
deemed probable and an allowance based upon the level of total accounts
receivable balances.

Property and Equipment

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset. Depreciation
expense was $442,000, $574,000 and $674,000 for the years ended December 31,
1995, 1996 and 1997, respectively.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under a fixed price contract. Such contracts generally
provide that the customer accept completion of progress to date and compensate
the Company for services which have been rendered, measured typically in terms
of units

F-56
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

installed, hours expended or some other measure of progress. Revenues from
fixed price contracts are recognized on the percentage-of-completion method
measured by the percentage of costs incurred to date to total estimated costs
for each contract. Contract costs include all direct material, labor and
subcontract costs and those indirect costs related to contract performance,
such as indirect labor, supplies, tools, repairs and depreciation costs.
Provisions for the total estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance,
job conditions, estimated profitability and final contract settlements may
result in revisions to costs and income, and their effects are recognized in
the period in which the revisions are determined.

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience
with similar contracts in recent years, the retention balance at each balance
sheet date will be collected within the subsequent fiscal year.

Warranty Costs

For certain contracts, the Company warrants labor for the first year after
installation of new electrical systems. An accrual for warranty costs is
recorded based upon the historical level of warranty claims and management's
estimate of future costs.

Income Taxes

The Company has elected S corporation status as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal
purposes. Under S corporation status, the shareholders report their shares of
the Company's taxable earnings or losses in their personal tax returns. The
Company will terminate its S corporation status concurrently with the
effective date of the IPO (see Note 11).

Collective Bargaining Agreements

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. Reference is made to the
"Revenue Recognition" section of this footnote and Note 9 for discussion of
certain estimates reflected in the Company's financial statements.

New Accounting Pronouncement

F-57
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if an impairment of such property is necessary.
Adoption of this standard did not have a material effect on the financial
position or results of operations of the Company.

3. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES --------------
IN YEARS 1996 1997
------------ ------ ------
<S> <C> <C> <C>
Operating equipment and vehicles............ 5-7 $3,957 $4,653
Leasehold improvements...................... 10-31 384 384
Office furniture and equipment.............. 5 317 285
------ ------
4,658 5,322
Less-Accumulated depreciation and
amortization............................... (2,016) (2,417)
------ ------
Property and equipment, net............... $2,642 $2,905
====== ======
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade.................................... $3,702 $3,765
Accrued compensation and benefits.......................... 340 341
Other accrued expenses..................................... 423 461
------ ------
$4,465 $4,567
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Costs incurred on contracts in progress.................... $9,178 $9,696
Estimated earnings, net of losses.......................... 1,630 2,138
------ ------
10,808 11,834
Less-Billings to date...................................... 9,683 8,311
------ ------
$1,125 $3,523
====== ======
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $1,853 $3,619
Less-Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... 728 96
------ ------
$1,125 $3,523
====== ======
</TABLE>

F-58
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. DEBT:

The Company has a $5 million line of credit agreement with a bank bearing
interest at the national prime rate. The line of credit is collateralized by
the Company's receivables, inventory, property and equipment. The Company's
weighted average interest rate for the facility was 8.4 percent and 8.5
percent as of December 31, 1996 and 1997, respectively. At December 31, 1996
and 1997, the outstanding balance on this facility was $797,000 and
$1,976,000, respectively, and is payable upon demand.

The Company's debt obligations consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER
31,
-----------
1996 1997
---- ------
<S> <C> <C>
Note payable to bank, due in November 2000 with interest only
payments until that date, interest due at 8.0%.................... $ -- $5,050
Note payable to bank, 8.2% and 8.6% weighted average interest rate,
respectively, due $10,000 monthly with final maturity on May 1,
2001.............................................................. 663 597
Note payable to commercial finance company, 8.1% interest rate,
$3,871 due monthly with final maturity on March 1, 1998........... 51 8
---- ------
714 5,655
Less-Current maturities............................................ 107 80
---- ------
Total long-term debt............................................... $607 $5,575
==== ======
</TABLE>

The long-term debt is secured by the Company's receivables, inventory,
property and equipment and is guaranteed by the Company's principal
shareholders. The line of credit and notes payable to the bank are subject to
certain financial reporting and financial ratio requirements. At December 31,
1997, the Company was in violation of its minimum debt to net worth ratio due
to the distribution of the Company's retained earnings (see Note 11). The
Company has received a waiver, effective through January 1, 1999, from the
bank for this violation.

The maturities of long-term debt as of December 31, 1997, are as follows (in
thousands):

<TABLE>
<S> <C>
Year ending December 31--
1998............................................................. $ 80
1999............................................................. 79
2000............................................................. 5,135
2001............................................................. 361
</TABLE>

6. LEASES:

The Company leases its office and warehouse space from an entity owned
principally by the Company's shareholders. The lease expires in June 2000 and
requires the Company to pay all taxes, insurance and maintenance on the
property. In November 1997, the Company amended the lease agreement. The
amended lease will begin on February 1, 1998 for a term of five years. The
Company has the option to renew the lease for an additional five years at a
current market value rent. The rent paid on this related-party lease was
approximately $49,000, $59,000 and $59,000 for the years ended December 31,
1995, 1996 and 1997, respectively.

F-59
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company leases various equipment under noncancelable sale-leaseback
capital leases and the leased assets are included as part of "Property and
equipment." Details of the capital leased assets are as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Operating equipment and vehicles.......................... $1,022 $1,442
Less--Accumulated depreciation............................ (194) (357)
------ ------
Net capitalized leased assets............................. $ 828 $1,085
====== ======
</TABLE>

At December 31, 1997, the future minimum lease payments under operating and
capital leases are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1998.................................................... $ 70 $ 486
1999.................................................... 71 322
2000.................................................... 71 197
2001.................................................... 71 --
2002.................................................... 71 --
Thereafter.............................................. 6 --
---- -----
Total................................................. $360 1,005
Less-Amount representing interest....................... (116)
-----
Present value of minimum lease payments................. 889
Less-Current maturities................................. (415)
-----
Long-term obligations................................... $ 474
=====
</TABLE>

7. EMPLOYEE BENEFIT PLAN:

In connection with its collective bargaining agreements with various
electrical, labor and operating engineer unions, the Company participates with
other companies in the unions' multiemployer pension plans. These plans cover
all of the Company's employees who are members of such unions. The Employee
Retirement Income Security Act of 1974, as amended by the Multi-Employer
Pension Plan Amendments Act of 1980, imposes certain liabilities upon
employers who are contributors to a multiemployer plan in the event of the
employer's withdrawal from, or upon termination of, such plan. The Company has
no plan to withdraw from these plans. The plans do not maintain information on
net assets and actuarial present value of the accumulated share of the plan's
unfunded vested benefits allocable to the Company, and amounts, if any, for
which the Company may be contingently liable are not ascertainable at this
time. Total contributions to the plans were approximately $403,000, $474,000
and $606,000 for the years ended December 31, 1995, 1996, 1997, respectively.

The Company has a defined contribution profit-sharing plan. The plan
provides for the Company to match one-half of employee contributions to the
plan up to a maximum of $3,500 per year per employee. Total contributions by
the Company under the plan were approximately $31,000, $30,000 and $23,000 for
the years ended December 31, 1995, 1996 and 1997, respectively. The Company
may also make discretionary contributions. The Company made discretionary
contributions of $44,000, $70,000 and none for the years ended December 31,
1995, 1996 and 1997, respectively.

F-60
<PAGE>

TRANS TECH ELECTRIC, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, a line of credit, accounts payable, notes payable and
debt. The Company believes that the carrying value of these instruments on the
accompanying balance sheets approximates their fair value.

9. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including workers'
compensation, business auto liability, general liability and an umbrella
policy. The Company is self-insured for medical claims up to $5,000 per year
per covered individual. The Company has recorded accruals for its estimated
portion of self-insured claims based on estimated claims incurred through
December 31, 1995, 1996 and 1997.

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments which are personally
guaranteed by certain shareholders of the Company.

10. MAJOR CUSTOMERS AND RISK CONCENTRATION:

During 1995 and 1996, one customer accounted for 17 percent and 21 percent
of the Company's revenue, respectively. During 1997, two customers accounted
for 23 percent and 11 percent of the Company's revenues, respectively.

The Company grants credit, generally without collateral, to its customers,
which include real estate operators, general contractors and state and
regulatory agencies, located primarily in Indiana and Michigan. Consequently,
the Company is subject to potential credit risk related to changes in business
and economic factors within Indiana and Michigan. However, management believes
that its contract acceptance, billing and collection policies are adequate to
minimize the potential credit risk.

11. SUBSEQUENT EVENTS:

In December 1997, the Company and its shareholders entered into a definitive
agreement with Quanta Services, Inc. ("Quanta"), providing for all outstanding
shares of the Company's common stock to be exchanged for cash and shares of
Quanta common stock, concurrent with an initial public offering of additional
common stock by Quanta which closed in February 1998. In addition, two
executives of the Company entered into employment agreements with the Company
and Quanta which have an initial term of three years and generally restricts
the disclosure of confidential information as well as restricts competition
with the Company and Quanta for a period of five years from the date of the
employment agreement. Reference is made to Note 1 of Quanta Services, Inc.
financial statements included elsewhere herein.

Prior to the closing of the transaction discussed above, the Company made a
distribution of approximately $1,605,000. The Company funded the distribution
through bank borrowings.

F-61
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Potelco, Inc.:

We have audited the accompanying balance sheets of Potelco, Inc., a Washington
Subchapter S corporation, as of December 31, 1996 and 1997, and the related
statements of operations, cash flows and stockholder's equity for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Potelco, Inc., as of December
31, 1996 and 1997, and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 18, 1998

F-62
<PAGE>

POTELCO, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997(1)
ASSETS ------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ 36 $ 107 $ 107
Accounts receivable--
Trade, net of allowance of $15 and
$103 respectively.................... 2,987 5,002 5,002
Retainage............................. 902 546 546
Costs and estimated earnings in excess
of billings on uncompleted contracts. 117 532 532
Prepaid expenses and other current
assets............................... 25 -- --
------ ------ ------
Total current assets................ 4,067 6,187 6,187
PROPERTY AND EQUIPMENT, net............. 2,679 3,778 3,778
------ ------ ------
Total assets........................ $6,746 $9,965 $9,965
====== ====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Note payable to bank.................. $ 550 $1,095 $3,095
Note payable to stockholder........... 109 10 10
Current maturities of long-term debt.. 445 589 589
Current portion of note payable to
related party........................ 216 1,033 1,033
Accounts payable and accrued expenses. 1,839 2,224 2,224
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ 139 72 72
------ ------ ------
Total current liabilities........... 3,298 5,023 7,023
LONG-TERM DEBT, net of current
maturities--
Note payable to related party......... 863 -- --
Other long-term debt.................. 537 928 928
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $5 par value, 10,000
shares authorized, 22 shares issued
and 2 shares outstanding............. -- -- --
Additional paid-in capital............ 160 160 160
Retained earnings..................... 1,888 3,854 1,854
------ ------ ------
Total stockholder's equity.......... 2,048 4,014 2,014
------ ------ ------
Total liabilities and stockholder's
equity............................. $6,746 $9,965 $9,965
====== ====== ======
</TABLE>
- --------
(1) The pro forma balance sheet column presented reflects the impact of Sub S
distributions. See Note 13 for further discussion.

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

F-63
<PAGE>

POTELCO, INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
REVENUES...................................................... $14,549 $19,220
COST OF SERVICES (including depreciation)..................... 12,946 15,563
------- -------
Gross profit................................................ 1,603 3,657
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................. 971 1,478
------- -------
Income from operations...................................... 632 2,179
------- -------
OTHER INCOME (EXPENSE):
Interest expense............................................ (321) (202)
Other, net.................................................. (123) (11)
------- -------
Other income (expense), net............................... (444) (213)
------- -------
NET INCOME.................................................... $ 188 $ 1,966
======= =======
</TABLE>

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

F-64
<PAGE>

POTELCO, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1996 1997
----- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 188 $1,966
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation.................................................. 473 506
Loss on sale of property and equipment........................ 129 14
Changes in operating assets and liabilities--
(Increase) decrease in--
Accounts receivable........................................ 208 (1,659)
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... 79 (415)
Prepaid expenses and other current assets.................. (16) 25
Increase (decrease) in--
Accounts payable and accrued expenses...................... (611) 385
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (371) (67)
----- ------
Net cash provided by operating activities................. 79 755
----- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.................. 60 52
Additions to property and equipment........................... (322) (1,671)
----- ------
Net cash used in investing activities..................... (262) (1,619)
----- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in note payable to bank.......................... 250 545
Net decrease in note payable to stockholder................... (8) (99)
Payments of note payable to related party..................... (45) (46)
Payments of other long-term debt.............................. (437) (567)
Proceeds from other long-term debt............................ 50 1,102
Distributions to stockholder.................................. (101) --
----- ------
Net cash provided by (used in) financing activities....... (291) 935
----- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (474) 71
CASH AND CASH EQUIVALENTS, beginning of period.................. 510 36
----- ------
CASH AND CASH EQUIVALENTS, end of period........................ $ 36 $ 107
===== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................................ $ 328 $ 215
</TABLE>

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

F-65
<PAGE>

POTELCO, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31,
1995..................... 2 $ -- $160 $1,801 $1,961
Distributions to
stockholder............ -- -- -- (101) (101)
Net income.............. -- -- -- 188 188
--- ---- ---- ------ ------
BALANCE, December 31,
1996..................... 2 -- 160 1,888 2,048
Net income.............. -- -- -- 1,966 1,966
--- ---- ---- ------ ------
BALANCE, December 31,
1997..................... 2 $ -- $160 $3,854 $4,014
=== ==== ==== ====== ======
</TABLE>

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

F-66
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Potelco, Inc., a Washington Subchapter S corporation (the Company), focuses
on providing underground and overhead power and telephone cable installation
primarily under commercial, industrial and governmental contracts. The Company
performs the majority of its contract work in Washington under lump-sum, cost-
plus and unit-priced contracts, with contract terms generally ranging from 30
days to 18 months.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Supplemental Cash Flow Information

The Company had noncash investing and financing activities related to
capital leases of approximately $374,000 and $378,000 during the years ended
December 31, 1996 and 1997, respectively.

Accounts Receivable and Provision for Doubtful Accounts

Property and Equipment

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset. Depreciation
expense was approximately $473,000 and $506,000 for the years ended December
31, 1996 and 1997, respectively.

Revenue Recognition

The Company recognizes revenue when services are performed except when work
is being performed under fixed price or cost-plus-fee contracts. Such
contracts generally provide that the customer accept completion of progress to
date and compensate the Company for services which have been rendered,
measured typically in terms of units installed, hours expended or some other
measure of progress. Revenues from fixed price contracts are recognized on the
percentage-of-completion method measured by the percentage of costs incurred
to date to total estimated costs for each contract. Revenues from cost-plus-
fee contracts are recognized on the basis of costs incurred during the year,
plus the fee earned, and are measured by the cost-to-cost method. Contract
costs include all direct material and labor costs and those indirect costs
related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation costs.

Provisions for the total estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in job performance,
job conditions, estimated profitability and final contract

F-67
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

settlements may result in revisions to costs and income, and their effects are
recognized in the period in which the revisions are determined.

The balances billed but not paid by customers pursuant to retainage
provisions in fixed price or cost plus fee contracts will be due upon
completion of the contracts and acceptance by the customer. Based on the
Company's experience with similar contracts in recent years, the retention
balance at each balance sheet date will be collected within the subsequent
fiscal year.

The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.

Warranty Costs

For certain contracts, the Company generally warrants labor for the first
year after completion of the installation. An accrual for warranty costs is
recorded based upon the historical level of warranty claims and management's
estimate of future costs.

Income Taxes

Collective Bargaining Agreements

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. Reference is made to the
"Revenue Recognition" section of this footnote for discussion of significant
estimates reflected in the Company's financial statements.

New Accounting Pronouncement

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". Accordingly, in the event
that facts and circumstances indicate that property and equipment or other
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset are compared to the asset's carrying amount to
determine if an impairment of such property is necessary. Adoption of this
standard did not have a material effect on the financial position or results
of operations of the Company.

F-68
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES --------------
IN YEARS 1996 1997
------------ ------ ------
<S> <C> <C> <C>
Operating equipment and vehicles............. 5-10 $5,279 $6,607
Office equipment, furniture and fixtures..... 5 99 116
Leasehold improvements....................... 5 184 210
------ ------
Total cost................................. 5,562 6,933
Less-Accumulated depreciation................ (2,883) (3,155)
------ ------
Property and equipment, net................ $2,679 $3,778
====== ======
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accounts payable, trade.................................... $1,117 $ 881
Accrued compensation and benefits.......................... 149 479
Other accrued expenses..................................... 573 864
------ ------
$1,839 $2,224
====== ======
</TABLE>

Contracts in progress are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Costs incurred on contracts in progress.................. $1,147 $3,386
Estimated earnings, net of losses........................ 782 1,125
------ ------
1,929 4,511
Less-Billings to date.................................... (1,951) (4,051)
------ ------
$ (22) $ 460
====== ======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................... $ 117 $ 532
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... (139) (72)
------ ------
$ (22) $ 460
====== ======
</TABLE>

5. NOTE PAYABLE TO BANK:

The note payable to bank as of December 31, 1996, represents borrowings
under a revolving credit agreement maturing April 30, 1997. Borrowings are
based on percentages of contract billings and are secured by substantially all
of the Company's assets. This agreement provides for a total credit limit of
$800,000, of which $550,000, had been drawn at December 31, 1996, and requires
monthly interest payments of prime plus .75 percent.

F-69
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

On May 2, 1997, the Company entered into revolving credit agreements with a
bank maturing May 1, 1998. The agreements provide for total credit limits of
$1,000,000 and $400,000, and require monthly interest payments of prime (8.5
percent at December 31, 1997) plus .75 percent beginning June 1, 1997. On
October 1, 1997, the $1,000,000 revolving credit agreement was amended to
increase the credit limit to $1,500,000, of which approximately $1,095,000 had
been drawn at December 31, 1997.

The notes payable outstanding as of December 31, 1996 and 1997, related to
the revolving credit agreements contain several ratio and covenant
requirements, including a minimum working capital ratio and a debt to net
worth restriction. Furthermore, these notes are guaranteed by the stockholder.
The Company was in compliance with these requirements for the years ended
December 31, 1996 and 1997.

6. LONG-TERM DEBT AND CAPITAL LEASES:

Long-term debt and capital leases consist of the following:

<TABLE>
<CAPTION>
DECEMBER
31,
------------
1996 1997
----- -----
<S> <C> <C>
Notes payable to a third party due in monthly installments
aggregating approximately $10,000 including interest ranging
from 7.9% to 11%, collateralized by equipment.................. $ 263 $ 434
Note payable to a bank due in monthly installments of
approximately $6,000 including interest at prime plus .75,
collateralized by equipment.................................... -- 289
Notes payable to a third party due in monthly installments
aggregating approximately $12,000 plus interest at 10%,
collateralized by equipment.................................... 128 116
Notes payable to a third party due in monthly installments of
approximately $800 plus interest at 10.27%, collateralized by
equipment...................................................... 21 13
Obligations under capital leases................................ 570 665
----- -----
982 1,517
Less-Current maturities of long-term debt....................... (445) (589)
----- -----
Other long-term debt............................................ $ 537 $ 928
===== =====
</TABLE>

Future required principal payments on long-term debt (excluding capital
leases) as of December 31, 1997, over the next five years and are as follows
(in thousands):

<TABLE>
<S> <C>
Year ending December 31, 1997--
1998.............................................................. $303
1999.............................................................. 200
2000.............................................................. 134
2001.............................................................. 146
2002.............................................................. 69
</TABLE>

The $400,000 revolving credit agreement was terminated during the fourth
quarter of 1997 and the balance ($289,000 at December 31, 1997) was converted
to a long-term note payable to the bank.

F-70
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company has entered into noncancelable lease agreements with third-party
leasing companies for the acquisition of trucks and equipment. The required
lease payments, including interest at varying rates implicit in the leases, as
of December 31, 1997, over the next four years are as follows (in thousands):

<TABLE>
<S> <C>
Twelve months ending December 31--
1998.............................................................. $313
1999.............................................................. 244
2000.............................................................. 152
2001.............................................................. 34
----
Net minimum lease payments........................................ 743
Less amount representing interest................................. (78)
----
Present value of net minimum lease payments....................... $665
Less-Current maturities........................................... (286)
----
Long-term obligations............................................. $379
====
</TABLE>

7. RELATED-PARTY NOTES PAYABLE:

The Company entered into a debt agreement with the father of the Company's
sole stockholder for approximately $1,163,000, as amended. The agreement
stipulates that the note will accrue interest at 8 percent, with required
monthly payments including interest and principal of at least $10,000. The
note is scheduled to mature on December 1, 2014. The balance outstanding was
approximately $1,079,000 and $1,033,000 as of December 31, 1996 and 1997,
respectively.

The Company's sole stockholder advanced funds to the Company totaling
$200,000 to provide short-term liquidity during 1994. The interest rate on the
advance is based on a blended annual rate, which is approximately 6.35 percent
as of December 31, 1996 and 1997, respectively. Amounts due totaled
approximately $109,000 and $10,000 as of December 31, 1996 and 1997,
respectively.

All related party debt is classified as current as of December 31, 1997,
based upon the Company's intent to repay such amounts during 1998.

8. RELATED-PARTY LEASES:

The Company leases a facility from the father of the Company's sole
stockholder for a monthly rental of $2,000 plus annual property taxes. The
lease is month-to-month, with no termination date.

The Company also leases a facility from its sole stockholder at a monthly
rental of $2,800 plus annual property taxes. The lease is month-to-month, with
no termination date.

Lease payments on the above facilities aggregated approximately $58,000 for
each of the years ended December 31, 1996 and 1997, respectively.

9. EMPLOYEE BENEFIT PLANS:

F-71
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

withdrawal from, or upon termination of, such plan. The Company has no plans
to withdraw from these plans. The plans do not maintain information on net
assets and actuarial present value of the accumulated share of the plan's
unfunded vested benefits allocable to the Company, and amounts, if any, for
which the Company may be contingently liable are not ascertainable at this
time. Total contributions to the plans were approximately $246,000 and
$352,000 for the years ended December 31, 1996 and 1997, respectively.

The Company has two retirement plans covering all employees not included in
a collective bargaining unit. These noncontributory plans consist of a money
purchase pension plan and a profit-sharing plan. The money purchase pension
plan requires Company contributions equal to 10 percent of the covered
salaries. Contributions to this plan totaled approximately $27,000 and $35,000
for the years ended December 31, 1996 and 1997, respectively. The Company made
discretionary contributions to the profit-sharing plan of approximately
$14,000 and $49,000 for the years ended December 31, 1996 and 1997,
respectively. In addition, during the year December 31, 1997, the Company
accrued $228,000 related to employee bonuses that are anticipated to be paid
subsequent to December 31, 1997.

10. FINANCIAL INSTRUMENTS:

11. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, general liability, workers' compensation and an umbrella
policy.

Performance Bonds

In certain circumstances, the Company is required to provide performance
bonds in connection with its contract commitments which are personally
guaranteed by certain stockholders of the Company.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

During the year ended December 31, 1996, three customers accounted for 36
percent, 20 percent and 12 percent of the Company's revenues, respectively.
During the year ended December 31, 1997, three customers accounted for 34
percent, 16 percent and 7 percent of the Company's revenues, respectively.

The Company grants credit, generally without collateral, to its customers,
which are located primarily in the northwestern United States. Consequently,
the Company is subject to potential credit risk related to changes in business
and economic factors within this region. However, management believes that its
contract acceptance, billing and collection policies are adequate to minimize
the potential credit risk.

F-72
<PAGE>

POTELCO, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

13. SUBSEQUENT EVENTS:

In December 1997, the Company and its stockholder entered into a definitive
agreement with Quanta Services, Inc. ("Quanta"), subject to certain conditions
pursuant to which all outstanding shares of the Company's common stock would
be exchanged for cash and shares of Quanta common stock, concurrent with an
initial public offering of additional common stock by Quanta which closed in
February 1998. In addition, the key executives of the Company entered into
employment agreements with the Company and Quanta which have an initial term
of three years, and generally restricts the disclosure of confidential
information as well as restricts competition with the Company and Quanta for a
period of five years following termination of employment. Reference is made to
Note 1 of Quanta Services, Inc. financial statements included elsewhere
herein.

Prior to the closing of the transaction noted above, the Company made a Sub
S distribution of approximately $2.0 million representing substantially all of
the previously-taxed undistributed earnings through December 31, 1997. The
Company funded the distribution through borrowings.

F-73
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Spalj Construction Company:

We have audited the accompanying balance sheet of Spalj Construction Company
(a Minnesota Subchapter S Corporation) as of December 31, 1997, and the
related statements of operations, cash flows and shareholders' equity for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spalj Construction Company as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 1, 1998

F-74
<PAGE>

SPALJ CONSTRUCTION COMPANY

BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31,
1997 1997(1)
ASSETS ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 3,251 $ 3,251
Accounts receivable--
Trade, net of allowance of $100.................. 2,788 2,788
Retainage........................................ 1,429 1,429
Note receivable due from affiliate................. 125 125
Costs and estimated earnings in excess of billings
on uncompleted contracts.......................... 556 556
Prepaid expenses and other current assets.......... 262 262
------- -------
Total current assets............................. 8,411 8,411
PROPERTY AND EQUIPMENT, net.......................... 2,349 2,349
------- -------
Total assets..................................... $10,760 $10,760
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............. $ 1,947 $ 5,526
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 142 142
------- -------
Total current liabilities........................ 2,089 5,668
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 400 shares authorized,
62 shares issued and outstanding.................. 21 21
Additional paid-in capital......................... 226 226
Retained earnings.................................. 8,424 4,845
------- -------
Total shareholders' equity....................... 8,671 5,092
------- -------
Total liabilities and shareholders' equity....... $10,760 $10,760
======= =======
</TABLE>
- --------
(1) The pro forma balance sheet column presented reflects the impact of
Subchapter S Corporation distributions. See Note 12 for further
discussion.

The accompanying notes are an integral part of this financial statement.

F-75
<PAGE>

SPALJ CONSTRUCTION COMPANY

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUES............................................................... $21,492
COST OF SERVICES, including depreciation............................... 15,099
-------
Gross profit......................................................... 6,393
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................... 1,145
-------
Income from operations............................................... 5,248
OTHER INCOME (EXPENSE), net............................................ 115
-------
INCOME BEFORE PROVISION FOR INCOME TAXES............................... 5,363
PROVISION FOR INCOME TAXES............................................. 14
-------
NET INCOME............................................................. $ 5,349
=======
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-76
<PAGE>

SPALJ CONSTRUCTION COMPANY

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS)

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 5,349
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization....................................... 537
Loss on sale of property and equipment.............................. 13
Changes in operating assets and liabilities-
Decrease (increase) in--
Accounts receivable................................................ (2,205)
Note receivable due from affiliate................................. 125
Costs and estimated earnings in excess of billings on uncompleted
contracts......................................................... (446)
Prepaid expenses and other current assets.......................... (183)
Increase (decrease) in--
Accounts payable and accrued expenses.............................. 1,295
Billings in excess of costs and estimated earnings on uncompleted
contracts......................................................... (333)
-------
Net cash provided by operating activities......................... 4,152
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment........................ 16
Additions of property and equipment................................. (981)
Other............................................................... 19
-------
Net cash used in investing activities............................. (946)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders....................................... (3,852)
-------
Net cash used in financing activities............................. (3,852)
-------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................. (646)
CASH AND CASH EQUIVALENTS, beginning of year.......................... 3,897
-------
CASH AND CASH EQUIVALENTS, end of year................................ $ 3,251
=======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid................................................... $ 3
=======
Interest paid....................................................... $ --
=======
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-77
<PAGE>

SPALJ CONSTRUCTION COMPANY

STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996..... 62 $21 $226 $ 6,927 $ 7,174
Net income................... -- -- -- 5,349 5,349
Distributions to
shareholders................ -- -- -- (3,852) (3,852)
--- --- ---- ------- -------
BALANCE, December 31, 1997..... 62 $21 $226 $ 8,424 $ 8,671
=== === ==== ======= =======
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-78
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Spalj Construction Company (the Company), a Minnesota Subchapter S
Corporation located in Deerwood, Minnesota, is primarily engaged in the
installation of telephone fiber optic lines and buried cables in the
continental United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts when collection is
considered doubtful.

Property and Equipment

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset. Depreciation and
amortization expense was approximately $537,000 for the year ended December
31, 1997.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated over its
estimated life. Upon retirement or disposition of property and equipment, the
cost and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is recognized in the statement of operations.

Revenue Recognition

The Company generally recognizes revenue as services are performed. The
Company's contracts generally provide that the customer accept completion of
progress to date and compensate the Company for services rendered. Measurement
is typically in terms of units installed or some other measure of progress.
Revenues are recognized using the percentage-of-completion method measured by
the percentage of costs incurred to date to the total estimated costs for each
contract. Contract costs include all direct material, direct labor,
subcontract costs and indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs and depreciation costs. Provisions
for the total estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result
in revisions to contract costs and income. The resulting effects are
recognized in the period in which the revisions are determined.

Accounts receivable billed but not paid by customers pursuant to contract
retainage provisions is due upon completion of the contract and acceptance by
the customer. Based on the Company's experience with similar contracts in
recent years, the retainage balance as of the balance sheet date will be
collected within the subsequent fiscal year.

F-79
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Warranty Costs

As provided in its contracts, the Company generally warrants labor for the
first year after completion and acceptance of the work by the customer. An
accrual for warranty costs is recorded based upon the historical level of
warranty claims and management's estimate of future costs.

Income Taxes

The Company has elected S Corporation status as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal
purposes. Under S Corporation status, the shareholders report their shares of
the Company's taxable earnings or losses in their personal tax returns.

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
and 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 may differ from those estimates. Reference is
made to the "Revenue Recognition" section of this footnote and Note 8 for
discussion of certain estimates reflected in the Company's financial
statements.

New Accounting Pronouncement

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of". Accordingly, in the
event that facts and circumstances indicate that property and equipment or
other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted
cash flows associated with the asset are compared to the asset's carrying
amount to determine if an impairment of such property is necessary. Adoption
of this standard did not have a material effect on the financial position or
results of operations of the Company.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following as of December 31, 1997 (in
thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C> <C>
Buildings and leasehold improvements................. 7-31.5 $ 115
Operating equipment and vehicles..................... 3-7 5,375
Office equipment, furniture and fixtures............. 7 154
------
5,644
Less--Accumulated depreciation and amortization...... (3,295)
------
Property and equipment, net........................ $2,349
======
</TABLE>

F-80
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following as of
December 31, 1997 (in thousands):

<TABLE>
<S> <C>
Accounts payable, trade........................................... $1,711
Accrued compensation and other expenses........................... 236
------
$1,947
======
</TABLE>

Contracts in progress are as follows as of December 31, 1997 (in thousands):

<TABLE>
<S> <C>
Costs incurred on contracts in progress.......................... $6,761
Estimated earnings, net of losses................................ 1,733
------
8,494
Less--Billings to date........................................... 8,080
------
$ 414
======
Costs and estimated earnings in excess of billings on uncompleted
contracts....................................................... $ 556
Less--Billings in excess of costs and estimated earnings on
uncompleted contracts........................................... (142)
------
$ 414
======
</TABLE>

5. LEASES:

Operating Leases

The Company rents various pieces of equipment and warehouse space near its
job sites under several operating lease agreements on a month-to-month basis.
The rent paid under these lease agreements was approximately $198,000 for the
year ended December 31, 1997.

The Company also leases certain management vehicles on a longer-term basis.
The total future minimum lease payments under these noncancelable operating
leases are $12,000 for 1998.

6. INCOME TAXES:

According to the Internal Revenue Service, certain S Corporations are
responsible for a tax on the "built-in gain" realized on the sale of an asset
that existed at the time a company changes its status from a C Corporation.
The Company had previously elected S Corporation status effective April 1,
1994. Of the Company's provision for income taxes for the year ended December
31, 1997, $9,000 is a result of these taxes, and the remaining $5,000 relates
to tax imposed by certain states in which the Company does business.

F-81
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. RELATED-PARTY TRANSACTIONS:

During 1997, the Company leased building and yard space located in Deerwood,
Minnesota, from certain Company shareholders for $60,000. During 1998, the
Company extended this lease agreement to December 31, 1998 for an additional
annual rate of $60,000.

At December 31, 1997, an affiliate was indebted to the Company for a note
receivable of approximately $125,000. The note receivable is due on demand
with interest calculated at the prime rate. Interest income from this note
totaled approximately $9,000 during the year ended December 31, 1997.

At December 31, 1997, the Company's cash and cash equivalents were deposited
in a financial institution controlled by certain shareholders.

During 1997, the Company charged approximately $93,000 to an affiliated
company controlled by certain Company shareholders for various office,
administrative and other costs. At December 31, 1997, approximately $53,000
was due to the Company related to such charges and was included in prepaid
expenses and other current assets in the accompanying balance sheet.

8. EMPLOYEE BENEFIT PLAN:

The Company has a self-funded medical plan covering substantially all
employees. The Company is responsible for all family claims paid in the plan
year up to a specific stop-loss amount of $10,000 per family. Aggregate excess
coverage is purchased to protect the Company for claims above the self-funded
limit. The financial statements reflect an estimated accrued liability for
outstanding claims.

The Company has a 401(k) plan and profit-sharing plan covering substantially
all employees. Participant contributions to the 401(k) plan are limited to 17
percent of total compensation paid to participants during the plan year. The
Company may also make discretionary contributions up to a maximum of $2,000
for each participant. Contributions to the plan were approximately $73,000 for
the year ended December 31, 1997.

9. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable and accounts payable. The Company believes that the
carrying value of these instruments on the accompanying balance sheet
approximates their fair values.

10. COMMITMENTS AND CONTINGENCIES:

Litigation

F-82
<PAGE>

SPALJ CONSTRUCTION COMPANY

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, business property liability, workers' compensation, general
liability and an umbrella policy.

11. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to four major
customers (comprising approximately 19 percent, 16 percent, 13 percent and 12
percent, respectively) during the year ended December 31, 1997.

The Company grants credit, generally without collateral, to its customers
which include telecommunication companies, utilities and municipalities
located primarily in the Midwestern, Central and Southern regions of the
United States. Consequently, the Company is subject to potential credit risk
related to changes in business and economic factors within the Midwestern,
Central and Southern regions of the United States. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.

12. SUBSEQUENT EVENT:

In January 1998, the Company made cash distributions to shareholders of
approximately $3,579,000 funded through its operations. Had this transaction
been recorded at December 31, 1997, the effect on the accompanying balance
sheet would be an increase in liabilities of $3,579,000 and a decrease in
shareholders' equity of $3,579,000.

13. SUBSEQUENT EVENTS TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

On May 5, 1998, the Company was acquired by Quanta Services, Inc.

F-83
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Underground Construction Co., Inc.:

We have audited the accompanying balance sheet of Underground Construction
Co., Inc. (a California Subchapter S Corporation) as of December 31, 1997, and
the related statements of operations, cash flows and shareholders' equity for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Underground Construction Co.,
Inc., as of December 31, 1997, and the results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.

S. J. Gallina & Co., LLP

Walnut Creek, California
February 23, 1998

F-84
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 278 $ 859
Marketable securities............................... 216 249
Accounts receivable--
Trade, net of allowance of $135................... 11,627 8,759
Retainage......................................... 1,764 1,994
Other receivables................................. 112 150
Costs and estimated earnings in excess of billings
on uncompleted contracts........................... 1,645 854
Prepaid expenses and other current assets........... 105 116
------- -------
Total current assets............................ 15,747 12,981
PROPERTY AND EQUIPMENT, net........................... 5,604 5,486
CASH SURRENDER VALUE OF LIFE INSURANCE................ 748 773
------- -------
Total assets.................................... $22,099 $19,240
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................ $ 202 $ 114
Current maturities of capital lease obligations..... 422 214
Bank line of credit................................. 700 --
Accounts payable and accrued expenses............... 7,827 4,967
Billings in excess of costs and estimated earnings
on uncompleted contracts........................... 1,688 1,558
------- -------
Total current liabilities....................... 10,839 6,853
LONG-TERM DEBT, net of current maturities............. 217 468
LONG-TERM CAPITAL LEASE OBLIGATIONS, net of current
maturities........................................... 768 823
COMMITMENTS AND CONTINGENCIES......................... -- --
------- -------
Total liabilities............................... 11,824 8,144
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 100,000 shares
authorized, 42,983 shares issued and outstanding at
December 31, 1997 and 40,923 shares issued and
outstanding at June 30, 1998....................... 43 41
Paid-in capital..................................... 2,943 2,802
Accumulated other comprehensive income.............. 135 154
Notes receivable from shareholders for purchase of
common stock....................................... (577) (377)
Retained earnings................................... 7,731 8,476
------- -------
Total shareholders' equity...................... 10,275 11,096
------- -------
Total liabilities and shareholders' equity...... $22,099 $19,240
======= =======
</TABLE>

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

F-85
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30
DECEMBER 31, ----------------
1997 1997 1998
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES......................................... $48,478 $16,920 $25,345
COST OF SERVICES, including depreciation......... 40,858 15,113 21,582
------- ------- -------
Gross profit................................. 7,620 1,807 3,763
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..... 4,152 1,781 1,680
------- ------- -------
Income from operations....................... 3,468 26 2,083
OTHER INCOME (EXPENSE), net:
Interest expense............................... (225) (96) (98)
Other, net..................................... 365 92 312
------- ------- -------
Other income (expense), net.................. 140 (4) 214
------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES......... 3,608 22 2,297
PROVISION FOR INCOME TAXES....................... 103 1 156
------- ------- -------
NET INCOME....................................... $ 3,505 $ 21 $ 2,141
======= ======= =======
</TABLE>

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

F-86
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------
1997 1997 1998
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 3,505 $ 21 $ 2,141
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization............... 1,073 506 550
Gain on sale of property and equipment...... (19) (16) (210)
Changes in operating assets and
liabilities--
Decrease (increase) in--
Accounts receivable....................... (7,603) (68) 2,696
Costs and estimated earnings in excess of
billings on uncompleted contracts........ (53) (408) 791
Prepaid expenses and other current assets. 88 146 (11)
Cash surrender value of life insurance.... (119) -- (25)
Increase (decrease) in--
Accounts payable and accrued expenses..... 3,871 328 (1,844)
Billings in excess of costs and estimated
earnings on uncompleted contracts........ 999 39 (129)
------- ------- -------
Net cash provided by operating
activities............................. 1,742 548 3,959
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.. 66 30 216
Additions of property and equipment........... (462) (205) (77)
Purchase of marketable securities............. (4) (3) (14)
Proceeds from shareholder notes............... 142 87 200
Other, net.................................... 5 (22) (102)
------- ------- -------
Net cash provided by (used in) investing
activities............................. (253) (113) 223
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments made to acquire common stock......... (2,048) (2,048) (559)
Payments of long-term debt and capital lease
obligations.................................. (722) (330) (345)
Net borrowings (repayments) under bank line of
credit....................................... 700 1,000 (700)
Distributions to shareholders................. (1,166) (680) (1,997)
------- ------- -------
Net cash used in financing activities... (3,236) (2,058) (3,601)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... (1,747) (1,623) 581
CASH AND CASH EQUIVALENTS, beginning of period.. 2,025 2,025 278
------- ------- -------
CASH AND CASH EQUIVALENTS, end of period........ $ 278 $ 402 $ 859
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid........................... $ 11 $ 3 $ 121
Interest paid............................... $ 218 $ 96 $ 102
</TABLE>

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

F-87
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
ACCUMULATED NOTES
COMMON STOCK OTHER RECEIVABLE TOTAL
-------------- PAID-IN RETAINED COMPREHENSIVE FROM STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME SHAREHOLDERS EQUITY
------ ------ ------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1996................... 49,783 $50 $3,109 $ 7,507 $107 $(280) $10,493
Net income............. -- -- -- 3,505 -- -- 3,505
Distributions to
shareholders.......... -- -- -- (1,845) -- -- (1,845)
Redemption of stock.... (8,800) (9) (603) (1,436) -- -- (2,048)
Issuance of stock...... 2,000 2 437 -- -- (439) --
Change in market value
of securities......... -- -- -- -- 28 -- 28
Payments received on
notes receivable...... -- -- -- -- -- 142 142
------ --- ------ ------- ---- ----- -------
BALANCE, December 31,
1997................... 42,983 43 2,943 7,731 135 (577) 10,275
Net income (unaudited). -- -- -- 2,141 -- -- 2,141
Distributions to
shareholders
(unaudited)........... -- -- -- (980) -- -- (980)
Redemption of stock
(unaudited)........... (2,060) (2) (141) (416) -- -- (559)
Change in market value
of securities
(unaudited)........... -- -- -- -- 19 -- 19
Payments received on
notes receivable
(unaudited)........... -- -- -- -- -- 200 200
------ --- ------ ------- ---- ----- -------
BALANCE, June 30, 1998
(unaudited)............ 40,923 $41 $2,802 $ 8,476 $154 $(377) $11,096
====== === ====== ======= ==== ===== =======
</TABLE>

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

F-88
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Underground Construction Co., Inc. (the Company), a California Subchapter S
Corporation located in Benicia, California, is primarily engaged in various
types of construction projects. The Company performs its contract work under
fixed-fee, unit price and cost-plus contracts with contract terms generally
ranging from one month to one year. The Company performs the majority of its
work in California, Texas and Oregon.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

The interim financial statements for the six months ended June 30, 1997 and
1998, are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnote disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the
results for the entire fiscal year.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Supplemental Cash Flow Information

The Company had noncash investing activities of approximately $1,132,000,
$654,000 and $361,000 related to property and equipment during the year ended
December 31, 1997, and the six months ended June 30, 1997 and June 30, 1998,
respectively. The Company also had noncash investing and financing activities
of approximately $439,000 related to issuance of common stock during the year
ended December 31, 1997.

Marketable Securities

The Company's marketable securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported in shareholders' equity. Aggregate cost, gross
unrealized holding gains and gross unrealized holding losses were
approximately $81,000, $140,000 and $5,000, respectively, at December 31,
1997. Unrealized gains of approximately $28,000, $13,000 and $19,000 were
recorded during the year ended December 31, 1997, and the six months ended
June 30, 1997 and June 30, 1998, respectively. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in other income. The costs of securities sold are
based on the specific identification method. Interest and dividends from these
securities are included in other income.

Accounts Receivable and Provision for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the level
of total accounts receivable balances.

Property and Equipment

F-89
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

useful life of the building. Depreciation expense was approximately
$1,073,000, $506,000 and $550,000 for the year ended December 31, 1997, and
the six months ended June 30, 1997 and June 30, 1998, respectively.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated over its
estimated life. Upon retirement or disposition of property and equipment, the
cost and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is recognized in the statement of operations.

Revenue Recognition

The Company generally recognizes revenue as services are performed. The
Company's contracts generally provide that the customer accept completion of
progress to date and compensate the Company for services rendered. Revenues
are recognized using the percentage-of-completion method measured by the
percentage of costs incurred to date to the total estimated costs for each
contract. Contract costs include all direct material, direct labor,
subcontract costs and indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs and depreciation. Provisions for the
total estimated losses on uncompleted contracts are made in the period in
which such losses are determined. Changes in job performance, job conditions,
estimated profitability and final contract settlements may result in revisions
to contract costs and income. The resulting effects are recognized in the
period in which the revisions are determined.

Accounts receivable billed but not paid by customers pursuant to contract
retainage provisions are due upon completion of the contract and acceptance by
the customer. Based on the Company's experience with similar contracts in
recent years, the retainage balance as of the balance sheet date will be
collected within the subsequent fiscal year.

Warranty Costs

Income Taxes

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
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates.
Reference is made to the "Revenue Recognition" and "Warranty Costs" sections
of this footnote for discussion of certain estimates reflected in the
Company's financial statements.

F-90
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997. The Company will adopt SFAS No. 131
in 1998.

3. PROPERTY AND EQUIPMENT:

Property and equipment as of December 31, 1997, consist of the following (in
thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C> <C>
Land.................................................. -- $ 767
Buildings and building improvements................... 10-25 2,824
Operating equipment and vehicles...................... 5-10 13,026
Office equipment, furniture and fixtures.............. 3-7 683
-------
17,300
Less--Accumulated depreciation........................ (11,696)
-------
Property and equipment, net........................... $ 5,604
=======

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses as of December 31, 1997, consist of
the following (in thousands):

Accounts payable, trade............................... $ 4,518
Accrued compensation and other expenses............... 3,309
-------
$ 7,827
=======

Contracts in progress as of December 31, 1997, are as follows (in
thousands):

Costs incurred on contracts in progress............... $38,367
Estimated earnings, net of losses..................... 4,865
-------
43,232
Less--Billings to date................................ (43,275)
-------
$ (43)
=======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ $ 1,645
Less--Billings in excess of costs and estimated
earnings on uncompleted contracts.................... (1,688)
-------
$ (43)
=======
</TABLE>

F-91
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. DEBT:

The Company has a $3,000,000 line of credit with a bank, bearing interest at
the bank's prime rate (8.5 percent at December 31, 1997), of which $700,000
and $0 was outstanding as of December 31, 1997, and June 30, 1998,
respectively. The line of credit expires June 1, 1999, and is secured by
personal guarantees of certain officers and directors of the Company.
Commitment fees of approximately $8,000 and $7,500 were charged on this line
of credit during the year ended December 31, 1997, and the six months ended
June 30, 1998, respectively. The Company also has a $500,000 standby letter of
credit with a bank supported by an unsecured promissory note. As of December
31, 1997, and June 30, 1998, there was no outstanding balance under this
letter of credit.

The loan agreement covering the line of credit contains various covenants
which, among other things, limit the Company's ability to incur additional
indebtedness and require the Company to maintain a minimum tangible net worth
of not less than $6.5 million as of December 31, 1997. The Company is also to
maintain a ratio of current assets to current liabilities of not less than
1.25 to 1.00 and other various coverage ratios.

The Company's long-term debt obligations as of December 31, 1997, consist of
the following (in thousands):

<TABLE>
<S> <C>
Notes payable to third parties due in monthly installments through
2001; interest ranging from 7.01% to 8.75%; collateralized by
equipment............................................................ $419
Less--Current maturities.............................................. (202)
----
Total long-term debt.............................................. $217
====
</TABLE>

The maturities of long-term debt as of December 31, 1997, are as follows (in
thousands):

6. LEASES:

The Company leases certain vehicles under capital leases, and the leased
assets are included as part of property and equipment, net. Details of the
capital leased assets as of December 31, 1997, are as follows (in thousands):

<TABLE>
<S> <C>
Vehicles............................................................. $1,800
Less--Accumulated depreciation....................................... (481)
------
Net capital leased assets........................................ $1,319
======
</TABLE>

F-92
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments under the capital leases as of December 31,
1997, are as follows (in thousands):

<TABLE>
<S> <C>
1998................................................................. $ 507
1999................................................................. 384
2000................................................................. 318
2001................................................................. 145
2002................................................................. 5
------
Total minimum lease payments..................................... 1,359
Less--Amounts representing interest.................................. (169)
------
Present value of minimum lease payments............................ 1,190
Less--Current portion................................................ (422)
------
Long-term obligation............................................... $ 768
======
</TABLE>

7. INCOME TAXES:

Federal and state income taxes as of December 31, 1997, are as follows (in
thousands):

<TABLE>
<S> <C>
Current--
Federal............................................................... $ 1
State................................................................. 102
----
$103
====
</TABLE>

As a result of the Company's S Corporation status, the only corporate-level
taxes for the year ended December 31, 1997, are built-in gains taxes on
property dispositions, the 1.5 percent California surtax on California-
apportioned income and other non-California state taxes. Of the Company's
provision for income taxes for the year ended December 31, 1997, approximately
$47,000 relates to taxes imposed on California-apportioned income, $55,000
relates to taxes imposed by certain states in which the Company does business
and the remaining $1,000 relates to the built-in gains tax.

8. RELATED-PARTY TRANSACTIONS:

The Company and its shareholders have an agreement which describes
procedures for transfer of the Company's common stock due to termination of
active employment, retirement, death or other occasion. The Company and its
employee benefit trusts have first priority for the purchase of shares
tendered by a shareholder in such instances. If the Company and its employees
benefit trusts do not accept such offer, the remaining shareholders may
purchase all or part of the offered shares. The methodology for determining
the purchase price is set forth in the agreement.

The Company holds unsecured notes receivable due from shareholders for
purchase of common stock. These notes receivable bear interest at 5.0 percent
to 7.0 percent and are due in installments through January 2006.

During the year ended December 31, 1997, bonuses to shareholders totaled
approximately $899,000, of which approximately $599,000 is included in accrued
expenses at December 31, 1997.

Accrued shareholder distributions of approximately $1,017,000 are included
in accrued expenses at December 31, 1997.

Personal guarantees of certain officers and directors of the Company secure
the line of credit discussed in Note 5.

F-93
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

9. EMPLOYEE BENEFIT PLAN:

The Company has a defined contribution plan covering full-time employees
with two or more years of service which is funded entirely by the Company.
Contributions to the plan for the year ended December 31, 1997, were
approximately $791,000. All contributions are fully vested. As of December 31,
1997, there is no unfunded vested liability. The Company owes the plan
approximately $62,000 at December 31, 1997.

10. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
marketable securities, accounts receivable, notes receivable, a line of
credit, accounts payable and debt. The Company believes that the carrying
values of these instruments on the accompanying balance sheets approximates
their fair values.

11. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, business property liability, workers' compensation, general
liability and an umbrella policy.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to two major
customers (comprising approximately 33 percent and 16 percent of total sales)
during the year ended December 31, 1997 and to two major customers (comprising
approximately 25 percent and 23 percent of total sales) during the six months
ended June 30, 1998.

The Company grants credit, generally without collateral, to its customers,
which include national industrial or commercial enterprises or regional
utilities located primarily in the Western United States. Consequently, the
Company is subject to potential credit risk related to changes in business and
economic factors within these regions. However, management believes that its
contract acceptance, billing and collection policies are adequate to minimize
the potential credit risk.

13. COMPREHENSIVE INCOME:

Comprehensive income for the six months ended June 30, 1998 consists of the
following (in thousands):

<TABLE>
<S> <C>
Net income........................................................... $2,141
Unrealized gains on marketable securities............................ 19
------
$2,160
======
</TABLE>

14. SUBSEQUENT EVENTS:

On January 1,1998, the Company redeemed 2,060 shares of common stock for
$559,000.

F-94
<PAGE>

UNDERGROUND CONSTRUCTION CO., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

15. SUBSEQUENT EVENTS TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

The Company paid shareholder distributions of approximately $342,000 and
$638,000 on April 15, 1998 and June 9, 1998, respectively.

On August 4, 1998, the Company was acquired by Quanta Services, Inc.

F-95
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Sumter Builders, Inc.:

We have audited the accompanying balance sheet of Sumter Builders, Inc. (a
South Carolina corporation) as of December 31, 1997 and the related statements
of operations, stockholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sumter Builders, Inc. as of
December 31, 1997 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Columbia, South Carolina
March 23, 1998

F-96
<PAGE>

SUMTER BUILDERS, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 1,053 $ 904
Contract receivables................................ 2,360 3,196
Costs and estimated earnings in excess of billings
on contracts in progress........................... 2,476 1,641
Prepaid expenses.................................... 3 11
------- -------
Total current assets.............................. 5,892 5,752
------- -------
PROPERTY AND EQUIPMENT:
Cost................................................ 14,104 14,455
Less--Accumulated depreciation...................... (10,539) (11,198)
------- -------
Net property and equipment........................ 3,565 3,257
------- -------
OTHER ASSETS:
Due from officers and employees..................... 93 98
Cash surrender value of life insurance.............. 62 62
Investments......................................... 1,534 1,094
------- -------
Total other assets................................ 1,689 1,254
------- -------
Total assets...................................... $11,146 $10,263
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses.................................... $ 956 $ 738
Accounts payable.................................... 734 594
Billings in excess of costs and estimated earnings
on contracts in progress........................... 295 8
Current maturities of long-term debt and capital
lease obligations.................................. 527 756
------- -------
Total current liabilities......................... 2,512 2,096
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS.......... 801 662
DEFERRED COMPENSATION................................. 83 64
POSTRETIREMENT BENEFITS............................... 678 666
------- -------
Total liabilities................................. 4,074 3,488
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 60,000 shares
authorized, 1,632 shares issued and outstanding in
1997 and 1998, respectively........................ 2 2
Additional paid-in capital.......................... 557 557
Retained earnings................................... 6,358 5,947
Unrealized holding gain, net........................ 155 269
------- -------
Total stockholders' equity........................ 7,072 6,775
------- -------
Total liabilities and stockholders' equity........ $11,146 $10,263
======= =======
</TABLE>

The accompanying notes to financial statements are an integral part of these
balance sheets.

F-97
<PAGE>

SUMTER BUILDERS, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES........................................ $22,445 $ 9,749 $ 13,556
COST OF SERVICES (including depreciation)....... 19,131 8,184 11,745
------- ------- --------
Gross profit................................ 3,314 1,565 1,811
------- ------- --------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.... 2,150 783 953
------- ------- --------
Income from operations...................... 1,164 782 858
------- ------- --------
OTHER INCOME (EXPENSE):
Interest expense.............................. (86) (36) (62)
Interest and dividends........................ 112 62 33
Gain on sale of investments................... 144 44 --
Gain on sale of property and equipment........ 171 159 16
Miscellaneous................................. 109 101 8
------- ------- --------
Total other income (expense)................ 450 330 (5)
------- ------- --------
NET INCOME...................................... $ 1,614 $ 1,112 $ 853
======= ======= ========
</TABLE>

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

F-98
<PAGE>

SUMTER BUILDERS, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ------------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 1,614 $ 1,112 $ 853
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation.............................. 1,485 615 759
Gain on sale of property and equipment.... (171) (159) (16)
Gain on sale of investments............... (144) (44) --
Change in assets and liabilities:
Contract receivables.................... 85 321 (836)
Costs and estimated earnings in excess
of billings on contracts in progress... (1,821) (519) 835
Prepaid expenses........................ (1) -- (8)
Due from officers and employees......... (71) (19) (5)
Cash surrender value of life insurance.. 9 -- --
Accrued expenses........................ 241 (377) (218)
Accounts payable........................ 232 53 (140)
Billings in excess of costs and
estimated earnings on contracts in
progress............................... 127 (110) (287)
Deferred compensation................... (77) -- (19)
Postretirement benefits................. (11) -- (12)
------- -------- --------
Net cash provided by operating
activities........................... 1,497 873 906
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......... (1,320) (660) (451)
Proceeds from sale of property and
equipment.................................. 222 159 16
Proceeds from sale of investments........... 1,394 528 754
Additions to investments.................... (928) (452) (200)
------- -------- --------
Net cash used in investing activities. (632) (425) 119
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.... -- -- 397
Principal payments on long-term debt and
capital lease obligations.................. (328) (136) (307)
Cash dividends paid......................... (1,017) (931) (1,264)
------- -------- --------
Net cash used in financing activities. (1,345) (1,067) (1,174)
------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS..... (480) (619) (149)
------- -------- --------
Cash and cash equivalents, beginning of
period....................................... 1,533 1,533 1,053
------- -------- --------
Cash and cash equivalents, end of period...... $ 1,053 $ 914 $ 904
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--
Cash paid during the year for interest...... $ 93 $ 36 $ 62
Purchase of property and equipment through
the issuance of capital lease obligations.. 747 -- 213
</TABLE>

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

F-99
<PAGE>

SUMTER BUILDERS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED
---------------- PAID-IN RETAINED HOLDING
SHARES PAR VALUE CAPITAL EARNINGS GAIN, NET TOTAL
------ --------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1996................... 1,632 $ 2 $557 $ 5,761 $ 55 $ 6,375
Dividends paid........ -- -- -- (1,017) -- (1,017)
Net income............ -- -- -- 1,614 -- 1,614
Change in unrealized
holding gain, net.... -- -- -- 0 100 100
----- ---- ---- ------- ---- -------
BALANCE, December 31,
1997................... 1,632 2 557 6,358 155 7,072
===== ==== ==== ======= ==== =======
Dividends paid
(unaudited).......... -- -- -- (1,264) -- (1,264)
Net Income
(unaudited).......... -- -- -- 853 -- 853
Change in unrealized
holding gain, net
(unaudited).......... -- -- -- -- 114 114
----- ---- ---- ------- ---- -------
BALANCE, June 30, 1998
(unaudited)............ 1,632 $ 2 $557 $ 5,947 $269 $ 6,775
===== ==== ==== ======= ==== =======
</TABLE>

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

F-100
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization and Operation

Sumter Builders, Inc. (the Company), incorporated in 1935, constructs
electrical substations, installs transmission and distribution lines and
provides maintenance services for existing power distribution lines. The
Company provides its services primarily to utility companies located in the
Southeastern United States.

Revenue and Cost Recognition

Revenues from long-term fixed price construction contracts are recognized by
the percentage of completion method. The percentages of completion are
determined by relating actual cost of work performed to date to the estimated
total cost of the respective contracts.

Generally, profits from short-term cost plus and unit price contracts are
recognized upon substantial completion of each contract. The substantial
completion requirement is deemed to have been met when such contracts have
been accepted by the owner(s).

At the time a loss on a contract becomes known, the full amount of the
estimated loss is accrued.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and all highly
liquid debt instruments with an original maturity of three months or less.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided
primarily using accelerated methods based on the estimated useful lives of the
assets, which generally range from 5 to 31 1/2 years.

Investments

Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" requires debt and equity
securities to be classified according to the Company's investment strategy.
The classifications are held-to-maturity, available-for-sale and trading.

The Company's investments are held for an indefinite period and are
classified as available-for-sale as defined by SFAS No. 115. These investments
are stated at market value with the difference between cost and market
classified as unrealized holding gain or loss as part of stockholders' equity.
During 1997, an increase in the value of the investments resulted in
unrealized gains of $100,246. The net increase in unrealized gains resulted in
the unrealized holding gain, net reported in stockholders' equity of $155,528
at December 31, 1997. The Company's investments had an aggregate fair value
and cost basis of $1,533,667 and $1,378,139 at December 31, 1997,
respectively.

As of December 31, 1997, the Company's investments are primarily in equity
securities. These investments are classified as long-term investments in the
accompanying balance sheet.

Income Taxes

The Company elected to include its taxable income with that of its
stockholders (an S Corporation election) effective January 1, 1983.
Accordingly, the accompanying financial statements do not include a provision
for income taxes.

F-101
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Postretirement Benefits Other Than Pensions

In 1995, the Company adopted the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". The statement
requires employers to accrue the cost of postretirement benefits during the
employees' careers with the Company based on actuarially determined costs from
the date of hire to the full eligibility date of employees who are expected to
qualify for benefits. In applying the provisions of this statement, the
Company recognized the accumulated postretirement benefit obligation as of the
beginning of 1995 of $637,367 as a change in accounting principle.

Postretirement benefits other than pensions consist of certain health care
and life insurance benefits provided to a group of retired employees.

For purposes of measuring the expected postretirement obligation, a 6
percent annual rate of increase in the per capita claims cost was assumed for
1997. This rate is assumed to remain at 6 percent. The discount rate used in
determining the accumulated postretirement benefit obligation was 8 percent.

If the health care cost trend rate were increased by 1 percent, the
accumulated postretirement benefit obligation as of the end of 1997 would have
been increased by $65,972. The service cost and interest cost for 1997 would
have been unchanged.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

2. PROPERTY AND EQUIPMENT:

At December 31, 1997, property and equipment consist of the following (in
thousands):

<TABLE>
<CAPTION>
1997
--------
<S> <C>
Autos and trucks................................................... $ 9,405
Heavy equipment.................................................... 3,124
Computer equipment................................................. 129
Leasehold improvements............................................. 157
Office and other buildings......................................... 298
Land............................................................... 123
Office equipment................................................... 92
Warehouse and shops................................................ 29
Equipment under capital leases..................................... 747
--------
14,104
Less--Accumulated depreciation..................................... (10,539)
--------
$ 3,565
========
</TABLE>

F-102
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS:

Information related to contracts in progress at December 31, 1997, is
presented below (in thousands):

<TABLE>
<CAPTION>
1997
-------
<S> <C>
Costs incurred on contracts in progress................................ $35,319
Estimated profit earned to date........................................ 1,397
-------
36,716
Less--Billings to date on contracts in progress........................ (34,535)
-------
$ 2,181
=======
</TABLE>

These amounts (in thousands) are included in the accompanying balance sheets
under the following captions:

<TABLE>
<CAPTION>
1997
------
<S> <C>
Costs and estimated earnings in excess of billings on contracts in
progress.............................................................. $2,476
Billings in excess of costs and estimated earnings on contracts in
progress.............................................................. (295)
------
$2,181
======
</TABLE>

Contract receivables at December 31, 1997, are as follows (in thousands):

<TABLE>
<CAPTION>
1997
------
<S> <C>
Due currently............................................................ $2,220
Retainage................................................................ 140
------
$2,360
======
</TABLE>

4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS:

Long-term debt consists of the following at December 31, 1997 (in
thousands):

<TABLE>
<CAPTION>
1997
----
<S> <C>
Note payable to bank, monthly payments of $12 with a maturity of January
2000, interest rate is prime rate (8.5% at December 31, 1997), secured
by equipment of the Company............................................. $264
Note payable to bank, monthly payments of $10 with a maturity of October
2000, interest rate is fixed at 8.5%, secured by equipment of the
Company................................................................. 297
Note payable to bank, monthly payments of $6, with a maturity of December
1998, interest rate is prime rate (8.5% at December 31, 1997), secured
by equipment of the Company............................................. 72
----
633
Less--Current portion.................................................... (292)
----
Long-term debt........................................................... $341
====
</TABLE>

As of December 31, 1997, the annual maturities of long-term debt are: 1998,
$292; 1999, $238 and 2000, $103.

Capital Leases

The Company is party to various equipment leases expiring through 2000 which
transfer ownership at the end of the lease terms. These leases have been
capitalized using interest rates from 6.89 percent through

F-103
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7.61 percent. Amortization on the capital leases is included in depreciation
expense. Future minimum lease payments under these leases are as follows (in
thousands):

<TABLE>
<CAPTION>
PRESENT VALUE OF
MINIMUM LEASE
TOTAL PAYMENT INTEREST PAYMENTS
------------- -------- ----------------
<S> <C> <C> <C>
1998.................................... $278 $43 $235
1999.................................... 278 25 253
2000.................................... 213 6 207
---- --- ----
$769 $74 $695
==== === ====
</TABLE>

Interest expense incurred related to the leases totaled $18,077 for the year
ended December 31, 1997. The lease obligations are reflected in the
accompanying balance sheet under the following captions (in thousands):

<TABLE>
<S> <C>
Current maturities of long-term debt and capital lease obligations........ $235
Long-term debt and capital lease obligations.............................. 460
----
$695
====
</TABLE>

5. COMMITMENTS AND CONTINGENCIES:

The Company leases vehicles and office equipment under various operating
leases. Rentals for the year ended 1997 were $786,968. Minimum rental payments
required under the operating leases are as follows (in thousands):

<TABLE>
<S> <C>
1998................. $1,228
1999................. 1,252
2000................. 1,119
2001................. 1,076
2002................. 504
------
Total.............. $5,179
======
</TABLE>

The Company maintains a self-insurance program, administrated by an
insurance carrier, for that portion of workers' compensation costs that are
not covered by insurance. As of December 31, 1997, the Company was liable for
workers' compensation claims in the aggregate amount of $300,000 per incident
and in the aggregate amount of $1,000,000 annually.

As part of the Company's workers compensation insurance agreement, the
Company has obtained letters of credit from a bank in the aggregate amount of
$700,000. These letters of credit expire on various dates through May 1998. At
December 31, 1997, the Company owed no amounts under these letters of credit.

The Company is involved in various legal proceedings arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
financial condition or results of operations.

6. BENEFIT PLAN:

The Company has a 401(k) benefit plan for which employees meeting certain
requirements are eligible. The Company made matching contributions of
approximately $107,000 in 1997.

F-104
<PAGE>

SUMTER BUILDERS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. SHAREHOLDER AGREEMENT:

Effective February 17, 1993, the shareholders of the Company entered into an
agreement that establishes the compensation level for the shareholders and
outlines commitments of the minority shareholder to sell his ownership in the
Company and of the majority shareholder to purchase this ownership. In
accordance with the shareholder agreement, the Company has accrued
approximately $160,650 as of December 31, 1997, of which $83,750 is classified
as long term, to provide for the present value of the future obligation for
deferred compensation to the minority shareholder (a former employee of the
Company).

8. SUBSEQUENT EVENTS TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

On August 14, 1998, the Company was acquired by Quanta Services, Inc.

F-105
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Manuel Bros., Inc.:

We have audited the accompanying balance sheet of Manuel Bros., Inc. (a
California Stock Corporation) as of September 30, 1997, and the related
statements of operations, stockholders' equity and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Manuel Bros., Inc., as of
September 30, 1997, and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.

S. J. Gallina & Co., LLP
Sacramento, California
October 21, 1998

F-106
<PAGE>

MANUEL BROS., INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................... $1,246 $ 995
Marketable securities.............................. 292 322
Accounts receivable:
Trade, net of allowance of $0.................... 2,486 1,339
Retainage........................................ 304 253
Other receivables................................ 111 119
Costs and estimated earnings in excess of billings
on uncompleted contracts.......................... 115 678
Prepaid expenses and other current assets.......... 12 66
Deferred Income Taxes.............................. -- 112
------ ------
Total current assets........................... 4,566 3,884
PROPERTY AND EQUIPMENT, net.......................... 3,452 3,328
NOTES RECEIVABLE, noncurrent......................... 79 149
------ ------
Total assets................................... $8,097 $7,361
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............... $ 228 $ 281
Bank line of credit................................ 540 --
Accounts payable and accrued expenses.............. 1,514 2,088
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 495 --
Deferred income taxes.............................. 16 --
------ ------
Total current liabilities...................... 2,793 2,369
LONG-TERM DEBT, net of current maturities............ 1,468 1,395
DEFERRED INCOME TAXES................................ 64 100
------ ------
Total liabilities.............................. 4,325 3,864
STOCKHOLDERS' EQUITY:
Common stock, $0 par value, 10,000 shares
authorized, 3,852 shares issued and outstanding at
September 30, 1997 and 3,852 shares issued and
outstanding at June 30, 1998...................... 58 58
Accumulated other comprehensive income............. 41 41
Retained earnings.................................. 3,673 3,398
------ ------
Total stockholders' equity..................... 3,772 3,497
------ ------
Total liabilities and stockholders' equity..... $8,097 $7,361
====== ======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-107
<PAGE>

MANUEL BROS., INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30,
SEPTEMBER 30, ------------------
1997 1997 1998
------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES..................................... $16,571 $ 12,789 $ 11,761
COST OF SERVICES, including interest and
depreciation................................ 13,169 9,511 10,132
------- -------- --------
Gross profit............................. 3,402 3,278 1,629
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. 1,683 1,075 1,990
------- -------- --------
Income (loss) from operations............ 1,719 2,203 (361)
OTHER INCOME (EXPENSE), net:
Interest expense........................... (87) (64) (77)
Other, net................................. 186 120 71
------- -------- --------
Other income (expense), net.............. 99 56 (6)
------- -------- --------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES....................................... 1,818 2,259 (367)
PROVISION FOR INCOME TAXES................... 699 524 (92)
------- -------- --------
Net income (loss)........................ $ 1,119 $ 1,735 $ (275)
======= ======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-108
<PAGE>

MANUEL BROS., INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER TOTAL
-------------- RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT EARNINGS INCOME EQUITY
------ ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, September 30, 1996. 4,221 $63 $2,807 $22 $2,892
Net income................ -- -- 1,119 -- 1,119
Redemption of stock....... (369) (5) (253) -- (258)
Change in market value of
securities............... -- -- -- 19 19
----- --- ------ --- ------
BALANCE, September 30, 1997. 3,852 58 3,673 41 3,772
Net income (loss)
(unaudited).............. -- -- (275) -- (275)
Change in market value of
securities (unaudited)... -- -- -- -- --
----- --- ------ --- ------
BALANCE, June 30, 1998
(unaudited)................ 3,852 $58 $3,398 $41 $3,497
===== === ====== === ======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-109
<PAGE>

MANUEL BROS., INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30,
SEPTEMBER 30, -------------------
1997 1997 1998
------------- --------- --------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................... $ 1,119 $ 1,735 $ (275)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation.............................. 776 588 587
(Gain) loss on sale of property and
equipment................................ (3) 1 (1)
Gain on sale of marketable securities..... (5) -- --
Change in deferred income taxes........... 39 1 (92)
Changes in operating assets and
liabilities:
Decrease (increase) in:
Accounts receivable...................... (756) 1,143 959
Costs and estimated earnings in excess of
billings on uncompleted contracts....... 417 403 (562)
Prepaid expenses and other current
assets.................................. (1) (9) 4
Increase (decrease) in:
Accounts payable and accrued expenses.... (20) (957) 573
Billings in excess of costs and estimated
earnings on uncompleted contracts....... (1,475) (1,735) (495)
Income taxes payable..................... (576) (552) --
------- --------- --------
Net cash provided by (used for) operating
activities.............................. (485) 618 698
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment................................. 60 15 30
Additions of property and equipment........ (1,035) (932) (285)
Reinvestment of dividends and purchase of
marketable securities, net of sales....... (136) (126) (30)
Collections (loans) on notes receivable,
net....................................... (43) (48) 103
------- --------- --------
Net cash provided by (used for) investing
activities.............................. (1,154) (1,091) (182)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt................. (325) (251) (227)
Net borrowings (repayments) under bank line
of credit................................. 540 -- (540)
------- --------- --------
Net cash provided by (used for) financing
activities.............................. 215 (251) (767)
------- --------- --------
Net increase (decrease) in cash.......... (1,424) (724) (251)
CASH, beginning of period................... 2,670 2,670 1,246
------- --------- --------
CASH, end of period......................... $ 1,246 $ 1,946 $ 995
======= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid.......................... $ 1,251 $ 1,076 $ 22
Interest paid.............................. $ 132 $ 97 $ 126
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-110
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Manuel Bros., Inc. (the Company), a California Corporation located in Grass
Valley, California, is primarily engaged in heavy engineering construction
which includes installation of underground telephone cable and paving. The
Company performs its contract work under unit-price contracts with various
contracts being modified by incentive and penalty provisions. The Company is
also engaged in the limited production of concrete and concrete materials. The
Company sells these products to a variety of users on a retail basis.
Approximately ninety-six percent of the Company's revenues are derived from
its heavy engineering construction operations.

The accompanying financial statements include all amounts relating to the
Company's concrete production and sales activities. The accompanying financial
statements also include all amounts relating to the rental of non-residential
real estate owned by the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

The interim financial statements for the nine months ended June 30, 1997 and
1998, are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnote disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the
results for the entire fiscal year.

Supplemental Cash Flow Information

The Company had noncash investing activities of approximately $963,672,
$783,726 and $207,478 related to property and equipment during the year ended
September 30, 1997, and the nine months ended June 30, 1997 and June 30, 1998,
respectively. The Company also had noncash investing and financing activities
of $258,286 related to redemption of common stock during the year ended
September 30, 1997 and approximately $160,000 related to the conversion of
accounts receivable to a note for the nine months ended June 30, 1998. See
Note 16.

Marketable Securities

The Company's marketable securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported in stockholders' equity. Aggregate cost, gross
unrealized holding gains and gross unrealized holding losses were
approximately $224,388, $69,011 and $1,375, respectively, at September 30,
1997. Unrealized gains, net of deferred income taxes of $27,148, of
approximately $40,488 were recorded during the year ended September 30, 1997.
No unrealized gains were recorded for the nine months ended June 30, 1997 and
June 30, 1998, respectively. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are
included in other income. The costs of securities sold are based on the
specific identification method. Interest and dividends from these securities
are included in other income.

Property and Equipment

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Building improvements are capitalized and depreciated over the estimated
useful life of the building. Depreciation expense was $775,954, $587,859 and
$587,181 for the year ended September 30, 1997, and the nine months ended June
30, 1997 and June 30, 1998, respectively.

F-111
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated over its
estimated life. Upon retirement or disposition of property and equipment, the
cost and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is recognized in the statement of operations.

Revenue Recognition

The Company generally recognizes revenue as services are performed. The
Company's contracts generally provide that the customer accept completion of
progress to date and compensate the Company for services rendered. Revenues
are recognized using the percentage-of-completion method measured by the
percentage of costs incurred to date to the total estimated costs for each
contract. Contract costs include all direct material, direct labor,
subcontract costs and indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs, interest and depreciation.
Provisions for the total estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance,
job conditions, estimated profitability and final contract settlements may
result in revisions to contract costs and income. The resulting effects are
recognized in the period in which the revisions are determined.

Income Taxes

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
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates.
Reference is made to the "Revenue Recognition" section of this footnote for
discussion of certain estimates reflected in the Company's financial
statements.

New Accounting Pronouncements

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. See Note 15 for other
comprehensive income.

F-112
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. NOTES RECEIVABLE:

Notes receivable consist of various promissory notes amounting to $149,372
bearing interest from 8.00% to 10.00%.

4. PROPERTY AND EQUIPMENT:

Property and equipment as of September 30, 1997, consist of the following
(in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C> <C>
Land................................................... -- $ 308
Buildings and building improvements.................... 10-31.5 1,038
Operating equipment and vehicles....................... 5-7 5,522
Office equipment, furniture and fixtures............... 5-7 174
------
7,042
Less--Accumulated depreciation......................... 3,590
------
Property and equipment, net............................ $3,452
======

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses as of September 30, 1997, consist of
the following (in thousands):

Accounts payable, trade................................ $1,171
Accrued compensation and other expenses................ 343
------
$1,514
======

Contracts in progress as of September 30, 1997, are as follows (in
thousands):

Costs incurred on contracts in progress................ $7,778
Estimated earnings, net of losses...................... 1,019
------
8,797
Less--Billings to date................................. 9,177
------
$ (380)
======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. $ 115
Less--Billings in excess of costs and estimated
earnings on uncompleted contracts..................... (495)
------
$ (380)
======
</TABLE>

6. DEBT:

The Company has available a $1,250,000 revolving line of credit through
February 1, 1998 with Bank of America. Interest accrues on outstanding
advances at the bank's prime rate plus 0.50% and is payable monthly. The
Company has signed a security agreement pledging accounts receivable,
inventory, and equipment as security for this line of credit. The line of
credit is personally guaranteed by the principal stockholder of the Company.
As of September 30, 1997, there was an outstanding balance of $540,000 on the
line of credit.

F-113
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company also has a $150,000 non-revolving line of credit through
February 1, 1998 with Bank of America. Interest accrues at the bank's prime
rate plus 0.50%. This line of credit is for the purchase of equipment used for
operations. Payments on the line of credit are made over one to four years,
depending on the type of equipment purchased. The line of credit is personally
guaranteed by the principal stockholder of the Company. The unpaid balance on
the equipment line of credit amounted to $5,878 and $39,068 classified as
current and noncurrent liabilities, respectively, as of September 30, 1997.

Both lines of credit were renewed on February 1, 1998. See Note 16.

The Company's long-term debt obligations as of September 30, 1997, consist
of the following (in thousands):

<TABLE>
<S> <C>
Notes payable to third parties due in monthly installments through
2026; interest ranging from 7.0% to 9.75%; collateralized by equipment
and deed of trust ($177 unsecured).................................... $1,365
Notes payable to related parties due in monthly installments through
2007, interest ranging from 8% to 10%, collateralized by deed of trust
and common stock...................................................... 331
------
Total debt......................................................... 1,696
Less--Current maturities............................................... (228)
------
Total long-term debt............................................... $1,468
======
</TABLE>

The maturities of long-term debt as of September 30, 1997, are as follows
(in thousands):

<TABLE>
<S> <C>
1998..................................................................... $228
1999..................................................................... 231
2000..................................................................... 245
2001..................................................................... 175
Thereafter............................................................... 817
</TABLE>

7. OPERATING LEASES:

Operating Leases--Lessee:

The Company enters into various construction equipment operating leases.
Construction equipment lease terms are typically five years or less. Payments
made for operating leases were $216,908 for the year ended September 30, 1997.

Future minimum lease payments under these cancellable operating leases are
as follows (in thousands):

<TABLE>
<S> <C>
Year ending September 30--
1998.................................................................... $118
1999.................................................................... 68
2000.................................................................... 4
----
190
====
</TABLE>

F-114
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Operating Leases--Lessor:

The Company currently leases office space to various businesses under
operating lease agreements. The cost and accumulated depreciation related to
the building and land, included in property and equipment, for the year ended
September 30, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
Cost.................................................................... $555
Accumulated depreciation................................................ (28)
----
Book value............................................................ $527
====
</TABLE>

Rents received during the year ended September 30, 1997 amounted to $75,541.
Rental income for the year ended September 30, 1997 amounted to $45,101, net of
$30,440 of expenses.

The aggregate rental revenues over the next four years are as follows (in
thousands):

<TABLE>
<S> <C>
Year Ending September 30:
1998..................................................................... $ 50
1999..................................................................... 42
2000..................................................................... 30
2001..................................................................... 25
----
$147
====
</TABLE>

8. INCOME TAXES:

Federal and state income taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Federal--
Current...................................................... $564
Deferred..................................................... 28
State--
Current...................................................... 96
Deferred..................................................... 11
----
$699
====
</TABLE>

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 34 percent to income
before provision for income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Provision at the statutory rate................................ $618
Increase resulting from--
State income tax, net of related tax effect.................. 62
Nondeductible expenses....................................... 14
Permanent differences........................................ 5
----
$699
====
</TABLE>

F-115
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Deferred income tax liabilities--
Property and equipment....................................... $ 82
Marketable Securities........................................ 27
Other........................................................ 2
----
Total deferred income tax liabilities...................... 111
----
Deferred income tax assets--
State taxes.................................................. 30
Other accruals not currently deductible...................... 1
----
Total deferred income tax assets........................... 31
----
Total net deferred income tax liabilities.................. $ 80
====
</TABLE>

The net deferred tax assets and liabilities are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Deferred tax assets--
Current...................................................... $ 31
Long-term.................................................... --
----
Total...................................................... 31
----
Deferred tax liabilities--
Current...................................................... 47
Long-term.................................................... 64
----
Total...................................................... 111
----
Net deferred income tax liabilities........................ $ 80
====
</TABLE>

9. RELATED-PARTY TRANSACTIONS:

Operating lease:

The Company rents, on a month-to-month basis, yard space in California and
Montana from a stockholder and a former stockholder, respectively. Rent
expense relating to these leases amounted to $38,927 for the year ended
September 30, 1997.

Stock Redemption:

On January 1, 1997, the Company redeemed 369 shares of stock, held by Joan
Manuel, by issuing a note in the amount of $258,286. The note is secured by
the redeemed shares of stock, is payable in monthly principal and interest
payments of $3,134 and bears interest at 8.00%. See Note 6.

F-116
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. EMPLOYEE PROFIT SHARING PLAN AND BENEFIT PLAN:

The Company maintains a defined contribution profit sharing plan for
substantially all of its employees. The amount of the contribution to the
profit sharing plan is determined annually by the board of directors and may
not exceed fifteen percent of the participant's compensation. The board of
directors elected not to make a contribution to the profit sharing plan for
the year ended September 30, 1997.

In addition, the Company maintains an employee 401(k) plan. The Company
contributes to the plan at the discretion of management. Matching
contributions made by the Company amounted to $30,000 for the year ended
September 30, 1997.

11. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash, marketable securities,
accounts receivable, notes receivable, a line of credit, accounts payable and
debt. The Company believes that the carrying values of these instruments on
the accompanying balance sheets approximate their fair values.

12. CONTRACT BACKLOG:

The following schedule is a reconciliation of contract backlog representing
signed contracts as of September 30, 1997 (in thousands):

<TABLE>
<S> <C>
Balance, September 30, 1996.......................................... $11,280
Contract adjustments and new contracts awarded....................... 9,000
-------
Subtotal........................................................... 20,280
Less contract revenue earned......................................... 15,906
-------
Balance, September 30, 1997.......................................... $ 4,374
=======
</TABLE>

13. COMMITMENTS AND CONTINGENCIES:

Litigation

Insurance

The Company carries a broad range of insurance coverage, including business
auto liability, business property liability, workers' compensation, general
liability and an umbrella policy.

Internal Revenue Service Audit

In 1996, the Internal Revenue Service (the "Service") completed an
examination of the Company's federal income tax returns for 1993, 1994, and
1995. The examining agent proposed adjustments relating to per diem

F-117
<PAGE>

MANUEL BROS., INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

and other issues that, if sustained, would result in additional federal income
taxes and penalties for those years of approximately $123,866 plus interest.
In addition, if similar adjustments were applied to 1996 and 1997, the Company
estimates that the additional federal income taxes and penalties as well as
the state taxes and penalties for those years would approximate $182,000 plus
interest. The Company does not agree with the adjustments proposed by the
Service and is contesting the proposed tax deficiencies in the federal tax
court. The Company is confident that upon final resolution of the issue, the
proposed tax deficiencies will be substantially reduced.

No provision has been made in the accompanying financial statement for the
proposed additional taxes, penalties, and interest since the ultimate
liability cannot be reasonably estimated.

14. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales greater than 10 percent of total sales to two major
customers (comprising approximately 46 percent and 28 percent of total sales)
during the year ended September 30, 1997. Approximately 31% and 39% of trade
and retainage receivables are due from these two customers.

The Company grants credit, generally without collateral, to its customers,
which include publicly traded utility companies, governmental agencies and
general contractors. Consequently, the Company is subject to potential credit
risk related to changes in business and economic factors. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.

15. COMPREHENSIVE INCOME:

Comprehensive income for the year ended September 30, 1997 consists of the
following (in thousands):

<TABLE>
<S> <C>
Net income........................................................... $1,119
Unrealized gains on marketable securities............................ 19
------
$1,138
======
</TABLE>

16. SUBSEQUENT EVENTS:

In September 1998, the Company wrote off approximately $160,000 of
uncollectible contract billings which are included in accounts receivable at
September 30, 1997 and notes receivable at June 30, 1998.

Subsequent to September 30, 1997, the Company made revisions to the
estimated contract revenues and costs which would have resulted in a decrease
in gross profit of $128,000. These revisions are reflected in the June 30,
1998 financial statements.

On October 15, 1998, the Company was acquired by Quanta Services, Inc. In
conjunction with this acquisition, the following events occurred: (i) the
related party notes payable of $330,816 and third party notes payable of
$652,657 were paid off; (ii) the Company's concrete production and sales
activities and the rental activities were sold; and (iii) the availability on
both lines of credit terminated at the time of acquisition.

F-118
<PAGE>

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE AND THE SELLING STOCKHOLDERS ARE OFFERING TO
SELL SHARES OF COMMON STOCK AND SEEKING OFFERS TO BUY SHARES OF COMMON STOCK
ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY
SALE OF THE COMMON STOCK.

---------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 2
Risk Factors.............................................................. 7
The Company............................................................... 12
Use of Proceeds........................................................... 13
Price Range of Common Stock............................................... 13
Dividend Policy........................................................... 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 18
Business.................................................................. 29
Management................................................................ 37
Certain Transactions...................................................... 41
Principal Stockholders.................................................... 42
Selling Stockholders...................................................... 43
Description of Capital Stock.............................................. 44
Shares Eligible for Future Sale........................................... 47
Plan of Distribution...................................................... 48
Legal Matters............................................................. 49
Additional Information.................................................... 50
Index to Financial Statements............................................. F-1
</TABLE>

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508,436 SHARES

[LOGO OF QUANTA SERVICES, INC. APPEARS HERE]

COMMON STOCK

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PROSPECTUS
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October 29, 1998

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