<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
---------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NO. 001-13831
QUANTA SERVICES, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
DELAWARE 74-2851603
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1360 POST OAK BLVD.
SUITE 2100
HOUSTON, TEXAS 77056
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code: (713) 629-7600
---------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
62,413,782 shares of Common Stock were outstanding as of August 10, 2000. As of
the same date, 1,851,952 shares of Limited Vote Common Stock were outstanding.
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<PAGE> 2
QUANTA SERVICES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
QUANTA SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets............................... 1
Consolidated Statements of Operations..................... 2
Consolidated Statements of Cash Flows..................... 3
Notes to Condensed Consolidated Financial Statements...... 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 9
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities............................... 13
ITEM 4. Submission of Matters to a Vote of Security
Holders................................................... 14
ITEM 6. Exhibits and Reports on Form 8-K.................... 15
Signature................................................... 16
</TABLE>
i
<PAGE> 3
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 10,775 $ 2,373
Accounts receivable, net of allowance of $5,947 and
$10,650................................................ 253,881 348,798
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 45,963 52,018
Inventories............................................... 8,741 11,560
Prepaid expenses and other current assets................. 15,703 17,416
---------- ----------
Total current assets.............................. 335,063 432,165
PROPERTY AND EQUIPMENT, net................................. 191,854 252,595
OTHER ASSETS, net........................................... 7,962 8,298
GOODWILL, net............................................... 624,757 742,799
---------- ----------
Total assets...................................... $1,159,636 $1,435,857
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 6,664 $ 9,010
Accounts payable and accrued expenses..................... 141,025 170,344
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 23,234 24,309
---------- ----------
Total current liabilities......................... 170,923 203,663
LONG-TERM DEBT, net of current maturities................... 150,308 251,701
CONVERTIBLE SUBORDINATED NOTES.............................. 49,350 --
DEFERRED INCOME TAXES AND OTHER NON-CURRENT
LIABILITIES............................................ 32,130 32,812
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.00001 par value, 10,000,000 shares
authorized: Series A Convertible Preferred Stock,
1,860,000 shares issued and outstanding................ -- --
Common Stock, $.00001 par value, 100,000,000 shares
authorized, 51,035,283 and 61,938,234 shares issued and
outstanding, respectively.............................. -- --
Limited Vote Common Stock, $.00001 par value, 3,345,333
shares authorized, 3,746,020 and 1,871,110 shares
issued and outstanding, respectively................... -- --
Additional paid-in capital................................ 675,106 815,687
Retained earnings......................................... 81,819 131,994
---------- ----------
Total stockholders' equity........................ 756,925 947,681
---------- ----------
Total liabilities and stockholders' equity........ $1,159,636 $1,435,857
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
<PAGE> 4
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES....................................... $193,821 $423,526 $321,600 $757,263
COST OF SERVICES (including depreciation)...... 150,249 324,890 255,120 585,946
-------- -------- -------- --------
Gross profit................................. 43,572 98,636 66,480 171,317
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES... 17,895 33,515 29,877 63,466
MERGER RELATED CHARGES......................... 6,437(a) -- 6,574(a) --
GOODWILL AMORTIZATION.......................... 2,227 4,611 3,725 8,827
-------- -------- -------- --------
Income from operations....................... 17,013 60,510 26,304 99,024
OTHER INCOME (EXPENSE):
Interest expense............................. (3,437) (6,410) (5,661) (10,943)
Other, net................................... 358 838 678 1,387
-------- -------- -------- --------
INCOME BEFORE INCOME TAX
PROVISION.................................... 13,934 54,938 21,321 89,468
PROVISION FOR INCOME TAXES..................... 9,127(b) 23,843 13,091(b) 38,829
-------- -------- -------- --------
NET INCOME..................................... 4,807 31,095 8,230 50,639
DIVIDENDS ON PREFERRED STOCK................... -- 232 -- 464
-------- -------- -------- --------
NET INCOME ATTRIBUTABLE TO COMMON STOCK........ $ 4,807 $ 30,863 $ 8,230 $ 50,175
======== ======== ======== ========
BASIC EARNINGS PER SHARE(c).................... $ 0.11 $ 0.52 $ 0.20 $ 0.87
======== ======== ======== ========
DILUTED EARNINGS PER SHARE(c).................. $ 0.10 $ 0.42 $ 0.19 $ 0.70
======== ======== ======== ========
DILUTED EARNINGS PER SHARE BEFORE MERGER
CHARGES(c)(d)................................ $ 0.23 $ 0.42 $ 0.34 $ 0.70
======== ======== ======== ========
SHARES USED IN COMPUTING EARNINGS PER SHARE:
Basic(c)..................................... 45,112 58,860 42,030 57,410
======== ======== ======== ========
Diluted(c)................................... 51,711 75,496 48,435 73,985
======== ======== ======== ========
</TABLE>
---------------
(a) As a result of the termination in June 1999 of an employee stock ownership
plan associated with a company acquired in a pooling transaction, the
Company incurred a non-cash, non-recurring compensation charge of $5.3
million and a non-recurring excise tax charge of $1.1 million. In addition,
the Company incurred $137,000 in merger charges associated with a pooling
transaction in the first quarter of 1999.
(b) Reflects the non-deductibility of the merger related charges. In addition,
for the six months ended June 30, 1999, it includes a non-cash,
non-recurring deferred tax charge of $677,000 as a result of a change in
the tax status from an S corporation to a C corporation of a company
acquired in a pooling transaction during the first quarter of 1999.
(c) Share and earnings per share data have been restated to give effect to a
3-for-2 stock split as discussed in Note 1 to these condensed consolidated
financial statements.
(d) Excludes the effect of all non-recurring merger related charges.
Additionally, for the six months ended June 30, 1999, it excludes the
non-cash, non-recurring deferred tax charge of $677,000 described in (b)
above.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 5
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
1999 2000 1999 2000
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to common stock.................. $ 4,807 $ 30,863 $ 8,230 $ 50,175
Adjustments to reconcile net income attributable to
common stock to net cash provided by operating
activities --
Depreciation and amortization.......................... 7,414 12,998 12,764 25,405
(Gain) loss on sale of property and equipment.......... (119) 276 (153) 57
Non-cash compensation charge for issuance of Common
Stock (ESOP)......................................... 5,319 -- 5,319 --
Deferred income tax provision.......................... (476) 2,173 214 2,346
Preferred stock dividend............................... -- 232 -- 464
Changes in operating assets and liabilities, net of
non-cash transactions --
(Increase) decrease in --
Accounts receivable, net............................. (20,095) (40,764) (32,093) (66,991)
Costs and estimated earnings in excess of billings on
uncompleted contracts............................. (1,156) 4,878 (12,031) (608)
Inventories.......................................... (944) (1,523) (1,766) (3,244)
Prepaid expenses and other current assets............ 60 870 (616) 193
Other, net........................................... 870 63 1,024 63
Increase (decrease) in --
Accounts payable and accrued expenses................ 18,486 6,048 26,391 11,564
Billings in excess of costs and estimated earnings on
uncompleted contracts............................. (4,510) 2,054 (2,034) (167)
-------- -------- --------- ---------
Net cash provided by operating activities......... 9,656 18,168 5,249 19,257
-------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment............. 194 359 481 885
Additions of property and equipment...................... (16,303) (21,380) (24,883) (43,322)
Cash paid for acquisitions, net of cash acquired......... (77,461) (46,684) (175,045) (85,659)
Net proceeds from sale of business....................... -- -- -- 2,410
-------- -------- --------- ---------
Net cash used in investing activities............. (93,570) (67,705) (199,447) (125,686)
-------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under bank lines of credit..... 89,360 50,138 113,765 (53,186)
Proceeds from other long-term debt....................... 933 1,540 3,361 151,682
Payments on other long-term debt......................... (7,153) (12,422) (22,810) (17,075)
Debt issuance costs...................................... (1,659) -- (1,659) (2,104)
Issuances of stock, net of offering costs................ -- 5,140 101,119 9,373
Exercise of stock options................................ 1,368 5,304 1,368 9,337
-------- -------- --------- ---------
Net cash provided by financing activities......... 82,849 49,700 195,144 98,027
-------- -------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....... (1,065) 163 946 (8,402)
CASH AND CASH EQUIVALENTS, beginning of period............. 5,257 2,210 3,246 10,775
-------- -------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period................... $ 4,192 $ 2,373 $ 4,192 $ 2,373
======== ======== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for --
Interest............................................... $ 1,517 $ 3,263 $ 3,457 $ 7,246
Income taxes........................................... 4,874 26,403 10,312 37,255
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 6
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND ORGANIZATION:
Quanta Services, Inc. is a leading provider of specialized contracting
services, offering end-to-end network solutions to the telecommunications, cable
television and electric power industries. References herein to the "Company"
include Quanta and its subsidiaries. The consolidated financial statements of
the Company include the accounts of Quanta and its wholly owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Since its inception and through 1999, Quanta has acquired 52 businesses.
The Company has acquired 15 additional businesses through June 30, 2000 and
intends to continue to acquire, through merger or purchase, similar companies to
expand its national and regional operations.
In the course of its operations, the Company is subject to certain risk
factors, including but not limited to: rapid technological and structural
changes in the Company's industries, risks related to internal growth and
operating strategies, risks related to acquisition financing and integration,
significant fluctuations in quarterly results, risks associated with contracts,
management of growth, dependence on key personnel, availability of qualified
employees, unionized workforce, competition, recoverability of goodwill,
potential exposure to environmental liabilities and anti-takeover measures.
All share amounts and per share amounts in these notes to condensed
consolidated financial statements have been adjusted to give effect to a 3-for-2
stock split declared by the board of directors on March 8, 2000 and paid on
April 7, 2000 to stockholders of record as of March 27, 2000.
Interim Condensed Consolidated Financial Information
These unaudited condensed consolidated financial statements have been
prepared pursuant to the rules of the SEC. Certain information and footnote
disclosures, normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States,
have been condensed or omitted pursuant to those rules and regulations. The
Company believes that the disclosures made are adequate to make the information
presented not misleading. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present the
financial position, results of operations and cash flows with respect to the
interim consolidated financial statements, have been included. The results of
operations for the interim periods are not necessarily indicative of the results
for the entire fiscal year. The results of the Company have historically been
subject to significant seasonal fluctuations.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the audited financial statements and notes thereto of
Quanta Services, Inc. and subsidiaries included in the Company's Annual Report
on Form 10-K, which was filed with the SEC on March 30, 2000.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
2. PER SHARE INFORMATION:
Earnings per share amounts are based on the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period. The weighted average number of shares used to
4
<PAGE> 7
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compute basic and diluted earnings per share for the three and six months ended
June 30, 1999 and 2000 is illustrated below (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
1999 2000 1999 2000
-------- -------- ------- -------
<S> <C> <C> <C> <C>
NET INCOME:
Net income for basic earnings per share -- income
attributable to common stockholders............... $ 4,807 $30,863 $ 8,230 $50,175
Effect of Convertible Subordinated Notes under the
"if converted" method -- interest expense addback,
net of taxes...................................... 542 445 1,085 991
Dividends on Preferred Stock......................... -- 232 -- 464
------- ------- ------- -------
Net income for diluted earnings per shares........... $ 5,349 $31,540 $ 9,315 $51,630
======= ======= ======= =======
WEIGHTED AVERAGE SHARES:
Weighted average shares outstanding for basic
earnings per share................................ 45,112 58,860 42,030 57,410
Effect of dilutive stock options..................... 1,216 3,017 1,022 2,424
Effect of Convertible Subordinated Notes under the
"if converted" method -- weighted convertible
shares
issuable.......................................... 5,383 4,319 5,383 4,851
Effect of conversion of Preferred Stock into common
stock -- weighted convertible shares issuable..... -- 9,300 -- 9,300
------- ------- ------- -------
Weighted average shares outstanding for diluted
earnings per share................................ 51,711 75,496 48,435 73,985
======= ======= ======= =======
</TABLE>
3. INCOME TAXES:
Certain of the businesses the Company has acquired were S corporations for
income tax purposes and, accordingly, any income tax liabilities for the periods
prior to the acquisitions are the responsibility of the respective stockholders.
Effective with the acquisitions, the S corporations converted to C corporations.
Accordingly, an estimated deferred tax liability has been recorded to provide
for the estimated future income tax liability as a result of the difference
between the book and tax bases of the net assets of these former S corporations.
For purposes of these consolidated financial statements, federal and state
income taxes have been provided for the post-acquisition periods. In addition,
during the first quarter of 1999, a non-cash, non-recurring tax charge of
$677,000 was recorded as a result of a change in the tax status from an S
corporation to a C corporation of a company acquired in a pooling transaction.
4. NEW ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".
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. In June
1999, SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133",
was issued and defers the adoption date to the beginning of an entity's fiscal
year-end beginning after June 15, 2000. Management does not believe that the
adoption of this statement will have a material impact on the financial position
or results of operations of the Company.
5
<PAGE> 8
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT:
Credit Facility
We currently have a $350 million credit facility with 14 banks. The credit
facility is secured by a pledge of all of the capital stock of the Company's
subsidiaries and the majority of the Company's assets and is to provide funds to
be used for working capital, to finance acquisitions and for other general
corporate purposes. Amounts borrowed under the credit facility bear interest at
a rate equal to either (a) the London Interbank Offered Rate (the 30 day LIBOR
rate was 7.75% at June 30, 2000) plus 1.00% to 2.00%, as determined by the ratio
of the Company's total funded debt to EBITDA (as defined in the credit facility)
or (b) the bank's prime rate (which was 9.5% at June 30, 2000) plus up to 0.25%,
as determined by the ratio of the Company's total funded debt to EBITDA.
Commitment fees of 0.25% to 0.50% (based on certain financial ratios) are due on
any unused borrowing capacity under the credit facility. The credit facility
matures June 14, 2004. The Company's subsidiaries guarantee the repayment of all
amounts due under the facility and the facility restricts pledges on all
material assets. The credit facility contains usual and customary covenants for
a credit facility of this nature including the prohibition of the payment of
dividends on common stock, certain financial ratio covenants and the consent of
the lenders for acquisitions exceeding a certain level of cash consideration. As
of June 30, 2000, $85.8 million was borrowed under the credit facility, and the
Company had $5.2 million of letters of credit outstanding, resulting in a
borrowing availability of $259.0 million under the credit facility.
Senior Secured Notes
In March 2000, the Company closed a senior secured notes private placement
with 16 lenders, primarily insurance companies, for $150 million. The senior
secured notes have maturities of five, seven or ten years with a weighted
average interest rate of 8.52% and rank pari passu in right of repayment to
Quanta's credit facility. The senior secured notes have financial covenants
similar to the credit facility. Proceeds from this private placement were used
to reduce outstanding borrowings under the credit facility.
Convertible Subordinated Notes
In October 1998, the Company entered into a strategic investment agreement
with Enron Capital & Trade Resources Corp., a subsidiary of Enron Corp.,
pursuant to which Enron Capital & Trade Resources Corp. and an affiliate made an
investment of $49.4 million in Quanta. The investment was in the form of
Convertible Subordinated Notes bearing interest at 6 7/8% and is convertible
into 5,383,636 shares of Quanta common stock at a price of $9.17 per share.
Additionally, Quanta and Enron Capital & Trade Resources Corp. entered into a
strategic alliance under which Enron Capital & Trade Resources Corp. and Quanta
will exchange information regarding the design, construction and maintenance of
electric power transmission and distribution systems and fiber optic
communications systems. The Convertible Subordinated Notes required quarterly
interest payments and equal semi-annual principal payments beginning in 2006
until the notes are paid in full. The Company had the option to redeem the notes
at a premium beginning in 2002.
In April 2000, UtiliCorp United Inc. ("UtiliCorp") purchased the $49.4
million Convertible Subordinated Notes from Enron Capital & Trade Resources
Corp. and an affiliate. UtiliCorp converted the Convertible Subordinated Notes
into approximately 5.4 million shares of Quanta's common stock on June 13, 2000.
6. SERIES A CONVERTIBLE PREFERRED STOCK:
In September 1999, the Company entered into a securities purchase agreement
with UtiliCorp pursuant to which the Company issued 1,860,000 shares of Series A
Convertible Preferred Stock, $.00001 par value per share, for an initial
investment of $186,000,000, before transaction costs. The holders of the Series
A Convertible Preferred Stock are entitled to receive dividends in cash at a
rate of 0.5% per annum on an amount
6
<PAGE> 9
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
equal to $100.00 per share, plus all unpaid dividends accrued. In addition to
the preferred dividend, the holders are entitled to participate in any cash or
non-cash dividends or distributions declared and paid on the shares of common
stock, as if each share of Series A Convertible Preferred Stock had been
converted into common stock at the applicable conversion price immediately prior
to the record date for payment of such dividends or distributions. However,
holders of Series A Convertible Preferred Stock will not participate in non-cash
dividends or distributions if such dividends or distributions cause an
adjustment in the price at which Series A Convertible Preferred Stock converts
into common stock. At any time after the sixth anniversary of the issuance of
the Series A Convertible Preferred Stock, if the closing price per share of the
Company's common stock is greater than $20.00, then the Company may terminate
the preferred dividend. At any time after the sixth anniversary of the issuance
of the Series A Convertible Preferred Stock, if the closing price per share of
the Company's common stock is equal to or less than $20.00, then the preferred
dividend may, at the option of UtiliCorp, be adjusted to the then "market coupon
rate", which shall equal the Company's after-tax cost of obtaining financing,
excluding common stock, to replace UtiliCorp's investment in the Company.
UtiliCorp is entitled to that number of votes equal to the number of shares
of common stock into which the outstanding shares of Series A Convertible
Preferred Stock are then convertible. Subject to certain limitations, UtiliCorp
will be entitled to elect three of the total number of directors of the Company.
All or any portion of the outstanding shares of Series A Convertible Preferred
Stock may, at the option of UtiliCorp, be converted at any time into fully paid
and nonassessable shares of common stock. The conversion price currently is
$20.00, yielding 9,300,000 shares of common stock upon conversion of all
outstanding shares of Series A Convertible Preferred Stock. The conversion price
may be adjusted under certain circumstances. Also in certain circumstances,
UtiliCorp has the right to purchase additional securities from the Company to
maintain the percentage ownership of the Company represented by the Series A
Convertible Preferred Stock. During the six months ended June 30, 2000,
UtiliCorp purchased 395,169 shares of common stock pursuant to these rights.
7. SEGMENT INFORMATION:
The Company operates in one reportable segment as a specialty contractor.
The Company provides comprehensive network solutions to the telecommunications,
cable and electric power industries, including designing, installing, repairing
and maintaining network infrastructure. Each of these services is provided by
several of the Company's subsidiaries and discrete financial information is not
provided to management at the service level. The following table presents
information regarding revenues derived from the services noted above:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1999 2000
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Telecommunications network services......................... $106,743 $326,380
Cable television network services........................... 8,879 98,444
Electric power network services............................. 164,438 202,947
Ancillary services.......................................... 41,540 129,492
-------- --------
$321,600 $757,263
======== ========
</TABLE>
The Company does not have significant operations or long-lived assets in
countries outside of the United States.
7
<PAGE> 10
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED PARTY TRANSACTIONS:
In September 1999, the Company entered into a strategic alliance agreement
with UtiliCorp. Under the terms of the strategic alliance agreement, UtiliCorp
will use the Company, subject to the Company's ability to perform the required
services, as a preferred contractor in outsourced transmission and distribution
infrastructure installation and maintenance and natural gas distribution
installation and maintenance in all areas serviced by UtiliCorp, provided that
the Company provides such services at a competitive cost. The strategic alliance
agreement has a term of six years.
In addition to the strategic alliance agreement, the Company entered into a
management services agreement with UtiliCorp. Under the management services
agreement, to the extent mutually agreed upon by the parties, UtiliCorp will
provide advice and services including financing activities; corporate strategic
planning; research on the restructuring of the utility industries; the
development, evaluation and marketing of the Company's products, services and
capabilities; identification of and evaluation of potential acquisition
candidates and other merger and acquisition advisory services; and other
services that the board of directors may reasonably request. In consideration of
the advice and services rendered by UtiliCorp, the Company will pay UtiliCorp on
a quarterly basis in arrears a fee of $2,325,000. The management services
agreement has a term of six years. The Company has the right to terminate the
management services agreement at any time if, in the reasonable judgment of the
board of directors, changes in the nature of the relationship between the
Company and UtiliCorp make effective provision of the services to be provided
unlikely. As of June 30, 2000, payments owed to UtiliCorp under this arrangement
were approximately $7.2 million.
9. SUBSEQUENT EVENTS:
Business Combinations
Subsequent to June 30, 2000 and through August 10, 2000, the Company has
acquired three additional companies for an aggregate consideration of $80.9
million in cash and 71,542 shares of common stock. The cash portion of such
consideration was provided by borrowings under the Company's credit facility.
Convertible Subordinated Notes
On July 19, 2000, the Company issued $150.0 million of convertible
subordinated notes, plus an additional $22.5 million on August 7, 2000 which
represents the exercise of the underwriters' over-allotment option. Net proceeds
from the offering were used to repay outstanding indebtedness under the credit
facility. The convertible subordinated notes bear interest at 4.0% and are
convertible into shares of Quanta common stock at a price of $54.53 per share.
The convertible subordinated notes require semi-annual interest payments
beginning December 31, 2000, until the notes are due on July 1, 2007. The
Company has the option to redeem the notes beginning July 3, 2003.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and related notes thereto included elsewhere
in this Quarterly Report on Form 10-Q. Except for the historical financial
information contained herein, the matters discussed in this Quarterly Report on
Form 10-Q may be considered "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements include declarations regarding our intent,
belief or current expectations, statements regarding the future results of
acquired companies and our gross margins. Any such forward-looking statements
are not guarantees of future performance and involve a number of risks and
uncertainties. Actual results could differ materially from those indicated by
such forward-looking statements. Among the important factors that could cause
actual results to differ materially from those indicated by such forward-looking
statements are the risk factors identified in our Annual Report on Form 10-K,
which was filed with the SEC on March 30, 2000, which is available at the SEC's
Web site at www.sec.gov.
We derive our revenues from one reportable segment by providing specialized
contracting services and offering comprehensive network solutions. Our customers
include telecommunications, cable television and electric power companies, as
well as commercial, industrial and governmental entities.
We enter into contracts principally on the basis of competitive bids, the
final terms and prices of which we frequently negotiate with the customer.
Although the terms of our contracts vary considerably, most are either a lump
sum or unit price basis in which we agree to do the work for a fixed amount for
the entire project (lump sum) or for units of work performed (unit price). We
also perform services on a cost-plus or time and materials basis. We are
generally able to achieve higher margins on lump sum and unit price contracts
than on cost-plus contracts as a result of our experience in bidding and
performance. Our exposure to loss on fixed price contracts has historically been
limited by the high volume and relatively short duration of the fixed price
contracts we undertake. However, as we perform larger projects, our reported
margins may be significantly affected by actual results on these projects.
We complete most installation projects within one year, while we frequently
provide maintenance and repair work under open-ended, unit price master service
agreements which are renewable annually. We generally record revenues from lump
sum contracts on a percentage-of-completion basis, using the cost-to-cost method
based on the percentage of total cost incurred to date in proportion to total
estimated costs to complete the contract. We recognize revenue when services are
performed except when work is being performed under fixed price or cost-plus
contracts. Such contracts generally require that the customer accept completion
of progress to date and compensate us for services rendered, measured typically
in terms of units installed, hours expended or some other measure of progress.
Some of our customers require us to post performance and payment bonds upon
execution of the contract, depending upon the nature of the work to be
performed. Our fixed price contracts often include payment provisions pursuant
to which the customer withholds a 5% to 10% retainage from each progress payment
and forwards the retainage to us upon completion and approval of the work.
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. Our gross margin, which is gross profit
expressed as a percentage of revenues, is typically higher on projects where
labor, rather than materials, constitutes a greater portion of the cost of
services. We can predict material costs more accurately than labor costs.
Therefore, to compensate for the potential variability of labor costs, we seek
to maintain higher margins on our labor-intensive projects. Certain of our
subsidiaries were previously subject to deductibles ranging from $100,000 to
$1,000,000 for workers' compensation insurance and, as of August 1, 2000, we
will have a deductible of $500,000 per occurrence related to workers'
compensation, automobile and general liability claims. Fluctuations in insurance
accruals related to these deductibles could have an impact on gross margins in
the period in which such adjustments are made. Selling, general and
administrative expenses consist primarily of compensation and related benefits
to management, administrative salaries and benefits, marketing, office rent and
utilities, communications and professional fees.
9
<PAGE> 12
RESULTS OF OPERATIONS
The following table sets forth selected unaudited statements of operations
data and such data as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------- -----------------------------------
1999 2000 1999 2000
---------------- ---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues....................... $193,821 100.0% $423,526 100.0% $321,600 100.0% $757,263 100.0%
Cost of services (including
depreciation)................ 150,249 77.5 324,890 76.7 255,120 79.3 585,946 77.4
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit.......... 43,572 22.5 98,636 23.3 66,480 20.7 171,317 22.6
Selling, general and
administrative expenses...... 17,895 9.2 33,515 7.9 29,877 9.3 63,466 8.4
Merger related charges......... 6,437 3.3 -- -- 6,574 2.0 -- --
Goodwill amortization.......... 2,227 1.2 4,611 1.1 3,725 1.2 8,827 1.2
-------- ----- -------- ----- -------- ----- -------- -----
Income from
operations.......... 17,013 8.8 60,510 14.3 26,304 8.2 99,024 13.0
Interest expense............... (3,437) (1.8) (6,410) (1.5) (5,661) (1.8) (10,943) (1.4)
Other income, net.............. 358 0.2 838 0.2 678 0.2 1,387 0.2
-------- ----- -------- ----- -------- ----- -------- -----
Income before income tax
provision.................... 13,934 7.2 54,938 13.0 21,321 6.6 89,468 11.8
Provision for income taxes..... 9,127 4.7 23,843 5.7 13,091 4.1 38,829 5.1
-------- ----- -------- ----- -------- ----- -------- -----
Net income............ $ 4,807 2.5% $ 31,095 7.3% $ 8,230 2.5% $ 50,639 6.7%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Consolidated Results for the Three and Six Months Ended June 30, 1999,
Compared to the Three and Six Months Ended June 30, 2000.
Revenues. Revenues increased $229.7 million and $435.7 million, or 118.5%
and 135.5% to $423.5 million and $757.3 million for the three and six months
ended June 30, 2000. This increase was primarily attributable to revenues of
$113.9 million and $191.6 million for the three and six months ended June 30,
2000 from platform companies acquired subsequent to June 30, 1999 which
continued to exist as separate reporting subsidiaries, as well as a full period
of contributed revenues for the six months ended June 30, 2000 for those
companies acquired through June 30, 1999. In addition, we have experienced
strong growth in key business areas as a result of greater demand for bandwidth,
increased outsourcing, deregulation and industry convergence.
Gross profit. Gross profit increased $55.1 million and $104.8 million, or
126.4% and 157.7%, to $98.6 million and $171.3 million for the three and six
months ended June 30, 2000. As a percentage of revenues, gross margin increased
from 22.5% for the three months ended June 30, 1999 to 23.3% for the three
months ended June 30, 2000. Gross margin increased from 20.7% for the six months
ended June 30, 1999 to 22.6% for the six months ended June 30, 2000. This
increase in our gross margin resulted from a shift in our revenue mix to higher
margin cable television and telecommunications services. We also experienced
improved margins in our electric power network services as a result of better
asset utilization and more favorable pricing.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $15.6 million and $33.6 million, or 87.3% and
112.4%, to $33.5 million and $63.5 million for the three and six months ended
June 30, 2000. Of this increase, $6.2 million and $11.0 million for the three
and six months ended June 30, 2000, respectively, was attributable to the
platform companies we acquired subsequent to June 30, 1999. Selling, general and
administrative expenses also included a full period of costs in 2000 associated
with those companies acquired during the first six months of 1999. The remainder
of the increase was attributable to tuck-in acquisitions, the continued
establishment of infrastructure to facilitate our growth and to integrate our
acquired businesses and an increase in accruals associated with a company-wide
incentive program that pays bonuses to management at the operating units and to
corporate management for exceeding
10
<PAGE> 13
their performance targets. As a percentage of revenues, selling, general and
administrative expenses decreased due to better absorption of the fixed
component of overhead costs by the higher level of revenues.
Interest expense. Interest expense increased $3.0 million and $5.3 million,
or 86.5% and 93.3%, to $6.4 million and $10.9 million for the three and six
months ended June 30, 2000 due to higher levels of debt resulting from the
acquisitions of the companies we purchased subsequent to June 30, 1999. Funds
were also borrowed under our credit facility for equipment purchases and other
operating activities to support higher levels of revenue. In addition, interest
expense increased due to higher interest rates on our credit facility and from
the issuance of the senior secured notes.
Provision for income taxes. The provision for income taxes was $38.8
million for the six months ended June 30, 2000 with an effective tax rate of
43.4% compared to $13.1 million for the six months ended June 30, 1999 and an
effective tax rate of 61.4%. In 1999, the provision reflects the
non-deductibility of the merger related charges and a non-cash non-recurring tax
charge of $677,000 as a result of a change in the tax status of a company
acquired in a pooling-of-interest transaction from an S corporation to a C
corporation.
Net Income. Net income increased $26.3 million and $42.4 million, or 546.9%
and 515.3%, to $31.1 million and $50.6 for the three and six months ended June
30, 2000 compared to $4.8 million and $8.2 million for the three and six months
ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had cash and cash equivalents of $2.4 million,
working capital of $228.5 million and long-term debt of $251.7 million, net of
current maturities, including borrowings of $150.0 million of senior secured
notes and $85.8 million under the credit facility. We also had $5.2 million of
letters of credit outstanding under the credit facility.
During the six months ended June 30, 2000, operating activities provided
net cash flow of $19.3 million. Changes in working capital accounts are affected
by the acquisitions throughout the year and as such are not comparable to prior
periods. We used net cash in investing activities of $125.7 million, including
$85.7 million used for the purchase of businesses, net of cash acquired and
$43.3 million of additions to property. Financing activities provided a net cash
flow of $98.0 million, resulting primarily from $150.0 million from the private
placement of senior secured notes, partially offset by $70.3 million in
repayments on our credit facility and on other long-term debt.
We currently have a $350 million credit facility with 14 banks. The credit
facility is secured by a pledge of all of the capital stock of our operating
subsidiaries and the majority of our assets. We use the credit facility to
provide funds to be used for working capital, to finance acquisitions and for
other general corporate purposes. Amounts borrowed under the credit facility
bear interest at a rate equal to either (a) LIBOR plus 1.00% to 2.00%, as
determined by the ratio of our total funded debt to EBITDA (as defined in the
credit facility) or (b) the bank's prime rate plus up to 0.25%, as determined by
the ratio of our total funded debt to EBITDA. We owe commitment fees of 0.25% to
0.50% (based on total funded debt to EBITDA) on any unused borrowing capacity
under the credit facility. Our subsidiaries guarantee repayment of all amounts
due under the credit facility, and the credit facility restricts pledges of
material assets. We agreed to usual and customary covenants for a credit
facility of this nature, including a prohibition on the payment of dividends on
common stock, certain financial ratios and indebtedness covenants and a
requirement to obtain the consent of the lenders for acquisitions exceeding a
certain level of cash consideration. As of August 10, 2000 we had no outstanding
borrowings under the credit facility and $4.3 million of letters of credit
outstanding, resulting in a borrowing availability of $345.7 million under the
revolving credit facility.
In September 1999, we issued 1,860,000 shares of Series A Convertible
Preferred Stock to UtiliCorp for an initial investment of $186,000,000, before
transaction costs. The Series A Convertible Preferred Stock bears a dividend
rate of 0.5% per annum and is convertible into common stock at any time at the
option of UtiliCorp at $20.00 per share, subject to customary adjustments for
certain dilutive events. We used the net proceeds from the investment to reduce
outstanding borrowings under our credit facility.
11
<PAGE> 14
We also entered into a management services agreement with UtiliCorp for
advice and services including financing activities; corporate strategic
planning; research on the restructuring of the power industries; the
development, evaluation and marketing of our products, services and
capabilities; identification of and evaluation of potential U.S. acquisition
candidates and other merger and acquisition advisory services; and other
services that we may reasonably request. In consideration of the advice and
services rendered by UtiliCorp, we agreed to pay UtiliCorp, on a quarterly basis
in arrears, a fee of $2,325,000. The UtiliCorp management services agreement
lasts for six years, but can be extended by mutual agreement of the parties. We
have the right to terminate the management services agreement at any time if, in
our reasonable judgment, changes in the nature of our relationship with
UtiliCorp make effective provision of the services to be provided unlikely.
In March 2000, we closed a private placement of senior secured notes with
16 lenders, primarily insurance companies, for $150 million. The senior secured
notes have maturities of five, seven or ten years with a weighted average
interest rate of 8.52% and, pursuant to an intercreditor agreement, rank pari
passu in right of repayment with our credit facility indebtedness. The senior
secured notes have financial covenants similar to the credit facility. We used
the proceeds from this private placement to reduce outstanding borrowings under
the credit facility.
In April 2000, Utilicorp purchased $49.4 million principal amount of our
Convertible Subordinated Notes from Enron Capital & Trade Resources Corp. and an
affiliate. Utilicorp converted these notes into approximately 5.4 million shares
of Quanta's common stock on June 13, 2000.
Between January 1, 2000 and June 30, 2000, we acquired 15 companies for an
aggregate consideration of 2.6 million shares of common stock and $86.5 million
in cash. The cash portion of such consideration was provided by borrowings under
our credit facility. The timing, size or success of any acquisition effort and
the associated potential capital commitments cannot be predicted.
On July 19, 2000, the Company issued $150.0 million of convertible
subordinated notes, plus an additional $22.5 million on August 7, 2000 which
represents the exercise of the underwriters' over-allotment option. Net proceeds
from the offering were used to repay outstanding indebtedness under the credit
facility. The convertible subordinated notes bear interest at 4.0% and are
convertible into shares of Quanta common stock at a price of $54.53 per share.
The convertible subordinated notes require semi-annual interest payments
beginning December 31, 2000, until the notes are due on July 1, 2007. The
Company has the option to redeem the notes beginning July 3, 2003.
We anticipate that our cash flow from operations and our credit facility
will provide sufficient cash to enable us to meet our working capital needs,
debt service requirements, and planned capital expenditures for property and
equipment for at least the next 12 months. However, if companies we wish to
acquire are unwilling to accept our common stock as part of the consideration
for the sale of their businesses, we could be required to utilize more cash to
complete acquisitions. If sufficient funds were not available from operating
cash flow or through borrowings under the credit facility, we may be required to
seek additional financing through the public or private sale of equity or debt
securities. There can be no assurance that we could secure such financing if and
when we need it or on terms we would deem acceptable.
SEASONALITY; FLUCTUATIONS OF QUARTERLY RESULTS
Our results of operations can be subject to seasonal variations. During the
winter months, demand for new projects and new maintenance service arrangements
may be lower due to reduced construction activity. However, demand for repair
and maintenance services attributable to damage caused by inclement weather
during the winter months may partially offset the loss of revenues from lower
demand for new projects and new maintenance service arrangements. Additionally,
our industry can be highly cyclical. As a result, our volume of business may be
adversely affected by declines in new projects in various geographic regions in
the United States. Typically, we experience lower gross and operating margins
during the winter months. The timing of acquisitions, variations in the margins
of projects performed during any particular quarter, the timing and magnitude of
acquisition assimilation costs and regional economic conditions may also
materially affect quarterly results. Accordingly, our operating results in any
particular quarter may not be indicative of the results that can be expected for
any other quarter or for the entire year.
12
<PAGE> 15
PART II -- OTHER INFORMATION
QUANTA SERVICES, INC. AND SUBSIDIARIES
ITEM 2. CHANGES IN SECURITIES.
(b) Registered Sales of Securities.
On July 19, 2000, the Company sold, in an underwritten public offering,
$150 million principal amount of 4% convertible subordinated notes due 2007. The
convertible subordinated notes are convertible into shares of the Company's
common stock at a price of $54.53 per share and require semi-annual interest
payments beginning December 31, 2000, until the notes are due on July 1, 2007.
The Company has the option to redeem the notes beginning July 3, 2003. The notes
are subordinated to the Company's senior secured debt including the Company's
revolving credit facility and senior secured notes. On August 7, 2000, the
underwriters fully exercised their over-allotment option resulting in the
Company issuing an additional $22.5 million principal amount of convertible
subordinated notes.
(c) Unregistered Sales of Securities.
Between March 31, 2000, and June 30, 2000, the Company completed nine
acquisitions in which some or all of the consideration was unregistered
securities of the Company. The aggregate consideration paid in these
transactions was $46.5 million in cash and 981,903 shares of common stock. None
of these acquisitions were affiliated with each other prior to acquisition by
the Company.
All securities listed on the following table were shares of common stock.
The Company relied on Section 4(2) of the Securities Act of 1933, as amended, as
the basis for exemption from registration. For all issuances, the purchasers
were "accredited investors" as defined in Rule 501 promulgated pursuant to the
Securities Act of 1933, as amended. All issuances were to the owners of
businesses acquired in privately negotiated transactions or to UtiliCorp, not
pursuant to public solicitation. The issuance to UtiliCorp was made pursuant to
certain preemptive rights negotiated with UtiliCorp at the time of its initial
investment in Series A Convertible Preferred Stock of the Company.
<TABLE>
<CAPTION>
NUMBER
OF
DATE SHARES PURCHASERS CONSIDERATION
---- ------- ---------- -------------
<C> <C> <S> <C>
4/10/00 133,934 One owner of Croce Electric Acquisition of Croce Electric
Company, Inc. Company, Inc.
4/16/00 209,546 Thirteen owners of Utilities Acquisition of Utilities
Construction Co., Inc. Construction Co.
4/20/00 208,995 UtiliCorp United Inc. $5,139,619.88
4/28/00 220,697 Five owners of Eastern Acquisition of Eastern
Communications Corp. Communications Corp.
5/5/00 142,507 One owner of Southeast Pipeline Acquisition of Southeast Pipeline
Construction, Inc. and Construction, Inc. and
Southeast Pipeline Management Southeast Pipeline Management
Corporation Corporation
6/1/00 68,849 Two owners of Kuenzi Acquisition of Kuenzi
Construction, Inc. Construction, Inc.
6/8/00 121,878 Two owners of dot 05 Optical Acquisition of dot 05 Optical
Communications, Inc. Communications, Inc.
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER
OF
DATE SHARES PURCHASERS CONSIDERATION
---- ------- ---------- -------------
<C> <C> <S> <C>
6/12/00 6,766 Two owners of Marlboro Acquisition of Marlboro
Cablevision Constructors, Inc. Cablevision Constructors, Inc.
6/14/00 55,108 Four owners of NetCom Management Acquisition of NetCom Management
Group, Inc. Group, Inc.
6/15/00 22,618 Two owners of Great Western Acquisition of Great Western
Enterprises, Inc. Enterprises, Inc.
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of stockholders in Houston, Texas on
May 24, 2000. The following sets forth matters submitted to a vote of
stockholders at the annual meeting:
(a) Nine members were elected to the Board of Directors, each to serve
until the next annual meeting of the Company and until their respective
successors have been elected and qualified. The following six individuals
were elected to the Board of Directors by the holders of the common stock
of the Company: James R. Ball, John R. Colson, John A. Martell, Gary A.
Tucci, Michael T. Willis and John R. Wilson. The following two individuals
were elected to the Board of Directors by the holders of the Series A
Preferred Stock of the Company: Robert K. Green and James G. Miller. The
holders of Limited Vote Common Stock of the Company elected Vincent D.
Foster to the Board of Directors.
Every director elected by the holders of common stock was elected by a
vote of at least 51,132,219 shares, being more than a plurality of the
outstanding shares cast for or against, with a maximum of 585,214 shares
voting against and no broker non-votes. Messrs. Green and Miller were each
elected by a vote of 1,860,000 shares of the Series A Preferred Stock,
being more than a plurality of the outstanding shares of Series A Preferred
Stock cast for or against, with no shares voted against or abstaining. Mr.
Foster was elected by a vote of 1,684,047 shares of the Limited Vote Common
Stock, being more than a plurality of the outstanding shares of Limited
Vote Common Stock cast for or against, with no shares voted against or
abstaining.
(b) The stockholders approved the proposal to exchange shares of the
Company's common stock held by UtiliCorp for shares of the Company's Series
A Preferred Stock, and to amend the Certificate of Designation of the
Company's Series A Preferred Stock so as to have sufficient shares of
Series A Preferred Stock to effect the exchange and to decrease the amount
per share on which dividends are calculated for the Series A Preferred
Stock. The stockholders approved the proposal with a vote of (i) 47,573,845
votes of the Series A Preferred Stock, common stock, and Limited Vote
Common Stock voting together, representing a majority of the aggregate
votes entitled to be cast by the holders of all issued and outstanding
shares of Series A Preferred Stock, common stock and Limited Vote Common
Stock, (ii) 38,273,845 votes of the common stock and Limited Vote Common
Stock voting together, representing a majority of the aggregate votes
entitled to be cast by the holders of all issued and outstanding shares of
common stock and Limited Vote Common Stock, and (iii) 9,300,000 votes of
the Series A Preferred Stock, voting as a separate class, representing a
majority of the aggregate votes entitled to be cast by the holder of all
issued and outstanding shares of Limited Vote Common Stock. Holders of
926,542 shares of common stock voted against this proposal and holders of
85,718 shares of common stock abstained on this proposal.
(c) The stockholders approved the proposal to amend the Company's 1997
Stock Option Plan to include the Company's Limited Vote Common Stock and
Series A Preferred Stock in the definition of "stock" with holders of
shares representing 43,393,797 votes voting for the proposal, representing
a majority of all votes cast for or against the proposal, with holders of
3,708,923 shares of common stock voting against the proposal and holders of
90,036 shares of common stock abstaining on the proposal.
14
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
27.1 -- Financial data schedule
</TABLE>
(b) Reports on Form 8-K.
On March 20, 2000, the Company filed a current report on Form 8-K regarding
adoption of the Company's Shareholder Rights Plan.
15
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Quanta Services, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
QUANTA SERVICES, INC.
By: /s/ DERRICK A. JENSEN
----------------------------------
Derrick A. Jensen
Vice President, Controller and
Chief Accounting Officer
Dated: August 14, 2000
16
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27.1 -- Financial data schedule
</TABLE>
