Quanta Services' CEO Discusses Q3 2011 Results - Earnings Call Transcript

Quanta Services (PWR)

Q3 2011 Earnings Call

November 02, 2011 9:30 am ET

Executives

James Haddox - Chief Financial Officer

Kip A. Rupp - Founder and Managing Partner

James F. O'Neil - Chief Executive Officer, President and Director

Analysts

William D. Bremer - Maxim Group LLC, Research Division

Jamie L. Cook - Crédit Suisse AG, Research Division

Craig E. Irwin - Wedbush Securities Inc., Research Division

Scott J Levine - JP Morgan Chase & Co, Research Division

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Daniel J. Mannes - Avondale Partners, LLC, Research Division

Mark Caruso - Millennium Partners

Zach Larkin - Stephens Inc., Research Division

Will Gabrielski - American Technology

John Rogers - D.A. Davidson & Co., Research Division

Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Quanta Services' Third Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, November 2, 2011. I would now like to turn the conference over to our host for today, Mr. Kip Rupp, Vice President of Investor Relations. Please go ahead, sir.

Kip A. Rupp

Great. Thank you, Patricia, and welcome, everyone, to the Quanta Services' conference call to review third quarter of 2011 results. Before I turn the call over to management, I have the normal housekeeping details to run through. If you would like to have Quanta news releases and other information emailed to you when they occur, please sign up for email information alerts by going to the Investors & Media section of Quanta Services' website at quantaservices.com. A replay of today's call will be available on Quanta's website at quantaservices.com. In addition, a telephonic recorded instant replay will be available for the next 7 days, 24 hours a day, that can be accessed as set forth in the press release. Please remember that information reported on this call speaks only as of today, November 2, 2011, and therefore you are advised that any time-sensitive information may no longer be accurate as of the time of any replay of this call.

This conference call will include forward-looking statements intended to qualify under the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include all statements reflecting Quanta's expectations, intentions, assumptions or beliefs about future events or performance or that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict or are beyond Quanta's control, and actual results may differ materially from those expected or implied as forward-looking statements. Management cautions that you should not place undue reliance on Quanta's forward-looking statements, and Quanta does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after this call.

For additional information concerning some of the risks, uncertainties and assumptions that could affect Quanta's forward-looking statements, please refer to the company's annual report on Form 10-K for the year ended December 31, 2010, and its quarterly reports on Form 10-Q and its other documents filed with the Securities and Exchange Commission, which may be obtained on Quanta's website or through the SEC's website at sec.gov.

With that, I would now like to turn the call over to Mr. Jim O'Neil, Quanta's President and CEO. Jim?

James F. O'Neil

Thanks, Kip. Good morning, everyone, and welcome to the Quanta Services' Third Quarter 2011 Earnings Conference Call. I will start the call with an operational overview before turning the call over to James Haddox, Quanta's CFO, to provide a detailed review of our third quarter financial results. Following James' comments, we'll welcome your questions.

In the third quarter, we expensed momentum in the each of our operating segments for the first time since 2008. Specifically, our electric transmission business in the quarter continued to ramp up as a number of projects moved into full construction. We were also awarded nearly $250 million of pipeline projects in the third quarter, which are beginning to mobilize into construction in the fourth quarter. As a result of this increased activity, our workforce increased by approximately 2,500 employees or 17% at the end of the third quarter as compared to June 30, 2011. Both our 12 month and total backlog at the end of the third quarter were at record levels. Our 12-month backlog at the end of the third quarter increased about 39% and total backlog increased approximately 25% compared to backlog at the end of the third quarter of 2010.

During the quarter, our Electric Power segment grew revenues by approximately 55% compared to the same period last year. Our Electric Power segment 12-month backlog as of the end of the third quarter increased nearly 49% and total backlog increased nearly 17% as compared to the third quarter of 2010. We believe we are in the early stages of a major multiyear transmission buildout in the United States and Canada and expect backlog to continue to remain strong throughout 2012. The large electric transmission projects that we are progressing are progressing in a manner that is consistent with the expectations we set on our second quarter conference call without any meaningful delays during the quarter.

During the third quarter, the joint venture including Quanta operating unit, Valard Construction, finalized the contract with BC Hydro for the engineering, procurement and construction of the Northwest Transmission Line. Under our scope of the contract, we will construct the 344-kilometer 287-kilovolt transmission line, which is designated to provide a secure interconnection point for clean energy generation projects and supply electricity to support future industrial developments in Northern British Columbia. We have commenced preconstruction activities but do not expect to move toward full construction until the spring of 2012, with completion expected in the fourth quarter of 2013.

While large transmission projects are grabbing the headlines, we are also experiencing an increase in activity for projects less than $100 million in value that we typically don't announce. For example, AEP awarded Quanta work in 2 states to rebuild a number of transmission lines totaling more than 300 miles, and Oklahoma Gas and Electric recently awarded Quanta the Seminole to Muskogee Transmission Project, which is a 125-mile, 345-kilovolt line. Construction on this project is expected to start in the middle of 2012 with completion expected in late 2013. The aggregate of these projects is approximately $170 million.

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