Quanta Services Inc (PWR) 2003 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Quanta Services first quarter earnings conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. If anyone needs assistance at any time during the conference, please press the * followed by the zero. As a reminder, this conference is being recorded Tuesday, May 6, 2003.

I would now like to turn the conference over to Mr. Ken Dennard of DRG and E. Please go ahead, sir.

Thank you, Kristen. Good morning, everyone. We appreciate you joining us for Quanta Services conference call to review first quarter results. Before I turn the call over to management, I have the normal housekeeping details to run through. If you'd like to be on the e-mail distribution or fax list to receive future news releases for Quanta Services, or if you've experienced a technical problem and didn't receive yours this morning, please call DRG and E at our offices, and relay that information to the folks there. That number to dial is 713.529.6600.

Also, if you'd like to listen to a replay of today's call, it will be available via webcast, by going to www.QuantaServices.com. Click on the webcast section. Or there's a telephonic recorded instant replay that'll be available for 7 days, 24 hours a day. To use the dial-in replay feature, dial 303.590.3000 and use the pass code 537442. That information is also in today's press release.

As you know, this conference call today contains various forward-looking statements and information, including management's expectations regarding revenues, earnings-per-share and other results for the second quarter and full year of 2003. These statements are based on management's beliefs as well as assumptions made by and information currently available through management.

Although the company believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will have proven to be correct. Such statements are subject to risks, uncertainties and assumptions, including and among other matters, future growth in the electric utility and telecommunications outsourcing industry, the ability of Quanta to complete acquisitions and effectively integrate operations of acquired companies, access to sufficient funding to finance Quanta's desired growth, dependence on fixed-price contracts, cancellation provisions in contracts, departure of key personnel, as well as general risks related to the industry in which Quanta operates.

Should one or more of these risks materialize, or should underlying assumptions prove to be incorrect, actual results may differ materially from those expected. For more detailed information and discussion of these risks, investors are urged to refer to the company's filings with the SEC.

Now, I'd like to turn the call over to Mr. John Colson, Quanta's Chairman and CEO. John?

Thanks, Ken, and welcome to the Quanta Services first quarter 2003 conference call. Joining me today is James Haddox, our CFO, John Wilson, President of Quanta's Electric Power and Gas Division, and Luke Spalj, President of Quanta's Telecommunications and Cable Television Division.

In our last call, John Wilson talked about the electric power and gas side of our business, the new management structure and industry trends. Today we thought it would be appropriate to hear from Luke Spalj about our telecom and cable division. So after my initial comments, Luke will outline the structure and integration of his division, and discuss the state of our telecom and cable business, and overall market trends. James then will wrap up the call with financial details, before we open the call for questions.

Today we announced the results for the first quarter of 2003. Revenues for the first quarter of 2003 were approximately $367m. Income from operations for the quarter was a negative $1.2m. These results are slightly better than our revised expectations announced last month.

As you know, the quarter brought very unique weather conditions to almost every region of the United States. The Northeast United States was struck by extreme cold, and large amounts of snow, late in the winter season. The South and Southeast received more than twice the normal precipitation. The front range of the Rocky Mountain area was paralyzed by record-breaking snowfall.

In many cases, our offices could not open because the staff could not travel to work. Our crews were hindered by the weather or not able to work at all. This unprecedented weather delayed many projects, increased costs, and as a result directly impacted our quarter.

Frankly, in the current market environment, there's not a lot of opportunity to make up for difficulties such as weather. We've never in our history missed a quarter due to weather. We have had better-than-expected results because of weather, and we've had lower margins due to rain and snow. But nothing as severe as the first quarter of this year.

The weather in the first quarter was severe, but also, overall margins, customer attitudes, and a depressed market compounded the effects of Mother Nature. We continue to believe that 2003 will not bring a recovery in our markets. But the implementation of our new structure, cost-savings measures, integration of operations, and more effective coordination between units should strengthen our business.

Taking these factors into account, we expect that our performance in the three remaining quarters of 2003 will show sequential improvement over the first quarter. We're providing new guidance for the year based on the first quarter shortfall and market conditions. Our 2003 guidance, which overlaps the low end of our previous guidance, is $0.25 - $0.30 per share. During the next 60-90 days, we are bidding or negotiating nine jobs, totaling approximately $800mmin revenue. The outcome of these bids and negotiations could affect our projections. These are extraordinary jobs-larger in size than we've seen in many years.

Now, looking at a breakout of our revenues by type-of-customer. 60% of our revenues for the quarter were from electric and gas utilities. 14% were from telecom companies. Cable customers accounted for 7%. Commercial industrial customers made up 6%. Transportation made up 5%, and 8% were ancillary services.

Our largest customer for the quarter made up only 5% of our revenues. Our top 10 customers for the quarter equated to 31% of our total revenues. Our top 20 customers made up approximately 45% of our revenues.

The electric power market continues to be challenged by low credit rating, lack of short-term capital, indecision over future direction, and delivery constraints in the transmission system. However, power consumption is on the rise. According to the Edison Electric Institute, in 2002, US electricity consumption grew 4.1%. In the first quarter of 2003, consumption was up 6.4% over the same period last year probably as a result of weather.

There may be a generation glut, but the system to deliver the power is in dire need of an upgrade. This continues to present opportunities for our electric power and gas operations, as we pursue large transmission upgrade undertakings throughout the nation.

In addition, many utilities are exploring outsourcing to address their maintenance needs and to enhance current operations. With the sales cycle for outsourcing being longer than our traditional work, the contracts are typically much larger and cover a span of 5-10 years. Our discussions with several utilities continues to advance.

We are also experiencing an increase in outsourcing enquiries outside the electric power industry. Both our gas and telecom management teams have seen an increase in outsourcing enquiries from these customers. We are positioned to benefit from the new legislation in the natural gas industry, as gas utilities are faced with increased regulations related to testing an ensuring pipeline integrity. Quanta is one of the few companies that possesses the full external corrosion detection assessment and pipeline rehabilitation expertise required to meet the new expectations, no matter the location, the type, length or age of the pipeline.

To give you more insight into our current work in the telecommunications and cable television industries, I'd like to turn the call over to Luke Spalj. Luke was raised in the contracting business. His father founded Spalj Construction in 1956, which was acquired by Quanta in 1998. Luke was integral to Spalj Construction's growth, and served as its CFO for over a decade. He is a registered professional engineer, and became a Senior VP of Quanta in 2001.

As President of the Telecommunications and Cable Television Division, Luke is responsible for managing our inside and outside plants-wireless and broadband cable-and inside electrical specialty operations. Luke?

Thanks, John. Good morning, everyone. Before I talk about our business developments and industry climate, I'd like to first thank all of our employees for their hard work, and for maintaining their focus in this difficult operating environment, as we've had to lay off people and consolidate some operations.

Following is a brief overview of how the telecom, cable television and specialty groups are organized. The division incorporates 22 operating units in five primary groups. However, there are overlapping services in both John Wilson and my companies. Generally, my five groups are as follow.

Our wire line group is the largest of the five groups. It includes the outside plant and inside plant, or central office services. Our wireless group performs the design and construction of cellular, digital and PCS tower and switching offices. Cable television group delivers broadband infrastructure services at the leading MSOs around the country.

Our commercial and industrial group performs the installation of data cabling, inside wiring and intelligent traffic systems for both commercial and governmental industry. Lastly, our specialty group incorporates highly technical services such as our large diameter horizontal directional drilling and customer [inaudible] services.

We have two business development specialists, who coordinate efforts throughout the division and Quanta when appropriate, to ensure that we aggressively pursue strong business opportunities with acceptable margins. Each group is managed directly by a VP or a Senior VP, and in some cases, both. By limiting the number of operating units in each group to no more than four, we have significantly increased cross-unit business development coordination, equipment-sharing, integration of services and access to management.

As you all know, there's minimal growth in our traditional business, and little expected in the near future. Overall, industry capital expenditures continue to be down, with little sign of new spending. However, we are starting to see some small movement in certain segments of our business. Specifically, in the government-related sector and in outsourcing requests from various [cylinders]. Both of these may present future opportunities.

Government. There's some activity from organizations with access to government funding, such as Homeland Security, municipalities, rural utilities service, or RUS carriers, military bases and educational institutions. Many are planning network upgrades or new build-up projects. Also, the government and the Department of Defense are focused on improving their communications infrastructure worldwide.

Quanta is well-positioned to leverage these opportunities as they present themselves. We do expect the new $1.4b rural broadband loan and loan guarantee program that John Colson spoke about last quarter to have a positive effect on our outside plant business in 2004. Bidding activity will take place over the next 6-18 months, once the loan, design and engineering processes are finalized.

While there has been a large revenue decline in this portion of our business resulting from the demise of the long-haul industry and the tough margin pressure that John mentioned earlier, we have been successful in maintaining our existing master contract revenue. We believe that spending has stabilized, which has given us the ability to size this portion of our business properly, and reallocate some resources to other segments of our business.

Our inside plant and central office operations continue to be affected by the decrease in telecom spending and continuing uncertainty in the market-resulting from the ruling by the FCC earlier this year. However, this group remains focused on partnering with the leading original equipment manufacturers, such as Nortel, Jujitsu and Alcatel, and has managed to increase our share of the market by increasing the size and our number of direct clusters with companies such as Verizon, SBC and Qwest.

Capital spending in the broadband cable television segment of our business is greatly reduced, and we expect revenues from this group to be down for the year. We have some backlog with both Adelphia and Comcast, but with the exception of Comcast, CAPEX in this segment is limited.

The wireless industry has been greatly affected by the challenging operating and financial environment, and the slowdown of the 3G rollout by various carriers. Our customers' focus has shifted to hard-dollar, fixed-cost contracts. Similar to our inside plant operations, our wireless group has concentrated on and benefited from performing strategic alliances and partnerships with existing customers to increase market share and brand loyalty, for quality, safety and commitment. The success of these customers over the years has paid off. We're continuing to leverage our strength in this sector to expand these relationships.

Our commercial and industrial operating has faced stiff competition, willing to accept low margin work. However, our company is continuing to win work and execute it profitably. We are pursuing opportunities that arise from government funding, out of traffic and intelligent highway systems, nationwide. In fact, we were recently the low bidder on a $7.1m project that incorporates new traffic controllers, dynamic message signs and closed-circuit television cameras-all connected by 500,000 feet of fiber-optic cable. We also have a number of projects to bid in the near future. However, we expect that potential state budget cuts will affect this market next year.

Our specialty group has greatly increased efficiencies by consolidating operations. Streamlined operations have allowed us to leverage our experience in a large diameter of horizontal directional drilling markets to secure new projects. This service offering serves the gas pipeline in electric, water, sewer and telecom industries. Projects in progress include large crossings in North Carolina, Washington, Florida and Alaska. We believe that we are one of the industry's leaders in this market.

Relative to outsourcing, our customers are increasingly expressing interest in outsourcing strategies on many levels. As you know, Quanta has had an outsourcing partnership with Eriksson for more than a year, now. We continue to be viewed as an outsourcing leader. Much like in our utility business, telecom owners that are under increased earnings pressure are looking hard at the expense side of their income statement to help them maintain profitability. They're looking to outsource the decreased cost, increasing service and efficiencies. We expect to continue high-level conversations regarding the outsourcing of design and engineering, installation and other specific functions for our customers.

In summary, though our telecom operating environment continues to be challenging, and capital expenditures delayed, we believe that the strength of our best-in-class subsidiary operations and benefits of our new structure will enable us to pursue developing opportunities. We remain focused on overall business strategies to maximize opportunities by leveraging our strength, and partnering with our customers to maintain our market position.

At this time, we don't have good clarity of when CAPEX will flow back into this sector. But we do believe that when this happens, our previously-mentioned strengths and skill sets will allow us to increase our share of the market.

John? I'll turn the call back over to you.

Thanks, Luke.

I hope it's been helpful to hear directly from the president of our two divisions. We plan to continue alternating presentations from the two divisions. Both presidents will be present for the call. On the next call, you'll hear an update on the power and gas division from John Wilson.

Our operations have benefited greatly from the leadership that Luke and John bring to their positions. Our industry alignment will make integration of our operations seamless. We are also able to increase efficiencies, reduce costs and open up communication lines.

By now, you've all probably received the 2002 annual report and notification of the annual meeting. If not, it is available on our website. I'd like to close my comments today by reiterating the theme of that report-a key driver of the future of our business. The fact is that people need power, not just electrical power to light their homes and offices. People need the power to communicate through computers and phones and wireless devices.

Our customers need the power to control costs, by working with an outsourcing leader, to maintain their infrastructure or increase consumer satisfaction by upgrading a power line without an outage. These things remain true, even in this challenging market environment.

Looking forward, we will continue to leverage our core strengths in innovative tools. We will strive to establish new outsourcing partnerships, secure new projects with adequate margins, expand our presence in specific regions and market segments, expand relationships with current customers, increase brand loyalty, and enhance brand recognition to potential customers through marketing strategies. These actions should strengthen our business and our balance sheet.

Now I'd like to turn the call over to James Haddox, our CFO, who's present the financial results for the quarter. James?

Thanks, John. As John said, today we announced revenues of $367.1m for the first quarter. This compares to $449.2m in revenues in the prior year's first quarter. The reduction in revenues is primarily due to the well-publicized slowdown in the telecom and independent power-producer markets.

The net loss attributable to common stock for the quarter was $2.7m, or $0.04 per share, compared to a net loss of $435m, or $5.56 per diluted share in the first quarter of 2002. For the first quarter of 2002, diluted earnings before cumulative and effective change in accounting principles were $0.13. The prior year results also included the impact of $4.6m in expenses associated with our proxy contest with Aquilla.

Our gross margins for the quarter of 10.3% compared to 13.6% during the fourth quarter of 2002, and 16.8% during last year's first quarter. The declining margins between last year's fourth quarter and our first quarter of 2003 was due to adverse weather conditions of the first quarter, and the very challenging operating environment.

We continue to make progress in reducing our G&A expenses. Excluding the impact of the $4.6m in proxy costs incurred during the first quarter of 2002, our G and A expenses were $46.1m in the first quarter of 2002, compared to $39m in the first quarter of 2003. In addition, G&A expenses are down sequentially from the fourth quarter of 2002. This decrease reflects our continuing efforts to align our fixed cost structure to the current operating environment.

Due to the new Reg G rules, our discussion of EBITDA this quarter will take a little bit longer than it has in the past. For the first quarter of 2003, EBITDA was $14m; or $0.12 per diluted share. EBITDA calculations begin with a net loss of $4.8m, plus net interest expense of $7.8m. Depreciation and amortization of $14.9m, and stock-based compensation expense of $0.2m. Less the tax benefit of $4.1m.

During the quarter, to revitalize our equity-based compensation program, we completed our options exchange program. Out of $7.3m eligible options, $6.8m were exchanged. As such, we issued restricted stock of 3mmshares, for a total value of approximately $9m.

These shares will vest over three years, and we will report a non-cash compensation charge of approximately $750,000 per quarter through the vesting period. There were many eligible options that were not exchanged are required to be accounted for in the variable plan accounting, and they're at had an average exercised price of $23.92.

Also during the first quarter of 2003, Aquilla converted all the remaining shares of Series A convertible preferred stock. Upon conversion, any undeclared dividends are forfeited. Therefore, we recorded a reversal of the remaining accrued dividends of $2.1m during the quarter.

Cash flow from operations totaled approximately $37.3m for the quarter-due in large part to decreases in our receivables balances of $44.6m. Cash flow from operations. Less capital expenditures of $4.9m, our free cash flow was approximately $32.4m for the quarter. The $4.9m in capital expenditures for the first quarter was below our forecast for the quarter, and it's the lowest quarterly level in years. We're currently projecting capital expenditures to be below $30m for all of 2003-which is a reduction of $20m from our previous projection for CAPEX.

The current backlog of work to be completed during the next 12 months is approximately $980m which is equal to our backlog as of our year-end conference call. Once again, backlog represents the amount of revenue that we expect to realize from work to be performed over the next 12 months on uncompleted contracts, and equated that list of work under a long-term maintenance contracts and new contractual agreements on which work has not begun. As John stated, we are currently in the middle of our bidding season.

Our days sales outstanding or DSOs, which we calculate including accounts receivable, cost-and-earnings in excess of bills-less billings in excess of costs-were all components of receivables or revenue recognition on the balance sheet. They were 88 days at March 31st, versus 86 days at year-end, and reflect the impact of the seasonality typical to our first quarter. DSOs were 96 days last year at this time.

At quarter end, we had $61m in cash, and we had no borrowings outstanding under our line of credit. We had $77.4m in lines of credit outstanding primarily to secure our insurance program. We're in compliance with our bank covenants, and currently forecast no need for additional borrowings. On March 31st, the company had a debt-to-total cap ratio of 36.4%.

Concerning our outlook for the future, we project that revenues for the second quarter of 2003 will be in the range of $380m-$420m, and that EPS will be in the range of $0.03-$0.05. Currently, we're projecting revenues of $1.6b-$1.7b for the fall of 2003, and expect operating losses to be about 5%-5.5%. With additional guidance, in case you've got your own model, we're projecting that our tax rate for the full year of 2003 will be 46%, and our diluted share count will be about 115m shares. As John said, we expect EPS for 2003 to be approximately $0.25-0.30.

As John and Luke mentioned, we have an incredible management team and employees throughout our operations that have helped guide the company through the fiscal operating environment. It's their dedication that ensures Quanta's future as a market leader. That concludes our formal presentation, and we'll now open the line for q-and-a.

Thank you, sir. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. If you have a question, please press the * followed by the 1 on your pushbutton phone. If you'd like to decline from the polling process, please press the * followed by the 2. You'll hear a three-tone prompt acknowledging your selection.

Please ask one question and one follow-up, and re-queue for any additional questions. If you are using a speakerphone, you will need to lift the handset before pressing the numbers. One moment, please, for our first question.

Our first question comes from Jason Voss. Please state your company name, followed by your question.

Good morning, guys.

It's Jason Voss from Davis Mutual Funds. Given that operating results were just about breakeven this quarter, is it safe to say that around $370m in revenues are breakeven revenues? Then my follow-on to that is, if so, then what's the incremental margin on revenue dollars beyond $370m? Thanks.

Jason, I think that's about right. $375m-$400m. Along that range.

Depending on margins.

Yes. Depending on margins. That's difficult to talk about. Margins will improve as the weather improves and as efficiencies improve during the summer months.

We have cost reduction programs in place, also, to reduce our overheads and SG&A. Increasing margins will reduce that breakeven revenue line, considerably.

Do you have any idea what the incremental margin would be in dollars beyond that $375m-$400m range?

I think we're probably looking at margins in the 13%-16%. I don't think you'll see much incremental overhead as revenues went up, right now.

Okay. Thank you.

Thank you. Our next question comes from Primese Perit (ph) of Q Investments. Please go ahead with your question, sir.

Thank you. Could you talk about where you guys are going, in terms of SG&A? What levels are you going down to? If you could talk about the margins that you're seeing per line-of-business, and what your gross margins are and what you're targeting in new business?

I'll start, if I may. We announced I think last fall that our goal was to reduce SG&A to $38mmin the third quarter. As John said, I think last first quarter, excluding some extraordinary costs, our SG&A was $46m. This quarter, I think it was $38.9m or $39m. So, we're well on our way to that $38m goal.

Okay. That has not changed.

That has not changed. But we are continuing to reduce SG&A and that really depends on our revenue. If our revenue starts to pick up, then we're probably okay in that $38mmrange. But if we don't start seeing a pretty firm recovery, I think there's still some more SG&A that we can take out of this business. I'd like, if the business stabilizes, to see our SG&A in the 8%-9% range. That's below the $38m level. So that's our next target-again, depending upon our revenues.

Got it.

In case you want to discuss it - I guess while I've got the microphone I'll talk about where we want to see margins. Traditionally, telecom margins have been in the 20%-25% range. That's a tradition. I'm talking about the first 30 years of my career. That's the range that telecom margins were at. Utility margins-we'd like to see those in the 20% range. Cable, similar to telecom, or even better, in many cases. Those are our goals.

Realistically, that's not going to happen this year. It may take 18 months or two years before we can get back to those goals. Again, depending upon the full economic recovery and how long that takes-and recovery in some of our markets. Those are our goals, but realistically, we'd like to see telecom in the 14%-15% level. We'd like to see utilities at 15%, 16%-18%. And cable at 18%-20% this year.

Did that answer your question? Or did you want to know what they were in the past?

If you could actually just talk about what kind of margins you're seeing in the outsourcing deals that you're looking at. Are they similar to the 15%-18%?

Yes. We're trying to target those in the 20% range. We're settling for 17%-18% at this time.

Okay. That answers it. Thank you.

Thank you. Our next question is a follow-up question from Jason Voss with Davis Mutual Funds. Please go ahead with your question.

I guess the fact that I got back in the queue so quickly and got answered means you guys are diamonds in the rough. The question I had was that CAPEX was pretty low in the quarter. Clearly, the benefit is higher free cash flow for you guys. But what are the costs?

I think that what you're seeing here is an increased sharing of equipment across our operating ends. Primarily, as a result of Luke and John's efforts. That's something that they've been working on very diligently since they came on board before the first of the year, actually. They officially took over the first of the year. That's something that they've worked on most diligently-to increase equipment-sharing across our operating unit lines. Of course, that reduces CAPEX. I don't think we've suffered at all from the reduction in CAPEX.

If I may follow-up. As a management team, what are you guys most excited about right now?

I guess the thing we're most excited about is some of these larger projects that we're seeing come across the horizon. That $800min projects are projects outside the new ones. Those are projects that are basically being negotiated at the Quanta level-not at the operating unit level, or being bid at the Quanta level. That's pretty unusual. That's something we haven't seen for a while. All of those are electric power projects. We're pretty excited about it. If we can get a good piece of those - no guarantees we will. It's a very competitive business, right now. Those are the things I think we're most excited about, right now.

James? Are you excited about anything specifically?

No. That's pretty much it.

Thank you very much.

Yes.

Thank you. Ladies and gentlemen, if there are any additional questions, please press the * followed by the 1 at this time. As a reminder, if you are using speaker implements, you will need to lift the handset before pressing the numbers. One moment, please, for our next question.

Our next question comes from Mr. Paul McNolty. Please state your company name, followed by your question.

Yes. Five Points Capital. The big projects that you're seeing on the horizon-the nine jobs you're bidding on-do you think that's for an industry-specific situation that have come about recently? Or do you think it reflects an improvement, in general, in the economy? Also, typically, who are you bidding against in those kinds of projects?

To kind of summarize those projects, a couple of them are related to the Persian Gulf area. Not Iraq, but in the Persian Gulf area. Some of them are large transmission projects that have been on the drawing board for decades or a decade, anyway. It finally looks like they're going to be built. A couple of them are outsourcing projects that include one we've been working on for three years and another one for a good six or eight months.

So I wouldn't say they're an indicator of an economic recovery. I think that most of them are by-necessity projects. The good news is that there is some funding out there for these projects.

And who are you bidding against, typically?

It varies. On the outsourcing, a couple of large private contractors - I guess they're semi-public. They're owned by utilities. Both of them are owned by utilities. They're contracting groups that are owned by utilities. The other are just two private companies. Basically, regional contractors on major transmission lines. In the Persian Gulf area, I think we're bidding against European contractors, there.

Thanks.

Ladies and gentlemen, at this time, we'd like to give an additional opportunity to ask any questions. If you have any questions, please press the * followed by the 1 at this time. Once again, as a reminder, if you are using a speakerphone, please lift up the handset before pressing the numbers. One moment, please, for our next question.

Thank you. Our next question comes from Gary Limern (ph) with Catalyst. Please go ahead with your question.

Yes. Good morning. What are you planning on doing with all the cash that you'll be building over the next few quarters?

At the current time, we're just investing it in normal T-Bills and things like that. Since we don't have any debt outstanding, the only real debt that we have outstanding is our senior note. Those notes carry a pretty substantial prepayment penalty. There's not really an incentive right now to make payments on debt.

We're also expecting some demands for working capital as our revenues increase. There are acquisitions out there that we're looking at. But nothing that's eminent or going to happen very soon. I don't anticipate any acquisitions for a while, yet.

That's right. As John said, our working capital requirements will go up over the next three quarters-especially if we win a portion of these contracts that we're talking about.

What's your current availability under the revolver?

That's difficult to discuss right now, because we've got a bucket of add-backs under our loan agreement, which allows for certain costs to be added. We don't really forecast right now to have any need, under our credit facility. We forecasted that our cash is going to build over the next three quarters.

What do you think the cash is going to look like at year end, based on your current guidance?

It could be somewhere north of $100m.

Thank you.

Well, it sounds like that's it. Why don't we wrap up with John for some final comments?

Actually, gentlemen, we have one more question. Would you like to go ahead and take that?

Yes.

Our next question comes from David Mathery. Please state your company affiliation, followed by your question.

[inaudible] and Associates. You just reconciled the cash flow for the quarter. $5m-$6m It looks like you generated more than that. Also, are there risks to backlog that you've seen historically?

I'll approach the risk and backlog. Again, I have to talk about the first 30 years of my career. There was seldom any backlog that wasn't fulfilled. There were very few canceled projects. There were always delays. Right away, there were environmental problems and those sorts of things. But when you had a backlog, you had a contract that was going to happen.

For the last couple of years, that's been different. There has been risk in backlog. We think that our backlog is pretty firm. But over the past two years, we've been disappointed in canceled projects just taken away from us. Then there were projects that were ongoing as our customers filed for bankruptcy. So we've had some disappointments in the last 18 months to 2 years. We think our backlog's pretty firm, but unfortunately in this environment, we just can't be certain of it.

Could you restate the question about reconciling cash? Were you asking just for more components of the cash flow statement?

Yes.

Okay. Starting out with net income of minus $2.7m, net cash provided by operating activities was $37.3m. Net cash used for investing activities, which is primarily property and equipment, was $4.6m. Net cash provided by financing activities was about $900,000. I don't know if you're asking me -- We have not provided our full-year cash statement, yet. So I don't know if you're asking for more details on that, or not.

Yes, I would be. But if you don't have it, you don't have it. But it looks like free cash of $32.5m, although only $6m went to the cash balance I see on the balance sheet.

I guess I don't understand. Cash went from $27mmto over $61m.

Okay.

All right? If there are no further questions, then I'd like to thank you all for participating in our conference call, this morning. We appreciate your questions and your ongoing interest in Quanta. I thank you, and goodbye until next quarter.

Thank you. Ladies and gentlemen, that concludes the Quanta Services first quarter earnings conference call. If you would like to listen to a replay of this conference, please dial in to 303.590.3000, using the access number of 537442. Once again, if you'd like to listen to a replay of today's conference, please dial 303.590.3000, using the access number of 537442. We thank you for your participation in today's teleconference. You may now disconnect, and thank you for using AT&T Teleconferencing.