Quanta Services Inc (PWR) 2009 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by.

Welcome to the Quanta Services fourth quarter earnings conference call. (Operator Instructions).

This conference is being recorded today, Monday, February 22, 2010.

I would now like to turn the conference over to Kip Rupp with DRG&E. Please go ahead, sir.

Welcome to Quanta Services conference call to review 2009 fourth quarter and full-year results.

Before I turn the call over to Management, I have the normal housekeeping details to run through. If you would like to be on the e-mail or fax distribution list to receive future press releases for Quanta, or if you had nay technical difficulties this morning and did not receive your e-mail or fax, please call our offices at DRG&E at 713-529-6600. If you would like to listen to a replay of today's call, it will be available via webcast by going to Quanta's web site at QuantaServices.com. In addition there is telephonic recorded instant replay that will be available for the next seven days, 24 hours a day, that can be accessed as set forth in the press release by dialing 303-590-3030, and using the passcode 4233173-#.

Please remember that information reported on this call speaks only as of today, February 22, 2010, and therefore you are advised that any time sensitive information may know longer be accurate as of the time of any replay of this call. Also 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 any 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 product or are beyond Quanta's control and actual results may differ materially from those expected or implied as forward-looking statements.

For additional information concerning some of the risks and uncertainties and assumptions that could affect our forward-looking statements, please refer to the Company's annual report on Form 10-K for the year ended December 31, 2008, the Company's quarterly reports on Form 10-Q for each of the quarters in 2009, and its other documents filed with the Securities and Exchange Commission, which may be obtained three the SECs Web site at SEC. Gov. Management cautions that you should not place undue reliance on Quanta's forward-looking statements and Quanta does not under take any obligation update any forward-looking statements to reflect events or circumstances after this call.

With that I would now like to turn the call over to Mr. John Colson, Quanta's Chairman and CEO. John?

Thank you.

Good morning everyone, and welcome to Quanta Services fourth quarter 2009 conference call.

To start the call this morning, I will provide a summary of the quarter and 2009 annual results, with added insight on the impact of current industry circumstances and overall economic conditions. My comments will be followed by an operational review by Jim O'Neil, President and Chief Operating Officer; and a review of financial results by James Haddox, Chief Financial Officer. As always we welcome your questions following our remarks.

I want to briefly mention that we've made some enhancements to our quarterly earnings announcement that we believe provide greater insight into our financial results and overall operations. Specifically, you will find in the press release increased disclosure of revenues, backlog and operating income by segment.

As a reminder, Quanta's fourth quarter 2009 results include those of Price Gregory services, which we acquired on October 1. This impacts our year-over-year and quarter-over-quarter comparisons.

Revenues for the fourth quarter were $985.4 million compared to $921.5 million in the prior year's fourth quarter. In the fourth quarter of 2009, we had approximately $32 million less in Emergency Restoration revenues compared to the fourth quarter of 2008. Diluted EPS for this quarter was $0.21. We continued to strengthen gross margins despite a reduction in higher margin Emergency Restoration work. We are deliberately selective in our projects and continue to not pursue unprofitable or break-even projects simply for the sake of growing revenues.

Revenues for the full year of 2009 were $3.32 billion compared to $3.78 billion in 2008. Diluted EPS for 2009 was $0.81. Throughout 2009, every industry in which we operate was impacted by the continued recession, stall of regulatory process, delayed stimulus funding and uncertain financial environment. However, 2009 did not bring all bad news for Quanta.

During the year, Quanta increased gross margins in 2009 quarter-over-quarter and year-over-year, generated cash flow of $377 million increased our cash balance for the $438 million to $700 million, expanded international operations, particularly in South Africa, continued to strengthen operations through efficiency and safety initiatives, increased market share and expanded our pipeline service offerings through the acquisition of Price Gregory. Jim will talk in more detail about each of these milestones in his remarks.

I believe the strength of our business of long-term opportunities for growth are evident in these successes, particularly given the spending environment in 2009. These achievements have not gone unrecognized by the industry and business community. During the year, Quanta was added to the Standard & Poor's 500 index, and is named as one of Fortune 100 fastest growing companies, and Newsweek's list of Greenest Large Companies. For the third consecutive year, Quanta was named the Largest Specialty Contractor in the Utility Category.

Our customers continue to be impacted by lower revenues, capital constraints, uncertainty related to funding, legislative changes and the economy overall. And as we all can attest, record snow fall has impacted all outdoor activity including most of our products in the north and northeastern United States.

In the electric power industry, we believe utilities remain committed to ensuring reliability of power delivery through their transmission initiatives. While 2009 experienced a decline in electricity consumption, we have seen very few transmission projects slowed as a result, and none have been cancelled.

As it relates to our business, what's important is the long-term consumption projection, not the monthly or even annual swings. Industry sources are increasingly confident that the decrease in electricity demand is nearing bottom. In the Energy Information Administration projects increase in electricity consumption of 1.6% in 2010. And long-term projections have been reiterated and reflect a significant future increase in demand for electricity; 23% by 2030. North American Electric Reliability Corporation projects transmission additions triple from about 1000 miles per year for 2000 through 2008, to 3100 miles per year for 2009 through 2018.

Renewable strategies continue to be a key element of Quanta's long-term strategy. According to industry sources, as many as 25 utility-scale PV projects totaling about 2300 megawatts and a total investment of approximately $13 billion are scheduled to kick-off in 2010. The Department of Energy estimates that solar in the United States could be at the beginning of a 25% growth rate over the next 20 years, resulting in solar contributing between 10% and 20% of total electricity by 2030.

We also see opportunities for our Natural Gas and Pipeline business. While forecasts varied, it appears that North America fuel mix for power generation continues to shift away from coal and oil-fired generation. This supports our belief that natural gas will continue to emerge as a viable, clean domestic energy source. And we believe that current infrastructure is insufficient to support these developments. According to industry sources, an estimated $108 billion will be invested in pipeline infrastructure by the year 2030.

Demand for high-speed broadband services remained strong. Recent studies show that in challenging economic conditions, consumers opt to reduce spending in other areas, fans to broadband service. Keep in mind only 15% of homes have access to fiber networks and only 5.3 million households are connected directly into high-speed, high-bandwidth fiber networks. These statistics show the rationale behind our government's focus to deploy broadband services to unserved and underserved areas. While telecom service providers have been committed to do fiber initiatives for years, the downturn in the economy and restraints on capital expenditures have forced service providers to look at new ways to construct the networks required to meet this continuing demand.

Over the long-term, the American Reinvestment and Recovery Act, or the ARRA, presents opportunities for Quanta relative to Smart Grid deployment, renewable infrastructure and telecom networks. However, any potential for positive impact from the ARRA on Quanta's revenues is not anticipated until late 2010 and into 2011 and 2012.

The success of our Smart Grid initiatives, knowledge of telecom networks and industry leading renewable solutions positions us well to capitalize on future opportunities. Looking forward, we are still optimistic that the bottom of the economic cycle's negative impact on our business is nearing. Meanwhile, we will continue to leverage our strength both financial and operational to successfully navigate this environment of uncertainty while maintaining margins. And we'll keep our eye on the long-term opportunities and position our Company accordingly.

We continue to believe that 2010 will be a better year for Quanta in 2009. We believe our healthy balance sheet, superior services, extensive training and a viable workforce will ensure that we emerge from this challenging economic environment stronger than ever and poised for growth.

Now I want to turn the call over to Jim O'Neill, who will talk more in detail about key operational accomplishments during the quarter.

Thank you, John, and good morning everyone.

The diversity of our customer base and strategic approach in a challenging business environment has enhanced our 2009 financial performance and well positions us to maximize opportunities in 2010 and beyond.

The percentages of our 2009 fourth quarter revenues by operating segment were approximately 52% of revenue from our Electric Power Infrastructure Services segment, 36% from our Natural Gas and Pipeline Infrastructure Services segment, 10% from our Telecommunications Infrastructure Services segment and 2% from our Fiber-Optic Licensing segment.

For the fourth quarter of 2009 our largest customer made up 9.7% of our revenues, our top ten customers represented 43% of our total revenues, and our top 20 customers made up approximately 54% of our revenues. In the fourth quarter of 2009, revenues from our Electric Power Infrastructure Services segment were approximately $516.4 million. Revenues from Emergency Restoration work in the quarter were approximately $15.4 million. This compares to approximately $565.7 million in revenue for the fourth quarter of 2008, which included approximately $46.4 million in Emergency Restoration work.

During the quarter, we continued to have significant activity on key electric power transmission projects. For example, our work on phases one through three from the Southern California Edison Tehachapi project was completed ahead of schedule in the fourth quarter and energized in mid-December. The construction of a 120-mile 345,000-volt transmission line from Woodward, Oklahoma to Oklahoma City for Oklahoma Gas & Electric was recently complete ad head of schedule, as well. We expect the momentum behind other large transmission projects will continue into 2010 and beyond.

On the TrAIL project, we have approximately 250 people working on all phases of construction. This project is expected to ramp up significantly in 2010 and is projected for completion in early to mid-2011.

We continue to work under our contract in subsequent extension for Lower Colorado River Authority with more than 200 people working on this project. This project is expected to ramp up significantly in 2010 and continue into 2013.

Early phase construction activities also continued under our $950 million contract with Northeast Utilities. This contract is expected to hit its stride in early 2011, with projected completion in 2015. For National Grid, we continued work to upgrade the utility's Northeast transmission infrastructure. As a reminder, this work is being performed under a five-year contract between National Grid and the New Energy Alliance , a joint venture between a Quanta operating unit and Balfour Beatty Infrastructure. Work is in the initial phase with more than 200 Alliance employees currently deployed. This project is expected to ramp up each of the next three years.

In late 2009, our contract with American Transmission Company, or ATC, was renewed for four years and is valued at approximately $100 million. Currently this work is in the engineering phase, the full-scope of transmission line and substation includes labor, equipment and program management to cost-effectively execute ATC's Transmission Enhancements Program. This program is expected to move into construction in 2011 and be completed in 2013. Following its acquisition of transmission assets from Alliant Energy, ITC selected a Quanta operating unit to perform transmission and substation construction in Iowa. This award leverages a long-term alliance between ITC and our MJ operating unit.

In 2009, we experienced year-over-year revenue growth of about 20% in our Electric Power Transmission Services compared to 2008. We expect a double-digit growth trend to continue into and beyond 2010. In addition to our ongoing projects, numerous significant transmission projects are anticipated to be awarded to contractors and begin this year. These projects include the Texas CREZ or Competitive Renewable Energy Zone, San Diego Gas & Electric Sunrise Powerlink, PacifiCorps' Mona-to-Oquirrh line, Southern Cal Edison's Devers to Blythe line, as well as to Tehachapi sections four through 11, LS Power and NV Energy 's Las Vegas to Ely line, and British Columbia Transmission Company's Northwest transmission line. In total, the construction portion of these projects approaches $4 billion in total construction spend.

During 2009, the growth of our Electric Transmission Services was not at a level sufficient to offset the decline in the electric distribution market. Electric Power Distribution revenues for the full year 2009 compared to 2008 were down nearly 30% if you include the effect of Emergency Restoration revenues in both periods. While we don't expect a meaningful recovery in Electric Distribution in 2010, we saw customer spending beginning to stabilize in the fourth quarter of 2009. We also think that Smart Grid stimulus spending by our customers in the second half of 2010 may have a positive impact on Electric Distribution revenues.

In the fourth quarter of 2009, we experienced significant growth in revenues from Renewable Energy. Approximately $100 million of the approximate $120 million of Renewable revenues in 2009 were generated in the last four months of this year. Of our total Renewable revenues in 2009, approximately $77 million was associated with wind energy construction and $43 million associated with solar. Renewable highlights for the fourth quarter included the completion of the CalRENEW-1 project, a five-megawatt solar facility in Mendota, California and also the completion of 3.5-megawatt solar facility for SunEdison in North Carolina.

We expect several utility-scale and large commercial solar programs to be announced in 2010 as utilities strive to meet state RPS standards. We believe Quanta is well-positioned to capture a significant portion of these opportunities as we have established ourselves as the leading EPC contractor in this space. We are the largest union and non-union specialized outside electric contractor in the nation. We are a technology agnostic, therefore we can help our customers select the best technology to meet their objectives.

Over the last two years, we have worked closely with solar technologies to bring the overall cost of installation or balance the system cost to what we believe are the lowest in the industry. Once such project is the Teanaway Solar Reserve, a proposed 75-megawatt photovoltaic solar project to be located 90 miles east of Seattle. Teanaway announced earlier this month that it has signed a Memorandum of Understanding, or MOU with Potelco, a Quanta operating unit located in Seattle, Washington. Under the MOU, we have agreed to negotiate a contract for EPC services for the solar facility. Permits are not yet issued and power purchase agreements, as well as the terms and conditions of our contract, are yet to be negotiated.

Additionally, we experienced an increase in RFP activity from wind developers in the fourth quarter of 2009 and expect this trends to continue into 2010. Quanta has performed Wind Energy Construction Services for over a decade. While we have project management capabilities in this area, our services are typically associated with the electrical portion of the wind farm which includes down wiring of the turbine, collection systems and substation construction, as well as the interconnection to the grid. We are projecting renewal revenues approximately $300 million for the full year of 2010, of which $200 million is estimated for solar projects and $100 million related to wind.

In the fourth quarter of 2009, revenues from our Natural Gas and Pipeline Infrastructures Services segment were approximately $351.5 million. This compared to approximately $229.2 million in the fourth quarter of 2008. The increase in revenues is attributable to the acquisition of Price Gregory. Similar to Electric Power, revenues from Natural Gas Distribution are down approximately 35% for the year ending 2009 as compared to 2008. However, the decline in Gas Distribution revenues appears to have stabilized, and we believe Gas Distribution revenues to be flat to slightly down in 2010 as compared to 2009.

We continue to believe that 2010 will be a trough year for transmission pipeline construction. We now expect 2010 Gas Transmission revenues to be near the top of the $700 million to $900 million range we forecasted in October. We continue to be very bullish on Natural Gas and related transmission infrastructure in 2011 and beyond. During 2010, more than 15,000 miles of pipeline are projected for construction in the United States, according to FERC,and The Oil and Gas Pipeline Journal. As you look at 2011 and beyond, this number increases. Currently, there is approximately $1 billion in natural gas projects that we anticipate will be awarded to contractors in the first half of 2010.

In the fourth quarter of 2009, revenues from our Telecommunications Infrastructure Services segment were approximately $94.3 million. This represents a decrease of approximately 13% when compared to revenues of approximately $108 million in the fourth quarter of 2008. This negative growth is a result of continued soft spending across the board from our telecom customers and earlier-than-normal adverse winter weather conditions at some of our major project locations.

Our Telecom revenues were down 30% for the full -ear 2009 compared to 2008, primarily due to decrease in spending by AT&T and Verizon on FTTX initiatives. This area of our business is beginning to show signs of recovery as numerous projects are awaiting budget approval and permitting.

Additionally, this is an environment and wait-and-see relative to projects with the potential for stimulus funding. So far, just under $500 million of the $7.2 billion in broadband stimulus funds has been awarded. We expect increased telecom spending at stimulus funding awards continue throughout 2010 and customers prepare to meet stringent deadlines to deploy broadband technologies and services to underserved and unserved areas. However, we do not expect to see significant revenues from the stimulus program before the third quarter of 2010. Over the next three years, these broadband deployments are expected to be a growth area for Quanta, particularly given our competitive advantage established by our turnkey services and patent-pending micro-trenching solutions.

Our Fiber-Optic Licensing business continues to show strong revenue and earnings growth. Revenues grew 23% in the fourth quarter of 2009 compared to the fourth quarter of 2008 with continued margin expansion.

We are in the midst of an active bidding season. The yearly E-Rate Awards, the FCC-mandated program supporting deployment of new technology in schools and libraries, will be largely completed by the end of this month. Looking forward, opportunities from carriers seeking wireless fiber backhaul are strong, which we believe will benefit this group. We expect to invest $65 million to $75 million in CapEx for this business in 2010.

In summary, we are emerged from 2009 well-positioned financially and operationally. We capitalized on what we believe will be an increase in opportunities for revenues and earnings growth in 2010.

Now I will turn the call over to James Haddox, our

Thanks, Jim, and good morning everyone.

Today we announced revenues of $985 million for the fourth quarter, compared to $922 million in the prior year's fourth quarter, reflecting growth of approximately 7%. The growth in consolidated revenues in 4Q 2009 was driven primarily by an increase in revenues from Natural Gas and Pipeline Services as a result of the acquisition of Price Gregory on October 1, 2009. We also realized an increase in revenues from Fiber-Optic Licensing Services. These increases were partially offset by decreases in revenues from Electric Power Services, primarily as a result of lower Emergency Restoration Services and Telecom Services, primarily as a result of lower FTTX services.

Our consolidated gross margins improved by 130 basis points, from 18.1% in 4Q 2008 to 19.4% in 4Q 2009. The improvement this quarter was due to a higher proportion of our revenues coming from Transmission Pipeline Services, which produced higher margins than our other services.

Our G&A expenses increased $12.6 million to $94.8 million quarter-over-quarter, primarily due to the acquisition of Price Gregory in 4Q 2009. In addition, we recorded a loss of $4.5 million in 4Q 2009 on gas segment equipment that was deemed to be duplicative as a result of the acquisition, along with $1.5 million in transaction and integration cost. D&A expenses are up from 8.9% of revenues in 4Q 2008 to 9.6% in 4Q 2009, primarily due to the recording of the losses on the equipment held for sale and transaction costs on a lower -- I'm sorry, G&A was sequentially up $71 million in 3Q 2009 to $94.8 million 4Q 2009, due to the quarter-over-quarter explanations just given, as well as increased discretionary bonus expenses due to hire levels of income and increased legal fees.

Our consolidated operating margins before amortization expense increased from 9.2% in 4Q 2008 to 9.8% in 4Q 2009. Amortization of intangible assets increased from $6.8 million in 4Q 2008 to $23.7 million in 4Q 2009, due primarily to the increase in intangibles resulting from the acquisition of Price Gregory.

Drilling further down into the details by segment, Electric Power revenues were down by $49 million quarter-over-quarter, or about 8.7%, due mostly to lower Emergency Restoration revenues, which were down from $46 million in 4Q 2008 to $15 million in 4Q 2009. Additionally, increases in Electric Transmission and Renewables work were offset by decreases in Electric Distribution work.

Operating margins in the electric power segment were 9.2% in 4Q 2009 compared to 11.2% in 4Q 2008. This decrease was primarily the result of the greater contribution from Emergency Restoration Services in the last year's fourth quarter, which typically generate hire margins, as well as unusually high margins on a large transmission project in 4Q 2008, compared to projects performed in the fourth quarter of 2009.

Electric Power Infrastructure revenues for the full year of 2009 were down $234 million, $126 million of this reduction was a result of lower revenues from Emergency Restoration Services, down from $206 million in 2008 to $80 million in 2009. Electric Power revenues were also negatively impacted by reducing spending by our customers for electric distribution, power plant and substation services. These decreases were offset partially by increases in revenues from Electric Transmission Services, primarily due to an increased number of larger projects being performed. Overall, operating margins in the Electric Power segment roses slightly year-over-year, despite the significant reduction in Emergency Restoration Service work.

Our Natural Gas and Pipeline revenues increased quarter-over-quarter approximately 53% to $352 million in 4Q 2009 due primarily to the contribution to Gas Transmission Services from Price Gregory. Certain portions of our legacy Gas Transmission business were tucked into Price Gregory effective October 1 of 2009. However, we estimate that Price Gregory generated approximately $245 million in incremental revenues in 4Q 2009.

Operating margins in the Natural Gas and Pipeline segment were 15.5% in 4Q 2009 compared to 10.9% in 4Q 2008. This increase was due to a greater contribution from higher margin Gas Transmission revenues, partially offset by lower margins on Gas Distribution Services due to poor fourth quarter weather in the northwest, creating poor working conditions, coupled with less absorption of fixed costs as a result of lower revenues on our legacy Natural Gas business. Natural Gas and Pipeline Infrastructure revenues for fiscal year 2009 were down $95 million primarily due to decreases in Natural Gas Distribution revenues. Based on the pro forma assumption that if Price Gregory had been acquired on January 1, 2008, pro forma Natural Gas and Pipeline revenues would have decreased from $2.31 billion in 2008, $2.04 billion in 2009 or about 12%.

Revenues from our Telecommunications Infrastructure Services segment decreased approximately $14 million, or 13%, to approximately $94 million in 4Q 2009, due primarily to reduced spending from a specific customer for fiber build-out initiatives due to the weakened economic environment. Excluding this customer, revenues from other FTTX initiatives, as well as other telecommunications work, were relatively constant as compared to last year's fourth quarter.

Overall for the year, Telecommunications Infrastructure Services revenues were down $158 million as compared to 2008, primarily due to reduction of $115 million in FTTX revenues. Operating margins in the Telecommunications segment were lower both for the quarter and the year due to less absorption of general and administrative costs as a result of lower revenues, although overall G&A costs were reduced throughout 2009 in this segment.

Fiber-Optic Licensing revenues contributed approximately $23 million to the fourth quarter, for an increase of about 23%. And for all of 2009, revenues were approximately $87 million, which is 40% higher than 2008 as a result of our continued investment in fiber-optic network expansion and the associated revenues from licensing and the right to use point-to-point fiber-optic telecommunications facilities.

Operating margins in the Fiber-Optic Licensing segment were in the 50% to 53% range for the fourth quarters and full-year periods for both 2009 and 2008, which is typical for this segment. When discussing operating margins by segment, we do not allocate certain selling, general and administrative expenses and amortization expense to our segments, therefore the previous discussions about operating margins by segment excludes the effects of such expenses.

Returning to a discussion of our consolidated results, our tax rate for the fourth quarter was lower than we forecasted due to our hire level of income and a higher Section 199 deduction due to true ups at year end. This contributed about $0.01 more to EPS for 4Q 2009 than we originally forecasted.

Net income attributable to common stock for the quarter was $43.9 million, or $0.21 per diluted share, compared to $46.5 million or $0.24 per diluted share in 4Q 2008. Adjusted diluted earnings per share as calculated in our press release rose to $0.31 for the fourth quarter of 2009 as compared to $0.27 for 4Q 2008.

Cash flow from operations totaled approximately $98 million for the quarter. Cash flow from operations less net capital expenditures of about $40 million resulted in approximately $58 million in free cash flow for the quarter. Cash flow from operations for the fiscal year 2009 totaled about $377 million. Deducting net CapEx of $156 million for the year yielded free cash flow of $220 million -- $221 million for the 12 months of 2009.

EBITDA for the fourth quarter of 2009 was about $96.1 million, or 9.8% of revenues, compared to about $84.5 million, or 9.2% of revenues for the fourth quarter of 2008. Adjusted EBITDA was $132.8 million for the fourth quarter of 2009, compared to $108.4 million for the same period in 2008. Adjusted EBITDA for the fiscal year of 2009 totaled approximately $394.2 million.

Our days sales outstanding, or DSOs, were 63 days at December 31, versus 79 days at September 30, 2009, and 80 days at December 31 of 2008. While Quanta's legacy DSOs decreased compared to 3Q. 2009 and 4Q 2008, the majority of the decrease in DSOs during the 4Q 2009 was due to Price Gregory having lower DSOs than the rest of Quanta. The calculation of EBITDA and EBITDA and adjusted EBITDA, all nonGAAP measures and the definitions of DSOs can be found in the Financial News section of our Web site at Quanta Services.com.

Regarding backlog, beginning this quarter we've added backlog data to our press release. Therefore I won't go into a detailed discussion of backlog other than to state that the 9/30/09 backlog amounts did not include Price Gregory's backlog.

At the end of the quarter, we had about $700 million in cash. We had approximately $287 million in available borrowing capacity under our $475 million credit facility. We had about $188 million in letters of credit outstanding, primarily to secure our insurance program. The combination of our cash balance and availability under our credit facility gives us about $987 million until total liquidity as of December 31, 2009.

Concerning our outlook for the future, our estimate of revenues for the first quarter of 2010 is from $700 million to $750 million. Our revenue forecast for 1Q. 2010 includes about $35 million for expected Emergency Restoration work. Revenues for the first quarter of 2009 included approximately $46 million of Emergency Restoration revenues.

Our estimate for 1Q 2010 EPS based on revenues of between $700 million and $750 million is $0.07 per diluted share on a GAAP basis. Our GAAP EPS forecast includes an estimate of $11.7 million for amortization, non-cash compensation expenses and non-cash interest expenses. Excluding these expenses, our nonGAAP adjusted diluted EPS for the quarter are expected to be about $0.11.

For additional guidance, we are currently projecting our tax rate to be approximately 40% to 41% for 2010. And we expect our diluted share count to be about 210 million shares. We expect intangible amortization expense in 2010 to total about $36 million, and that's broken down by quarter as follows.

1Q will be about $6 million, 2Q will be about $9 million, 3Q will be about $13 million, and 4Q will be about $8 million.

You will note that we began giving annual guidance this quarter. We are giving annual guidance for the first time in several years because we've received an increasing number of requests from investors to express our opinion by the wide range of analyst estimates on the street for 2010. We currently feel comfortable initiating annual guidance due to increased clarity in the industries we serve based on bidding activity and perceived stability in our markets.

For 2010, we are establishing our initial earnings guidance in the range of $0.90 to $1 per diluted share on revenues from $3.9 billion to $4.2 billion. We expect our adjusted diluted EPS to be between $1.06 and $1.16 for 2010. We expect CapEx for all of 2010 to be approximately $215 million. This compares to gross CapEx for all of 2009 of $165 million.

In summary, we are pleased with our results for 2009 when taking into consideration the economic environment which we and our customers operate in. During 2009, we acquired what we believe to be the best pipeline construction company in North America, thereby strengthening the Company to take advantage of growing opportunities in this industry and the future, we strengthened our balance sheet by increasing our liquidity position, we introduced new innovative products such as micro-trenching, we expanded our international presence and we continue to increase our gross margins over 2007 and 2008 levels.

This concludes our formal presentation and we will now up the lines for Q&A.

Thank you, sir.

We will now begin the question-and-answer session. (Operator Instructions).

Our first question comes from the line of Tahira Afzal with KeyBank. Please go ahead.

Good morning and congratulations on a good quarter.

Thank you.

Just one question, and that is if you can talk about bidding activity in the fourth quarter for Price Gregory, how that played out with expectations. And if we look at the first and second quarters of 2010, if you can run us through where they do higher intensive bidding activity or lower, if we can get an idea on how to place our bookings?

Okay, I think that the bidding activity on the natural gas pipeline for the fourth quarter was higher than expected. There was of course a lot of capacity in the market. So the backlog for Price Gregory and for our Transmission group didn't grow as much as the activity would suggest because of the amount of contractors out there looking for work. However, bid activity remains strong and we are fairly optimistic in our projections for our Gas Pipeline group for 2010.

The first and second quarter, I think is pretty much as we thought it would be in the last six months of last year. As I mentioned the gas transmission pipeline is strong. Jim talked pretty specifically about the electric transmission projects that are going to be bidding over this year. So that activity still very strong. Distribution is -- particularly on the Electric side and Gas side, both of those are going to be fairly weak. We don't expect to see any improvement above 2009 levels, unless in the latter part of the year we might see something from the Smart Grid and Smart Meters

Hope that answers your question.

It does. And congratulations again on a clean quarter. I don't have any questions for once. Thanks. Thank you.

Thank you.

Our next question comes from the line of Jamie Cook with Credit Suisse. Please go ahead.

Hi, good morning and congratulations as well.

Just clarification, on price, I think you said you feel more comfortable with the higher end of revenues. Does that imply the higher end of EPS? And I guess, just the follow-up question to that, if we back out Price Gregory, that assumes your core business again is going to be down year-over-year.

So I'm just -- given some of the optimism you talked about on some of the large transmission projects moving forward, I would assume transmission is probably at a trough, teleco should be improving, at least flat-based on what we are seeing from some of the CapEx trends from some of the largest customers, more color I guess on the base business.

Sure. No, we don't think the core business is going to be down in 2010. Remember that Price Gregory contributed to EPS in the fourth quarter for Quanta.

Okay.

So if you subtract that out for the year and you add them in at the mid-level of what we expected them to contribute, that shows pretty good growth within our core business of Quanta.

But you are saying we expect a higher level now, right? The higher end?

We expect to see, yes, revenues at the higher end of the $700 million to $900 million or, for Price Gregory, yes.

Okay. Then the EPS is still at the $0.20 -- I think you were guiding $0.13 to $0.21, are we now at $0.21 on the EPS side or about?

We haven't given any guidance and it's very difficult to given specific guidance for Price Gregory because they've merged in with our legacy transmission business. However, we expect that they are going to be in that $0.13 to $0.21 range and if revenues are towards the high-end, towards the high-end could mean $801 million.

Okay.

So given any specific projections about Price Gregory, but we are more optimistic now than when we purchased them, and I think that you can reasonably expect you are going to be in the mid-range of that EPS estimate or higher.

Okay.

Then on just one other clarification, you also -- you named specifically some awards sort of on the transmission side that you expect to move forward in 2010 despite some of the negative -- some project push-outs we saw with MAP and PATh and some negative comments from some other utilities. Is there any way -- you want to give clarification on what, I'm assuming you won't talk by project, but what you are expecting your win rate should be on the transmission side or how we look at backlog for year-end, the growth that you're anticipating?

Yes, you're right, we would you know comment about any specific project on the transmission side. We are optimistic about our revenues for 2010 on the transmission side. We expect double-digit growth and most all of that is already in backlog. What we will be bidding in 2010, although there may be some revenues derived from it, most of the projects we bid in 2010 will be 2011 revenues. And it's definitely unknown. There's certainly a lot of capacity in that market as well. So it's going to be difficult to project what kind of success rate we will have, but we've been very successful so far and I don't see any reason we won't continue to get our share of the business.

Thank you. Our next comes from the line of Stuart Bush with RBC Capital Markets. Please go ahead.

Yes, good morning. Yes, good morning.

Do you assume similar operating margins for the acquired Price Gregory business as what you have in the backlog as you saw in the Q4 period? And can you talk a little bit about how that business has mix of union labor versus some of the other competitors out there bidding?

Yes, we are all nonunion on the Price Gregory side of the business -- all union, I'm sorry. All union.

And so to answer the other part of your question, yes, we expect margins to be similar to what they were in 2009. I don't expect to see in this environment much improvement. They should be about the same.

Okay, and so how does having an all-union workforce improve your chances when bidding for JP Morgan work?

Well it certainly depends on the customer. But being a union contractor opens many opportunities for us. Many of the companies that bid pipelines require that you bid union. Many of the owners of pipeline companies require you to bid union. If you are nonunion you can't bid on those particular projects. It also helps you with skilled workforce. The availability of a skilled workforce.

So there are some advantages. And, of course, the obvious disadvantages, nonunions in their markets can compete cheaper for some of the work. So you have to be more efficient, more productive, because you are paying typically a higher wage.

Thank you.

Our next question comes from the line of Andrea Wirth with Robert W. Baird. Please go ahead.

Good morning, gentleman.

Morning.

Wondering if you could dig a little bit more into the 1Q guidance. The revenue was pretty meaningfully below expectations. Is this maybe a case where there was maybe some pull forward of revenue into 4Q? Sounds like a couple of projects got done ahead of schedule. So just want to understand a little bit more the weakness in 1Q.

Yes, there could have been a little of that. Not much. I don't think that was an appreciable thing.

If you take a look at the weather map, that's a big impact. A lot of our projects, big projects particularly, are in the Northeast and North and Midwestern United States. And just nothing has been going on there for some weeks now.

Also Price Gregory has their normal seasonality back. We haven't owned them long enough to be able to mitigate any of that seasonality. And so we are suffering from that as well.

Those two things combined contribute to a pretty tough quarter.

Got it.

Then just as a follow-up, looking at the Natural Gas margins obviously very nice at 15.5%. How do we think about the progression throughout 2010? Can they stay in the double digits or should we expect them to decline a bit further from here?

What was the first part of the question?

The margins in Natural Gas, I think they came in at 15.5% for 4Q. Just wondering where we think about the progression in the margins in that segment from here, essentially is that level sustainable or should we be thinking about more declines from here?

I think that we are going to be able to hold those margins. The bidding activity is robust and were haven't built a lot of backlog yet in Natural Gas transmission. But we are fairly optimistic about the amount of activity that's going on. So we think we are going to be able to hold those margins through 2010.

Thank you, your next question comes from Scott Levine with JP Morgan. Please go ahead.

Good morning, guys.

Hi.

On the fourth quarter it looked likes you exceeded your own revenue guidance by a meaningful amount, on your EPS as well, you said a penny of the beat on earnings was tax-related, but if you could talk maybe a little bit more about where the upside versus your own expectations in the quarter came from, given the strom looked like or -- the Emergency Restoration work was relatively modest there.

Well, we think that Price Gregory came in a bit higher than what we anticipated, Scott. I think that's the main piece.

Also we completed some of these transmission projects ahead of schedule on the electric side, which brought some profitability into the quarter.

Okay.

Then talking about the acquisition profile, you indicated that you have close to $1 billion in liquidity. Exiting the quarter, I know you're coming off a large acquisition here with Price. But could you talk maybe a little bit about your thoughts on future acquisition activity or maybe uses of cash going forward?

Certainly working capital on some large projects, we are looking at a number of very large projects both on the Gas transmission, the Electric transmission and the Renewable side of our business, some very large projects that are going to take up some working capital. That's first and foremost the best use of our capital. Then we will look a at acquisitions and after that we would probably look at things like stock buybacks. Maybe even a dividend, but stock buybacks would be first.

Great, thank you.

Thank you. Our next question comes from the line of Jeff Beach with Stifel Nicolaus. Please go ahead.

Good morning. And great quarter, John.

Thank you, Jeff.

The good growth you're looking for in Renewables this year to about $300 million in revenues, heavy in solar, do you have a lot of projects in-hand when you're looking at that guidance, and can you talk maybe a little bit more about if you have secured some large projects, a little bit more details about them?

Jeff, we can't share that level of detail right now but we do have good visibility in the pipeline for 2010. Which includes discussions with customers and we've submitted several RFPs for big projects that will be coming out this year. So we are very comfortable with the guidance of $300 million for Renewables, particularly the $200 million in solar. We feel that's very achievable.

All right. As the follow up, the big jump in CapEx kind of surprised me to $215 million, and you'd given us an idea of the spending on the Dark Fiber, where is the big increase going in the non-Dark Fiber business?

You have to remember also -- Jeff, this is James, You have to remember that we acquired Price Gregory this year. So Price Gregory is going to make up probably $25 million or so of that.

Thank you. Our next question comes from the line of Alex Rygiel with FBR Capital Markets. Please go ahead.

Thank you, good morning, gentlemen. I do want to thank you for the additional disclosure.

You're welcome, thank you.

Like every (inaudible), I am going to ask for more. If you could help us to better understand the mix in your Electrical business between transmission and distribution, that would be helpful.

Alex, we are running about 63% transmission at year-end 2009 and it's not that much different for the quarter. So that would be about 63% transmission to 27% on -- or 37% on distribution.

Perfect. Then as it relates to Price Gregory, can you help us with the contribution to 12-month backlog from Price Gregory?

I think Price Gregory's 12-month backlog is, isn't it $550 million?

$550, 12-month, and $775 million for total backlog. And that's up from $425 million, I think was the backlog that we had for 2010 at the acquisition date. Alex, that's 725 for total backlog, Price Gregory.

Thank you. Our next question comes from the line of Carter Shoop with Deutsche Bank. Please go ahead.

Good morning.

Looking at your guidance, it looks like the amount of business you need to book and ship in 2010 is about $1.6 billion compared to $400 million in booked and shipped business in 2009, excluding Price Gregory. One, where do you see the most contribution by segment there for the book and ship business, and then also, how have bookings trended for the entire business for the first two months of the year?

Definitely Price Gregory and Renewables are where we are going to see a lot of book and burn revenues in 2010.

Okay, that's helpful.

In regards to the Price Gregory deal, it is looking like more of a steal each day, the timing is pretty impeccable. That said, can you talk about any potential earnout that may be necessary in 2010 if we start to see revenue and earnings contributions towards the ends of guidance there for Price Gregory?

There were no earnouts involved in the acquisition.

Great. Thank you very much.

Thank you. Our next question come from the line of Joe Ritchie with Goldman Sachs. Please go ahead.

Good morning, everyone.

Good morning.

First question is on the -- taking a look at your Gas distribution margin, again just a follow-up question, you posted very strong operating margins on the Gas segment this quarter. Can you help me just understand what happened in the fourth quarter, was there anything one-time that's embedded in those 15-plus percent operations that you booked?

No, there's no one-time issues involved at all in that.

Okay, great. So you feel fairly comfortable that you could sustain those margins going forward 2010, especially if you start to see -- if the transmission projects pick up, call it in the back half of 2010 and into 2011?

Yes and it's not all transmission either. We expect to see some improvements in a lot of our legacy business as well.

Great.

One last follow-up question. On the $1 billion-plus gas contracts that are expected to be awarded in the first half of 2010, is -- do you expect those contracts then to start potentially in 2010, or are you expecting those contracts then to potentially start in 2011, so it's more of a 2011 boost to your P&L than 2010?

Most of what we are looking at is related to contracts that will start in -- mostly be finished in 2010. There are some 2011 contracts as well. But most of it is 2010 contracts. Thank you. Our next question comes from the line of Craig Irwin with Wedbush Securities. Please go ahead.

Good morning, gentlemen, thank you for taking my questions.

You're welcome.

One thing that we've encountered quite a lot out there is a number of the solar manufacturers have projects in their own backlog that could have aggressive expectations around permitting. I was hoping that you could share a little bit with us about the $200 million you're expecting from solar in 2010, your confidence level on the permits on those projects, really if you could possibly describe the process you go through embedding those projects and helping your customers basically proceed there.

We certainly can provide that service to our customers and assist him in the permitting process. The projects that we are looking at now, many of them have been through the permitting process and, of course, projects like Teanaway way have not finalized getting all of their permits. But we believe that the forecast that we gave on revenues for the $300 million takes into account any issues with permitting that customers may have.

Another point that I want to make is that a good part of the revenues that will generate this year in solar will be from large commercial installations, as well, and many of those projects have gone through the permitting process. So they are not all utility-scale programs. But the utility-scale programs that we are looking at, many of those have gone through the permitting process successfully.

Great. Thank you.

And a second question if I may, I was hoping you could describe the cash flow for Price Gregory in the fourth quarter, and how this compares to the Company's cash flows over the last few quarters, and whether or not you expect it to make a strong contribution to cash flow in 2010?

I can't get into details specifically on Price Gregory, but Price Gregory did -- they had a very good quarter, plus they were coming off of a very good third quarter, so their cash flows were fairly significant during the fourth quarter. And they are a good cash flow company. I expect a fairly significant contribution to our cash flows overall in 2010. But I can't get into any specific numbers.

Our next question comes from the line of Sanjay Shrestha with Lazard Capital Markets. Please go ahead.

Hi, this is Sarah in for Sanjay.

I know you've said you haven't seen any large transmission project push-outs, but given what's happened with PATH and MAP delays, what are you hearing from customers on other large projects, and do you see any changes in the permitting environment?

I think you might have misunderstood what I said, or maybe I said it wrong, but we have seen some push-outs, obviously PATH and MAP are a couple of the projects, but what we are saying is those projects haven't been been cancelled. Some have been pushed back, but Jim O'Neill listed several projects, I think, how many billion dollars, $4 billion worth of projects that we expect that will be bid in the next 12 months.

Okay. Thank you.

Thank you. Your next question comes from the line of Will Gabrielski with Broadpoint. Please go ahead. Sure. Thanks, good morning, everybody.

Good morning, Will.

Good morning, guys.

Among the $4 billion, since you just mentioned that number, can you give a mix of how much is Renewables-driven versus reliability- driven projects?

Well let's see. CREZ, Sunrise, Mona-Oquirrh, (inaudible), LS Power to NV Energy, those are all renewable-driven.

So the share of renewables is clearly moving up or -- ?

A good piece of them are renewable, that's correct.

Okay. And then following up on the reliability side, in terms of your interaction with customers, obviously I think there's also a PR game going on right now amongst utilities as well. What's the general sense among customers, is there still a sense of urgency to get these projects done, do they still feel pressured to hit certain deadlines, or are we seeing more of a lax approach to this?

I think that our customers are still anxious to build these projects and moving forward, even when they are being delayed by the public service commissions or by other things, they are pushing forward on other front. I fully expect that these projects will be built.

There are still many customers in the Northeast that are paying congestion charges even though electric usage is down. So if we have a year as expected in 2010 when electric usage is back up, those congestion problems are going to be more problematic than ever.

Thank you. Our next question comes from the line of John Rogers with DA Davidson. Please go ahead.

Hi, good morning, just wanted to follow up on the project in Teanaway. What level of equity or project financing are you planning on providing on that.

John, that hasn't been determined that but I can tell you that it's going to be an insignificant number as far as Quanta is concerned.

And on the other additional either winds or solar projects, is that going to be a trend that we are going to see going forward, or is it just temporary getting through this downturn and credit availability?

John, that's not going to be the norm. We have different options for projects, but that's not going to be the norm.

Okay, great. Thank you.

Thank you. Our next question comes from the line of William Bremer with Maxim Group. Please go ahead.

Good morning, gentlemen. Fantastic execution this quarter.

Thank you.

Just want to get a little housekeeping. On the SG&A, the $94.8 million for the quarter, what should we be looking for in terms of a run rate going forward, incorporating Price Gregory into the mix? Is there going to be any type of restructuring that's going to be needed on that front, or is that pretty much a good run number? And then, of course, we will tweak it because of the volume per quarter.

Right, that number for the fourth quarter is high. I expect that G&A expenses going forward on a quarterly basis will be closer to $85 million or so, somewhere $82 million to $85 million, somewhere in there.

Okay. Great. Thank you very much.

Thank you. Our next question comes from the line of Morris Ajzenman with Griffin Securities. Please go ahead.

Good morning, guys.

Good morning.

Hi. Looking at the backlog, you said earlier that Price Gregory contributed about $550 million. So, I think if I do the math correct, from September quarter to December quarter, total backlog ex Price Gregory was down about $100 million?

Yes, I think that's right.

Okay, clearly we know 2009 was a difficult environment and the backlog had trended down starting through the first quarter and again trended down more though the fourth quarter. Based on what you see out there, and I know it's tough making predictions, but a lot of people do like to look at backlog of the precursor of things improving. Do you think we're at a low -- at the bottom here in the fourth quarter with the revenue -- with the backlog level and starts improving sequentially into the next few quarters? Any sort of sharing, any sort of guesstimate on that?

Yes, sir, I think that to reach the revenues that we are a talking about we are going to have to see a considerable amount of projects bid and be successful on it. So, yes, I think your conclusion is right that there probably is a low level of backlog at this time, as far as yearly backlog for sure. We are seeing a lot, as Jim indicated in his remarks, a lot of activity on the Transmission business, Electric and Gas distribution is -- in Electric and Gas are both fairly slow, and we are hoping to see some improvement in telecom this year. So, that kind of sums -- of course in Renewables, there's a huge amount of backlog, but not backlog for us, but projects bidding out there and opportunities for backlog in renewable sections as well.

Thank you.

Depending upon the timing of the signing some of these contracts we could see a similar number at the end of March if they are not signed until second quarter. It just depends. Because we don't put contracts in backlog until they are signed.

Got you. Thank you, guys.

Thank you. Our next question comes from the line of Adam Thalhimer with BB&T Capital Markets. Please go ahead.

Thank,good morning, everybody.

Good morning.

First of all, great margin performance in Q4 and it sounds like you think that will be sustainable in 2010. I'm curious, are the projects you're winning today at comparable margins?

Yes, overall our margins in backlog are better than our margins are today. The -- but not significantly, they are up just a little bit above what we've been performing at.

Great. Thanks, John.

Just my follow-up question would be, do you think you are picking up some share due to how strong your balance sheet is?

Yes, sir, I think it's a definite benefit to -- particularly on large projects, to have a very strong balance sheet.

Okay. Thank you.

Thank you. Our next question comes from the line of Tahira Afzal with KeyBank. Please go ahead.

I just had one quick follow-up question. James, as we look through 2011, is it -- would it be possible to comment on how the gap in the cash EPS GAAP would potentially look, would that be coming down as you burn off amortization related to backlog for Price Gregory?

It will be coming down, Tahira. I don't know if I can give you a number off the top of my head. I think that amortization will probably go down to the somewhere between $20 million and $25 million, somewhere in there. So it will drop $10 million, $12 million, somewhere around that.

Got it. Thank you very much.

There'll be $0.03 or $0.04 difference between where we are right now on an EPS basis.

Okay. Thanks.

Our next question comes from the line of Alex Rygiel with FBR Capital Markets. Please go ahead.

Just one quick follow up. It would appear that in order to achieve your revenue targets, we are liking to see backlog start to build soon in 2010. Is that a fair conclusion?

Yes, sir.

Thank you.

It has to happen that way, obviously. Again, I point to the fact what Jim had mentioned earlier about the number of projects that are out there, both on the Renewable side and the Transmission side, both Gas and Electric.

Thank you.

At this time I would like to turn the call back over to John Colson for any closing remarks.

I would just like to thank you again for your participation in our fourth quarter conference call. With appreciate your questions and ongoing interest in Quanta Services.

Thank you very much.

Ladies and gentlemen, this concludes the Quanta Services fourth quarter earnings conference call.

If you would like to listen to a replay of today's conference, please dial 303-590-3030, followed by passcode of 4233173.

ACT would like to thank you for your participation and you may now disconnect.