Quanta Services Inc (PWR) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Quanta Services first quarter 2010 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Wednesday, May 5, 2010. I would now like to turn the conference over to Kip Rupp with DRG&E. Please go ahead, sir.

Thank you, Brandy. And welcome everyone to Quanta Services conference call to review 2010 first quarter 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 leases for Quanta or if you had any technical difficulties this morning and did not receive your e-mail or fax, please call our offices at DRG&E at 713-529-6600. Also if you would like to listen to a replay of today's call, it will be available via webcast by going to the Quanta's website at quantaservices.com. In addition, there is a 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 4291394 pound.

Please remember that information reported on this call speaks only as of today May 5, 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 project or are beyond Quanta's control and actual results may differ materially from those expected or implied forward-looking statements. Management cautions that you should not place undue reliance on Quanta's forward-looking statements and Quanta does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after this call. For additional information concerning some of the risks, uncertainties, and assumptions that could affect Quanta's forward-looking statements, please refer to the Company's annual report on Form 10-K for the year ended December 31, 2009 and other documents filed with the Securities and Exchange Commission which may be obtained through the SEC's website at SEC.gov.

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

Good morning, everyone and welcome to Quanta Services first quarter 2010 conference call. To start the call this morning, I will provide a summary of the quarterly results with added insight on the impact of the 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 our financial results by James Haddox, our Chief Financial Officer. As always, we welcome your questions following our remarks. As a reminder, Quanta's first quarter 2010 results include those of Price Gregory Services Incorporated which we acquired on October 1 of 2009. This impacts our quarter over quarter comparisons.

Revenues for the first quarter were $748 million compared to $738.5 million in the prior year's first quarter. In the first quarter of 2009, we had approximately $46.2 million in emergency restoration revenues compared to $52.9 million in the first quarter of 2010. Diluted EPS for this quarter was $0.11.

During the first quarter, our revenues were impacted by the abnormally harsh winter weather as well as by a slowly improving economy. As we discussed in prior calls, we do not expect the economy to recover swiftly. We are, however, cautiously optimistic about the second half of 2010 and continue to seek signs of growth and increased spending on the horizon. Even in this challenging environment, Quanta increased margins, made significant progress on key projects, and secured noteworthy new contracts to support our customers' infrastructure strategies.

Specifically during the quarter, Quanta increased gross margins quarter over quarter by 140 basis points. Notably, this is the 11th consecutive quarter in which we increased gross margins when comparing the current quarter to the quarter of the prior year. We increased operating income before amortization by 11% over the first quarter of 2009, and we continue to strategically expand our international operations.

Many of our customers continue to put their spending on hold, with capital constraints, uncertainty related to funding, legislative changes, and the economy overall negatively influencing our customer spending. However, we believe utilities remain focused on reliability and improving their infrastructure to support reliability requirements and renewable portfolio standards. In a recent survey of investor owned utilities by the Sierra Energy Group, reliability ranked as the number one concern among utilities, followed directly by regulation, long-term investment, environment, aging work force, technology, and aging infrastructure.

However, the utility industry remains in a holding pattern. New regulations to address climate change, reliability and other energy issues were expected to be enacted by now, but utilities are still waiting on government guidance and the new legal requirements. Meanwhile, industry sources are increasingly confident that the decrease in electricity demand is nearing a bottom. For example, the Energy Information Administration projects an increase in electricity consumption of 1.6% during 2010 and long-term growth projections by industry sources continue to reflect a significant future increase in demand for electricity; 23% by 2030.

These projections are reinforced by the Edison Electric Institute's recent report, The Investment Challenge 2010-2030. This report states that we can expect to see a total infrastructure investment on the order of $1.5 trillion between 2010 to 2030 into the energy delivery marketplace, of which $505 billion are expected to be invested in generation systems; that's discounting carbon policy and energy efficiency initiatives, $582 billion in distribution systems, $298 billion in transmission systems, and $85 billion in advanced metering and energy efficiency demand response. These factors bolster our expectations that electric transmission and distribution remains a key growth engine in the future of our business.

News in the first quarter of this year regarding delays that certain transmission projects may be experiencing are common, particularly with large projects for multiple states in jurisdictions are involved. In many cases, these delays are anticipated and built into the schedule. Currently, most are moving forward on schedule and we are not seeing cancellation of major transmission projects.

Renewable energy strategies also continue to present opportunities for our business in the short and the long term. As a result of decreased system prices, increased stimulus funding, regulatory incentives and demand, photovoltaic resources for solar energy production are rapidly expanding according to Greentech Media Research. GMR's report also states that compared to other countries, the United States is poised to experience the most rapid growth in demand for solar power resources over the next four years. Utility scale installations for our expertise in this industry lies, is projected to be the fastest growing market segment, reaching an estimated 466 megawatts in the 2012 regulatory scenario. Also in the first quarter, we experienced increased activity related to installation, maintenance and interconnection of wind facilities.

Relative to our natural gas pipeline operations, there have been significant developments since the beginning of the year with several contract awards and a healthy level of bidding activity, and we continue to see long-term opportunities for natural gas transmission and services. Currently the interstate natural gas pipeline industry operates 215,000 miles of pipeline and transports 90% of the natural gas consumed in the United States. Looking forward, a study recently released by the Interstate Natural Gas Association of America indicates that between 2009 and 2030, the United States and Canada will acquire approximately 30,000 to 62,000 miles of new natural gas transmission pipeline capacity. This is estimated to require capital expenditures of between $108 billion and $162 billion.

In our telecommunications segment, we remain focused on the delivery of innovative services and solutions that support the service providers drive for a broader range of services, subscriber penetration reliability. While Verizon announced recently that it would not seek new cities in which to roll out its fiber optic service, it remains committed to subscriber acquisition in its existing markets. During 2009, FiOS was made available to more than 810,000 households. We expect to continue to play a key role in expanding the FiOS customer base.

Given the telco's commitment to deploy high-speed broadband throughout the country over the past several years, 40% of Americans still do not have high-speed internet access at home. Stimulus funds granted to the American Recovery and Investment Act, the ARRA, are expected to address this need for broadband development. To date, approximately $2.3 billion in funding has been awarded through 150 broadband deployment projects in 50 states and two territories. The application period for the second round of funding closed on March 26th. We also expect 2010 we'll see a shift in spending towards wireless facilities, both 3G rollouts and fiber backed, all to support higher bandwidths.

While Quanta has not yet benefited significantly as a direct result of the ARRA funding, we continue to focus our marketing and customer outreach initiatives to strategically position our comprehensive turnkey services to funding recipients. As a result, we believe we are well-positioned to benefit from this funding surge, and support customers in meeting the overall objectives of the ARRA. Over the long-term, the ARRA also presents opportunities for Quanta relative to smart grid deployment and renewable infrastructure. However, any potential for positive impact from the ARRA on Quanta's revenues is not anticipated until late 2010 and into 2011 and 2012.

Looking beyond North America, we believe certain international regions present significant opportunities for growth. Building on the success of projects in South Africa, the Middle East, and the Caribbean, we are working to strategically evaluate unique opportunities to apply our expertise to strengthen the infrastructure in these and other regions where infrastructure enhancements are increasingly important. We are actively pursuing international opportunities in markets where we can leverage our technology or proprietary work methods to establish a presence in growth markets that recognize the value we provide.

We continue to believe that 2010 will be a better year for Quanta than 2009, and that the second half of 2010 will be better than the first half of 2010. We believe our healthy balance sheet, superior services, extensive training, and variable workforce will position us to emerge from this challenging economic environment stronger than ever and poised for growth. Now I'll turn the call over to Jim O'Neil, who will talk in more detail about key operational accomplishments during the quarter.

Thank you, John and good morning everyone. As anticipated, the first quarter of 2010 presented certain challenges for our customers relative to a slow economic recovery and abnormal winter weather that affected projects throughout the United States. However, we believe certain industries we serve have reached the bottom of the decline. Specific indications of spending and project momentum include an active bidding season across most segments of our business, electric power transmission and substation project approvals and a growing focus on infrastructure planning by our electric power and natural gas and pipeline customers. Looking forward we believe the second quarter 2010 will be a transition.

Looking forward, we believe the second quarter of 2010 will be a transition period. We expect large projects to begin to mobilize in the second quarter in our electric power, natural gas, and pipeline and renewable operations which we expect to be reflected in a robust second half of 2010. We believe our financial performance, revenue diversity, and operator operational strengths position us to maximize opportunities in 2010 and beyond. For the first quarter of 2010, our largest customer made up approximately 5% of our revenues. Our top 10 customers represented approximately 31% of our total revenues, and our top 20 customers made up approximately 48% of our revenues.

In the first quarter of 2010, revenues from our electric power infrastructure services segment were approximately $456.8 million. This compares to approximately $534.7 million in revenue for the first quarter 2009. Revenues from the electric power infrastructure services segment were down largely due to decreased maintenance spending by our customers on their electric distribution systems. We believe this to be the the bottom of the electric distribution revenues decline, but expect no significant growth in system maintenance for the remainder of this year. However, smart grid stimulus spending by our customers in the second half of 2010 may have a positive impact on electric distribution revenues.

On the transmission side of our electric power segment, we continue to work on several significant projects. Our construction work on the trial project remains on schedule for completion in June of 2011. We are working on both CREZ and non-CREZ projects for the Lower Colorado River Authority or LCRA on approximately 160 miles of transmission lines. On June first, we are scheduled to start LCRAs, Clear Spring to Hutto transmission lines. This CREZ project is 88 miles of double circuit 345,000-volt transmission.

Construction activities continue under our $950 million contract with Northeast Utilities. This contract is expected to hit its stride in early 2011 with projected completion in 2015. The Connecticut portion of Northeast Utilities greater Springfield Reliability Project recently received citing approval and preliminary construction is targeted for the later this year. Under our five-year contract with National Grid, our joint venture new energy alliance continues work to upgrade the utility's Northeast transmission infrastructure. For example, Alliance employees are using their hand skills to refurbish a 230,000-volt energized transmission line in Massachusetts. We continued work under our renewed contract with American Transmission Company. This program is expected to move into construction in 2011 and be completed in 2013.

Additionally, we continued to see ongoing activity on key electric power transmission initiatives throughout the country. For example, recently PSE&G Susquehanna to Roseland project, approximately 45 miles of 500,000-volt transmission line, was approved by the New Jersey Utilities Board and construction bids have been submitted on this project. Construction on this project is expected to start this year.

Southern California Edison's Tehachapi project, segments four through 11, approximately 250 miles of 500,000-volt transmission line, has moved through the environmental impact and citing processes. Construction bids were submitted earlier this week. This project is scheduled to start later this year.

Maine Power's reliability project, a 400-mile 345,000-volt transmission line, consisting of new build and reconnect of its existing lines, this project is scheduled to bid in June and construction is anticipated to start at the end of this year. Other significant transmission projects being planned with construction awards expected this year include two large transmission lines in Canada for British Columbia Transmission Company, LS Power and NV Energy's Las Vegas to Ely line, Southern California Edison's Devers transmission line, and the remaining sections of CREZ.

Now turning our attention to smart grid. Momentum continues relative to our contract with Itron for the installation of Smart Meters for our long time customer, CenterPoint Energy. Under a stimulus grant from the Department of Energy, the timeline for deployment has been compressed. Our crews are now installing an average of 3000 Smart Meters per day. We expect this momentum to increase as we work to install a total of $2.2 million on this project.

We expect our momentum in renewable energy to continue in 2010. In the first quarter, Quanta was selected by SunEdison to provide engineering, procurement, and construction services for two nine-megawatt solar parks in Ontario, Canada. The solar parks are being developed under a joint venture between SunEdison and Sky Power Limited. SunEdison and Sky Power will own and finance the solar parks and the Ontario Power Authority will purchase the energy. This project is an example of how Quanta can transfer EPC capabilities and best practices to international markets. We consider Ontario, with it's Feed-in Tariff a growth opportunity for Quanta.

We continue to see increased RFPs from independent power producers and smaller developers. We have an opportunity pipeline of large commercial and utility scale solar projects that we believe reaffirms our commitment to $200 million in solar revenues this year, of which the majority will be generated in the second half of 2010. Our wind facility work is continuing under existing contracts, primarily for wind facilities in Indiana, Illinois, Missouri, and South Dakota. We also experienced a sharp increase in winds RPs and contract awards during the first half of this year.

We were awarded nine contracts, totaling a total of more than $51 million for wind facilities in Arizona, Illinois, Indiana, Maryland, Minnesota, North Dakota, and Oregon which are expected to be completed this year. We continue to estimate wind revenues to be $100 million for the full year of 2010. Total renewable revenues for 2010 continue to be forecasted at approximately $300 million.

In the first quarter of 2010, revenues from our natural gas and pipeline infrastructure services segment were approximately $188.9 million. This compared to approximately $111.4 million in the first quarter of 2009. The increase in revenues is primarily attributable to increasing our transmission capabilities. Revenues from natural gas distribution services were flat compared to the first quarter of 2009. We believe that the lower gas distribution revenues that we experienced in 2009 have stabilized and we expect a slight trend upward during the remainder of this year, primarily due to customer compliance with regulatory compliance for operations and maintenance.

We continue to believe that 2010 will be a trough year for transmission pipeline construction. However, we continue to see new development in shale formations through North America, more recently in oil-rich shale plays such as the Bakken and Eagle Ford formations. These areas are experiencing significant expiration and production activities which will require a considerable amount of transportation infrastructure to move both oil and natural gas to downstream facilities, as the current facilities are not adequate to transport projected production volumes.

We expect pipeline activities in these newer areas in addition to ongoing activity in the Marcellus and Haynesville formations. Bidding activity remains robust for work in both 2010 and 2011, primarily from pipeline operators proposing large diameter pipelines to transfer oil and natural gas from unconventional shale plays throughout North America. As a result, we expect 2010 and beyond to be growth years for this segment.

In the first quarter of 2010, revenues from our telecommunications infrastructure services segment were approximately $78.2 million. This represents an increase of approximately 6.5% when compared to revenues of approximately $73.5 million in the first quarter of 2009. This growth is primarily the result of construction activity associated with the long haul transmission projects in the Northeast. Our patented micro- trenching method is being very well-received by our customers. We have targeted several opportunities that could begin late in the second quarter with expansion to more customers and projects in the second half of 2010.

Our telecom segment is showing signs of recovery. Funding for numerous projects has been awarded by the Department of Agriculture and Commerce pursuant to the ARRA broadband stimulus program. In addition, we are beginning to see signs of increased bidding activity in many of our end markets in this segment. However, the FTTX, an outside plant services portion of our telecom business continues to be stagnant. This business is directly tied to housing activity and decreased wireline revenues experienced by service providers. As the housing industry stabilizes, we expect growth opportunities over the next 36 months to come from fiber to the cell sites and rule broadband initiatives.

Round one of the stimulus package awards have been completed with a total of approximately $1.7 billion in grants and $486 million in loan guarantees to support approximately $20 million in matching funds for projects. While we expect increased telecom spending as the stimulus funding awards continue throughout 2010 and customers prepare to meet stringent deadlines to deploy broadband technologies and services to unserved and underserved areas, we do not expect to see any significant revenues attributable to the stimulus program before the third quarter of 2010.

Our fiber-optic licensing business continues to show strong revenues and earnings growth. Revenues grew 28.7% in the first quarter of 2010 compared to the first quarter of 2009 was operating margins continuing to expand by 160 basis points. We continue to be optimistic regarding our growth prospects in this segment and expect to continue to achieve double-digit growth rates.

In summary, we are cautiously optimistic that 2010 will be a better year than in 2009 as spending begins to return to certain areas of the industries in which we operate. We're beginning to see signs of an economic recovery as reflected in increased customer activity, particularly in the second half of 2010. The indications of increased spending activity and continuing commitments to infrastructure spending occurring now leads us to believe that 2011 will bring continued improvement in our financial and operational results.

In the meantime, we remain committed to delivering diverse services that meet our customers infrastructure requirements while striving for strong financial performance for our stakeholders. Now I will turn the call over to James Haddox, our CFO.

Thanks, Jim and good morning, everyone. Today we announced revenues of $748 million for the first quarter compared to $739 million in the prior year's first quarter, reflecting growth of approximately 1.3%. Growth in consolidated revenues in 1Q of 2010 was driven primarily by an increase in revenues from natural gas and pipeline services, as a result of a major acquisition on October 1, 2009, as well as increases in revenues in our telco communications and fiber optic licensing segments.

These increases were partially offset by decreases in revenues from electric power services, primarily due to a decrease in spending by our customers. Our consolidated gross margins improved by 140 basis points from 15.9% in 1Q 2009 to 17.3% in 1Q of 2010. The increase in gross margins were due to higher margins of our natural gas and pipeline divisions due to a major acquisition in late 2009.

Our G&A expenses increased $17.4 million to $81.0 million quarter over quarter, primarily due to approximately $6.3 million of additional administrative expenses associated with an acquisition in 4Q 2009, coupled with $1.3 million in additional non-cash stock compensation. G&A expenses are up from 10.0% of revenues in 1Q '09 to 10.8% in 1Q 2010, primarily due to the increase in expenses discussed above. G&A was down sequentially from $94.8 million in 4Q '09 to to $81.0 million in 1Q 2010, due to the fourth quarter of 2009 being impacted by the reporting of certain losses on assets held for sale and transaction costs associated with an acquisition, as well as higher levels of bonus expenses due to higher levels of income during the period. Our consolidated operating margins before amortization expense increased from 5.9% in 1Q '09 to 6.5% in 1Q 2010. Amortization of intangible assets increased from $4.9 million in 1Q '09 to $5.8 million in 1Q 2010, due to the increase in intangibles resulting from the acquisition in the fourth quarter of '09.

Drilling further down into the details of our results by segment, electric power revenues were down about $77.9 million quarter over quarter or about 14.6%, due to a decrease in spending by our customers, primarily on their distribution systems. Due to the timing of major projects, transmission services were also down quarter over quarter, but to a much lesser extent. Additionally, the substantial amount of rainfall and snowfall during the period caused delays and hampered progress on various projects throughout the United States. These factors affected all services performed under the electric power infrastructure services segment.

Slightly offsetting these decreases were increases in emergency restoration services, which were approximately $53 million in 1Q of 2010 versus about $45 million in 1Q of '09. Operating margins in the electric power segment were 8.7% in 1Q of 2010 compared to 9.9% in 1Q of '09. This decrease was primarily the result of lower margins on emergency restoration services in 1Q of 2010 as compared to 1Q of '09. Emergency restoration work in 1Q of '09 earned higher margins than in the first quarter of 2010 due to a change in the mix of customers and type of work being performed. Additionally, electric work performed in 1Q of 2010 suffered from the productivity effects of the weather previously discussed and lower absorption of G&A expenses.

Our natural gas and pipeline revenues increased quarter over quarter approximately 70% to about $189 million in 1Q of 2010, due primarily to the contribution of gas transmission services from the major acquisition completed in the fourth quarter of '09. Operating margins in the natural gas and pipeline segment were 9.7% in 1Q 2010 compared to a negative 1.3% in 1Q of '09. This increase was primarily due to the favorable results of the negotiated increases to contract values on certain gas transmission services projects that were ongoing in the current quarter along with the completion of certain low margin gas transmission contracts in 2009 that did not occur in 2010.

Revenues from our telecommunications infrastructure services segment increased approximately $4.7 million or 6.5% to approximately $78.2 million in the first quarter of 2010, due primarily to increased activity in long haul fiber installation during the quarter, partially offset by lower revenues from fiber to the premise build out initiatives, the wireless network construction services as a result of reduced capital spending by our customers. Operating margins in the telecommunications segment remained relatively flat due to the typical seasonality effect of lower first quarter revenues and this segment's ability to cover fixed costs.

Fiber optic licensing revenues contributed approximately $24.3 million to the first quarter for an increase of about 29%, as result of our continued investment in fiber optic network expansion and the associated revenues from licensing the right to use point to point fiber optic telecommunications facilities. Operating margins in the fiber optic licensing segment were about 50% for the first quarter of 2010. 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 discussion about operating margins by segment excludes the effects of such expenses.

Corporate and unallocated costs increased about $4.2 million to $27.2 million in the first quarter of 2010 as compared to the first quarter of '09, primarily due to the increased non-cash stock compensation discussed previously, increased amortization expense of intangible assets associated with acquisitions, and higher salary and benefits expense. Net income attributable to common stock for the quarter was $23.7 million or $0.11 per diluted share compared to $21.4 million or $0.11 per diluted share in the first quarter of '09. Adjusted diluted earnings per share as calculated in our press release rose to $0.15 for the first quarter of 2010 as compared to $0.14 for the first quarter of '09.

Cash flow from operations less net capital expenditures of about $42.9 million resulted in approximately $39.3 million in negative free cash flow for the quarter as compared to positive free cash flow of $71.8 million in the first quarter or 2009. This decrease is primarily due to higher operating cash flows in the first quarter of '09 associated with collection of significantly higher receivable and retainage balances that were outstanding at the end of 2008, as a result of the high level of emergency restoration work performed in 4Q or '08 due to hurricanes.

At the end of 2009, Quanta's receivable balances included about $152 million of retention balances with over one-third of these balances related to pipeline work, the majority of which cannot be billed until jobs reach final completion after the end of the first quarter. Also contributing to the decrease in free cash flow was the payment of bonus compensation and certain tax obligations in 1Q of 2010 that were associated with the acquisition that was completed in the fourth quarter of '09.

EBITA for the first quarter of 2010 was about $48.1 million or 6.4% of revenues compared to about $43.5 million or 5.9% of revenues for the first quarter 2009. And adjusted EBITDA was about $80.7 million for the first quarter 2010 compared to $67.9 million for the first quarter of 2009. Our day sales outstanding or DSOs were 80 days as of March 31 of 2010 versus 63 days as of December 31 of '09 and 83 days at March 31 of 2009. The increase in DSOs from December 2009 to March 2010 is primarily due to substantially lower revenues in the first quarter of 2010 versus the previous fourth quarter of 2009, and is affected by the high level of retentions previously discussed. The calculation of EBIT and EBITDA and adjusted EBITDA, all non-GAAP measures, and the definitions of DSOs can be found on the financial news section of our website at quantaservices.com.

At the end of the quarter, we had about $660 million in cash. We had approximately $285 million on available borrowing capacity under our $475 million credit facility. We had about $190 million in letters of credit outstanding, primarily to secure our insurance program. The combination of our cash balance and availability under our credit facility is just about $945 million in total liquidity as of March 31, 2010. Approximately $146 million of our cash will be utilized to redeem our outstanding convertible securities during the second quarter of 2010, assuming that none of the are converted.

Concerning our outlook for the future, our estimate of revenues for the second quarter of 2010 is from $900 million to $950 million. Our estimate for 2Q 2010 EPS, based on revenues of between $900 million to $950 million, is $0.15 to $0.17 per diluted share on a GAAP basis. Our GAAP EPS forecast includes an estimate of $15.3 million for amortization, non-cash compensation expenses and non-cash interest expense, plus approximately $4.4 million in expenses associated with the redemption of our convertible security. Excluding these expenses, our non-GAAP adjusted diluted earnings per share for the quarter is expected to be $0.20 to $0.22.

For additional guidance, we are currently projecting our tax rate to be approximately 40% for 2010 and we expect our diluted share count to be about 210 million shares. We expect intangible amortization for the rest of 2010 to total about $30 million, which is broken down by quarter as follows. 2Q should be about $9 million, 3Q should be about $13 million, and the fourth quarter should be about $8 million in amortization.

For the fiscal year 2010, we are reiterating our initial earnings guidance in the range of $0.90 to $1 per diluted share and revenues of $3.9 billion to $4.2 billion. And we continue to 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 and this compares to CapEx for all of '09 of about $165 million. This concludes our formal presentation, and will now open the line for Q&A. Operator?

(Operator Instructions). Our first question comes from the line of Jamie Cook with Credit Suisse. Please go ahead.

Good morning.

Good morning.

The first question -- the thing that surprised me on the quarter was the margin degradation in the electric power division. And you alluded in your prepared remarks, lower storm work and how that impacted productivity. Jim, is there any way you could give us more color on how we should think about margins. How we can think about margins, excluding the weather or productivity or how you see margins trending in the remaining nine months of the year for electric power?

This is John. There are a couple of things that affected electric power margins. One was the storm work that we did was at lower margins than it has been in the past. And the other, of course, was the weather, particularly in the Northeast where our major transition projects are ongoing. I don't think that those trends will continue. I think you will continue to see electric margins about the same as they've been on maybe a little better.

Okay. Better than -- so year-over-year are we talking about? Or -- you are talking about margins should be the same year-over-year and flat to improving? If I think of the remaining nine months of 2010 versus 2009?

That's correct. Look at 2009, and we expect those margins will be near those levels or maybe exceeding them. It all depends on contracts and where there located and and so forth. But first quarter with an anomaly.

And if you could talk about in general, the projects that your bidding on within electric power. Can you talk about the competitive environment and whether you think those margins will be accretive to backlog going forward? Or flat so we can think about how we're thinking about margins trends in 2011?

The margins on the small projects, a very competitive situation in small projects, small transmission projects. Those margins are difficult to improve. On large projects, I expect those margins will continue to be as good as they've been in the past. And were always seeking for ways to improve our productivity and improve those margins, but certainly, a more disciplined bidding environment in those larger projects than we see in smaller projects.

Okay. Thank you. I will get back into queue. Congratulations.

Thanks.

Thank you and our next question comes on the line of Tahira Afzal with Keybanc. Please go ahead.

Good morning, gentlemen, and nice quarter.

Thank you.

First question is as you look at your second quarter guidance, could you place it in terms of how that shaped up versus when you set your full-year guidance?

I think if you look at a combination of second quarter and first quarter, we are right on track for our expectations for the year when we gave the guidance for the year. The timing in the second quarter is very important. We have a number of projects that are starting in literally a few days or a few weeks change in the start date on these projects can make a big difference in the second quarter. We had to be very careful in our guidance for the second quarter. But if you combine the first quarter and the second quarter, we are right on track of what we thought when we give our yearly guidance.

Great. And my second question is we talked about bookings -- looking for $100 million since the start of the second quarter and some of the large awards. And you talk about $1.4 billion. Can you provide a little more color in terms of what the $400 million as relatively flat, comprised of as well as the $1.4 billion and perhaps is it possible to put the $1.4 billions in respect of what you saw last year?

Okay. Can't say too much about the $400 million. They were electric utility projects. On the projects that we bid, they are fairly evenly divided into three categories. One is renewables. One is transmission pipeline. And then the rest were our traditional electric power work.

Got it. Okay. Thank you very much, gentlemen. I'll jump back into the queue.

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

Thank you. Good morning, guys. Again, good quarter. Two quick questions. First one, in terms of your second half performance -- numbers of the second half skewed due to seasonality. How much more of a new bookings do you guys need to see here in Q2 and Q3 versus your existing backlog for us outsiders to be comfortable with that big jump in the second half of 2010?

That's a difficult thing to answer. We don't report nine-month backlog or backlog by quarter. We can give you a back of the envelope information on that.

That's what I want.

We're not in the practice of doing this every quarter, but I understand some of the concerns that you might have. Backlog fluctuations occur daily as projects are awarded or projects burned and also projects moved. They accelerate or they are delayed. But if you start out with our 12-month backlog as of 3/31 as roughly $2.5 billion and we estimate that maybe $300 million of that is associated with the first quarter of 2011, that gives you a nine-month backlog of approximately $2.2 billion.

And then of the $400 million in large projects awarded since 3/31 2010, which are not in backlog, roughly half of that revenue will occur this year. Our 2010 revenue guidance was $3.9 billion to $4.2 billion. And you have to subtract the first quarter revenues of $750 million, less the $2.2 million in backlog and less than $200 million in project awards, equals around $750 million on the low side to around $1 billion on the high side of our revenues of uncommitted revenues at this time.

That's what I was trying to get at. That's very helpful. One more question from me. With a lot of the transmission projects, bid activity up $1.4 billion, it looks like 2010 is experiencing pretty good visibility. But given 2011 with the large transmission project having the potential to be higher margin opportunity, it's shaping up to be a very, very strong year for you guys. Or am I jumping the gun here? Can you comment on that a little bit?

We expect this to be a good year for electric transmission growth. And we expect 2011 to be even better, as many of these projects are going to start in 2010, as we mentioned, but most of them will be ongoing and building in 2011. We're pretty optimistic about our electric transmission business.

Thank you. And our next question comes from the line of Steve Sanders from Stephens Incorporated. Please go ahead.

Good morning, everyone.

Good morning.

Just a follow-up question on the $400 million. Based on the bid activity that you're seeing out there now, how sustainable is that level over the next few months? Was that unusually high or does that feel like a run rate at least in the near-term?

That's impossible to say -- impossible to guess. That was significant, we thought, enough that we should talk about it. But with over $1 billion out there that we bid, we should get our fair share of those going forward. And in fact, we did a back of the envelope calculation and over the next couple of months, there's going to be a significant number of additional bids coming. As you can tell, we are fairly optimistic about 2010 -- cautiously optimistic. But 2011 certainly looks like its shaping up to be a great year with all of the activity we're seeing in bidding and project awards.

Okay. Thanks. And a follow-up on the renewable side. As we get further along in some of these bids, how should we think about the margins on the solar and wind against the corporate average that you're expecting for the year?

I think that combined, they'll be near the corporate average or a little better. They are equivalent or normally combined to our electric power margins which typically are a little better than our corporate average.

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

Good morning. When you think about the seasonality of your business, do you think the third quarter will be the strongest quarter of 2010, as it has been each of the last three years, excluding acquisition-related revenue?

It typically is our largest quarter, but this year it may not be because there's a lot of work that is backloaded toward the end of the year. Depending on the weather, fourth quarter could be a bigger quarter than third quarter. It's shaping up to be that way. But normally you are right, third quarter is our largest quarter.

Okay. Just to clarify that, right now you are planning on 4Q bing up sequentially though, assuming weather is consistent with normal seasonality?

That's right. That's simply because we're seeing this phenomena of projects that are starting in the last half of the year so they should be ramping up in the fourth quarter.

Carter, this is James. Following up on what Sanjay said a second ago relative to the $750 million number that needs to be booked between now and year end, this could also affect the fourth quarter versus third quarter nexus that is a change in our business this year where we have more renewable and more pipeline work than we've had in prior years. And that's a quicker booking and burning business than what we traditionally have. It's possible, in other words, specifically relative to Carter's question about the fourth quarter, that as you book smaller projects and pipeline projects in the late spring, early summer and they end up falling into the fourth quarter, which could change the seasonality of our business.

Thank you. And our next question comes from the line of Andrea Wirth with Robert W. Baird. Please go ahead.

Good morning, gentlemen. I was wondering if you could talk a little bit about the natural gas outlook. It sounded fairly positive, although I know that a lot of the industry experts are expecting rate counts to start rolling over as you get into the backhalf of the year. I was just wondering what your expectations are for rate counts and how much we should be worried all about that -- the potential impact on the business.

If it's an impact on the business, it will probably be later in 2011. Right now, the bidding activity is robust and the award activity has been fairly robust. Jim, do you want to add anything to that?

I think, Andrea, long term rate count could probably tie closely to our business. But right now, for the next five plus years, these transportation contractors are trying to build out infrastructure. Our business is somewhat working independently of [E&P] activity. The increased E&P activity we have seen over the last seven, eight months, if that continues then we should see some benefits of that in 2011 and beyond. But I think a decrease in rate count at the end of the year is not going to slow the transportation infrastructure that is being built out from these unconventional shale formations.

Got it. And going back to the quarter, I was wondering if you could quantify for us really how much storms impacted you. I am assuming that was a net negative for the quarter, but if you could give us an idea as to what the total impact was, maybe by segment, what the impact was.

By segment, it would all predominately be in electric power. But we don't typically quantify the effects of storm work. We can give you the revenues and I can tell you that the margins this year were lower than they were last year, just specifically because of a change in the mix of customers we were looking for and the type of work we were doing. Because typically an ice storm or a snowstorm is short term in duration compared to a hurricane. We were working with ice and snow storms in 2010 versus hurricanes in '09.

Also, it's difficult to tell exactly the effects of storm work because storms also have a negative effect on the rest of our business. They reduced margins, specifically in telecom and electric because of the working conditions working in heavy snow and that was partially offset by some of the storm work that we did get.

Thank you. And our next question comes from the line of Scott Levine with JPMorgan. Please go ahead.

It's actually Rodney Clayton here for Scott. Good morning, guys. First question, on the gas services business, first of all I want to make sure I got you right. You said you expect that to grow in 2011 and beyond. Please correct me if I didn't get that correct. And also, you talked about oil shales and that's something you haven't talked a whole lot about previously. How big of an opportunity do you see that being for you this year and then into the future?

That was unexpected for us to see this increase in activity. A lot of the rates were moving to these areas of the Bakken and to the Eagle Ford right now and we are seeing increased activity from both E&P and transportation contractors largely because not only is their gas there, but there's oil that's produced at economical limits. It just seems to be additive to what we're doing on the Marcellus and the Haynesville. And we do expect activity to increase and those two areas throughout the year.

We expect that the transmission pipeline business will be stronger in 2011 than it is in 2010.

Okay. That's helpful. And then secondly, you talked about stimulus. It sounds like you have a little more visibility on than in terms of the contribution it might make, beginning in the back half of the year. What exactly are you seeing or are you hearing that's giving you more comfort around the exploration space of those being developed?

The broadband stimulus money would help many of our customers apply for those funds in that first wave of funding and were involved in engineering a lot of those projects. Construction revenues should come toward the second half of this year. Then obviously on the stimulus money for renewables, in the ICCs we are seeing a flurry of activity trying to get projects built this year as well. And then the smart grid program, which Centerpoint was accelerated because the $3.4 billion in matching grants needs to be spent in three years. Centerpoint had a five-year program so they've accelerated their program to 3000 meters a day installed from about 2000 meters a day installed. You should start seeing increased activities by utilities spending smart grid money toward the second half of the year.

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

Good morning. Thanks for taking my question. I didn't hear any comment on the Sunrise project in California. Has this project been awarded and has Quanta received it?

We have been awarded the contract, but we cannot comment any further on the project.

You can't provide us with any color as two whether or not you're doing both aerial and underground or the mileage associated with that?

I really can't comment any further at this time on that project.

And is that project included in the $400 million that you're identifying in the April month as being awarded?

Yes it is.

Secondly, with your power -- electric power backlog being down year-over-year, should we think about the revenues from electric power being down in 2010 to 2009 at this point?

No, I don't think so. I think that you will see revenues increase, particularly on the transmission side. We expect to see strong double-digit growth on transmission. Distribution, we expect to be flattish year, unless we see some significant growth from smart grid and smart meters in the latter part of the year. And of course renewables, we expect to see significant growth in renewables in 2010 as well.

And the telecom wireless, it sounded like from your commentary that it was down year-over-year. Can you expand upon that a little bit more? I had thought AT&T was ramping spending this year on wireless.

Good morning, Alex. This is Ken. The [LT] rollouts -- they are putting the RFPs together and awards that we expect to see -- that's one of the reasons we are optimistic about the second half as we expect to see those roll our and accelerate.

What is the mix of the telecom business right now between wireline and wireless?

It's probably 80% wireline and 20% wireless. That's close.

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

Good looking outlook. I was wondering if you could comment on the transmission spending outlook. Do you expect to go at a steady rate or should we expect to see some surges in orders at the end of 2010 and early into 2011?

I think you could see fairly steady growth. 2008 was better than '07 for transmission. 2009 was better than 2008. 2010 is better than '09. And I think in 2011 and 2012, you're going to see continued improvement throughout. It's going to be somewhat lumpy quarter to quarter, but year-over-year I think you're going to see growth for several years in the future.

Okay. And then I had a couple of questions about specific projects. If you could comment on how that might affect your outlook. The Gillespie to Newton line was not approved. And TJM recently approved additions to trail, Carson, Suffolk and the Susquehanna line. Is any of that in your outlook?

The project with LTRA is part of our $460 million contract we have with them.

It's 256 --

For CREZ, but we also have $194 million in addition to that to $256 million. In any case, it is part of our LTRA backlog. We expect that has no effect on the next 12 months backlog. That project wasn't really scheduled to start this year. We'll see if it doesn't get cleared up, and probably won't be delayed from it's original start date or it's original completion date.

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

Good morning. John, when do you think the pricing environment will stabilize for the smaller projects?

I think it will require distribution spending and maintenance by the utilities to come back. That's going to be based on the economy improving and housing to pick up. If you can answer those two questions, I can tell you when distribution margins are going to come back and when growth in distribution is going to come back.

And second question, historically what has been the lag between an increase in electricity consumption and an increase in electricity utility CapEx?

This is uncharted territory. We haven't seen this scenario in the past so I would hesitate to guess on that particular front. But again, it's part of an overall economic recovery. Utilities are seeing and projecting an increase in electric usage this year. There's a lot of political uncertainty within the utilities. They don't know what their regulations are going to be regarding reliability, regarding generation, cap and trade, government subsidies.

There's a lot of things that the utilities are uncertain about and so that doesn't help things a heck of a lot. I expect to see distribution spending slowly pick up. I don't think we're going to see a big pickup in 2010, as I expressed earlier. But I think we will start to see distribution spending pickup in 2011. That's based on strictly what our utilities are telling us about their plans for spending over the next several quarters.

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

Good morning, John, James, Jim.

Good morning.

A couple of questions around gas and then one around solar. On the gas side of this, can you give us an idea how much price Gregory contributed this quarter to gas revenues versus your core business?

Gregory is fully integrated with our legacy gas group. I don't mind taking a guess. James, you want to give him an idea? But it was strictly a guess on our part.

I'd say it was around $100 million.

Around $100 million.

Okay. And most of the forecasts we're seeing for gas pipeline construction for next year, calling for a pretty good increase. For that to occur, when would you see the bulk of large gas transmission project awards occur in order to have that strong year next year?

I think some of them are going to be bid and awarded as soon as this quarter. And we have some backlog for 2011 already. But I think it's going to start in the second quarter and accelerate and third and fourth quarter of this year for awards for 2011.

Thank you. And our next question comes from the line of Craig Irwin with Wedbush Securities. Please go ahead.

Morning, gentlemen

Good morning.

I was hoping to better understand the contribution of your pipeline transmission business to the bookings in those 12 months and a total backlogs. Is that something you can breakout for us?

We don't typically break that out, but we had backlogs, even though price Gregory is integrated because we had to put our own transmission services into -- Price Gregory's backlog right now is about $700 million.

That's correct.

Okay. What were the bookings in the quarter for Price Gregory?

I think the number at year end was $525 million. Is that right, Jim?

$550 million for beyond 12 months.

$550 million.

Okay. Excellent. And just to understand Price Gregory a little bit better, previously in your filings, you have given us a six-month number for Price Gregory in 2009. And your guidance at the time of the acquisition was anticipating roughly 30% decline in the business. Can you comment on roughly how this quarter compared to the year ago numbers out of Price Gregory for the three months of the first quarter?

Oh, boy. I don't actually have that number handy, but I know it was down because Price Gregory's revenues were around $100 million this year. And I know last year -- if you can give me a second, I can probably tell you that number, but I don't have off the top of my head Price Gregory's numbers for the year last year for '09 by quarter.

It's fair to say it is down significantly because there was a tremendous amount of work in the year previous and the first quarter was carryover work from the year before. It was a very strong quarter for them last year.

Thank you and our next question comes on the line of William Bremer with Maxim Group. Please go ahead.

Good morning, gentlemen. Nice execution this quarter.

Thank you. Good morning.

I want to just hit on the operating margins for the nat gas segment. Fourth quarter, very nice and strong, 15.5%. First quarter now, 9.7%. Give us a local color on the pullback there. Is it purely mix or can you just provide some color on what we should be expecting going forward? What is a nice run rate that we should be expecting now?

The gas business is two different businesses actually. It is divided among distribution gas and transmission gas. Transmission gas, of course affected by weather this first quarter, but we expect transmission gas margins to go near the mid teens level. Distribution gas, of course is a drag on our markets both for the Company and for the gas division. That business has been affected greatly by the housing downturn and we don't expect to see much improvement in that business until housing starts to pick up.

We are doing what we can to improve margins there, but at our best level for those, they were around 7.5%, 8% operating income. You combine the two, and it depends on how much revenue comes from each. But combined, we think that gas margins should approach double-digit level with our transmission gas being in the near mid teens. And I think James has an answer here for the previous question.

The answer to the previous question was that Price Gregory's revenues in the first quarter of '09 were about $355 million.

Thank you. And our next question comes from the line of Michael Coleman with Sterne Agee. Please go ahead. Mr. Coleman, your line is open at this time. And our follow-up question comes from the line of Tahira Afzal with Keybanc. Please go ahead.

Hi, gentlemen. I just wanted to -- just had one small follow-up question and that's in regards to some of the Canadian transmission projects out there. Are those -- we have been hearing some more news from those, we would like to get some feedback on what your pipeline there looks like.

And number two, you talk a little more about international opportunities. Is this a very culinary effort to get more proactive there? Are you being approached? I would love to get a better sense for that.

Yes. On the international front, there is a number of variables. Electricity demand declined in the United States last year and in 2008 as well. And many of the countries overseas, even in a depressed economy, their electricity usage grew at double-digit levels. Many of these countries have a developing middle-class that are moving to the point where they are using electricity, demanding electricity. Much of the grid overseas is overloaded, congested, much worse than ours. And so our energized services, our ability to read conductor energized transmission lines without taking them out of services is in great demand in many places overseas.

This is a preliminary effort for us. We are being very cautious in our overseas work. It adds additional risk. And so we're being very cautious, but certainly we are being requested to see if we can solve some of their problems. Of course, we are moving forward, taking advantage of those opportunities. Canadian transmission work, I think Jim talked about two big transmission lines that we know of that are coming out over the next few months.

There's two lines that are supposed to bid this year. One of them is supposed to start this year. The Northwest transmission line is one of them, and the other one is called the Interior to lower Mainland line or the ILM line.

Got it. And one last question now that I'm back on. I know [Quarentech Technology] which I believe is your consulting arm, did a pretty extensive study for some of the Midwestern states and came up with $25 billion potential transmission spending for renewables. Would it be possible for you to provide any color on what the timeframe could be or anything you know about that?

No, Tahira, I couldn't provide any color on that. Those studies were performed for our customers and any comments about those studies should come from the customers, not from us.

Thank you. And our next question comes from the line of [Shane Burton with Rez Mason]. Please go ahead.

Thanks for taking my question. I just wanted to know if you could help a little bit to the extent that you'd like to share on the electric groups mix, maybe within different parts, transmission, distribution, renewables versus the revenue mix. And maybe some of the margin trends within those groups. Maybe also talking about that mix, compared to last year, what the cases still declining year-over-year -- is the transition growing during the first quarter?

I'll try to help you. The first quarter was affected tremendously by weather and by project. We finished one major transmission project at the end of last year. We are starting projects and existing projects were affected by weather. But the mix is primarily transmission now.

In the first quarter, there was very little this distribution and very little renewable work. We expect the mix for this year to be similar to last year as far as transmission and distribution which would be around 60%, maybe surging towards 70% transmission and 30% to 35% in distribution. But we have a new dynamic coming in that's becoming much larger, and that's renewables. And we expect to see renewables around $300 million of revenue this year. Margin-wise, transmission and renewables are nearly the same margin, much higher than distribution margins which is in the mid teens at this time.

Okay. And in terms of $300 of renewables, how much is the rate behind us in this quarter?

Would probably get around $30 million in renewables. We expected that for the first quarter. We have got a significant ramp up that's going to occur in the latter part of the second quarter and into the third and fourth quarter.

Thank you. And our last question comes in the line of Craig Irwin with Wedbush Securities. Please go ahead.

Thank you for taking my follow-up question. I actually just want to understand the renewables business a little bit better. As far as the $300 million that you are expecting from solar this year, I was hoping that you could comment a little bit about the breadth of projects -- the number of projects, and whether or not you expect a contribution from [Chenaway] in 2010.

Our $300 million projection does not take into account any contributions from Chenaway this year. We're looking at obviously several -- there's plenty of projects in the pipeline, both utility scale and large commercial. But for 2010, ones that we're really trying -- were in the final stages of moving those forward, there's probably two to three utility scale programs. And then we have got probably another ten or so large commercial programs that were looking at.

On wind, we're seeing significant activity on wind. As I said on the call, we had nine contracts that we signed just in the first quarter on wind projects for about six states. As we are saying, the activity on wind has really picked up and we feel really comfortable with the $100 million target we have there. We continue to see a lot of activity on RPs and wind, and hopefully that will continue through the year.

I wanted to jump in -- we have a question on backlog for Price Gregory. On 12/31, the 12-month backlog was $592 million and the beyond 12-month was $136 million for a total backlog of $728 million at 12/31. At 3/31 for Price Gregory, for our gas transmission business, the 12-month backlog was $707 million and beyond 12 was $135 million for a total backlog of $842 million.

Than you very much. Congratulations on the solid execution.

Thank you.

Thank you. At this time, there are no further questions. I'd like to turn the call back over to management for any closing comments.

I'd like to thank you again for your participation in our first quarter conference call. For those institutional investors that have not heard, we are hosting an analyst day on Tuesday, May 18. If you are interested in attending, please contact Kip Rupp with DRG&E at 404-872-6764. That's a 404-872-6764. We appreciate your questions and you're ongoing interest in Quanta. Thank you very much.

Ladies and gentlemen, this concludes the Quanta Services first quarter 2010 earnings conference call. If you like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325 followed by passcode of 4291394. We would like to thank you for your participation. You may now disconnect.