Quanta Services (PWR) Completes ~$315M Telecom Sale to Dycom (DY); Sees Q4 GAAP EPS Impact

December 3, 2012 5:54 PM EST Send to a Friend
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Quanta Services, Inc. (NYSE: PWR) has closed the sale of its telecommunications subsidiaries to Dycom Industries, Inc. (NYSE: DY) for $275 million in cash plus an estimated $25 million to $40 million related to certain working capital and other adjustments. The subsidiaries included in the transaction comprise substantially all of Quanta's former domestic telecommunications infrastructure services operations. The after-tax net proceeds from the sale are estimated to be approximately $250 million to $265 million. Quanta intends to use the proceeds of the transaction to support its ongoing strategic growth initiatives primarily associated with the electric power and pipeline infrastructure markets and for general corporate purposes.

The subsidiaries included in the transaction comprise substantially all of Quanta's former domestic telecommunications infrastructure services operations. The trailing twelve month revenues through September 30, 2012, associated with the subsidiaries in the transaction were approximately $535 million, which includes approximately $34 million for telecommunications infrastructure construction services performed within Quanta's Fiber Optic Licensing segment and approximately $39 million of revenues performed within other Quanta segments. Some of Quanta's remaining operating units will continue to derive domestic telecommunications revenues from various non-telecommunications customers and it is currently contemplated that these revenues will be combined with the existing Fiber Optic Licensing segment to form a new segment for disclosure purposes titled Fiber Optic Licensing and Other.

The company has concluded that the historical financial results of the disposed subsidiaries will be presented as discontinued operations and Quanta will revise its historical financial statements accordingly. Quanta intends to provide certain restated financial results reflecting these discontinued operations for investors and the investment community when this information is available.

Quanta expects this sale to result in a pre-tax gain after giving consideration to the effects of approximately $11 million to $13 million in transaction and severance costs. However, Quanta expects the sale to result in an after-tax loss of approximately $10 million to $20 million, or approximately $0.05 to $0.10 per diluted share, in the fourth quarter of 2012. The anticipated tax expense related to this transaction is expected to exceed the pre-tax gain due to differences between Quanta's book and taxable gain associated with the transaction. Consistent with its prior fourth quarter 2012 outlook, Quanta expects adjusted diluted earnings per share (a non-GAAP measure) to be $0.40 to $0.42. This non-GAAP measure is estimated before the impact of the after-tax loss from the transaction, as well as certain other non-cash items such as amortization of intangible assets and non-cash compensation expense, net of tax, on a basis similar to the adjusted diluted earnings per share presented in our earnings release dated October 31, 2012. Considering the impact of the transaction, Quanta currently expects GAAP diluted earnings per share for the fourth quarter of 2012 to be $0.27 to $0.34.


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