Good morning ladies and gentlemen and thank you for standing by. Welcome to the Quanta Services Second Quarter 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, August 06, 2008. I'd now like to turn the conference over to Kip Rupp, with DRG&E. Please go ahead, sir. Kip Rupp - DRG&E: Alright, thank you, Mitch and welcome everyone to Quanta Services' conference call to review 2008 second quarter results. Before I turn the call over to management, I have the normal housekeeping details to run through. If you'd like to be on the e-mail or fax distribution list to receive future press releases for Quanta, or if you had any technical difficulty 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'd like to listen to a replay of today's call, it will be available via webcast by going to 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 303-590-3000, and using the pass code 11116519. Please remember that information reported on this call speaks only as of today, August 06, 2008 and therefore you're advised that any time-sensitive information may no longer be accurate as of the time of any replay of this call. Also this conference 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, but are not limited to, projected revenues, earnings per share,…

Good morning everyone and welcome to Quanta Services second quarter 2008 conference call. To start call this morning I will provide a general overview of the quarter, insight on developments in the industries we serve and perspectives on emerging opportunities. My comments will be followed by a review of our telecommunications, cable television and wireless operations by Ken Trawick, President of those operations and a review of the financial results by James Haddox, our Chief Financial Officer. John Wilson, President of Quanta's Electric Power and Natural Gas Operations, is also present to answer questions. After our prepared remarks, we will open the call for questions. The second quarter of 2008 continued a strong trend of revenue growth and margin expansion for Quanta. We continue to perform well in the industries we serve and are well positioned to leverage emerging [ph] opportunities. Revenues for the quarter were approximately $961 million compared to $552 million in the second quarter of 2007. The second quarter of 2008 revenues include constitution from operations added through the acquisition of InfraSource completed in August of 2007, as well as a couple of smaller acquisitions we have completed since the end of the second quarter 2007. Internal revenue growth, however, was strong at approximately 20% compared to the second quarter of 2007 pro forma to include these acquisitions at both periods. We continue to be optimistic, although we're closely monitoring current and projected economic conditions. By design, Quanta's revenues base is diverse. Our service scope is broad and our operations are efficient, minimizing the impact of the fluctuating economy. Oil prices increased significantly during the first two quarters of this year, our margins remain strong in most of the in the industries we serve. This is primarily attributable to growing demand for our services. However, multiyear strategic…

Thank you, John and good morning everyone. I am very pleased to report continued strong results from Quanta's telecommunications and cable operations. In the second quarter of 2008, these operations had approximately 29% organic revenue growth compared to the second quarter of '07 on a pro forma basis including acquisitions in both periods. Our ability to maintain margins while growing revenues is a result of our ongoing focus on quality of revenues. This growth is driven primarily by the services we provide to deploy fiber networks for the RBOCs, rural telcos and municipalities as well as increased activity in our wireless division. The growth in our fiber installation services reflects the continuing commitment by the service providers and municipalities to deploy their fiber networks closer to the home and businesses that demand them. Our largest customers in this area are Verizon and AT&T both of them continued to announce expansion of their broadband services and communities throughout the nation. Our work is reflective of this and has been largely concentrated in California, Washington, Oregon, Pennsylvania, Florida, Texas, Delaware and New York. In the second quarter, Verizon unveiled its plans to expand availability of its high-speed triple play wireless service. The network currently reaches 10 million homes and small businesses throughout Verizon's 16 state territories. The company plans to initially reach 18 million homes and businesses about 2010 and recently indicated that there is potential for that target number to increase during the same time period. This represents an $18 billion investment for Verizon. We think this provides some insight into Verizon's commitment and a continued demand that we expect will exist for our proven quality of installation services. AT&T also recently stated their desired target to secure to more than 1 million customers with its numerous offering by year end…

Thank you, Ken and good morning everyone. Today we announced revenues of $960.9 million for the second quarter compared to $552.2 million in the prior year second quarter resulting in an increase of $408.7 million or 74%. Pro forma revenues in the second quarter of 2007 would have been $806.4 million. When I refer to pro forma information throughout my discussion, I am referring to data prepared on a combined company by just taking into account the acquisition of InfraSource and two smaller acquisitions, as if they occurred on January 1, 2007. Pro forma revenue growth for 2Q '08 compared to 2Q '07 totaled approximately 19.6%. The as reported results of operations covered in my discussion for the second quarter of 2008, are compared to Quanta's pre-merger historical results for the second quarter of 2007. This year's second quarter revenues included emergency restoration revenues of approximately $23 million compared to approximately $10 million being earned in pro forma revenues in 2Q '07. Excluding emergency restoration revenues from both periods, pro forma revenue growth would have been about 18% in the second quarter. I want to remind you that we changed our methodology for combining... for compiling revenue by industry. We now discuss revenue backlog of work performed. For example, in the past when we performed telecom work for a utility, the associated revenues would have been classified as utility work. Under our current methodology, the revenues will be classified as telecom work. Keep in mind, many times we maybe performing all types of works on one job as the same time, which requires us to estimate revenues and cost by type of work. However, we believe that the information by type of work is directionally accurate. On an as-reported basis, revenues from electric power during the second quarter of '08…

Thank you sir, we will know begin the question and answer session. [Operator Instructions]. And our first question. Sir, one moment please. Okay, I do apologize. Our first question comes from Tahira Afzal with KeyBanc Capital Markets. Go ahead please.

Congratulations guys on a very good quarter and outlook.

Thank you.

Just a couple of questions. It seems in terms of your third quarter guidance, the implied operating margins seem to be well above the 9.5... well closer to the 9.5% range which sort of enters into that 9 to 12% territory that you have always alluded to. And if you look... a year back from now and today, how do you feel about that 9 to 12% range.

I don't think we have changed our mind at all about the 9 to 12% operating range our core businesses, our electric power and telecom are typically closer in that range. The other... our challenges of course are the gas distribution business and our other businesses... the C&I business and ancillary businesses, getting those to acceptable to where they don't drag our core businesses down.

So given that we are sort of maybe six months closer versus where we were six months ago, would you say that 9 to 12% range is achievable over the next 12 months, i.e., should we see the continued momentum that's implied in third quarter to continue into '09 in terms of margins?

Yes we do, we think that's probably achievable.

Okay. Well that's pretty confident. That's a good thing.

Okay, I will try not to sound too confident.

No, no, I don't mind at all. In terms of... in terms of the timing and I am sure you've been getting a lot of questions on this, in terms of the timing of the CREZ award and any of the large other awards to the extent that you can comment, is there anything you can add?

John, you want to take that one?

Well we are continuing, we've seen an increase in our bidding activity this year and we expect to see activity increase over the next several months due to things just like what you said but that's the CREZ zone and other initiatives around the country. So without saying too much about specifics kind of leave it at that. We are seeing increased activity and pretty robust market starting to develop.

Okay. And the 20% organic growth rate, you think that's sustainable as we look past 2008 or should we build in some things that will be more tempered?

No I would not anticipate 40% growth. I suppose some quarters as we did in the second quarter and we are projecting for the third quarter we will have 20% but I think we will stick with our guidance of double-digit internal growth for the foreseeable future. But 20 is probably stronger than what is going to turn out to be for the entire year for sure.

Okay. And one last question in terms of your convertible, any change in your views on how you're going to approach that?

Tahira, this is James. No we haven't changed our views on that. We actually have not made the decision yet... the discussion has not been held with our board and there haven't been any decisions made on a formal basis here.

Okay, well thank you for the commentary and congratulations again.

Thank you.

Thank you. And our next question comes from Alex Rygiel with FBR. Go ahead please

Morning gentleman and nice quarter.

Thank you.

James, question for you as it relates to storm revenue in the quarter, I had in my note that last year pro forma storm revenue was $58 million not $10 million; am I noting correct or did you change?

No, I think your notes are correct.

Okay.

Didn't have as much of a storm... we didn't have much storm revenue in the third quarter of last year.

Fair enough. And as it relates to renewables in 2008 I believe you said that you planned on doing about $150 million revenue in renewables. How do you anticipate that number changing in 2009?

Well it's difficult to say exactly; it depends on the success we have for projects but it was reasonably successful that should increase significantly from the $150 million level for 2008. There' just a lot of opportunity out there and we expected to be I mean double that or more.

Great thank you.

Thank you.

Okay, thank you. And our next question comes from Jamie Cook with Credit Suisse. Go ahead please.

Hi, good morning. Just a follow up on the possible CREZ award; I think you talked about it being up a billing opportunity. Of that what's the addressable market for Quanta and how... and John how do you think that project will be bid out I guess.

Jamie this is John Wilson. We're probably looking at somewhere of total line mileage [ph] build on the CREZ zone. It's somewhere around 2500 to 3000 miles of line. We believe that the investor owned utilities in the region of where they operate will build and we will bid out their portion of the lines and the general service territory. We also believe that there could be some other participants in that market... some merchant guys when developers building their own private transmission. Out of the $5 billion we've always said that the construction piece of the line, the pieces that we actually do that could be always high as maybe 50% of that number. So it relates to a very large significant piece of business that going to have to be built in and say 2 to 3, 4 years because of all of the renewable rent that it going in West Texas. So as naturally we are pretty exited about what's out there because it's going to have to be built out. We are going to have turbid standing and no place to put your power.

And can you just talk about... I mean... I think if we looked in 2007 year, we said, yes, the renewable efforts were sort of ramping up but you guys see clearly just because the margins on that business wasn't as high as your traditional electric power was below where you guys sort of wanted because of some of the smaller contractors. What are you sort of seeing on the pricing environment on the renewable projects you are bidding on and how should we think about that impacting your 9 to 12% margin target?

Let me clarify that the portion of the renewables ticker [ph] to the wind; the installation of the wind turbines is the part that has been fairly low margin in the past. The transmission lines, the substations and the gathering lines have been in line with our traditional margins. So what we are seeing is that the margins on the installation of the turbines, in other words the complete project have been rising as there's been more demand for those services. They are not still in line with our expected margins but they are better than they have been in the past. On the solar side, margins there vary depending on the size of project and where they are located. Some of those are within our target margin range and some are not.

All right. And then last can you just give us a feel for how much... you talked about on the margin you are doing... the margins you are increasing because of the increased prizing but also the contribution from the dark fiber business. Can you just give a little color how much was dark fiber versus prizing initiatives. Our dark fiber in the as-reported numbers was somewhat around half of margin increase. On a pro forma basis it made up very little of the margin increase. Those margins in dark fiber increased maybe 100 basis points quarter-over-quarter on a pro forma basis.

Great. Thanks, I will get back in queue.

Thank you.

Thank you. And our next question come from Sanjay Shrestha with Lazard Capital Markets, go ahead please.

Great, thank you, once again a great quarter on Alfacare guys [ph]. A quick question... John I think you mentioned that you guys are sort of also watching the overall macro lump; I mean economic environment closely because you guys are a late cycle industry and 12 months slowdown doesn't impact you. At the same time you got this massive wave of spending both on the utility and the telecom side coming to you guys. So from the actual capacity and planning standpoint how are you guys sort of managing that and how are you sort of planning for that?

Well as you know we've started planning for the... this type of growth several years ago. So we started the increasing the participation in our training programs back then. We had a significant increase in our bowies [ph] from the first quarter to the second quarter and year-over-year as well. So we are building in capacity and what we is going to be necessary going forward.

Right.

Many of these projects as we all know will be delayed. So I think that bodes well for these projects getting done because there's probably not enough capacity of all these projects were to be completed in the timeframe that they are talking about... probably very difficult to do, but we all know that delays are just part of the landscape for these industries and transmission lines are controversial things. So there will be some delay involved in them. We work often that we are going to have the resources we need to meet our customer's demands as they are required.

Got it. So that was kind of where I was trying to go with it because that plays perfectly in your benefit because you guys are the largest player in the industry, so does that then mean the pricing even goes up higher for you guys given this dynamic and, two, then maybe we are at the point where we can even say, the operating margin can even get back to the prior levels where it was higher than 12%.

Right. The ideal environment is one where we have capacity in the industry as a whole is shorter capacity and that allows us to increase margins. And we do things come... it will come a time where it will be more important to have the timely completion of a project than a few percentage points of margins. So we think that margins will continue to increase as demand continues to increase.

Okay, terrific, that's great. Thank a lot guys.

Thank you.

Okay, thank you. And our next question comes from John Rogers with D.A. Davison. Go ahead please.

Hi.

Good morning.

Good morning. Very nice quarter [ph]. First of all in term of your third quarter guidance and I apologize you said this but what are your assumptions fro emergency revenue in there... emergency work?

We announced that we are going to do about $30 million; that's what in our forecast.

Okay. And what was it last year?

$18 million.

$18 million?

Yes.

$18 million.

Okay, thank you. And then secondly do you have a good or even a rough sense of what your market share is in terms of capacity for the distribution and the transmission... electrical transmission work?

Well I think the best judge of our market share relates back to our filings last year... the Hart-Scott-Rodino filings where we did extensive study and it showed that we had less than 15% of any market that we participated in.

John, I just want to clarify that storm number there I just gave you. That $18 million number is a pro forma number.

Okay.

Report... on an as-reported basis it was 13 million.

13, great. And just on the market share, do you think that... I mean is that changing?

I think...

Have you seen consolidation among some of the private companies or alternately are you growing faster... you think you are adding capacity proportionally faster than your peers?

Yes, I think that we are gaining market share. As you say that we are the largest and we are probably adding resources faster than our competitors and there's a lot of thing that we bring to the market besides just capacity that bodes well for our market share growth as well; things like our energized services and storm response, our reputation for timely completion, quality products. There are a lot of things that we bring to the market besides just add additional capacity.

And I assume that's especially true on the larger projects.

That's true, absolutely.

And are you seeing more or less competition on those larger projects or any of your competitors that are small ones trying to form JV as to compete for this work or... ?

We expect that they will. We haven't seen anything yet that is much different than what we expected here, what you've seen in the past. I don't know of any new competitors necessarily but we expect there will be some formation of joint ventures and so forth by smaller contractors to try to participate in the larger projects.

One larger contractor acting as a general as well and trying to do that?

That happens sometimes usually when margins are higher than they are right now in that market when the margins are approaching 30% then you start seeing some of the E&C contractors trying to enter our business and be it general and subcontractor work out.

Okay, but you haven't seen anything yet?

Not really, no.

Great, thank you.

Okay.

Okay, thank you. And our next question comes from Jeff Beach with Stifel Nicolaus. Go ahead please.

Yes good morning and again congratulations on a great quarter.

Thank you Jeff.

Last quarter you talked about the progress you had made in your gas services in shifting in the higher margin business. Can you talk about where you are today this quarter compared with a year ago, the industry conditions and kind of look out where you think you will be a year from now and that shift to higher margin business?

Yes sir. I think we've been fairly successful. We are pretty happy with... particularly with the growth on that side of the business margins continue to improve there. We've had really nice performance and we expect that to continue for probably the next several quarters. There comes a point where we'd probably max those out and then probably max out below our electric power and telecommunications margins but they are doing very well and I am very happy and very pleased with where we are out with it.

All right. And back on the renewable energy at the last quarter you had said you are hopeful you would... you might receive a sizeable award and I think a wind energy project in the North East and I've seen from other companies a foray of awards trying to get a lot of work done by the end of the year. You'd talked last quarter about 150 million, I think, in revenues and you are still talking about that. So are you participating in this foray of activity trying to beat the deadline for the tax credits and... until some decision is made?

Yes we are. I think we stated that there is nearly 30 or over 30... around 30 projects that we're working on related to renewables right now. Many of these projects are big projects but they are not $100 million larger projects which is kind of the threshold for an announcement by us Jeff.

And again are you seeing a steady... are you seeing an improvement in general in the profit margins across every... seeing in general across the whole slot of opportunities you have, are you seeing margins continuing to go up in the renewable area?

Yes, we are. They are not going up as fast as we would like to see them obviously, but yes we are seeing margins go up and that's simply supply and demand.

All right, thank you.

Okay thank you. And our next question comes from Steve Gambuzza with Longbow Capital. Go ahead please.

Good morning.

Good morning

Can you talk about what the impact of the telecom MSAs were on the backlog number for the quarter. You mentioned that that you didn't include... you expect them to be resigned but you didn't include any amount in backlog, can you just give us some kind of order of magnitude of what the sequential decrease from that was?

We have several AT&T, Verizon particularly most noteworthy that those contracts are just coming up on their normal expiration dates at the end of the year and we expect those to be renewed and I would guesstimate the revenues... they vary and we don't... and we put in backlog as we get close to the affected quarter what we expect the revenues to be. And so we... I would guess it to be... have an impact of $75 million to $100 million per quarter.

Per quarter?

That's correct.

So kind of... okay. Okay, thanks very much, I appreciate it.

Okay. Thank you. And I would like to... follow-up question from Tahira Afzal. Go ahead please.

Hi gentleman, just one follow-up question. We have been hearing a lot on the electric distribution side in term of lines being cut and then essentially being reconnected and this in... as I think on account of people not paying their bills. I was wondering if you would see any impact from that and does that even impact your businesses such that... just the lines connect and reconnect and doesn't really impact things?

Yes, we are not seeing too much impact from that. There are two things that impact us... are impacting the distribution business right now. Our housing starts which of course are down and also that the utilities are focusing on their major transmission projects and maybe taking their eye off of their distribution projects at this time.

So you think the distribution spending allocation might be a little soft in advance and that's being reallocated to some extent?

I believe that's the case... I think that's what we're seeing.

Okay. Thank you very much.

Thank you.

And thank you. And ladies and gentleman that does conclude our question and answer session. I'd now like to turn the conference back over to John Colson for closing remarks.

Thank you. I'd like to thank all of you again for your participation in our second quarter conference call. We appreciate you questions and ongoing interest in Quanta. Good bye.

Ladies and gentleman, this concludes the Quanta Services second quarter earnings conference call. Thank you for participation and you may now disconnect.