TMCNet:  QUANTA SERVICES INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

[August 08, 2014]

QUANTA SERVICES INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2013, which was filed with the Securities and Exchange Commission (SEC) on March 3, 2014 and is available on the SEC's website at www.sec.gov and on our website, which is www.quantaservices.com. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified under the headings "Uncertainty of Forward-Looking Statements and Information" below in this Item 2 and "Risk Factors" in Item 1A of Part II of this Quarterly Report.


Introduction We are a leading provider of specialty contracting services, offering infrastructure solutions primarily to the electric power and oil and gas industries in North America and in select international markets. The services we provide include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries we serve, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, pipeline transmission and distribution systems and facilities, and infrastructure services for the offshore and inland water energy markets. We also own fiber optic telecommunications infrastructure in select markets and license the right to use these point-to-point fiber optic telecommunications facilities to customers.

We report our results under three reportable segments: (1) Electric Power Infrastructure Services, (2) Oil and Gas Infrastructure Services and (3) Fiber Optic Licensing and Other. This structure is generally focused on broad end-user markets for our services. Our consolidated revenues for the six months ended June 30, 2014 were approximately $3.63 billion, of which 69.4% was attributable to the Electric Power Infrastructure Services segment, 28.4% to the Oil and Gas Infrastructure Services segment and 2.2% to the Fiber Optic Licensing and Other segment.

Our customers include many of the leading companies in the industries we serve.

We have developed strong strategic alliances with numerous customers and strive to develop and maintain our status as a preferred vendor to our customers. We enter into various types of contracts, including competitive unit price, hourly rate, cost-plus (or time and materials basis), and fixed price (or lump sum basis), the final terms and prices of which are frequently negotiated with the customer. Although the terms of our contracts vary considerably, most are made on either a unit price or fixed price basis in which we agree to do the work for a price per unit of work performed (unit price) or for a fixed amount for the entire project (fixed price). We complete a substantial majority of our fixed price projects, other than certain large transmission projects, within one year, while we frequently provide maintenance and repair work under open-ended unit price or cost-plus master service agreements that are renewable periodically.

We recognize revenue on our unit price and cost-plus contracts as units are completed or services are performed. For our fixed price contracts, we record revenues as work on the contract progresses on a percentage-of-completion basis.

Under this method, revenue is recognized based on the percentage of total costs incurred to date in proportion to total estimated costs to complete the contract. Fixed price contracts generally include retainage provisions under which a percentage of the contract price is withheld until the project is complete and has been accepted by our customer.

For internal management purposes, we are organized into three internal divisions, namely, the Electric Power Division, the Oil and Gas Infrastructure Division and the Fiber Optic Licensing Division. These internal divisions are closely aligned with the reportable segments described above based on the predominant type of work provided by the operating units within each division.

39 -------------------------------------------------------------------------------- Table of Contents Reportable segment information, including revenues and operating income by type of work, is gathered from each operating unit for the purpose of evaluating segment performance in support of our market strategies. These classifications of our operating unit revenues by type of work for segment reporting purposes can at times require judgment on the part of management. Our operating units may perform joint infrastructure service projects for customers in multiple industries, deliver multiple types of infrastructure services under a single customer contract or provide services across industries - for example, joint trenching projects to install distribution lines for electric power and natural gas customers. Our integrated operations and common administrative support at each of our operating units requires that certain allocations, including allocations of shared and indirect costs, such as facility costs, indirect operating expenses including depreciation, and general and administrative costs, be made to determine operating segment profitability. Corporate costs, such as payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs and amortization related to certain intangible assets are not allocated.

The Electric Power Infrastructure Services segment provides comprehensive network solutions to customers in the electric power industry. Services performed by the Electric Power Infrastructure Services segment generally include the design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities along with other engineering and technical services. This segment also provides emergency restoration services, including the repair of infrastructure damaged by inclement weather, the energized installation, maintenance and upgrade of electric power infrastructure utilizing unique bare hand and hot stick methods and our proprietary robotic arm technologies, and the installation of "smart grid" technologies on electric power networks. In addition, this segment designs, installs and maintains renewable energy generation facilities, consisting of solar, wind and certain types of natural gas generation facilities, and related switchyards and transmission infrastructure. To a lesser extent, this segment provides services such as the construction of electric power generation facilities, the design, installation, maintenance and repair of commercial and industrial wiring, installation of traffic networks and the installation of cable and control systems for light rail lines.

The Oil and Gas Infrastructure Services segment provides comprehensive network solutions to customers involved in the development and transportation of natural gas, oil and other pipeline products. Services performed by the Oil and Gas Infrastructure Services segment generally include the design, installation, repair and maintenance of pipeline transmission and distribution systems, gathering systems, production systems and compressor and pump stations, as well as related trenching, directional boring and automatic welding services. In addition, this segment's services include pipeline protection, integrity testing, rehabilitation and replacement, and fabrication of pipeline support systems and related structures and facilities. We also serve the offshore and inland water energy markets, primarily providing services to oil and gas exploration platforms, including mechanical installation (or "hook-ups"), electrical and instrumentation, pre-commissioning and commissioning, coatings, fabrication, pipeline construction, integrity services and marine asset repair.

To a lesser extent, this segment designs, installs and maintains airport fueling systems as well as water and sewer infrastructure.

The Fiber Optic Licensing and Other segment designs, procures, constructs, maintains and owns fiber optic telecommunications infrastructure in select markets and licenses the right to use these point-to-point fiber optic telecommunications facilities to our customers pursuant to licensing agreements, typically with terms from five to twenty-five years, inclusive of certain renewal options. Under those agreements, customers are provided the right to use a portion of the capacity of a fiber optic network, with the network owned and maintained by us. We are also expanding our service offerings to provide lit services, with Quanta providing network management services to customers, as well as owning the electronic equipment necessary to make the fiber optic network operational. We believe market opportunities exist for lit services that will enable us to leverage capacities of our dark fiber networks, as well as providing other attractive growth opportunities. The Fiber Optic Licensing and Other segment provides services to communication carriers as well as education, financial services, healthcare and other business enterprises with high bandwidth telecommunication needs. The telecommunication services provided through this segment are subject to regulation by the Federal Communications Commission and certain state public utility commissions. The Fiber Optic Licensing and Other segment also provides various telecommunication infrastructure services on a limited and ancillary basis, primarily to our customers in the electric power industry.

40-------------------------------------------------------------------------------- Table of Contents Recent Investments, Acquisitions and Divestitures During the first half of 2014, we completed six acquisitions. Four of these six companies are electric power infrastructure services companies located in Canada. The fifth company is a general engineering and construction company, based in California, specializing in hydrant fueling, waterfront and utility construction for U.S. Department of Defense military bases, and is generally included in our Oil and Gas Infrastructure Services segment. The sixth company is a geotechnical and geological engineering services company, based in the U.S., that offers services for the power transmission, mining, transportation and water resources sectors in the U.S., Canada and select international markets and is generally included in our Electric Power Infrastructure Services segment.

The aggregate consideration paid for these acquisitions consisted of approximately $83.2 million in cash, 459,392 shares of Quanta common stock and 899,858 exchangeable shares of a Canadian subsidiary of Quanta that are substantially equivalent to, and exchangeable on a one-for-one basis for, our common stock. In addition, we issued one share of Series G preferred stock, which share generally votes on the same matters as the common stock and is entitled to a number of votes equal to the number of such exchangeable shares outstanding at any time. The aggregate value of the above issued securities on the respective closing or settlement dates of the acquisitions totaled approximately $38.6 million. As these transactions were effective during the first half of 2014, the results of each company have been included in our consolidated financial statements beginning on the respective dates of acquisition. These acquisitions have enabled us to further enhance our electric power infrastructure service offerings in the U.S., Canada and select international markets and our oil and gas infrastructure service offerings in the U.S.

During 2013, we acquired six businesses, which included electric power and oil and gas infrastructure services companies. The electric power acquisitions expanded our geographic presence primarily in the Northeastern, Midwestern and Western regions of the United States and in the Central region of Canada, while the oil and gas infrastructure services companies increased our capacity to provide mechanical installations for the offshore oil and gas industry and pipeline logistics services throughout the United States and expanded our geographic presence to include pipeline construction services in Australia. The aggregate consideration paid for these acquisitions consisted of approximately $341.1 million in cash and 3,547,482 shares of our common stock valued, as of the respective dates of issuance, at approximately $88.9 million. The results for each company have been included in our consolidated financial statements beginning on the respective dates of acquisition. These acquisitions have enabled us to further enhance our electric power infrastructure service and oil and gas infrastructure service offerings in the United States and select international markets.

Backlog Backlog is not a term recognized under United States generally accepted accounting principles; however, it is a common measurement used in our industry.

Our methodology for determining backlog may not be comparable to the methodologies used by other companies.

41-------------------------------------------------------------------------------- Table of Contents Our backlog represents the amount of consolidated revenue that we expect to realize from future work under construction contracts, long-term maintenance contracts, master service agreements (MSAs) and licensing agreements. These estimates include revenues from the remaining portion of firm orders not yet completed and on which work has not yet begun, as well as revenues from change orders, renewal options, and funded and unfunded portions of government contracts to the extent that they are reasonably expected to occur. For purposes of calculating backlog, we include 100% of estimated revenues attributable to consolidated joint ventures and variable interest entities (VIEs). The following table presents our total backlog by reportable segment as of June 30, 2014 and December 31, 2013, along with an estimate of the backlog amounts expected to be realized within 12 months of each balance sheet date (in thousands): Backlog as of Backlog as of June 30, 2014 December 31, 2013 12 Month Total 12 Month Total Electric Power $ 3,260,291 $ 5,864,661 $ 3,346,721 $ 5,964,061 Oil and Gas Infrastructure 1,317,748 2,220,391 1,515,612 2,218,503 Fiber Optic Licensing and Other 136,705 594,405 137,883 545,503 Total $ 4,714,744 $ 8,679,457 $ 5,000,216 $ 8,728,067 Revenue estimates included in our backlog can be subject to change as a result of project accelerations, cancellations or delays due to various factors, including but not limited to commercial issues, regulatory requirements and adverse weather. These factors can also cause revenue amounts to be realized in periods and at levels different than originally projected. Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and while we did not experience any material cancellations during the current periods, most of our contracts may be terminated, typically upon 30 to 90 days notice, even if we are not in default under the contract. We determine the estimated amount of backlog for work under MSAs by using recurring historical trends inherent in current MSAs, factoring in seasonal demand and projected customer needs based upon ongoing communications with the customer. In addition, many of our MSAs, as well as contracts for fiber optic licensing, are subject to renewal options. As of June 30, 2014 and December 31, 2013, MSAs accounted for approximately 40% and 31% of our estimated 12 month backlog and approximately 51% and 44% of total backlog. There can be no assurance as to our customers' actual requirements or that our estimates are accurate.

Seasonality; Fluctuations of Results; Economic Conditions Our revenues and results of operations can be subject to seasonal and other variations. These variations are influenced by weather, customer spending patterns, bidding seasons, project timing and schedules, and holidays.

Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can cause delays on projects. In addition, many of our customers develop their capital budgets for the coming year during the first quarter and do not begin infrastructure projects in a meaningful way until their capital budgets are finalized. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact second quarter productivity. Third quarter revenues are typically the highest of the year, as a greater number of projects are underway, and weather is more accommodating. Generally, revenues during the fourth quarter of the year are lower than the third quarter but higher than the second quarter.

Many projects are completed in the fourth quarter, and revenues are often impacted positively by customers seeking to spend their capital budgets before the end of the year; however, the holiday season and inclement weather can sometimes cause delays, reducing revenues and increasing costs. Any quarter may be positively or negatively affected by atypical weather patterns in a given part of the country, such as severe weather, excessive rainfall or warmer winter weather, making it difficult to predict these variations and their effect on particular projects quarter to quarter. The timing of project awards and unanticipated changes in project schedules as a result of delays or accelerations can also create variations in the level of operating activity from quarter to quarter.

42 -------------------------------------------------------------------------------- Table of Contents These seasonal impacts are typical for our U.S. operations, but as our foreign operations continue to grow, we may see a lessening of this pattern impacting our quarterly revenues. For example, revenues in Canada are often higher in the first quarter as projects are accelerated so that work can be completed prior to the break-up, or seasonal thaw, as productivity is adversely affected by wet ground conditions during the warmer spring and summer months. Also, although revenues from Australia and other international operations have not been significant relative to our overall revenues to date, their seasonal patterns may differ from those in North America and may impact our seasonality more in the future.

Additionally, our industry can be highly cyclical. As a result, our volume of business may be adversely affected by declines or delays in new projects in various geographic regions, including the United States, Canada and Australia.

Project schedules, particularly in connection with larger, longer-term projects, can also create fluctuations in the services provided, which may adversely affect us in a given period. The financial condition of our customers and their access to capital, variations in the margins of projects performed during any particular period, regional, national and global economic and market conditions, timing of acquisitions, the timing and magnitude of acquisition and integration costs associated with acquisitions, dispositions, fluctuations in our equity in earnings of unconsolidated affiliates, impairments of goodwill, intangible assets, long-lived assets or investments and interest rate fluctuations are examples of items that may also materially affect quarterly results.

Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.

We and our customers continue to operate in an uncertain business environment, with heightened regulatory and environmental requirements, stringent permitting processes and only gradual recovery in the economy from recessionary levels. We are closely monitoring our customers and the effect that changes in economic and market conditions have had or may have on them. Certain of our customers have reduced or delayed spending in recent years, which we attribute primarily to regulatory and permitting hurdles and negative economic and market conditions, and we anticipate that these issues may continue to affect demand for some of our services in the near-term. However, we believe that most of our customers, many of whom are regulated utilities, remain financially stable in general and will be able to continue with their business plans in the long-term. You should read "Outlook" and "Understanding Margins" for additional discussion of trends and challenges that may affect our financial condition, results of operations and cash flows.

Understanding Margins Our gross margin is gross profit expressed as a percentage of revenues, and our operating margin is operating income expressed as a percentage of revenues. Cost of services, which is subtracted from revenues to obtain gross profit, consists primarily of salaries, wages and benefits to employees, depreciation, fuel and other equipment expenses, equipment rentals, subcontracted services, insurance, facilities expenses, materials and parts and supplies. Selling, general and administrative expenses and amortization of intangible assets are then subtracted from gross profit to obtain operating income. Various factors - some controllable, some not - can impact our margins on a quarterly or annual basis.

Seasonal and geographical. As discussed previously, seasonal patterns can have a significant impact on margins. Generally, business is slower in the winter months versus the warmer months of the year, resulting in lower productivity and consequently reducing our ability to cover fixed costs. This can be offset somewhat by increased demand for electrical service and repair work resulting from severe weather. Additionally, project schedules, including when projects begin and when they are completed, may impact margins. The mix of business conducted in different parts of the country will also affect margins, as some parts of the country offer the opportunity for higher margins than others due to the geographic characteristics associated with the physical location where the work is being performed. Such characteristics include whether the project is performed in an urban versus a rural setting or in a mountainous area or in open terrain. Site conditions, including unforeseen underground conditions, can also impact margins.

43 -------------------------------------------------------------------------------- Table of Contents Weather. Adverse or favorable weather conditions can impact gross margins in a given period. For example, snow or rainfall in the areas in which we operate may negatively impact our revenues and margins due to reduced productivity, as projects may be delayed or temporarily placed on hold until weather conditions improve. Conversely, in periods when weather remains dry and temperatures are accommodating, more work can be done, sometimes with less cost, which would have a favorable impact on margins. In some cases, severe weather, such as hurricanes and ice storms, can provide us with higher margin emergency restoration service work, which generally has a positive impact on margins.

Revenue mix. The mix of revenues derived from the industries we serve will impact margins, as certain industries provide higher margin opportunities.

Additionally, changes in our customers' spending patterns in each of the industries we serve can cause an imbalance in supply and demand and, therefore, affect margins and mix of revenues by industry served.

Service and maintenance versus installation. Installation work is often performed on a fixed price basis, while maintenance work is often performed under pre-established or negotiated prices or cost-plus pricing arrangements.

Margins for installation work may vary from project to project, and may be higher than maintenance work, as work obtained on a fixed price basis has higher risk than other types of pricing arrangements. We typically derive approximately 30% of our annual revenues from maintenance work, but a higher portion of installation work in any given period may affect our gross margins for that period.

Subcontract work. Work that is subcontracted to other service providers generally yields lower margins. An increase in subcontract work in a given period may contribute to a decrease in margins. We typically subcontract approximately 20% to 25% of our work to other service providers.

Materials versus labor. Typically, our customers are responsible for supplying their own materials on projects; however, for some of our contracts, we may agree to procure all or part of the required materials. Margins may be lower on projects where we furnish a significant amount of materials, as our mark-up on materials is generally lower than on our labor costs. In a given period, an increase in the percentage of work with higher materials procurement requirements may decrease our overall margins.

Depreciation. We include depreciation in cost of services. This is common practice in our industry, but it can make comparability of our margins to those of other companies difficult. This must be taken into consideration when comparing us to other companies.

Insurance. Margins could be impacted by fluctuations in insurance accruals as additional claims arise and as circumstances and conditions of existing claims change. We are insured for employer's liability, general liability, auto liability and workers' compensation claims. On May 1, 2014, we renewed our employer's liability and workers' compensation policies for the 2014-2015 policy year and extended our general liability and auto liability policies to April 30, 2015. As a result of the renewal and extension, the deductibles for general liability and auto liability remained at $10.0 million per occurrence, the deductible for workers' compensation remained at $5.0 million per occurrence, and the deductible for employer's liability remained at $1.0 million per occurrence. We also have employee health care benefit plans for most employees not subject to collective bargaining agreements, of which the primary plan is subject to a deductible of $375,000 per claimant per year.

Performance risk. Margins may fluctuate because of the volume of work and the impacts of pricing and job productivity, which can be affected both favorably and negatively by weather, geography, customer decisions and crew productivity.

For example, when comparing a service contract between a current quarter and the comparable prior year's quarter, factors affecting the gross margins associated with the revenues generated by the contract may include pricing under the contract, the volume of work performed under the contract, the mix of the type of work specifically being performed and the productivity of the crews performing the work. Productivity can be influenced by many factors, including where the work is performed (e.g., rural versus urban area or mountainous or rocky area versus open terrain), whether the work is on an open or encumbered right of way, the 44 -------------------------------------------------------------------------------- Table of Contents impacts of inclement weather or the effects of environmental restrictions or regulatory delays. These types of factors are not practicable to quantify through accounting data, but each of these items may individually or in the aggregate have a direct impact on the gross margin of a specific project.

Foreign currency risk. Our financial performance on a U.S. dollar denominated basis is subject to fluctuation in currency exchange rates. Fluctuations in exchange rates from our operations units with functional currencies other than the U.S. dollar, primarily our operating units with Canadian and Australian dollar functional currencies that translate their results into U.S. dollars for reporting purposes, could cause material fluctuations in quarter-to-quarter comparisons of our results of operations.

Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of compensation and related benefits to management, administrative salaries and benefits, marketing, office rent and utilities, communications, professional fees, bad debt expense, acquisition costs, gains and losses on the sale of property and equipment, letter of credit fees and maintenance, training and conversion costs related to the implementation of an information technology solution.

Results of Operations As previously discussed, we have acquired certain businesses, the results of which have been included in the following results of operations beginning on their respective acquisition dates. The following table sets forth selected statements of operations data and such data as a percentage of revenues for the three and six month periods indicated (dollars in thousands): Consolidated Results Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 Revenues $ 1,864,550 100.0 % $ 1,474,377 100.0 % $ 3,627,124 100.0 % $ 3,060,087 100.0 % Cost of services (including depreciation) 1,583,102 84.9 1,233,093 83.6 3,073,605 84.7 2,580,530 84.3 Gross profit 281,448 15.1 241,284 16.4 553,519 15.3 479,557 15.7 Selling, general and administrative expenses 139,440 7.5 119,031 8.1 312,771 8.6 232,712 7.6 Amortization of intangible assets 8,615 0.4 5,079 0.4 16,860 0.5 10,380 0.4 Operating income 133,393 7.2 117,174 7.9 223,888 6.2 236,465 7.7 Interest expense (1,128 ) (0.1 ) (503 ) - (2,110 ) (0.1 ) (1,005 ) - Interest income 599 - 569 - 2,144 0.1 1,091 - Other income (expense), net (1,233 ) - (353 ) - (590 ) - (866 ) - Income before income taxes 131,631 7.1 116,887 7.9 223,332 6.2 235,685 7.7 Provision for income taxes 46,187 2.5 42,161 2.8 79,240 2.2 84,102 2.7 Net income 85,444 4.6 74,726 5.1 144,092 4.0 151,583 5.0 Less: Net income attributable to non-controlling interests 4,362 0.3 4,489 0.3 8,602 0.3 9,265 0.3 Net income attributable to common stock $ 81,082 4.3 % $ 70,237 4.8 % $ 135,490 3.7 % $ 142,318 4.7 % 45 -------------------------------------------------------------------------------- Table of Contents Three months ended June 30, 2014 compared to the three months ended June 30, 2013 Revenues. Revenues increased $390.2 million, or 26.5%, to $1.86 billion for the three months ended June 30, 2014. Revenues from electric power infrastructure services increased $192.8 million, or 18.4%, to $1.24 billion. Also contributing to the increase was higher revenues from oil and gas infrastructure services, which increased $199.4 million, or 51.7%, to $585.4 million. These increases were partially offset by a decrease in revenues from fiber optic licensing and other, which decreased $2.0 million, or 4.9%, to $40.0 million.

Gross profit. Gross profit increased $40.2 million, or 16.6%, to $281.4 million for the three months ended June 30, 2014. This increase was primarily due to the impact of higher overall revenues earned from the Electric Power and Oil and Gas Infrastructure Services segments, including mainline pipe revenues, which typically offer higher margin opportunities. These increases were partially offset by the negative production impact of wet weather conditions during the second quarter of 2014, primarily in Canada and northern regions of the U.S., as these areas thawed from a late winter season, as well as lower margins on certain power generation projects ongoing during the three months ended June 30, 2014 as compared to projects that were completed during the three months ended June 30, 2013. These negative factors also adversely impacted gross profit as a percentage of revenues which decreased to 15.1% for the three months ended June 30, 2014 from 16.4% for the three months ended June 30, 2013.

Selling, general and administrative expenses. Selling, general and administrative expenses increased $20.4 million, or 17.1%, to $139.4 million for the three months ended June 30, 2014. The increase was primarily attributable to $15.0 million in incremental general and administrative costs associated with companies acquired since the second quarter of 2013 and $5.5 million in higher professional fees primarily associated with ongoing legal matters. Selling, general and administrative expenses as a percentage of revenues decreased to 7.5% for the three months ended June 30, 2014 from 8.1% for the three months ended June 30, 2013, due primarily to the impact of the higher overall revenues described above, the impact of lower cost structures of certain of the companies acquired after the second quarter of last year, as well as lower non-cash stock-based compensation expense due to the recording of approximately $4.3 million of expense in the second quarter of 2013 related to the retirement of our former chairman.

Amortization of intangible assets. Amortization of intangible assets increased $3.5 million to $8.6 million for the three months ended June 30, 2014. This increase was primarily due to increased amortization of intangibles associated with companies acquired since the second quarter of 2013, partially offset by reduced amortization expense from previously acquired intangible assets as certain of these assets became fully amortized.

Interest expense. Interest expense increased $0.6 million to $1.1 million for the three months ended June 30, 2014 as compared to the three months ended June 30, 2013 due to increased borrowing activity under our credit facility, fees associated with the increase in unused capacity on our expanded credit facility and higher amortization of deferred financing costs following the amendment and restatement of our credit facility on October 30, 2013.

Interest income. Interest income was $0.6 million for both the three months ended June 30, 2014 and 2013. Lower cash balances period over period were offset by the impact of higher average interest rates earned on the cash balances during the quarter ended June 30, 2014 as compared to the quarter ended June 30, 2013.

Provision for income taxes. The provision for income taxes was $46.2 million for the three months ended June 30, 2014, with an effective tax rate of 35.1%. The provision for income taxes was $42.2 million for the three months ended June 30, 2013, with an effective tax rate of 36.1%. The lower effective rate for the three months ended June 30, 2014 was primarily due to a higher proportion of income before taxes earned from international jurisdictions, which are generally taxed at lower statutory rates.

46-------------------------------------------------------------------------------- Table of Contents Six months ended June 30, 2014 compared to the six months ended June 30, 2013 Revenues. Revenues increased $567.0 million, or 18.5%, to $3.63 billion for the six months ended June 30, 2014. This increase was primarily due to higher electric power infrastructure services revenues, which increased $290.0 million, or 13.0%, to $2.52 billion. Also contributing to the increase were additional revenues from oil and gas infrastructure services, which increased $286.4 million, or 38.4%, to $1.03 billion. These increases were partially offset by a decrease in revenues from fiber optic licensing and other, which decreased $9.3 million, or 10.6%, to $78.6 million.

Gross profit. Gross profit increased $74.0 million, or 15.4%, to $553.5 million for the six months ended June 30, 2014. This increase was primarily due to the impact of higher overall revenues earned during the current period. Gross profit as a percentage of revenues decreased to 15.3% for the six months ended June 30, 2014 from 15.7% for the six months ended June 30, 2013. This decrease in gross margin was primarily due to the negative production impact of wet weather conditions, primarily in Canada and northern regions of the U.S., as these areas thawed from a late winter season, as well as lower margins recognized on certain power generation projects that were ongoing during the six months ended June 30, 2014 as compared to similar projects that were completed during the six months ended June 30, 2013. These lower margins were partially offset by the contribution of mainline pipe revenues, which typically offer higher margin opportunities.

Selling, general and administrative expenses. Selling, general and administrative expenses increased $80.1 million, or 34.4%, to $312.8 million for the six months ended June 30, 2014. The increase was primarily attributable to an aggregate $38.8 million expense associated with an adverse arbitration decision regarding a contract dispute with the National Gas Company of Trinidad and Tobago (NGC) on a 2010 directional drilling project, as well as $28.6 million in incremental general and administrative costs associated with companies acquired since the second quarter of 2013, $9.8 million in higher professional fees primarily related to ongoing legal matters and $3.9 million in higher acquisition and integration costs. Selling, general and administrative expenses as a percentage of revenues increased to 8.6% for the six months ended June 30, 2014 from 7.6% for the six months ended June 30, 2013, due primarily to the impact of the arbitration decision described above, partially offset by lower cost structures of certain of the companies acquired after the second quarter of last year, as well as lower non-cash stock-based compensation expense due to the recording of approximately $4.3 million of expense in the second quarter of 2013 related to the retirement of our former chairman.

Amortization of intangible assets. Amortization of intangible assets increased $6.5 million to $16.9 million for the six months ended June 30, 2014. This increase was primarily due to increased amortization of intangibles associated with companies acquired since the second quarter of 2013, partially offset by reduced amortization expense from previously acquired intangible assets as certain of these assets became fully amortized.

Interest expense. Interest expense increased $1.1 million to $2.1 million for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 due to increased borrowing activity under our credit facility, fees associated with the increase in unused capacity on our expanded credit facility and higher amortization of deferred financing costs following the amendment and restatement of our credit facility on October 30, 2013.

Interest income. Interest income was $2.1 million and $1.1 million for the six months ended June 30, 2014 and 2013. This increase was due to higher average interest rates during the six months ended June 30, 2014 as compared to the six months ended June 30, 2013, partially offset by lower cash balances during the 2014 period.

Provision for income taxes. The provision for income taxes was $79.2 million for the six months ended June 30, 2014, with an effective tax rate of 35.5%. The provision for income taxes was $84.1 million for the six months ended June 30, 2013, with an effective tax rate of 35.7%. The lower effective rate for the six months ended June 30, 2014 was primarily due to a higher proportion of income before taxes earned from international jurisdictions, which are generally taxed at lower statutory rates.

47 -------------------------------------------------------------------------------- Table of Contents Segment Results The following table sets forth segment revenues and segment operating income for the periods indicated (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 Revenues: Electric Power Infrastructure $ 1,239,168 66.5 % $ 1,046,379 70.9 % $ 2,517,336 69.4 % $ 2,227,362 72.8 % Oil and Gas Infrastructure 585,367 31.4 385,942 26.2 1,031,224 28.4 744,874 24.3 Fiber Optic Licensing and Other 40,015 2.1 42,056 2.9 78,564 2.2 87,851 2.9 Consolidated revenues from external customers $ 1,864,550 100.0 % $ 1,474,377 100.0 % $ 3,627,124 100.0 % $ 3,060,087 100.0 % Operating income (loss): Electric Power Infrastructure $ 112,069 9.0 % $ 120,809 11.5 % $ 256,481 10.2 % $ 253,359 11.4 % Oil and Gas Infrastructure 55,583 9.5 27,644 7.2 34,411 3.3 38,001 5.1 Fiber Optic Licensing and Other 14,146 35.4 14,301 34.0 26,255 33.4 31,184 35.5 Corporate and non-allocated costs (48,405 ) N/A (45,580 ) N/A (93,259 ) N/A (86,079 ) N/A Consolidated operating income $ 133,393 7.2 % $ 117,174 7.9 % $ 223,888 6.2 % $ 236,465 7.7 % Three months ended June 30, 2014 compared to the three months ended June 30, 2013 Electric Power Infrastructure Services Segment Results Revenues for this segment increased $192.8 million, or 18.4%, to $1.24 billion for the three months ended June 30, 2014. Revenues were positively impacted by increased activity from electric power transmission, distribution and power generation projects due to increased capital spending by our customers as well as approximately $50 million in revenues generated by acquired companies.

Operating income decreased $8.7 million, or 7.2%, to $112.1 million for the three months ended June 30, 2014. Operating income as a percentage of segment revenues decreased to 9.0% for the three months ended June 30, 2014 from 11.5% for the three months ended June 30, 2013. These decreases were primarily due to the negative production impact of wet weather conditions primarily in Canada and northern regions of the U.S., as these areas thawed from a late winter season, as well as lower margins recognized on certain power generation projects that were ongoing during the three months ended June 30, 2014 as compared to those completed during the three months ended June 30, 2013.

Oil and Gas Infrastructure Services Segment Results Revenues for this segment increased $199.4 million, or 51.7%, to $585.4 million for the three months ended June 30, 2014. Revenues in the second quarter of 2014 were favorably impacted by approximately $150 million in revenues generated by acquired companies coupled with increased capital spending by our customers.

Operating income increased $27.9 million to $55.6 million for the quarter ended June 30, 2014 from $27.6 million for the quarter ended June 30, 2013. This increase was primarily due to the increase in segment revenues described above.

Operating income as a percentage of segment revenues increased to 9.5% for the quarter ended June 30, 2014 from 7.2% for the quarter ended June 30, 2013. This increase was primarily due to the contribution from mainline pipe projects in the U.S. and Australia, which typically offer higher margin opportunities as well as better fixed cost absorption due to higher revenues.

48-------------------------------------------------------------------------------- Table of Contents Fiber Optic Licensing and Other Segment Results Revenues for this segment decreased $2.0 million, or 4.9%, to $40.0 million for the three months ended June 30, 2014. This decrease in revenues was primarily due to lower levels of ancillary telecommunication services revenues during the three months ended June 30, 2014 as compared to the three months ended June 30, 2013.

Operating income decreased $0.2 million, or 1.1%, to $14.1 million for the three months ended June 30, 2014 as compared to the three months ended June 30, 2013.

Operating income as a percentage of segment revenues for the quarter ended June 30, 2014 increased to 35.4% as compared to 34.0% for the quarter ended June 30, 2013, primarily due to lower network maintenance costs.

Corporate and Non-allocated Costs Certain selling, general and administrative expenses and amortization of intangible assets are not allocated to segments. Corporate and non-allocated costs for the quarter ended June 30, 2014 increased $2.8 million to $48.4 million as compared to the quarter ended June 30, 2013. This increase was primarily the result of a $3.5 million increase in amortization expense primarily due to the amortization of newly acquired intangible assets from 2014 and 2013 acquisitions and a $2.3 million increase in consulting and other business development fees, partially offset by lower non-cash stock-based compensation expense due to the recording of approximately $4.3 million of expense in the second quarter of 2013 related to the retirement of our former chairman.

Six months ended June 30, 2014 compared to the six months ended June 30, 2013 Electric Power Infrastructure Services Segment Results Revenues for this segment increased $290.0 million, or 13.0%, to $2.52 billion for the six months ended June 30, 2014. Revenues were positively impacted by increased activity from electric power transmission and distribution projects primarily as a result of increased capital spending by our customers and approximately $120 million in revenues generated by acquired companies.

Partially offsetting these increases were the impact on production of frigid weather conditions throughout much of North America and the period-over-period impact of less favorable Canadian dollar to U.S. dollar exchange rates during the early portion of 2014 as compared to 2013.

Operating income increased $3.1 million, or 1.2%, to $256.5 million for the six months ended June 30, 2014. This increase was primarily due to the increase in segment revenues described above. Operating income as a percentage of segment revenues decreased to 10.2% for the six months ended June 30, 2014 from 11.4% for the six months ended June 30, 2013. This decrease was primarily due to the negative production impact of wet weather conditions, primarily in Canada and northern regions of the U.S., as these areas thawed from a late winter season, as well as lower margins recognized on certain power generation projects that were ongoing during the six months ended June 30, 2014 as compared to those completed during the six months ended June 30, 2013.

Oil and Gas Infrastructure Services Segment Results Revenues for this segment increased $286.4 million, or 38.4%, to $1.03 billion for the six months ended June 30, 2014. Revenues in the six months ended June 30, 2014 were favorably impacted by approximately $270 million in revenues generated by acquired companies.

Operating income decreased $3.6 million to $34.4 million for the six months ended June 30, 2014 from $38.0 million for the six months ended June 30, 2013.

Operating income as a percentage of segment revenues decreased to 3.3% for the six months ended June 30, 2014 from 5.1% for the six months ended June 30, 2013.

These decreases were primarily due to an aggregate $38.8 million expense associated with an adverse arbitration decision regarding a contract dispute with NGC on a 2010 directional drilling project, as well as the impact of an 49 -------------------------------------------------------------------------------- Table of Contents increase in the estimated withdrawal liability associated with the Central States, Southeast and Southwest Areas Pension Plan (the Central States Plan) based on certain withdrawal scenarios that increased the estimated range of possible liability. These decreases were partially offset by contributions from mainline pipe projects in the U.S. and Australia, which typically offer higher margin opportunities and the favorable settlement of certain contract change orders during the period as well as better fixed cost absorption due to higher overall revenues.

Fiber Optic Licensing and Other Segment Results Revenues for this segment decreased $9.3 million, or 10.6%, to $78.6 million for the six months ended June 30, 2014. This decrease in revenues was primarily due to lower levels of ancillary telecommunication services revenues during the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 as certain larger projects completed in the prior year did not recur to the same extent as in 2013.

Operating income decreased $4.9 million, or 15.8%, to $26.3 million for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013.

The decrease in operating income was primarily due to the decrease in segment revenues described above. Operating income as a percentage of segment revenues for the six months ended June 30, 2014 decreased to 33.4% as compared to 35.5% for the six months ended June 30, 2013, primarily due to higher network maintenance costs and startup costs associated with our new lit services offering.

Corporate and Non-allocated Costs Certain selling, general and administrative expenses and amortization of intangible assets are not allocated to segments. Corporate and non-allocated costs for the six months ended June 30, 2014 increased $7.2 million to $93.3 million as compared to the six months ended June 30, 2013. This increase was primarily the result of a $6.5 million increase in amortization expense primarily due to the amortization of newly acquired intangible assets from 2014 and 2013 acquisitions, $5.0 million in higher consulting and other business development fees, and $3.9 million in higher acquisition and integration costs.

These increases were partially offset by $6.0 million in lower salary and incentive compensation costs period-over-period associated with current levels of operating activity and profitability, as well as due to the recording of approximately $4.3 million of non-cash stock-based compensation expense in the second quarter of 2013 related to the retirement of our former chairman.

Liquidity and Capital Resources Cash Requirements Our cash and cash equivalents totaled $188.9 million as of June 30, 2014 and $488.8 million as of December 31, 2013. As of June 30, 2014 and December 31, 2013, cash and cash equivalents in domestic bank accounts were approximately $39.7 million and $236.7 million, and cash and cash equivalents held in foreign bank accounts were approximately $149.2 million and $252.1 million, primarily in Canada and Australia.

We were in compliance with the covenants under our credit facility at June 30, 2014. We anticipate that our cash and cash equivalents on hand, existing borrowing capacity under our credit facility, and our future cash flows from operations will provide sufficient funds to enable us to meet our future operating needs and our planned capital expenditures, as well as facilitate our ability to grow in the foreseeable future. During the fourth quarter of 2013, our board of directors approved a stock repurchase program authorizing us to purchase in the open market or in privately negotiated transactions, from time to time through December 31, 2016, up to $500.0 million of our outstanding common stock. As of June 30, 2014, we had repurchased $45.0 million of our common stock under this program.

Our industry is capital intensive, and we expect the need for substantial capital expenditures to continue into the foreseeable future to meet the anticipated demand for our services. Capital expenditures are expected to total 50 -------------------------------------------------------------------------------- Table of Contents $300 million to $325 million for 2014, of which we have spent approximately $146.8 million through June 30, 2014. Approximately $50 million to $60 million of the expected 2014 capital expenditures are targeted for the expansion of our fiber optic networks.

We also evaluate opportunities for strategic acquisitions from time to time that may require cash, as well as opportunities to make investments in customer-sponsored projects where we anticipate performing services such as project management, engineering, procurement or construction services. These investment opportunities exist in the markets and industries we serve and may require the use of cash in the form of debt or equity investments.

Management continues to monitor the financial markets and general national and global economic conditions. We consider our cash investment policies to be conservative in that we maintain a diverse portfolio of what we believe to be high-quality cash investments with short-term maturities. Accordingly, we do not anticipate that any weakness in the capital markets will have a material impact on the principal amounts of our cash investments or our ability to rely upon our credit facility for funds. To date, we have experienced no loss of or lack of access to our cash or cash equivalents or funds under our credit facility; however, we can provide no assurances that access to our invested cash and cash equivalents or availability under our credit facility will not be impacted in the future by adverse conditions in the financial markets.

If we were to repatriate cash that is indefinitely reinvested outside the U.S., we could be subject to additional U.S. income and foreign withholding taxes.

Because of the number and variability of assumptions required, it is not practicable to determine the amount of any additional U.S. tax liability that may result if we decide to no longer indefinitely reinvest foreign earnings outside the U.S. If our intentions or U.S. tax laws change in the future, there may be a significant negative impact on the provision for income taxes and cash flows as a result of recording an incremental tax liability in the period such change occurs.

Sources and Uses of Cash As of June 30, 2014, we had cash and cash equivalents of $188.9 million and working capital of $1.28 billion. We also had $243.8 million of outstanding letters of credit and bank guarantees and no outstanding revolving loans under our credit facility, with $1.08 billion available for borrowing or issuing new letters of credit under our credit facility.

Operating Activities Cash flow from operations is primarily influenced by demand for our services and operating margins but can also be influenced by working capital needs associated with the various types of services that we provide. In particular, working capital needs may increase when we commence large volumes of work under circumstances where project costs, primarily associated with labor, equipment and subcontractors, are required to be paid before the receivables resulting from the work performed are billed and collected. Accordingly, changes within working capital in accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, and billings in excess of costs and estimated earnings on uncompleted contracts are normally related and are typically affected on a collective basis by changes in revenue due to both changes in timing and volume of work performed and variability in the timing of customer billings and payments. Additionally, working capital needs are generally higher during the summer and fall months due to increased demand for our services when favorable weather conditions exist in many of the regions in which we operate. Conversely, working capital assets are typically converted to cash during the winter months. These seasonal trends can be offset by changes in the timing of projects which can be impacted by project delays or accelerations and other economic factors that may affect customer spending.

Operating activities provided net cash of $32.8 million during the three months ended June 30, 2014 as compared to providing $117.8 million during the three months ended June 30, 2013, and operating activities used net cash of $27.8 million during the six months ended June 30, 2014 as compared to providing $161.9 million 51 -------------------------------------------------------------------------------- Table of Contents during the six months ended June 30, 2013. Operating cash flow for the three months ended June 30, 2014 included cash outflows associated with prepayments related to the renewal and extension of our insurance policies, which have historically occurred in the third quarter, as well as the $28.3 million arbitration payment described in Legal Proceedings-National Gas Company of Trinidad and Tobago Arbitration in Note 10 of the Notes to Condensed Consolidated Financial Statements. The decrease in cash flows from operating activities for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 was partially a result of the cash outflows that occurred in the three months ended June 30, 2014 related to insurance prepayments and the arbitration payment mentioned above. Operating cash flow for the six months ended June 30, 2014 was also impacted by increased working capital requirements associated with the ramp up on certain electric power transmission projects, as well as weather related delays in part of North America and the timing of project close-outs that affected the achievement of certain billing milestones.

Additionally, the cash flow provided by operating activities during the six months ended June 30, 2013 was positively impacted by the collection of receivables during the first quarter of 2013 attributable to significantly higher levels of emergency restoration services provided in the fourth quarter of 2012 as compared to the fourth quarter of 2013.

Days sales outstanding (DSO) as of June 30, 2014 was 78 days as compared to 83 days at June 30, 2013. In spite of revenue growth of 26.5% and an increase in receivables quarter-over-quarter, DSO improved five days due primarily to improved collection of receivables near the end of the second quarter of 2014.

DSO is calculated by using the sum of current accounts receivable, net of allowance (which include retainage and unbilled balances), plus costs and estimated earnings in excess of billings on uncompleted contracts less billings in excess of costs and estimated earnings on uncompleted contracts, divided by average revenues per day during the quarter. In order to present a comparable amount, the DSO at June 30, 2013 given herein has been reduced by approximately ten days related to the impact of the Sunrise Powerlink project receivable, which was included in current accounts receivable at June 30, 2013 but was subsequently reclassified as a non-current asset prior to December 31, 2013. For additional information on the Sunrise Powerlink project, see Legal Proceedings-Sunrise Powerlink Arbitration in Note 10 of the Notes to Condensed Consolidated Financial Statements.

Investing Activities During the three months ended June 30, 2014, we used net cash in investing activities of $75.6 million as compared to $116.2 million in the three months ended June 30, 2013. Investing activities in the second quarter of 2014 included $75.4 million used for capital expenditures and $3.2 million used in connection with a business acquisition, partially offset by $4.1 million of proceeds from the sale of equipment. Investing activities in the second quarter of 2013 included $104.5 million used for capital expenditures, $13.3 million used for other investments related to the capital lease of an internally constructed electric power transmission asset, partially offset by $2.6 million of proceeds from the sale of equipment.

During the six months ended June 30, 2014, we used net cash in investing activities of $220.6 million as compared to $181.8 million in the six months ended June 30, 2013. Investing activities in the six months ended June 30, 2014 included $146.8 million used for capital expenditures and $79.6 million used in connection with business acquisitions, partially offset by $6.6 million of proceeds from the sale of equipment. Investing activities in the six months ended June 30, 2013 included $162.2 million used for capital expenditures, $13.3 million used for other investments related to the capital lease of an internally constructed electric power transmission asset, $9.5 million used for additional investments in unconsolidated affiliates, partially offset by $4.1 million of proceeds from the sale of equipment.

Our industry is capital intensive, and we expect the need for substantial capital expenditures to continue into the foreseeable future to meet the anticipated demand for our services. In addition, we expect to continue to pursue strategic acquisitions and investments, although we cannot predict the timing or magnitude of the potential cash outlays for these initiatives.

52-------------------------------------------------------------------------------- Table of Contents Financing Activities During the three months ended June 30, 2014, net cash used in financing activities was $44.8 million as compared to $1.0 million in the three months ended June 30, 2013. Financing activities in the second quarter of 2014 included $45.0 million of common stock repurchases under our stock repurchase program. We also had borrowing and repayments of $333.8 million under our credit facility during the three months ended June 30, 2014. Financing activities in the second quarter of 2013 included $3.9 million of cash payments to non-controlling interests as distributions of joint venture profits, partially offset by $2.6 million related to the tax impact of stock-based awards.

During the six months ended June 30, 2014, net cash used in financing activities was $55.1 million as compared to $5.9 million in the six months ended June 30, 2013. Financing activities in the six months ended June 30, 2014 included $45.0 million of common stock repurchases under our stock repurchase program and $10.7 million of debt repayments, primarily related to debt of acquired companies that was repaid shortly after the respective acquisition dates. We also had borrowings and repayments of $336.2 million under our credit facility during the six months ended June 30, 2014. Financing activities during the six months ended June 30, 2013 included $9.3 million of cash payments to non-controlling interests as distributions of joint venture profits, partially offset by $2.6 million related to the tax impact of stock-based awards.

Debt Instruments Credit Facility On October 30, 2013, we entered into a credit agreement which amended and restated our prior credit agreement with various lenders. The credit agreement provides for a $1.325 billion senior secured revolving credit facility maturing on October 30, 2018. Up to $400.0 million of the facility is available for revolving loans and letters of credit in certain alternative currencies in addition to the U.S. dollar. The entire amount of the facility is available for the issuance of letters of credit. Up to $50.0 million of the facility is available for swing line loans in U.S. dollars, up to $30.0 million of the facility is available for swing line loans in Canadian dollars and up to $20.0 million of the facility is available for swing line loans in Australian dollars.

In addition, subject to the conditions specified in the credit agreement, we have the option to increase the revolving commitments under the credit agreement by up to an additional $300.0 million from time to time upon receipt of additional commitments from new or existing lenders. Borrowings under the credit agreement are to be used to refinance existing indebtedness and for working capital, capital expenditures and other general corporate purposes.

As of June 30, 2014, we had approximately $243.8 million of outstanding letters of credit and bank guarantees, $215.5 million of which was denominated in U.S.

dollars and $28.3 million of which was denominated in Australian or Canadian dollars, and no outstanding borrowings under the credit facility. The remaining $1.08 billion was available for borrowings or issuing new letters of credit.

Effective April 1, 2014, amounts borrowed under the credit agreement in U.S.

dollars bear interest, at our option, at a rate equal to either (a) the Eurocurrency Rate plus 1.125% to 2.125%, as determined based on our Consolidated Leverage Ratio (as described below), or (b) the Base Rate plus 0.125% to 1.125%, as determined based on our Consolidated Leverage Ratio. Amounts borrowed as revolving loans under the credit agreement in any currency other than U.S.

dollars bear interest at a rate equal to the Eurocurrency Rate plus 1.125% to 2.125%, as determined based on our Consolidated Leverage Ratio. Standby letters of credit issued under the credit agreement are subject to a letter of credit fee of 1.125% to 2.125%, based on our Consolidated Leverage Ratio, and Performance Letters of Credit issued under the credit agreement in support of certain contractual obligations are subject to a letter of credit fee of 0.675% to 1.275%, based on our Consolidated Leverage Ratio. We are also subject to a commitment fee of 0.20% to 0.40%, based on our Consolidated Leverage Ratio, on any unused availability under the credit agreement.

Prior to April 1, 2014, amounts borrowed under the credit agreement in U.S.

dollars bore interest, at our option, at a rate equal to either (a) the Eurocurrency Rate (as defined in the credit agreement) plus 1.25%, or 53-------------------------------------------------------------------------------- Table of Contents (b) the Base Rate (as described below) plus 0.25%. Amounts borrowed as revolving loans under the credit agreement in any currency other than U.S. dollars bore interest at a rate equal to the Eurocurrency Rate plus 1.25%. Standby letters of credit issued under the credit agreement were subject to a letter of credit fee of 1.25%, and Performance Letters of Credit (as defined in the credit agreement) issued under the credit agreement in support of certain contractual obligations were subject to a letter of credit fee of 0.75%. We were also subject to a commitment fee of 0.20% on any unused availability under the credit agreement.

The Consolidated Leverage Ratio is the ratio of our Consolidated Funded Indebtedness to Consolidated EBITDA (as defined in the credit agreement). For purposes of calculating the Consolidated Leverage Ratio, Consolidated Funded Indebtedness is reduced by available cash and Cash Equivalents (as defined in the credit agreement) in excess of $25.0 million. The Base Rate equals the highest of (i) the Federal Funds Rate (as defined in the credit agreement) plus 1/2 of 1%, (ii) Bank of America's prime rate and (iii) the Eurocurrency Rate plus 1.00%.

Subject to certain exceptions, the credit agreement is secured by substantially all of our assets and the assets of our wholly owned U.S. subsidiaries and by a pledge of all of the capital stock of our wholly owned U.S. subsidiaries and 65% of the capital stock of our direct foreign subsidiaries of our wholly owned U.S.

subsidiaries. Our wholly owned U.S. subsidiaries also guarantee the repayment of all amounts due under the credit agreement. Subject to certain conditions, at any time we maintain an Investment Grade Rating (defined in the credit agreement as two of the following three conditions being met: (i) a corporate credit rating that is BBB- or higher by Standard & Poor's Rating Services, (ii) a corporate family rating that is Baa3 or higher by Moody's Investors Services, Inc. or (iii) a corporate credit rating that is BBB- or higher by Fitch Ratings, Inc.), all collateral will automatically be released from these liens.

The credit agreement contains certain covenants, including a maximum Consolidated Leverage Ratio and a Consolidated Interest Coverage Ratio, in each case as specified in the credit agreement. The credit agreement limits certain acquisitions, mergers and consolidations, indebtedness, asset sales and prepayments of indebtedness and, subject to certain exceptions, prohibits liens on assets. The credit agreement also allows for cash payments for dividends and stock repurchases subject to compliance with the following requirements on a post-incurrence basis: (i) no default or event of default under the credit agreement; (ii) continued compliance with the financial covenants described above; and (iii) at least $100 million of availability under the credit agreement and/or cash and cash equivalents on hand. As of June 30, 2014, we were in compliance with all of the covenants in the credit agreement.

The credit agreement provides for customary events of default and carries cross-default provisions with our underwriting, continuing indemnity and security agreement with its sureties and all of our other debt instruments exceeding $75.0 million in borrowings or availability. If an Event of Default (as defined in the credit agreement) occurs and is continuing, on the terms and subject to the conditions set forth in the credit agreement, amounts outstanding under the credit agreement may be accelerated and may become or be declared immediately due and payable.

Off-Balance Sheet Transactions As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected in our balance sheets. Our significant off-balance sheet transactions include liabilities associated with non-cancelable operating leases, letter of credit obligations, commitments to expand our fiber optic networks, commitments to purchase equipment, surety guarantees, certain multi-employer pension plan liabilities and obligations relating to our joint venture arrangements. Certain joint venture structures involve risks not directly reflected in our balance sheets. For certain joint ventures, we have guaranteed all of the obligations of the joint venture under a contract with the customer. Additionally, other joint venture arrangements qualify as a general partnership, for which we are jointly and severally liable for all of the obligations of the joint venture. In our joint venture arrangements, typically each joint venturer indemnifies the other party for any liabilities incurred in excess of the liabilities such other party is obligated to bear under the 54-------------------------------------------------------------------------------- Table of Contents respective joint venture agreement. Other than as previously discussed, we have not engaged in any material off-balance sheet financing arrangements through special purpose entities, and we have no material guarantees of the work or obligations of third parties.

Leases We enter into non-cancelable operating leases for many of our facility, vehicle and equipment needs. These leases allow us to conserve cash by paying a monthly lease rental fee for use of facilities, vehicles and equipment rather than purchasing them. We may decide to cancel or terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease.

We have guaranteed the residual value of the underlying assets under certain of our equipment operating leases at the date of termination of such leases. We have agreed to pay any difference between this residual value and the fair market value of each underlying asset as of the lease termination date. As of June 30, 2014, the maximum guaranteed residual value was approximately $366.7 million. We believe that no significant payments will be made as a result of the difference between the fair market value of the leased equipment and the guaranteed residual value. However, there can be no assurance that future significant payments will not be required.

Letters of Credit Certain of our vendors require letters of credit to ensure reimbursement for amounts they are disbursing on our behalf, such as to beneficiaries under our self-funded insurance programs. In addition, from time to time, certain customers require us to post letters of credit to ensure payment to our subcontractors and vendors under those contracts and to guarantee performance under our contracts. Such letters of credit are generally issued by a bank or similar financial institution, typically pursuant to our credit facility. Each letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit if the holder demonstrates that we have failed to perform specified actions. If this were to occur, we would be required to reimburse the issuer of the letter of credit. Depending on the circumstances of such a reimbursement, we may also be required to record a charge to earnings for the reimbursement. We do not believe that it is likely that any material claims will be made under a letter of credit in the foreseeable future.

As of June 30, 2014, we had $243.8 million in outstanding letters of credit and bank guarantees under our credit facility primarily to secure obligations under our casualty insurance program. These are irrevocable stand-by letters of credit with maturities generally expiring at various times throughout 2014 and 2015.

Upon maturity, it is expected that the majority of these letters of credit will be renewed for subsequent one-year periods.

Performance Bonds and Parent Guarantees Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a financial institution known as a surety. These bonds provide a guarantee to the customer that we will perform under the terms of a contract and that we will pay subcontractors and vendors.

If we fail to perform under a contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. We must reimburse the surety for any expenses or outlays it incurs. Under our underwriting, continuing indemnity and security agreement with our sureties and with the consent of our lenders under our credit facility, we have granted security interests in certain of our assets to collateralize our obligations to the sureties. Subject to certain conditions and consistent with terms of our credit facility, these security interests will be automatically released if we maintain a corporate credit rating that is BBB- (stable) or higher by Standard & Poor's Rating Services and a corporate family rating that is Baa3 (stable) or higher by Moody's Investors Services. We may be required to post letters of credit or other collateral in favor of the sureties or our customers in the future. Posting letters of credit in favor of the sureties or our customers would reduce the borrowing availability under our credit facility. To date, we have not been required to make any reimbursements to our sureties for bond-related costs. We believe that it is unlikely that we will 55-------------------------------------------------------------------------------- Table of Contents have to fund significant claims under our surety arrangements in the foreseeable future. As of June 30, 2014, the total amount of the outstanding performance bonds was estimated to be approximately $3.1 billion. Our estimated maximum exposure as it relates to the value of the bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each of our commitments under the performance bonds generally extinguishes concurrently with the expiration of our related contractual obligation. The estimated cost to complete these bonded projects was estimated to be approximately $750 million as of June 30, 2014.

From time to time, we guarantee the obligations of our wholly owned subsidiaries, including obligations under certain contracts with customers, certain lease obligations, certain joint venture arrangements and, in some states, obligations in connection with obtaining contractors' licenses. We are not aware of any material obligations for performance or payment asserted against us under any of these guarantees.

Contractual Obligations As of June 30, 2014, our future contractual obligations were as follows (in thousands): Remainder Total of 2014 2015 2016 2017 2018 Thereafter Operating lease obligations $ 190,835 $ 37,065 $ 47,305 $ 34,993 $ 26,277 $ 18,519 $ 26,676 Capital lease obligations (1) 1,606 668 811 127 - - - Pension plan withdrawal liability associated with demand letter (1) 3,630 470 940 940 940 340 - Other long-term debt (1) 4,211 276 472 472 2,991 - - Equipment purchase commitments 7,803 7,803 - - - - - Committed capital expenditures for fiber optic networks under contracts with customers 31,248 26,156 5,092 - - - - Total $ 239,333 $ 72,438 $ 54,620 $ 36,532 $ 30,208 $ 18,859 $ 26,676 (1) Amounts are recorded in our June 30, 2014 condensed consolidated balance sheet.

The committed capital expenditures for fiber optic networks represent commitments related to signed contracts with customers. The amounts are estimates of costs required to build the networks under contract. The actual capital expenditures related to building the networks could vary materially from these estimates. We have also committed capital for the expansion of our vehicle fleet in order to accommodate manufacturer lead times on certain types of vehicles. As of June 30, 2014, production orders for approximately $7.8 million had been issued with delivery dates occurring throughout 2014. Although we have committed to the purchase of these vehicles at the time of their delivery, we intend that these orders will be assigned to third party leasing companies and made available to us under certain of our master equipment lease agreements, which will release us from our capital commitment.

As of June 30, 2014, the total unrecognized tax benefits related to uncertain tax positions was $53.2 million. Certain of our subsidiaries remain under examination by various U.S. state and Canadian federal tax authorities for multiple periods, and the amount of unrecognized tax benefits could therefore increase or decrease as a result of the expiration of certain statute of limitations periods or settlements of these audits. We believe it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease up to $11.0 million due to the expiration of certain statute of limitations periods or settlements of the audits.

The previously presented table of estimated contractual obligations does not reflect the majority of the obligations under the multi-employer pension plans in which our union employees participate. Some of our operating units are parties to various collective bargaining agreements that require us to provide to the employees subject to these agreements specified wages and benefits, as well as to make contributions to multi-employer pension plans. Our multi-employer pension plan contribution rates generally are specified in the collective bargaining agreements (usually on an annual basis), and contributions are made to the plans on a "pay-as-you-go" basis based on our union employee payrolls. The location and number of union employees that we employ at 56-------------------------------------------------------------------------------- Table of Contents any given time and the plans in which they may participate vary depending on the projects we have ongoing at any time and the need for union resources in connection with those projects. Therefore, we are unable to accurately predict our union employee payroll and the amount of the resulting multi-employer pension plan contribution obligation for future periods.

We may also have additional liabilities imposed by law as a result of our participation in multi-employer defined benefit pension plans. The Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, imposes certain liabilities upon employers who are contributors to a multi-employer plan if the employer withdraws from the plan or the plan is terminated or experiences a mass withdrawal. These liabilities include an allocable share of the unfunded vested benefits in the plan for all plan participants, not merely the benefits payable to a contributing employer's own retirees. Other than as noted below, we are not aware of any material amounts of withdrawal liability that have been or are expected to be incurred as a result of a withdrawal by any of our operating units from any multi-employer defined benefit pension plans.

We may also be required to make additional contributions to our multi-employer pension plans if they become underfunded, and these additional contributions will be determined based on our union employee payrolls. The Pension Protection Act of 2006 added special funding and operational rules generally applicable to plan years beginning after 2007 for multi-employer plans that are classified as "endangered," "seriously endangered" or "critical" status. Plans in these classifications must adopt measures to improve their funded status through a funding improvement or rehabilitation plan, as applicable, which may require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to retiree benefits. A number of multi-employer plans to which our operating units contribute or may contribute in the future are in "endangered," "seriously endangered" or "critical" status.

The amount of additional funds, if any, that we may be obligated to contribute to these plans in the future cannot be reasonably estimated and is not included in the above table due to uncertainty of the future levels of work that require the specific use of the union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans.

We recorded a partial withdrawal liability of approximately $32.6 million in the fourth quarter of 2011 related to the withdrawal by certain of our subsidiaries from the Central States Plan. The partial withdrawal liability we recognized was based on estimates received from the Central States Plan during 2011 for a complete withdrawal by all of our subsidiaries participating in the Central States Plan. The Central States Plan asserted that the withdrawal of the PLCA members was not effective in 2011, although Quanta believed at that time that a legally effective withdrawal had occurred during the fourth quarter of 2011.

Although the federal district court of Northern Illinois, Eastern Division, ruled that the withdrawal of the PLCA members was not effective in 2011, the PLCA appealed the decision, and the outcome of that appeal remains uncertain.

Certain of our subsidiaries continued participation in the Central States Plan, and we believe we subsequently effected a complete withdrawal as of December 30, 2012.

In December 2013, the Central States Plan filed separate lawsuits against two of our subsidiaries. In the first lawsuit, the Central States Plan alleged that one of our subsidiaries elected to participate in the Central States Plan pursuant to the collective bargaining agreement under which it participates. The subsidiary argued that no such election was made and that any payments made by the subsidiary to the Central States Plan were made in error. The parties recently reached an agreement in principle to settle this lawsuit, pursuant to which, among other things, the Central States Plan agreed to return the payments made by the subsidiary. In the second lawsuit, the Central States Plan alleges that contributions made by another one of our subsidiaries to a new industry fund that was created after we withdrew from the Central States Plan should have been made to the Central States Plan. This arguably would extend the date of withdrawal for this subsidiary to 2014. We have disputed these allegations on the basis that we have properly paid contributions to the new industry fund based on the terms of the collective bargaining agreement under which we participate.

57 -------------------------------------------------------------------------------- Table of Contents In March 2014, one of our subsidiaries was notified of a Joint Committee decision relating to a separate grievance matter concluding that our subsidiary should have hired Teamsters under a specific collective bargaining agreement to perform certain jobs. This matter was subsequently resolved with the Teamsters, effectively resulting in awarding of wages and benefits (including pension contributions) to the two Teamsters employees under an alternate collective bargaining agreement that are not related to the Central States Plan. In addition, in March 2014 the Central States Plan provided revised estimates indicating that the withdrawal liability based on certain withdrawal scenarios from 2011 through 2014 could range between $40.1 million and $55.4 million. In July 2014, the Central States Plan provided us with a "Notice and Demand" of partial withdrawal liability for certain of our subsidiaries in the amount of $39.6 million. We continue to dispute the total withdrawal liability owed to the Central States Plan. However, monthly payments associated with this Notice and Demand began in the third quarter of 2014 while continuing the related process to determine the final withdrawal liability. The amount owed upon resolution of this matter will be reduced by the payments made.

The ultimate liability associated with the complete withdrawal of our subsidiaries from the Central States Plan will depend on various factors, including interpretations of the terms of the collective bargaining agreements under which the subsidiaries participated and whether exemptions from withdrawal liability applicable to construction industry employers will be available. Based on the previous estimates of liability associated with a complete withdrawal from the Central States Plan, and allowing for the exclusion of amounts we believe have been improperly included in such estimate, we will seek to challenge and further negotiate the amount owed in connection with this matter.

However, we recorded an adjustment to cost of services during the three months ended March 31, 2014 to increase the recognized withdrawal liability to an amount within the range communicated to us by the Central States Plan. We believe that the range of reasonable possible loss associated with the Central States Plan is up to $55.4 million. Given the unknown nature of some of the factors mentioned above, the final withdrawal liability cannot yet be determined with certainty. Accordingly, it is reasonably possible that the amount owed upon final resolution of these matters could be materially higher than the liability we have recognized through June 30, 2014. See Note 10 of the Notes to Condensed Consolidated Financial Statements.

On October 9, 2013, we acquired a company that experienced a complete withdrawal from the Central States Plan prior to the date of our acquisition. The Central States Plan issued a Notice and Demand dated March 13, 2013 to the acquired company for a withdrawal liability in the total amount of $6.9 million payable in installments. Based on legal arguments, the acquired company took the position that the amount of withdrawal liability payable to the Central States Plan as a result of its complete withdrawal was $4.8 million, of which approximately $3.6 million remained outstanding as of June 30, 2014. The acquired company and Quanta have taken steps to challenge the amount of the assessment by the Central States Plan; however, payments in accordance with the terms of the Central States Plan's demand letter are required to be made while the dispute process is ongoing. Accordingly, the $3.6 million is included in the previously presented table of contractual obligations. Approximately $2.1 million of the purchase price was deposited into an escrow account on October 9, 2013 to fund any withdrawal obligation in excess of the $4.8 million initially demanded. Accordingly, the acquired company's withdrawal from the Central States Plan is not expected to have a material impact on our results of operations, financial condition or cash flows.

Also excluded from the Contractual Obligations table is interest associated with letters of credit fees and commitment fees under our credit facility because the outstanding letters of credit, availability and applicable interest rates and fees are variable. For additional information regarding the interest rates under our credit facility, see Note 7 of the Notes to Condensed Consolidated Financial Statements in Item 1. "Financial Statements." We have also excluded from the Contractual Obligations table additional capital commitments associated with investments in unconsolidated affiliates related to planned midstream infrastructure projects of approximately $10.1 million because we are unable to determine the timing of these capital commitments but anticipate them to be paid before the end of 2015. As specific amounts of capital commitments and their timing are determined, we will reflect such amounts in the Contractual Obligations table.

58 -------------------------------------------------------------------------------- Table of Contents Self-Insurance We are insured for employer's liability, general liability, auto liability and workers' compensation claims. On May 1, 2014, we renewed our employer's liability and workers' compensation policies for the 2014 - 2015 policy year and extended our general liability and auto liability policies to April 30, 2015. As a result of the renewal and extension, the deductibles for general liability and auto liability remained at $10.0 million per occurrence, the deductible for workers' compensation remained at $5.0 million per occurrence, and the deductible for employer's liability remained at $1.0 million per occurrence. We also have employee health care benefit plans for most employees not subject to collective bargaining agreements, of which the primary plan is subject to a deductible of $375,000 per claimant per year.

Losses under all of these insurance programs are accrued based upon our estimate of the ultimate liability for claims reported and an estimate of claims incurred but not reported, with assistance from third-party actuaries. These insurance liabilities are difficult to assess and estimate due to unknown factors, including the severity of an injury, the extent of damage, the determination of our liability in proportion to other parties and the number of incidents not reported. The accruals are based upon known facts and historical trends, and management believes such accruals are adequate. As of June 30, 2014 and December 31, 2013, the gross amount accrued for insurance claims totaled $170.5 million and $161.8 million, with $126.7 million and $122.6 million considered to be long-term and included in other non-current liabilities. Related insurance recoveries/receivables as of June 30, 2014 and December 31, 2013 were $7.9 million and $9.1 million, of which $0.8 million and $0.7 million were included in prepaid expenses and other current assets and $7.1 million and $8.4 million were included in other assets, net.

We renew our insurance policies on an annual basis, and therefore deductibles and levels of insurance coverage may change in future periods. In addition, insurers may cancel our coverage or determine to exclude certain items from coverage, or we may elect not to obtain certain types or incremental levels of insurance if we believe that the cost to obtain such coverage exceeds the additional benefits obtained. In any such event, our overall risk exposure would increase, which could negatively affect our results of operations, financial condition and cash flows.

Concentration of Credit Risk We are subject to concentrations of credit risk related primarily to our cash and cash equivalents and our accounts receivable, including amounts related to unbilled accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts. Substantially all of our cash investments are managed by what we believe to be high credit quality financial institutions. In accordance with our investment policies, these institutions are authorized to invest this cash in a diversified portfolio of what we believe to be high quality investments, which primarily include interest-bearing demand deposits, money market mutual funds and investment grade commercial paper with original maturities of three months or less. Although we do not currently believe the principal amount of these investments is subject to any material risk of loss, changes in economic conditions could impact the interest income we receive from these investments. In addition, we grant credit under normal payment terms, generally without collateral, to our customers, which include electric power, oil and gas companies, governmental entities, general contractors, and builders, owners and managers of commercial and industrial properties located primarily in the United States and Canada. Consequently, we are subject to potential credit risk related to changes in business and economic factors throughout the United States and Canada, which may be heightened as a result of uncertain economic and financial market conditions that have existed in recent years. However, we generally have certain statutory lien rights with respect to services provided.

Historically, some of our customers have experienced significant financial difficulties, and others may experience financial difficulties in the future.

These difficulties expose us to increased risk related to collectability of billed and unbilled receivables and costs and estimated earnings in excess of billings on uncompleted contracts for services we have performed.

59-------------------------------------------------------------------------------- Table of Contents As of June 30, 2014, two customers each accounted for approximately 10% of consolidated net position, which includes accounts receivable (including long-term balances and costs and estimated earnings in excess of billings on uncompleted contracts) less billings in excess of costs and unearned revenue. As of December 31, 2013, the same two customers accounted for approximately 15% and 11% of consolidated net position. The services provided to these customers relate primarily to our Electric Power Infrastructure Services segment.

Substantially all of the balance for the customer with 10% of consolidated net position as of June 30, 2014 and 11% at December 31, 2013 relates to the Sunrise Powerlink project with a long-term receivable balance related to a significant change order that is subject to a contractually agreed upon arbitration process.

During the third quarter of 2013, we reclassified the receivable related to this matter from costs in excess of billings on uncompleted contracts to other assets, net due to the expected timetable for resolution of the matter. For additional information, see Legal Proceedings - Sunrise Powerlink Arbitration in Note 10 of the Notes to Condensed Consolidated Financial Statements.

Additionally, the customer with the 10% and 15% of consolidated net position at June 30, 2014 and December 31, 2013 also accounted for 10% and 12% of consolidated revenues for the three and six months ended June 30, 2013. No other customers represented 10% or more of revenues for the three or six months ended June 30, 2014 and 2013, and no other customers represented 10% or more of consolidated net position as of June 30, 2014 or December 31, 2013.

Legal Proceedings We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract and/or property damages, employment-related damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief.

With respect to all such lawsuits, claims and proceedings, we record a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. See Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1, "Financial Statements" for additional information regarding litigation, claims and other legal proceedings.

Related Party Transactions In the normal course of business, we enter into transactions from time to time with related parties. These transactions typically take the form of facility leases with prior owners of certain acquired companies.

New Accounting Pronouncements Adoption of New Accounting Pronouncements.

On January 1, 2014, we adopted an update that provides guidance on the balance sheet presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists as of the reporting date. The update is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard did not have a material effect on our consolidated financial statements.

Accounting Standards Not Yet Adopted.

In April 2014, the FASB issued an update that changes the requirement for reporting discontinued operations. A disposal of a component of an entity or a group of components of an entity will be required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the entity or group of components of an entity meets the criteria to be classified as held for sale or when it is disposed of by sale or other than by sale. The update also requires additional disclosures about discontinued operations, a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements, and an entity's significant continuing involvement with a discontinued operation. The update is effective prospectively for fiscal years beginning on or after December 15, 2014, including interim periods within those years. Early 60-------------------------------------------------------------------------------- Table of Contents adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in previously issued financial statements. We are currently evaluating the potential impact of this authoritative guidance on our consolidated financial statements and are planning to adopt this guidance effective January 1, 2015. This guidance will impact the disclosure and presentation of how we report any future disposals of components or groups of components of our business.

In May 2014, the FASB issued an update that supersedes most current revenue recognition guidance as well as some cost recognition guidance. The update requires that an entity recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires new qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, information about contract balances and performance obligations, and assets recognized from costs incurred to obtain or fulfill a contract. For public entities, the update is effective for fiscal years beginning on or after December 15, 2016, including interim periods within that year. The guidance can be applied on a full retrospective or modified retrospective basis whereby the entity records a cumulative effect of initially applying this update at the date of initial application, and early adoption is not permitted. We are currently evaluating the potential impact of this authoritative guidance on our consolidated financial statements and are planning to adopt this guidance effective January 1, 2017.

Outlook We currently see growth opportunities across all the industries we serve.

However, we and our customers continue to operate in a somewhat uncertain business environment, with gradual improvement in the economy yet continuing uncertainty in the marketplace. Our customers are also facing stringent regulatory and environmental requirements as they implement projects to enhance and expand their infrastructure. These economic and regulatory factors have negatively affected our results in the past and may continue to create some uncertainty as to the timing of anticipated customer spending. We believe that our financial and operational strengths will enable us to manage these challenges and uncertainties, and we remain optimistic about our near-term and long-term opportunities.

Electric Power Infrastructure Services Segment The North American electric grid is aging and requires significant upgrades, maintenance and expansion to meet current and future demands for power delivery.

Over the past several years, many utilities across North America have begun to implement plans to improve their transmission systems in order to improve reliability and reduce congestion. Among other things, these activities include new construction, structure change-outs, line upgrades and maintenance projects on many transmission systems. In addition, state renewable portfolio standards, which set required or voluntary standards for how much power is to be generated from renewable energy sources, can result in the need for additional transmission lines and substations to transport the power from these facilities, which are often in remote locations, to demand centers. Other factors, such as the reliability standards issued by the North American Electric Reliability Corporation (NERC) and other regulatory actions, are also driving transmission system upgrades and expansions. We believe these factors create significant opportunities for our transmission infrastructure services.

We believe that utilities remain committed to the expansion and strengthening of their transmission infrastructure with planning, engineering and funding for many of their projects in place. The regulatory and environmental permitting processes remain a hurdle for some proposed transmission and renewable energy projects, and these factors continue to create uncertainty as to timing of this spending. The timing and scope of projects can also be affected by other factors such as siting, right-of-way and unfavorable economic and market conditions. We anticipate many of these issues to be overcome and spending on transmission projects to be active over the next few years. We currently have a number of these projects underway, and we expect this segment's backlog to remain strong throughout the remainder of 2014 and into 2015.

61-------------------------------------------------------------------------------- Table of Contents Several existing, pending or proposed legislative or regulatory actions may also positively affect demand for the services provided by this segment in the long term, particularly in connection with electric power infrastructure and renewable energy spending. For example, legislative or regulatory action that alleviates some of the siting and right-of-way challenges that impact transmission projects would potentially accelerate future transmission line construction. We also anticipate increased infrastructure spending by our customers as a result of regulation requiring the power industry to meet federal reliability standards for its transmission and distribution systems and providing incentives to the industry to invest in and improve maintenance on its systems. Developments in environmental regulations concerning fossil fuel power generation plants are expected to result in the need to retire or upgrade older coal-fired generation facilities to comply with new environmental and emission rules. Much of the electricity previously generated from retired coal-fired generation facilities is expected to be replaced over the coming years by newly developed natural gas-fired generation facilities. We believe this "coal to gas" dynamic will require old transmission lines to be updated, rebuilt or replaced with higher voltage transmission infrastructure as well as the construction of new transmission infrastructure to connect new natural gas-fired generation facilities to the grid. In addition, as coal-fired generation facilities are retired, renewable generation is also expected to be developed to replace coal-fired generation.

The Federal Energy Regulatory Commission (FERC) issued FERC Order No. 1000 to promote more efficient and cost-effective development of new transmission facilities. The order establishes transmission planning and cost allocation requirements intended to facilitate multi-state electric transmission lines and to encourage competition by removing, under certain conditions, federal rights of first refusal from FERC-approved tariffs and agreements. We believe FERC Order No. 1000, which was affirmed by FERC in May 2012 with the issuance of FERC Order No. 1000-A, will have a favorable impact on electric transmission line development.

We benefited from increases in distribution spending throughout 2011, 2012 and 2013, despite continued economic and political uncertainties. Furthermore, as a result of reduced spending by utilities on their distribution systems during 2009 and 2010, combined with the need to meet reliability requirements, we believe there is an ongoing need for utilities to resume sustained investment in their distribution systems in order to properly maintain their systems. In addition, a number of utilities are implementing system upgrades or "hardening" programs in response to severe weather events that have occurred over the past few years, which is also increasing distribution investment in some regions of the United States. We also anticipate that utilities will continue to integrate "smart grid" technologies into their transmission and distribution systems over time to improve grid management and create efficiencies. Development and installation of smart grid technologies and other energy efficiency initiatives have benefited from stimulus funding under the American Recovery and Reinvestment Act of 2009, as well as the implementation of grid management initiatives by utilities and the desire by consumers for more efficient energy use.

The economic feasibility of renewable energy projects, and therefore, the attractiveness of investment in the projects, may depend on the availability of tax incentive programs or the ability of the project developer to take advantage of such incentives, and there is no assurance that the government will extend existing tax incentives or create new incentive or funding programs in the future. Although we see additional developments of renewable energy projects, primarily utility-scale solar facilities which could create increased demand for our engineering, procurement and construction services, we believe there is some uncertainty with these projects advancing towards award and construction.

The need to ensure available specialized labor resources for projects also drives strategic relationships with customers. In addition, several industry and market trends are also prompting customers in the electric power industry to seek outsourcing partners. These trends include an aging utility workforce and labor availability issues. As the economy and financial markets continue to recover, customer demand for labor resources will continue to increase, possibly outpacing the supply of industry resources.

Several other industry dynamics and market trends are prompting customers in the electric power industry to seek strategic relationships with service providers.

These trends include an aging customer workforce, 62-------------------------------------------------------------------------------- Table of Contents increasing pressure to reduce cost and improve reliability, and increasing duration and complexity of customer capital programs. As a result, we believe the number of opportunities for strategic partnerships is growing.

Oil and Gas Infrastructure Services Segment We see growth opportunities in our oil and gas infrastructure operations, primarily in the installation and maintenance of mainline pipe, gathering systems, production systems and related facilities, as well as pipeline integrity and specialty services such as horizontal directional drilling. We believe opportunities for this segment exist as a result of the increase in the ongoing development of unconventional shale formations in North America that produce natural gas, natural gas liquids and/or crude oil, as well as the development of Canadian oil sands and the development of coal seam gas and unconventional shale formations in Australia, which will require the construction of mainline pipe infrastructure to connect production with demand centers and the development of midstream gathering infrastructure within areas of production. We also believe the goals of clean energy and energy independence for North America, as well as more stringent environmental regulations, will make abundant, low-cost natural gas the fuel of choice versus coal for power generation over time, creating the need for continued investment in natural gas infrastructure. We believe our position as a leading provider of mainline pipe and gathering system infrastructure services in North America and Australia will allow us to capitalize on these opportunities.

The oil and gas industry is cyclical and subject to volatility as a result of fluctuations in natural gas, natural gas liquids and oil prices. In the past, sustained periods of low prices for these products negatively impacted the development of these natural resources and related infrastructure. In addition, environmental scrutiny, stringent regulatory requirements and cumbersome permitting processes caused delays in some mainline pipe projects during the past several years. These dynamics resulted in below average mainline pipe construction opportunities for us and the industry in 2011 and 2012.

The lack of mainline pipe opportunities in 2011 and 2012 negatively impacted our Oil and Gas Infrastructure Services segment margins, in part as a result of our inability to adequately cover certain fixed costs. Margins for mainline pipe projects are also subject to significant performance risk, which can arise from adverse weather conditions, challenging geography, customer decisions and crew productivity. Our specific opportunities in the mainline pipe business are sometimes difficult to predict because of the seasonality of the bidding and construction cycles within the industry.

A number of large mainline pipe projects are proposed from the Canadian oil sands and U.S. shale areas to refineries and other demand centers. Many of these projects are still developing, though several mainline projects have been awarded to us and various pipeline construction contractors. While there is risk that some of these projects will not occur or could be delayed, we are encouraged by these proposed mainline pipe development plans and the progression of some mainline projects being awarded to contractors, which could create an improved and favorable mainline pipe market in the second half of 2014 and into 2015 for us and the industry in North America. We also believe there are significant mainline pipe opportunities in Australia driven by the production of coal seam gas for LNG export. A number of LNG export facilities are under construction and proposed for development in Australia, Canada and the U.S., and pipelines and related infrastructure will be required to serve these facilities.

Our customers continue to invest in infrastructure needed to support the development of unconventional shales, particularly liquid rich formations. We continue to increase our presence in areas where unconventional shale formations are located, to continue to position us to successfully pursue projects associated with midstream gathering infrastructure development. Demand for pipeline services to support shale gathering infrastructure continues to be active, and we believe it will remain so into the foreseeable future. We have also expanded our service offerings in this segment through several recent acquisitions, including an acquisition in Australia, which has different market drivers and seasonality as compared to North America. In addition, recent acquisitions of 63 -------------------------------------------------------------------------------- Table of Contents companies that provide pipeline logistics services to the natural gas and oil industry in the United States and specialty services to the offshore oil and gas industry further enhance the segment's service offerings, customer base and end markets.

We also see growth potential in some of our other pipeline services. The U.S.

Department of Transportation has implemented significant regulatory legislation through the Pipeline and Hazardous Materials Safety Administration relating to pipeline integrity requirements that we expect will increase the demand for our pipeline integrity, rehabilitation and replacement services over the long-term.

As pipeline integrity testing requirements increase in stringency and frequency, we believe more information will be gathered about the condition of the nation's pipeline infrastructure and will result in an increase in spending by our customers on pipeline integrity initiatives. We also operate an engineering, research and development business that develops and owns pipeline inspection tools, enhancing our pipeline integrity offerings. We believe that our ability to offer a complete pipeline integrity turnkey solution to pipeline companies and gas utilities provides us an advantageous position in providing these services to our customers. We are also experiencing an increase in demand for our natural gas distribution services as a result of continuing improvement in economic conditions and lower natural gas prices.

We believe there are meaningful opportunities for us to penetrate the offshore and inland water energy markets in providing various infrastructure design, installation and maintenance services primarily to the Gulf of Mexico region but also in select international markets. The offshore infrastructure service opportunities we see are very similar to what we perform onshore in this segment, and several of our existing onshore customers who also have offshore assets have expressed interest in our ability to provide offshore infrastructure services. Demand for offshore energy infrastructure services is similar to that on land, including the need for engineering, construction and maintenance services for new and existing offshore exploration and production platforms. In addition, the majority of the thousands of miles of marine based pipelines and related production facilities are approaching or are beyond the end of their useful lives. We see this as an opportunity to leverage our onshore pipeline integrity services and technology to the offshore market's aging infrastructure.

Further, new regulations and the more stringent enforcement of existing regulations administered by the Bureau of Safety and Environmental Enforcement should create opportunities for offshore energy infrastructure construction, repair and replacement services.

Overall, we are optimistic about this segment's operations going forward. We continue to believe that mainline pipe opportunities can provide strong profitability, although these projects and the profits they generate are often subject to more cyclicality and execution risk than our other service offerings.

We have also taken steps to diversify our operations in this segment through other services, such as pipeline integrity, pipeline logistics, and offshore specialty services. We believe these measures, together with the potential for mainline pipe opportunities, will position us for profitable growth in this segment over the long-term.

Fiber Optic Licensing and Other Segment Our Fiber Optic Licensing and Other segment is experiencing growth primarily through geographic expansion, with a focus on markets where secure high-speed networks are important, such as markets where enterprise, telecommunications carriers, educational, financial services and healthcare institutions are prevalent. We continue to see opportunities for growth both in the markets we currently serve and new markets. The education market, which comprises a significant portion of this segment's revenue, had been negatively impacted by challenging economic conditions and budgetary constraints. These constraints eased through the end of 2012, and we currently see spending patterns providing renewed opportunities for growth. However, expanding the markets we serve continues to create competitive pressure which may impact this segment's prospects for future growth.

We are also expanding our service offerings to provide lit services. For lit services, we procure and own the electronic equipment necessary to make the fiber optic network operational, and we provide network management services to customers. The addressable market opportunity for lit services is larger than the dark 64 -------------------------------------------------------------------------------- Table of Contents fiber services market, and we believe providing lit services should enable us to leverage the fiber optic network capacity in our existing and future fiber networks. We have been investing in the necessary people and equipment needed to expand and grow our lit services, and although 2014 is a transition year as we deploy our lit services offering, we believe lit services will provide attractive growth opportunities.

Our Fiber Optic Licensing and Other segment typically generates higher margins than our other operations, but we can give no assurance that the Fiber Optic Licensing and Other segment margins will continue at historical levels.

Additionally, we anticipate the need for continued capital expenditures to support the build-out of our networks and growth of this business. The Fiber Optic Licensing and Other segment also provides various telecommunications infrastructure services on a limited and ancillary basis, primarily to our customers in the electric power industry. Due to the disposition of our telecommunications subsidiaries, telecommunications services are no longer a strategic priority for us. We will continue to provide these services to utility customers on an as needed basis. However, we believe that expected increases in this segment's revenues associated with fiber optic licensing services could be offset by decreases in other telecommunications infrastructure service revenues.

Conclusion We continue to see growth opportunities in all of the industry segments we serve, despite continuing challenges from restrictive regulatory requirements and uncertain economic conditions. We are benefiting from utilities' increased spending on projects to upgrade and expand their electric power transmission infrastructure to improve system reliability and to deliver renewable electricity from new generation sources to demand centers. Favorable industry legislation is also creating incentives and a positive environment for utilities to invest in their electrical infrastructure, particularly for transmission infrastructure. Additional environmental regulations concerning fossil fuel power generation emissions create opportunities for transmission lines to be updated, rebuilt or replaced due to "coal to gas" facility replacements. We also expect utilities to outsource more of their work to companies like us, due in part to the challenges associated with their aging workforce. We believe that we remain the partner of choice for many utilities in need of broad infrastructure expertise, specialty equipment and workforce resources, particularly as capital budgets and infrastructure projects have become larger and more complex.

We believe that our overall size and breadth of service offerings provide competitive advantages that allow us to leverage opportunities driven by the development and production of resources from North American unconventional shale developments, the Canadian oil sands and coal seam gas and unconventional shale formations in Australia. Development activity in liquid-rich shale areas in North America is strong, increasing the need for gathering system infrastructure, and we are seeing encouraging indications that increases in mainline pipe project activity in 2013 and the first half of 2014 could continue for the remainder of 2014 and into 2015. We also believe that our strategy to pursue midstream gathering system opportunities in liquid-rich unconventional shales in the U.S., as well as the anticipated increase in demand for our pipeline integrity, rehabilitation and replacement services from pipeline integrity initiatives, and other services in adjacent markets that we have gained through recent acquisitions, will create attractive growth potential for us and also further diversify the services provided by our Oil and Gas Infrastructure Services segment.

Our electric distribution and gas distribution services were both significantly affected by the uncertain economic conditions that existed during the prior recession. Demand for our electric distribution services has increased over the past three and a half years as the economy has stabilized and spending on maintenance to improve reliability has returned. We are optimistic that continued implementation of electric distribution reliability programs and the potential for improvement in the housing market will facilitate moderate growth in demand for our electric distribution services. Gas distribution spending has been driven primarily by improving economic conditions and the lower cost of natural gas.

Competitive pricing environments, project delays and effects from restrictive regulatory requirements have negatively impacted our margins in the past and could affect our margins in the future. Additionally, margins 65-------------------------------------------------------------------------------- Table of Contents may be negatively impacted on a quarterly basis due to adverse weather conditions, as well as timing of project starts or completions and other factors as described in "Understanding Margins" above. We continue to focus on the elements of the business we can control, including costs, the margins we accept on projects, collecting receivables, ensuring quality service, rightsizing initiatives as needed to match the markets we serve, and safely executing on the projects we are awarded.

Capital expenditures for 2014 are expected to be between $300 million to $325 million, of which approximately $50 million to $60 million of these expenditures are targeted for fiber optic network expansion, with the majority of the remaining expenditures for operating equipment. We expect 2014 capital expenditures to be funded substantially through internal cash flows, cash on hand and borrowings under our credit facility.

We continue to evaluate potential strategic acquisitions and similar investments to broaden our customer base, expand our geographic area of operation, grow our portfolio of services and increase opportunities across our operations. We believe that additional attractive acquisition candidates exist primarily as a result of the highly fragmented nature of the industry, the inability of many companies to expand and modernize due to capital constraints and the desire of owners for liquidity. We also believe that our financial strength, entrepreneurial operating model and experienced management team are attractive to acquisition candidates.

Certain international regions present significant opportunities for growth over time across many of our operations. We are evaluating ways in which we can strategically apply our expertise to strengthen infrastructure in various foreign countries where infrastructure enhancements are increasingly important.

For example, we are actively pursuing opportunities in growth markets where we can leverage our technology or proprietary work methods, such as our energized services, to establish a presence in these markets.

We believe that we are well-positioned to capitalize upon opportunities and trends in the industries we serve because of our full-service operations with broad geographic reach, our financial strength and our technical expertise.

Additionally, we believe the industry opportunities and trends discussed herein will increase the demand for our services over the long-term, although the actual timing, magnitude and impact of these opportunities and trends on our operating results and financial position is difficult to predict.

Uncertainty of Forward-Looking Statements and Information This Quarterly Report on Form 10-Q includes "forward-looking statements" reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended to qualify for the "safe harbor" from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "project," "forecast," "may," "will," "should," "could," "expect," "believe," "plan," "intend" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following: • Projected revenues, earnings per share, margins, capital expenditures, and other projections of operating or financial results; • Expectations regarding our business outlook, growth or opportunities in particular markets; • The expected value of contracts or intended contracts with customers; • The scope, services, term and results of any projects awarded or expected to be awarded for services to be provided by us; • The impact of renewable energy initiatives, including mandated state renewable portfolio standards, the economic stimulus package and other existing or potential energy legislation; • Potential opportunities that may be indicated by bidding activity or similar discussions with customers; • The potential benefits from acquisitions; 66 -------------------------------------------------------------------------------- Table of Contents • The outcome of pending or threatened litigation; • The business plans or financial condition of our customers; • Our plans and strategies; and • The current economic and regulatory conditions and trends in the industries we serve.

These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks, uncertainties, and assumptions that are difficult to predict or beyond our control. These forward-looking statements reflect our beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements and that any or all of our forward-looking statements may turn out to be wrong. Those statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties, including the following: • The effects of industry, economic or political conditions outside our control; • Quarterly variations in our operating results; • Adverse economic and financial conditions, including weakness in the capital markets; • Trends and growth opportunities in relevant markets; • Delays, reductions in scope or cancellations of anticipated, pending or existing projects, including as a result of weather, regulatory or environmental processes, project performance issues, or our customers' capital constraints; • The successful negotiation, execution, performance and completion of anticipated, pending and existing contracts, including the ability to obtain awards of projects on which we bid or are otherwise discussing with customers; • Our ability to attract skilled labor and retain key personnel and qualified employees; • The potential shortage of skilled employees; • Our dependence on fixed price contracts and the potential to incur losses with respect to these contracts; • Estimates relating to our use of percentage-of-completion accounting; • Adverse impacts from weather; • Our ability to generate internal growth; • Competition in our business, including our ability to effectively compete for new projects and market share; • Potential failure of renewable energy initiatives, the economic stimulus package or other existing or potential legislative actions to result in increased demand for our services; • Liabilities associated with multi-employer pension plans, including underfunding of liabilities and termination or withdrawal liabilities; • The possibility of further increases in the liability associated with our withdrawal from a multi-employer pension plan; • Liabilities for claims that are self-insured or not insured; • Unexpected costs or liabilities that may arise from lawsuits or indemnity claims asserted against us; • Risks relating to the potential unavailability or cancellation of third party insurance, the exclusion of coverage for certain losses, and potential increases in premiums for coverage deemed beneficial to us; 67 -------------------------------------------------------------------------------- Table of Contents • Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are replaced on less favorable terms; • Loss of customers with whom we have long-standing or significant relationships; • The potential that participation in joint ventures exposes us to liability and/or harm to our reputation for acts or omissions by our partners; • Our inability or failure to comply with the terms of our contracts, which may result in unexcused delays, warranty claims, failure to meet performance guarantees, damages or contract terminations; • The effect of natural gas, natural gas liquids and oil prices on our operations and growth opportunities; • The future development of natural resources in shale areas; • The inability of our customers to pay for services; • The failure to recover on payment claims against project owners or to obtain adequate compensation for customer-requested change orders; • The failure of our customers to comply with regulatory requirements applicable to their projects, including those related to awards of stimulus funds, which may result in project delays and cancellations; • Budgetary or other constraints that may reduce or eliminate tax incentives for or government funding of projects, including stimulus projects, which may result in project delays or cancellations; • Estimates and assumptions in determining our financial results and backlog; • Our ability to realize our backlog; • Risks associated with operating in international markets, including instability of foreign governments, currency fluctuations, tax and investment strategies and compliance with the laws of foreign jurisdictions, as well as the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws; • Our ability to successfully identify, complete, integrate and realize synergies from acquisitions; • The potential adverse impact resulting from uncertainty surrounding acquisitions, including the ability to retain key personnel from the acquired businesses and the potential increase in risks already existing in our operations; • The adverse impact of impairments of goodwill and other intangible assets or investments; • Our growth outpacing our decentralized management and infrastructure; • Requirements relating to governmental regulation and changes thereto; • Inability to enforce our intellectual property rights or the obsolescence of such rights; • Risks related to the implementation of an information technology solution; • The impact of our unionized workforce on our operations, including labor stoppages or interruptions due to strikes or lockouts; • Potential liabilities relating to occupational health and safety matters; • Our dependence on suppliers, subcontractors and equipment manufacturers; • Risks associated with our fiber optic licensing business, including regulatory and tax changes and the potential inability to realize a return on our capital investments; • Beliefs and assumptions about the collectability of receivables; • The cost of borrowing, availability of credit, fluctuations in the price and volume of our common stock, debt covenant compliance, interest rate fluctuations and other factors affecting our financing and investing activities; 68 -------------------------------------------------------------------------------- Table of Contents • The ability to access sufficient funding to finance desired growth and operations; • Our ability to obtain performance bonds; • Potential exposure to environmental liabilities; • Our ability to continue to meet the requirements of the Sarbanes-Oxley Act of 2002; • Rapid technological and structural changes that could reduce the demand for our services; • The impact of increased healthcare costs arising from healthcare reform legislation; and • The other risks and uncertainties as are described elsewhere herein and under Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013 and as may be detailed from time to time in our other public filings with the SEC.

All of our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this report. In addition, we do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or otherwise.

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