Contractors Report Mixed Financials

Although three of the largest publicly held electrical contractors saw some of their financials slip in the their most recent fiscal quarters, the companies were optimistic about the future.

For Quanta Services Inc., Houston, revenues for second-quarter 2003 were $408.3 million, compared with $432.5 million during the same period in 2002. Quanta’s second-quarter fiscal loss was $9.8 million, compared with $177.2 million last year. The company’s 2002 second-quarter included a goodwill impairment charge of $166.6 million.

John Colson, the company’s chairman and CEO, was encouraged by the stabilization of the company’s telecommunication revenues and said Quanta is “poised for growth when capital expenditures and maintenance funds flow from our utility and telecommunications customers.”

“While our markets appear to have stabilized, we have less visibility on the second half of the year based on the delay of awards from bid activity during the second quarter,” he said.

For fiscal 2003, Quanta now expects revenues of $1.55 billion to $1.65 billion. Longer term, some Wall Street analysts believe the recent blackout that left 50 million people in the United States and Canada without power will actually help companies like Quanta that concentrate on utility work because of the anticipated demand for the extension and renovation of the North American power grid. The company’s stock price has been at 52-week highs during the past few weeks.

Integrated Electrical Services Inc. (IES) also based in Houston, reported mixed financial results for its fiscal 2003 third quarter ended June 30, 2003. Net income for the quarter was $5.4 million, versus $7.5 million in its 2002 fiscal third quarter. However, revenues for the third quarter its 2003 fiscal year were up slightly, to $375.3 million compared with revenues of $374.8 million for the third quarter a year ago.

IES’ third quarter segment revenues for commercial/industrial were $305.6 million in fiscal 2003, compared with $302.1 million in fiscal 2002. Residential revenues for the third quarter were $69.7 million in fiscal 2003, compared with $72.7 million in fiscal 2002.

IES President and CEO H. Roddy Allen said IES’ earnings performance was within the guidance range it provided last quarter, which he considered a notable accomplishment considering the construction environment. According to F.W. Dodge, commercial and industrial construction spending was down 18.6 percent in 2002 and will decline 2.6 percent in 2003 from 2002.

However, according to F.W. Dodge forecasts for 2004 published recently in an IES company profile, two key segments of the electrical construction market are expected to rebound next year. The report said construction of office buildings would be up 10 percent and that construction of manufacturing facilities would increase 19 percent.

IES has added $175 million of new larger project work (projects greater than $300,000), to its backlog during the third quarter, a significant increase over the $130 million it added in the third fiscal quarter of 2002. IES’ backlog is currently $747 million compared with $771 million at the end of the third quarter of 2002.

The new work includes $57 million of new work at institutions including schools, $21 million of new work at hospitals and healthcare centers, $18 million of new work on apartment buildings, $15 million of new work at retail centers, $14 million of new work on utility projects and highway projects, $14 million of new office building work, $12 million of new work on hotels and condominiums, and $7 million of new work on manufacturing facilities.

One diversified provider of contracting services, Emcor, Norwalk, Conn., saw its second-quarter 2003 revenues increase 16 percent, from $986.4 million in 2002 to $1.1 billion this year. The company did not break out the second-quarter finanicials for its electrical contracting business, which account for approximately 29 percent of total revenues.

Frank MacInnis, Emcor’s chairman and CEO said, “The 2003 second quarter was a mixture of successes and challenges for the company. Our lower overall level of operating profits masked solid performance in our electrical and facilities services businesses. Furthermore, our diversity model allowed us to continue to retain market share and grow, as revenue and backlog rose to record levels with solid organic growth. Looking ahead, we see little evidence of any short-term improvement in the private sector commercial market.”

Along with providing electrical and mechanical contracting services, the company is a major player in the facility management market and in late 2002 acquired Consolidated Engineer Services Inc. (CES), Arlington, Va., in a $178 million acquisition.