(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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 (Quarterly Report) and with our Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Annual Report), which was filed with the Securities and Exchange Commission (SEC) on February 28, 2020 and is available on the SEC's website at www.sec.gov and on our website at 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 in Uncertainty of Forward-Looking Statements and Information below, Item 1A. Risk Factors of Part II of this Quarterly Report and Item 1A. Risk Factors of Part I of our 2019 Annual Report. Overview
Operating income increased 43.7%, or $34.3 million, to $112.9 million as compared to $78.6 million for the three months ended June 30, 2019;
Net income attributable to common stock increased 170.4%, or $46.6 million, to $73.9 million as compared to $27.3 million for the three months ended June 30, 2019;
Diluted earnings per share increased 177.7%, or $0.33, to $0.52 as compared to $0.19 for the three months ended June 30, 2019;
Net cash provided by operating activities increased by $606.1 million to $497.5 million, as compared to net cash used in operating activities of $108.7 million for the three months ended June 30, 2019;
Remaining performance obligations decreased 2.2%, or $117.9 million, to $5.18 billion as of June 30, 2020 as compared to $5.30 billion as of December 31, 2019; and
Total backlog (a non-GAAP measure) decreased 7.2%, or $1.08 billion, to $13.93 billion as of June 30, 2020, as compared to $15.00 billion as of December 31, 2019. For a reconciliation of backlog to remaining performance obligations, its most comparable GAAP measure, see Remaining Performance Obligations and Backlog below.
Key Segment Highlights and Significant Operational Trends and Events During the three months ended June 30, 2020, we were impacted by the following significant operational trends and events as compared to the three months ended June 30, 2019:
Operating income increased by 97.9% to $183.9 million, as compared to $92.9 million.
Revenues increased primarily due to a $46 million increase associated with growth in our North American communications operations; increased customer spending on distribution services projects, which are services we generally consider to be included within base business operations; and approximately $20 million of incremental revenues from acquired businesses.
Revenues associated with grid modernization and fire hardening programs in the western United States decreased; however, we expect revenues related to these services to increase in the second half of 2020 but remain lower than our revenues associated with such services in the second half of 2019.
Operating income increased due to improved performance across the segment and increased Canadian revenues contributed to improved equipment utilization and fixed cost absorption as compared to the three months ended June 30, 2019, which had lower Canadian revenue levels and higher unabsorbed costs as crews and equipment were transitioned from a completed larger transmission project.
Operating income increased as well due to a reduction in losses associated with our Latin American operations.
Pipeline and Industrial Infrastructure Services Segment
Operating income decreased by 69.6% to $21.3 million, as compared to $69.9 million.
Revenues decreased partially due to the impact of the COVID-19 pandemic, which resulted in decreased capital spending by our customers on industrial services due to the significant decline in demand for refined petroleum products, restrictions on our ability to perform services in certain downstream industrial locations and the suspension of gas utility services in certain metropolitan markets during a portion of the quarter.
Revenues associated with larger pipeline projects also decreased, as the timing of such projects is highly variable due to, among other things, potential permitting, delays, worksite access limitations related to environmental regulations and seasonal weather patterns.
Partially offsetting the decrease in revenues was approximately $55 million of incremental revenues from acquired businesses.
Operating income decreased primarily due to the decrease in revenues. Operating income for the three months ended June 30, 2019 was also negatively impacted by the recognition of a $13.9 million loss associated with continued rework and start-up delays on a processing facility project in Texas.
See COVID-19 Pandemic - Response and Impact, Results of Operations and Liquidity below for additional information and discussion related to consolidated and segment results.
Our ownership interest and participation in LUMA is accounted for as an equity method investment due to our equal ownership and management of LUMA with our joint venture partner. LUMA is operationally integral to the operations of Quanta, and therefore Quanta's share of LUMA's net income or losses is reported within operating income. We anticipate our ownership interest in LUMA will positively contribute to operating income and cash flow from operating activities and be accretive to diluted earnings per share attributable to common stock during 2020.
there is currently no legislation that would permit further deferrals of income taxes, the CARES Act permits deferral of payroll taxes through December 31, 2020, and we currently intend to continue to defer such payments, The broader and longer-term implications of the COVID-19 pandemic on our results of operations and overall financial performance and position remain highly uncertain, and therefore we cannot predict the full impact that the pandemic, or any resulting market disruption and volatility, will have on our business, cash flows, liquidity, financial condition and results of operations at this time. The ultimate impact will depend on future developments, including, among others, the ongoing spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration and severity of the pandemic, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume and continue. For additional discussion regarding risks associated with the COVID-19 pandemic, see Item 1A. Risk Factors of Part II of this Quarterly Report.
As discussed in COVID-19 Pandemic - Response and Impact, though we have experienced short-term disruptions due to the impact of the COVID-19 pandemic in certain metropolitan markets, in recent years demand has increased for our gas utility distribution services as a result of lower natural gas prices, increasing regulatory requirements and customer desire to upgrade and replace aging infrastructure. In particular, natural gas utilities have implemented multi-decade modernization programs to replace aging cast iron and bare steel gas system infrastructure with modern materials for safety, reliability and environmental purposes.
Aug 10, 2020
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