InfraSource Services, Inc. Reports First Quarter 2005 Results

    Business Editors/Energy Writers

    MEDIA, Pa.--(BUSINESS WIRE)--May 6, 2005--InfraSource Services, Inc. (NYSE:IFS), one of the largest specialty contractors servicing utility transmission and distribution infrastructure in the United States, today announced its financial results for the first quarter ended March 31, 2005.

    First Quarter Results

    Revenues for the first quarter 2005 increased $36.0 million, or 25% to $182.9 million, compared to $146.9 million for the same quarter in 2004. This increase was due to growth in revenues from each of our electric, natural gas, and telecommunication end markets, including organic growth and the acquisitions of EnStructure and Utili-Trax. This growth was achieved despite a decline in aerial electric transmission work primarily due to the substantial progress recognized in the first quarter 2004 on the Path 15 project that was substantially completed last year.
    Net income for the first quarter 2005 was $2.7 million, or $0.07 per diluted share, versus $1.1 million, or $0.04 per diluted share, for the first quarter last year. Net income for the first quarter 2005 included, on an after-tax basis, $2.3 million of income relating to the reversal of a judgment entered against the Company in connection with a proposed 1999 acquisition, $1.0 million of amortization of intangible assets arising from acquisitions, and other lesser items. Net income for the first quarter 2004 included, on an after-tax basis, $2.7 million of amortization of intangible assets, $1.0 million of IPO related expenses and a lesser item. Excluding the aforementioned items, income as adjusted (non-GAAP) was $1.6 million for the first quarter 2005 versus $4.7 million for the same quarter in 2004.
    EBITDA from continuing operations (non-GAAP) for the first quarter 2005 decreased $0.7 million to $14.5 million, compared to $15.2 million for the first quarter 2004. EBITDA from continuing operations for the first quarter 2005 included $3.8 million of income relating to the reversal of a judgment entered against the Company in connection with a proposed 1999 acquisition and a lesser item. EBITDA from continuing operations for the first quarter 2004 included $1.7 million of IPO related expenses. Excluding the aforementioned items, EBITDA from continuing operations as adjusted (non-GAAP) was $10.8 million for the first quarter 2005 versus $16.9 million for the first quarter a year ago primarily due to the progress recognized on the Path 15 project in the prior period and, to a lesser extent, higher fuel costs offset by growth in the balance of our business.
    A reconciliation of net income to income as adjusted, EBITDA from continuing operations, as well as to EBITDA from continuing operations as adjusted, is included in the attached table, including all reconciling items.

    Backlog

    At the end of the first quarter 2005, total backlog was $925 million, a 17% increase compared to the end of the first quarter 2004 and 1% less than at the end of the fourth quarter 2004. Approximately $400 to $425 million of this backlog is expected to be performed during the balance of 2005.
    "We are pleased with our first quarter results, and our substantial backlog gives us support for future performance. The level of activity of our end markets indicates favorable prospects for continued long-term growth. In the near-term, however, the level and quarterly profile of our earnings will continue to be dependant on the timing and scope of large electric transmission projects and the overall mix of electric transmission versus distribution-related service work. We are currently continuing to track the development of a number of large electric transmission project opportunities, but none of them has yet reached the stage for award." said David Helwig, Chief Executive Officer.

    Conference Call

    InfraSource has scheduled a conference call for May 6, 2005 at 9:00AM EDT to discuss the results for the quarter. This conference call will be webcast live on the InfraSource website at www.infrasourceinc.com by clicking on the investors, webcasts & presentations links. A webcast replay will be available immediately following the call at the same location on the website through June 30, 2005. For those investors who prefer to participate in the conference call by phone, please dial (718) 354-1172. An audio replay of the conference call will be available shortly after the call through May 13, 2005 by calling (718) 354-1112 and using passcode 3254600. For more information, please contact Laura Martin at Taylor Rafferty at (212) 889-4350.

    About InfraSource

    InfraSource Services, Inc. (NYSE:IFS) is one of the largest specialty contractors servicing utility transmission and distribution infrastructure in the United States. InfraSource designs, builds, and maintains transmission and distribution networks for utilities, power producers, and industrial customers. Further information can be found at www.infrasourceinc.com.

    Safe Harbor Statement

    Certain statements contained in this press release are forward-looking statements. These forward-looking statements are based upon our current expectations about future events. When used in this press release, the words "believe," "anticipate," "intend," "estimate," "expect," "will," "should," "may," and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. However, these statements are subject to a number of risks and uncertainties affecting our business. You should read this press release completely and with the understanding that actual future results may be materially different from what we expect as a result of these risks and uncertainties and other factors, which include, but are not limited to: (1) technological, structural and cyclical changes that could reduce the demand for the services we provide; (2) loss of key customers; (3) the uncertainty of the outcome of federal energy legislation; (4) the nature of our contracts, particularly our fixed-price contracts; (5) work hindrance due to inclement weather events; (6) the award of new contracts and the timing of the performance of those contracts; (7) project delays or cancellations; (8) the failure to meet schedule or performance requirements of our contracts; (9) the presence of competitors with greater financial resources and the impact of competitive products, services and pricing; (10) successful integration of the acquisitions into our business; (11) close out of certain of our projects may or may not occur as anticipated or may be unfavorable to us; and (12) other factors detailed from time to time in our reports and filings with the Securities and Exchange Commission. Except as required by law, we do not intend to update forward-looking statements even though our situation may change in the future.

    INFRASOURCE SERVICES, INC. AND SUBSIDIARIES
    Consolidated Statements of Operations
    (In thousands, except per share amounts)

Three Months Ended March 31, 2004 ------------------

Contract revenues $146,888 Cost of revenues 121,883 ------------------ Gross profit 25,005 ------------------ Selling, general and administrative expenses 15,534 Merger related costs - Provision (recoveries) of uncollectible accounts (7) Amortization of intangible assets 4,547 ------------------ Income from operations 4,931 Interest income 54 Interest expense and amortization of debt discount (3,352) Other income (expense), net 152 ------------------ Income before income taxes 1,785 Income tax expense 732 ------------------ Income from continuing operations 1,053 Discontinued operations: Income (loss) from discontinued operations (net of income tax provision (benefit) of $12 and $(95), respectively) 19 ------------------ Net income $1,072 ==================

Basic income per share: Income from continuing operations $0.04 Income (loss) from discontinued operations - ------------------

Net income $0.04 ==================

Weighted average basic common shares outstanding 28,057 ==================

Diluted income per share: Income from continuing operations $0.04 Loss (loss) from discontinued operations - ------------------

Net income $0.04 ==================

Weighted average diluted common shares outstanding 29,142 ==================

Three Months Ended March 31, 2005 ------------------

Contract revenues $182,917 Cost of revenues 161,273 ------------------ Gross profit 21,644 ------------------ Selling, general and administrative expenses 17,638 Merger related costs 76 Provision (recoveries) of uncollectible accounts 80 Amortization of intangible assets 1,612 ------------------ Income from operations 2,238 Interest income 194 Interest expense and amortization of debt discount (1,456) Other income (expense), net 3,829 ------------------ Income before income taxes 4,805 Income tax expense 1,922 ------------------ Income from continuing operations 2,883 Discontinued operations: Income (loss) from discontinued operations (net of income tax provision (benefit) of $12 and $(95), respectively) (141) ------------------ Net income $2,742 ==================

Basic income per share: Income from continuing operations $0.07 Income (loss) from discontinued operations - ------------------ Net income $0.07 ==================

Weighted average basic common shares outstanding 38,981 ==================

Diluted income per share: Income from continuing operations $0.07 Loss (loss) from discontinued operations - ------------------

Net income $0.07 ==================

Weighted average diluted common shares outstanding 39,794 ==================

    INFRASOURCE SERVICES, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets
    (In thousands, except share amounts)

December 31, 2004 ------------ ASSETS Current assets: Cash and cash equivalents $ 21,781 Restricted cash 5,000 Contract receivables (less allowances for doubtful accounts of $3,305 and $3,303, respectively) 109,099 Costs and estimated earnings in excess of billings 59,517 Inventories 13,567 Deferred income taxes 2,970 Other current assets 9,037 Current assets - discontinued operations 2,019 ------------ Total current assets 222,990 ------------ Property and equipment (less accumulated depreciation of $30,754 and $36,560, respectively) 144,670 Goodwill 134,478 Intangible assets (less accumulated amortization of $14,950 and $15,661, respectively) 6,795 Deferred charges and other assets, net 11,766 Deferred income taxes 1,265 Noncurrent assets - discontinued operations 516 ------------ Total assets $ 522,480 ============

Current liabilities: Current portion of long-term debt and capital lease obligations $ 900 Revolving credit facility borrowings - Other liabilities - related parties 3,904 Accounts payable 35,292 Accrued compensation and benefits 17,525 Other current and accrued liabilities 19,549 Accrued insurance reserves 26,042 Billings in excess of costs and estimated earnings 10,728 Deferred revenues 8,710 Current liabilities - discontinued operations 1,304 ------------ Total current liabilities 123,954 ------------ Long-term debt, net of current portion 83,878 Long-term debt - related party 1,000 Deferred revenues 16,935 Other long-term liabilities - related parties 8,493 Other long-term liabilities 4,226 Non-current liabilities - discontinued operations 11 ------------ Total liabilities 238,497 ------------

Commitments and contingencies Shareholders' equity: Preferred stock, $.001 par value (authorized - 12,000,000 shares; 0 shares issued and outstanding) - Common stock $.001 par value (authorized - 120,000,000 shares; issued and outstanding - 38,942,728 and 39,001,456, respectively) 39 Additional paid-in capital 272,954 Deferred compensation (329) Retained earnings 10,911 Accumulated other comprehensive income 408 ------------ Total shareholders' equity 283,983 ------------ Total liabilities and shareholders' equity $ 522,480 ============

March 31, 2005 ------------ ASSETS Current assets: Cash and cash equivalents $ 8,812 Restricted cash - Contract receivables (less allowances for doubtful accounts of $3,305 and $3,303, respectively) 103,435 Costs and estimated earnings in excess of billings 83,410 Inventories 13,123 Deferred income taxes 1,672 Other current assets 10,102 Current assets - discontinued operations 2,081 ------------ Total current assets 222,635 ------------ Property and equipment (less accumulated depreciation of $30,754 and $36,560, respectively) 146,979 Goodwill 134,484 Intangible assets (less accumulated amortization of $14,950 and $15,661, respectively) 5,183 Deferred charges and other assets, net 12,767 Deferred income taxes 877 Noncurrent assets - discontinued operations 635 ------------ Total assets $ 523,560 ============

Current liabilities: Current portion of long-term debt and capital lease obligations $ 889 Revolving credit facility borrowings 6,000 Other liabilities - related parties 13,103 Accounts payable 31,952 Accrued compensation and benefits 15,039 Other current and accrued liabilities 17,998 Accrued insurance reserves 26,419 Billings in excess of costs and estimated earnings 9,287 Deferred revenues 8,091 Current liabilities - discontinued operations 1,626 ------------ Total current liabilities 130,404 ------------ Long-term debt, net of current portion 83,657 Long-term debt - related party 1,000 Deferred revenues 16,671 Other long-term liabilities - related parties - Other long-term liabilities 4,392 Non-current liabilities - discontinued operations 11 ------------ Total liabilities 236,135 ------------

Commitments and contingencies Shareholders' equity: Preferred stock, $.001 par value (authorized - 12,000,000 shares; 0 shares issued and outstanding) - Common stock $.001 par value (authorized - 120,000,000 shares; issued and outstanding - 38,942,728 and 39,001,456, respectively) 39 Additional paid-in capital 273,396 Deferred compensation (302) Retained earnings 13,653 Accumulated other comprehensive income 639 ------------ Total shareholders' equity 287,425 ------------ Total liabilities and shareholders' equity $ 523,560 ============

    INFRASOURCE SERVICES, INC. AND SUBSIDIARIES
    Reconciliation of GAAP and Non-GAAP Financial Measures
    (Unaudited)
    (In thousands)

    We believe investors' understanding of our operating performance is enhanced by disclosing income as adjusted, EBITDA from continuing operations, and EBITDA from continuing operations as adjusted. We present these non-GAAP financial measures primarily as supplemental performance measures because we believe they facilitate operating performance comparisons from period to period and company to company as they exclude items that we believe are not representative of our core operations. In addition, we believe that these measures are used by financial analysts as measures of financial performance of us and other companies in our industry. These non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.
    We define income as adjusted as GAAP net income, adjusted to exclude certain significant items. For the periods shown in this press release, the significant items include discontinued operations, expenses associated with the September 2003 acquisition of InfraSource Incorporated, income relating to the reversal of a litigation judgment entered against the Company in connection with a proposed 1999 acquisition, amortization of intangibles arising from acquisitions, and expenses relating to our initial public offering. We define EBITDA from continuing operations as net income before discontinued operations, income tax expense, interest expense, interest income, depreciation and amortization for the periods shown. We define EBITDA from continuing operations as adjusted as EBITDA from continuing operations, adjusted for certain significant items. For the periods shown in this press release, the significant items include expenses associated with the acquisition of InfraSource Incorporated, income relating to the reversal of a litigation judgment entered against the Company in connection with a proposed 1999 acquisition, and expenses relating to our initial public offering.
    Because these measures facilitate internal comparison of our historical financial position and operating performance on a more consistent basis, we also use these measures for business planning and analysis purposes, in measuring our performance relative to that of our competitors and/or in evaluating acquisition opportunities.

Three Months Three Months Ended Ended March 31, March 31, 2004 2005 ----------------- ----------------

Net income (GAAP) $ 1,072 $ 2,742

Loss (income) on discontinued operations (19) 141

Merger related expenses - 46

Litigation judgment reversal - (2,271)

Amortization of intangible assets relating to purchase accounting 2,682 967

IPO related expenses 982 -

----------------- ---------------- Income as adjusted (a non-GAAP financial measure) $ 4,717 $ 1,625 ================= ================

    INFRASOURCE SERVICES, INC. AND SUBSIDIARIES
    Reconciliation of GAAP and Non-GAAP Financial Measures
    (Unaudited)
    (In thousands)

Three Months Three Months Ended Ended March 31, March 31, 2004 2005 ---------------- ----------------

Net income (GAAP) $ 1,072 $ 2,742

Loss (income) on discontinued operations (net of tax) (19) 141

Income tax expense 732 1,922

Interest expense 3,352 1,456

Interest income (54) (194)

Depreciation 5,563 6,826

Amortization of intangible assets relating to purchase accounting 4,547 1,612 ---------------- ----------------

EBITDA from continuing operations (a non-GAAP financial measure) 15,193 14,505 ---------------- ----------------

Merger related expenses - 76

Litigation judgment reversal - (3,785)

IPO related expenses 1,665 -

---------------- ---------------- EBITDA from continuing operations as adjusted (a non-GAAP financial measure) $ 16,858 $ 10,796 ================ ================

--30--JG/lo*

CONTACT: InfraSource Services, Inc. Terence R. Montgomery, 610-480-8000 terry.montgomery@infrasourceinc.com or Laura Martin, 212-889-4350 laura.martin@taylor-rafferty.com

KEYWORD: PENNSYLVANIA INDUSTRY KEYWORD: UTILITIES EARNINGS CONFERENCE CALLS SOURCE: InfraSource Services, Inc.

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