InfraSource Services, Inc. Reports Third Quarter 2006 Results

MEDIA, Pa., Nov. 1 /PRNewswire-FirstCall/ -- InfraSource Services, Inc. , one of the largest specialty contractors servicing electric, natural gas and telecommunications infrastructure in the United States, today announced earnings of $0.27 per diluted share for the third quarter ended September 30, 2006, above the upper end of previously announced net income guidance of $0.22 to $0.25 per diluted share.

Third Quarter Results

Revenues for the third quarter 2006 increased $49.3 million, or 22%, to $275.9 million, compared to $226.6 million for the same quarter in 2005 due primarily to growth in electric end market revenues. Net income for the third quarter 2006 was $10.8 million, or $0.27 per diluted share, versus $6.6 million, or $0.16 per diluted share, for the third quarter last year.

EBITDA from continuing operations (non-GAAP) for the third quarter 2006 was $27.0 million compared to $19.4 million for the third quarter 2005, an increase of 39%.

Reconciliations of net income to our non-GAAP financial measures are included in the attached tables. Excluding the items in the attached table, income as adjusted (non-GAAP) was $11.7 million for the third quarter 2006 versus $6.0 million for the same quarter in 2005 and EBITDA as adjusted (non- GAAP) increased $8.2 million, or 42%, to $27.9 million for the third quarter 2006 versus $19.7 million for the third quarter a year ago.

Backlog & New Awards

At the end of the third quarter 2006, total backlog was $802 million, which was comparable to the end of the third quarter 2005. Our electric and telecommunications backlogs increased 10% and 34%, respectively, from the third quarter 2005 to the third quarter 2006, offset by a 41% decrease in natural gas backlog due to the planned exit of certain low margin contracts and shorter than typical durations on the renewals of several of our natural gas master services agreement contracts. Our total backlog was 13% less than at the end of the second quarter 2006. The decrease in our backlog from the second quarter 2006 to the third quarter 2006 is primarily related to seasonal work-off of natural gas backlog (27% decline) and a 20% decline in electric backlog due to the timing of electric project work completions and awards, offset in part by an 11% increase in telecommunications backlog.

Among our awards during the third quarter 2006 were 17 scopes of electrical work totaling $72 million, 6 scopes of natural gas work totaling $11 million and 6 scopes of telecommunications work totaling $47 million.

David Helwig, Chairman, President and Chief Executive Officer, said, "We are very pleased with our results for the quarter as earnings exceeded the upper end of our expectations due primarily to profitable execution of high voltage electric work, as well as reductions in insurance expense due to favorable claims experience. Although our volume of backlog is down pending seasonal master service agreement renewals and new project awards, our backlog mix is strong with a higher proportion of electric and telecommunications work where we continue to target growth. We believe that we are well positioned to benefit from growth opportunities in our end markets; however, as we have said previously, our quarterly revenue and earnings will continue to depend on the timing and scope of contract awards, especially those for large electric projects, and our performance on those contracts."

Nine Months Financial Review

Revenues for the nine months ended September 30, 2006 increased $111.8 million, or 18%, to $744.4 million, compared to $632.6 million for the same period in 2005 due primarily to growth in revenues from our electric and telecommunications end markets and comparable natural gas end market revenues. Net income for the nine months ended September 30, 2006 was $18.6 million, or $0.46 per diluted share, versus net income of $7.9 million, or $0.20 per diluted share, for the same period last year. Net income for the nine months ended September 30, 2006 included the non-cash charge associated with the refinancing of our bank debt of $0.06 per diluted share, stock-based compensation expenses of $0.04 per diluted share pursuant to SFAS 123R and $0.01 per diluted share of amortization of intangible assets.

EBITDA from continuing operations for the nine months ended September 30, 2006 was $57.2 million compared to $42.6 million for the nine months ended September 30, 2005, an increase of 34%.

Excluding the items in the attached table, income as adjusted (non-GAAP) was $23.7 million for the nine months ended September 30, 2006 versus $7.4 million for the same period in 2005 and EBITDA as adjusted (non-GAAP) increased $25.9 million, or 66%, to $65.0 million for the nine months ended September 30, 2006 versus $39.1 million for the same period a year ago.

Conference Call

InfraSource has scheduled a conference call for November 1, 2006 at 9:00AM EST to discuss the results for the quarter and its updated guidance. This conference call will be webcast live on the InfraSource website at http://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 October 31, 2007. For those investors who prefer to participate in the conference call by phone, please dial (480) 629-9562. An audio replay of the conference call will be available shortly after the call through November 8, 2006 by calling (303) 590-3030 and using passcode 3623429. For more information, please contact Mahmoud Siddig at Taylor Rafferty at (212) 889-4350.

About InfraSource

InfraSource Services, Inc. is one of the largest specialty contractors servicing electric, natural gas and telecommunications 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 http://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 known and unknown risks, uncertainties and other factors affecting our business that could cause our actual results to differ materially from those contemplated by the statements. 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 impact of variations between actual and estimated costs under our contracts, particularly our fixed-price contracts; (4) our ability to attract and retain qualified personnel; (5) our ability to successfully bid for and perform large-scale project work in accordance with our estimated costs; (6) work hindrance due to inclement weather events; (7) the definitive award of new contracts and the timing of the performance of those contracts; (8) project delays or cancellations; (9) the failure to meet schedule or performance requirements of our contracts; (10) the uncertainty of implementation of the recently enacted federal energy legislation; (11) the presence of competitors with greater financial resources and the impact of competitive products, services and pricing; (12) successful integration of acquisitions into our business; (13) close out of certain of our projects may or may not occur as anticipated or may be unfavorable to us; and (14) 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 Condensed Consolidated Statements of Income Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2005 2006 2005 2006 (Unaudited) (In thousands, except per share data) Contract revenues $ 226,575 $275,880 $632,645 $744,416 Cost of revenues 194,857 230,832 562,230 634,642 Gross profit 31,718 45,048 70,415 109,774 Selling, general and administrative expenses 20,017 25,910 53,851 71,214 Merger related costs 66 - 218 - Provision for uncollectible accounts 61 5 145 36 Amortization of intangible assets 1,001 254 4,311 748 Income from operations 10,573 18,879 11,890 37,776 Interest income 122 229 328 638 Interest expense (2,170) (1,404) (5,872) (5,197) Write-off of deferred financing costs - - - (4,296) Other income, net 735 882 5,749 2,445 Income from continuing operations before income taxes 9,260 18,586 12,095 31,366 Income tax expense 3,994 7,604 5,188 12,770 Income from continuing operations 5,266 10,982 6,907 18,596 Discontinued operations: Income (loss) from discontinued operations (net of income tax expense (benefit) of $(330), $(110), $(557) and $9, respectively) (490) (151) (799) 28 Gain (loss) on disposition of discontinued operation (net of income tax provision (benefit) of $1,432, $(22), $1,432 and $(22), respectively) 1,790 (33) 1,790 (33) Net income $6,566 $10,798 $7,898 $18,591 Basic income (loss) per share: Income from continuing operations $0.14 $0.28 $0.18 $0.47 Income (loss) from discontinued operations (0.01) (0.01) (0.02) - Gain on disposition of discontinued operation 0.04 - 0.04 - Net income $0.17 $0.27 $0.20 $0.47 Weighted average basic common shares outstanding 39,139 39,778 39,059 39,657 Diluted income (loss) per share: Income from continuing operations $0.13 $0.27 $0.17 $0.46 Income (loss) from discontinued operations (0.01) - (0.01) - Gain on disposition of discontinued operation 0.04 - 0.04 - Net income $0.16 $0.27 $0.20 $0.46 Weighted average diluted common shares outstanding 40,090 40,308 40,008 40,249 INFRASOURCE SERVICES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets December 31, September 30, 2005 2006 (Unaudited) (In thousands, except share data) Current assets: Cash and cash equivalents $ 24,287 $15,834 Contract receivables (less allowances for doubtful accounts of $3,184 and $2,369, respectively) 136,610 164,988 Costs and estimated earnings in excess of billings 84,360 89,970 Inventories 6,747 6,769 Deferred income taxes 4,683 6,152 Other current assets 7,678 5,338 Current assets - discontinued operations 3,033 2,033 Total current assets 267,398 291,084 Property and equipment (less accumulated depreciation of $55,701 and $73,822, respectively) 143,881 147,323 Goodwill 138,054 138,857 Intangible assets (less accumulated amortization of $19,861 and $20,609, respectively) 1,884 1,136 Deferred charges and other assets, net 10,501 6,619 Assets held for sale - 1,245 Non-current assets - discontinued operations 319 1,749 Total assets $562,037 $588,013 Current liabilities: Current portion of long-term debt $889 $46 Other liabilities - related parties 11,299 1,227 Accounts payable 43,570 47,980 Accrued compensation and benefits 20,402 32,830 Other current and accrued liabilities 20,435 26,106 Accrued insurance reserves 30,550 34,907 Billings in excess of costs and estimated earnings 15,012 15,683 Deferred revenues 6,590 6,300 Current liabilities - discontinued operations 1,501 - Total current liabilities 150,248 165,079 Long-term debt, net of current portion 83,019 70,019 Deferred revenues 17,826 17,116 Other long-term liabilities - related party 420 - Deferred income taxes 3,320 3,683 Other long-term liabilities 5,298 5,055 Non-current liabilities - discontinued operations 50 - Total liabilities 260,181 260,952 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 39,396,694 and 39,911,185 shares, respectively, and outstanding - 39,366,824 and 39,881,315, respectively) 39 40 Treasury stock at cost (29,870 shares) (137) (137) Additional paid-in capital 278,387 283,459 Deferred compensation (1,641) - Retained earnings 24,640 43,231 Accumulated other comprehensive income 568 468 Total shareholders' equity 301,856 327,061 Total liabilities and shareholders' equity $562,037 $588,013 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 the following non-GAAP financial measures:

-- Net income, as adjusted ("Income as adjusted"), which we define as GAAP net income, adjusted for certain significant non-core items that, in management's opinion, are not indicative of our core operating performance; -- EBITA from continuing operations before extraordinary items, net ("EBITA from continuing operations"), which we define as net income before discontinued operations, income tax expense, interest expense, interest income and amortization; -- EBITA from continuing operations, as adjusted ("EBITA as adjusted"), which we define as EBITA from continuing operations, adjusted for certain significant items that, in management's opinion, are not indicative of our core operating performance; -- EBITDA from continuing operations before extraordinary items, net ("EBITDA from continuing operations"), which we define as EBITA from continuing operations before depreciation; and -- EBITDA from continuing operations, as adjusted ("EBITDA as adjusted"), which we define as EBITA as adjusted before depreciation.

The significant non-core items for the periods shown are set forth in the tables below. We believe it is helpful to an understanding of our business to assess the effects of these items on our results of operations in order to evaluate our performance from period to period on a more consistent basis. This presentation should not be construed as an indication that similar charges will not recur or that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.

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 certain 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 our financial performance and that of other companies in our industry. Because Income as adjusted, EBITA from continuing operations, EBITDA from continuing operations, EBITA as adjusted and EBITDA as adjusted facilitate internal comparisons 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. In addition, we use certain of these measures in establishing incentive compensation goals and/or determining compliance with covenants in our senior credit facility. We use EBITA from continuing operations and EBITA as adjusted in addition to our other non-GAAP measures because they include all aspects of our equipment charges, including both operating leases and depreciation from owned equipment. We believe these are important measures for analyzing our performance because they eliminate the variation related to lease versus purchase decisions on capital equipment. Because Income as adjusted, EBITA from continuing operations, EBITDA from continuing operations, EBITA as adjusted and EBITDA as adjusted have limitations as analytical tools, you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

-- These measures do not include cash expenditures for capital purchases or contractual commitments; -- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and these measures do not reflect cash requirements for such replacements; -- These measures do not reflect the non-cash costs of our stock-based compensation plans, which are an on-going component of our executive compensation program. -- These measures do not reflect changes in, or cash requirements necessary to service interest or principal payments on, our indebtedness; -- Income as adjusted, EBITA as adjusted and EBITDA as adjusted do not necessarily reflect adjustments for all earnings or charges resulting from matters that we may consider not to be indicative of our core operations; and -- Other companies, including companies in our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure. INFRASOURCE SERVICES, INC. AND SUBSIDIARIES Reconciliation of GAAP and Non-GAAP Financial Measures (Unaudited) (In thousands) Three Months Ended Three Months Ended September 30, 2005 September 30, 2006 Net income (GAAP) $6,566 $10,798 Loss from discontinued operations (net of tax) 490 151 (Gain) loss on disposition of discontinued operation (net of tax) (1,790) 33 Amortization of intangible assets relating to purchase accounting 569 150 Stock compensation expenses 155 561 Income as adjusted (a non-GAAP financial measure) $5,990 $11,693 Three Months Ended Three Months Ended September 30, 2005 September 30, 2006 Net income (GAAP) $6,566 $10,798 Loss from discontinued operations (net of tax) 490 151 (Gain) loss on disposition of discontinued operation (net of tax) (1,790) 33 Income tax expense 3,994 7,604 Interest expense 2,170 1,404 Interest income (122) (229) Amortization of intangible assets relating to purchase accounting 1,001 254 EBITA from continuing operations (a non-GAAP financial measure) 12,309 20,015 Stock compensation expenses 272 949 EBITA as adjusted (a non-GAAP financial measure) $12,581 $20,964 Depreciation 7,086 6,934 EBITDA from continuing operations (a non-GAAP financial measure) $19,395 $26,949 EBITDA as adjusted (a non-GAAP financial measure) $19,667 $ 27,898 INFRASOURCE SERVICES, INC. AND SUBSIDIARIES Reconciliation of GAAP and Non-GAAP Financial Measures (Unaudited) (In thousands) Nine Months Ended Nine Months Ended September 30, 2005 September 30, 2006 Net income (GAAP) $7,898 $ 18,591 Loss (income) from discontinued operations (net of tax) 799 (28) (Gain) loss on disposition of discontinued operation (net of tax) (1,790) 33 Amortization of intangible assets relating to purchase accounting 2,462 443 Litigation judgment reversal (2,161) - Stock compensation expenses 175 1,645 Secondary offering expenses - 437 Write-off of deferred financing costs - 2,547 Income as adjusted (a non-GAAP financial measure) $7,383 $23,668 Nine Months Ended Nine Months Ended September 30, 2005 September 30, 2006 Net income (GAAP) $7,898 $ 18,591 Loss (income) from discontinued operations (net of tax) 799 (28) (Gain) loss on disposition of discontinued operation (net of tax) (1,790) 33 Income tax expense 5,188 12,770 Interest expense 5,872 5,197 Interest income (328) (638) Amortization of intangible assets relating to purchase accounting 4,311 748 EBITA from continuing operations (a non-GAAP financial measure) 21,950 36,673 Litigation judgment reversal (3,785) - Stock compensation expenses 306 2,774 Secondary offering expenses - 737 Write-off of deferred financing costs - 4,296 EBITA as adjusted (a non-GAAP financial measure) $18,471 $44,480 Depreciation 20,624 20,538 EBITDA from continuing operations (a non-GAAP financial measure) $42,574 $57,211 EBITDA as adjusted (a non-GAAP financial measure) $39,095 $65,018 INFRASOURCE SERVICES, INC. AND SUBSIDIARIES Supplemental Financial Data (Unaudited) (In millions) Revenues by End Market Three Months Ended Three Months Ended Increase/ September 30, 2005 September 30, 2006 (decrease) $ % Electric - Transmission $ 35.0 15.4% $ 75.9 27.5% $ 40.9 116.9% - Substation 33.3 14.7% 60.2 21.8% 26.9 80.8% - Other Electric 42.3 18.7% 35.3 12.8% (7.0) -16.5% Subtotal 110.6 48.8% 171.4 62.1% 60.8 55.0% Natural Gas 83.3 36.8% 76.3 27.7% (7.0) -8.4% Telecommunications 27.5 12.1% 26.3 9.5% (1.2) -4.4% Other 5.2 2.3% 1.9 0.7% (3.3) -63.5% Total $226.6 100.0% $275.9 100.0% $ 49.3 21.8% Nine Months Ended Nine Months Ended Increase/ September 30, 2005 September 30, 2006 (decrease) $ % Electric - Transmission $112.6 17.8% $193.1 25.9% $80.5 71.5% - Substation 106.3 16.8% 157.1 21.1% 50.8 47.8% - Other Electric 127.2 20.1% 104.9 14.1% (22.3) -17.5% Subtotal 346.1 54.7% 455.1 61.1% 109.0 31.5% Natural Gas 202.3 32.0% 202.5 27.2% 0.2 0.1% Telecommunications 72.3 11.4% 80.3 10.8% 8.0 11.1% Other 11.9 1.9% 6.5 0.9% (5.4) -45.4% Total $632.6 100.0% $744.4 100.0% $111.8 17.7% Backlog by End Market Increase/ September 30, 2005 September 30, 2006 (decrease) $ % Electric - Transmission $156.8 19.4% $152.4 19.0% $(4.4) -2.8% - Substation 120.7 14.9% 132.2 16.5% 11.5 9.5% - Other Electric 41.5 5.1% 67.2 8.4% 25.7 61.9% Subtotal 319.0 39.4% 351.8 43.9% 32.8 10.3% Natural Gas 304.4 37.6% 180.4 22.5% (124.0) -40.7% Telecommunications 183.7 22.7% 245.5 30.6% 61.8 33.6% Other 3.1 0.4% 24.0 3.0% 20.9 674.2% Total $810.2 100.0% $801.7 100.0% $(8.5) -1.0% Increase/ June 30, 2006 September 30, 2006 (decrease) $ % Electric - Transmission $214.7 23.4% $152.4 19.0% $(62.3) -29.0% - Substation 136.5 14.9% 132.2 16.5% (4.3) -3.2% - Other Electric 88.1 9.6% 67.2 8.4% (20.9) -23.7% Subtotal 439.3 48.0% 351.8 43.9% (87.5) -19.9% Natural Gas 247.4 27.0% 180.4 22.5% (67.0) -27.1% Telecommunications 221.4 24.2% 245.5 30.6% 24.1 10.9% Other 7.7 0.8% 24.0 3.0% 16.3 211.7% Total $915.8 100.0% $801.7 100.0% $(114.1) -12.5% Note: Percentages may not add due to rounding. CONTACT: Terence R. Montgomery 610-480-8000 terry.montgomery@infrasourceinc.com Mahmoud Siddig 212-889-4350 mahmoud.siddig@taylor-rafferty.com