UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



(Mark One)
☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2020~~.

2021.



or
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
						For the transition period from to .



Commission ~~file no.~~File Number:			001-13831

Quanta Services, Inc.

(Exact name of registrant as specified in its charter)



Delaware			74-2851603
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

2800 Post Oak Boulevard, Suite 2600

Houston,, Texas77056

(Address of principal executive offices, including zip code)

(~~713~~) (713) 629-7600

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value

PWR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of August ~~4, 2020,~~3, 2021, the number of outstanding shares of Common Stock of the registrant was ~~138,020,980.~~

139,152,345.

QUANTA SERVICES, INC. AND SUBSIDIARIES

INDEX


				Page
			~~Page~~
	PART I. FINANCIAL INFORMATION
ITEM 1.		Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets		25
		Condensed Consolidated Statements of Operations		36
		Condensed Consolidated Statements of Comprehensive Income (Loss)		47
		Condensed Consolidated Statements of Cash Flows		58
		Condensed Consolidated Statements of Equity		69
		Notes to Condensed Consolidated Financial Statements		811
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		4740
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk		7563
ITEM 4.		Controls and Procedures		7664

		PART II. OTHER INFORMATION
ITEM 1.		Legal Proceedings		7865
ITEM 1A.		Risk Factors		7865
ITEM 2.		Unregistered Sales of Equity Securities and Use of Proceeds		7966
ITEM 3.		Defaults Upon Senior Securities		8066
ITEM 4.		Mine Safety Disclosures		8066
ITEM 5.		Other Information		8066
ITEM 6.		Exhibits		8167
Signature				8268

Cautionary Statement About Forward-Looking Statements and Information

This Quarterly Report on Form 10-Q (Quarterly Report) of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) 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, net income, earnings per share, margins, cash flows, liquidity, weighted average shares outstanding, capital expenditures and tax rates, as well as other projections of operating or financial results;

•Expectations regarding our business or financial outlook;

•Expectations regarding opportunities, technological developments, competitive positioning, future economic and regulatory conditions and other trends in particular markets or industries;

•Expectations regarding the pandemic associated with the novel coronavirus disease that began in 2019 (COVID-19), including the continued and potential impact of the COVID-19 pandemic and of governmental responses to the pandemic on our business, operations, supply chain, personnel, financial condition, results of operations, cash flows and liquidity;

•Expectations regarding our plans and strategies;

•The business plans or financial condition of our customers, including with respect to the COVID-19 pandemic and the transition to a carbon-neutral economy;

•The potential impact of commodity prices and production volumes on our business, financial condition, results of operations, cash flows and demand for our services;

•The potential benefits from, and future financial and operational performance of, acquired businesses and our investments, including our equity interest in LUMA Energy, LLC (LUMA);

•Beliefs and assumptions about the collectability of receivables;

•The expected value of contracts or intended contracts with customers, as well as the scope, services, term or results of any awarded or expected projects;

•The development of and opportunities with respect to future projects, including renewable energy projects and larger electric transmission and pipeline projects;

•Future capital allocation initiatives, including the amount and timing of, and strategies with respect to, any future stock repurchases and expectations regarding the declaration, amount and timing of any future cash dividends;

•The impact of existing or potential legislation or regulation;

•Potential opportunities that may be indicated by bidding activity or similar discussions with customers;

•The future demand for and availability of labor resources in the industries we serve;

•The expected realization of our remaining performance obligations or backlog;

•The expected outcome of pending or threatened legal proceedings; and

•Possible recovery of pending or contemplated insurance claims, change orders and claims asserted against customers or third parties.

These forward-looking statements are not guarantees of future performance, involve or rely on a number of risks, uncertainties, and assumptions that are difficult to predict or are beyond our control, and reflect management’s beliefs and assumptions based on information available 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 inaccurate or incorrect. These statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties, including the following:

•Market, industry, economic, financial or political conditions that are outside of our control, including economic, energy, infrastructure and environmental policies and plans that are adopted or proposed by the U.S. federal and state governments or other governments in territories or countries in which we operate, weakness in the capital markets and the ongoing and potential impact on financial markets and worldwide economic activity of the COVID-19 pandemic and governmental responses thereto;

•Quarterly variations in our operating and financial results, liquidity, financial condition, cash flows, capital requirements, and reinvestment opportunities, including the ongoing and potential impact to our business, operations and supply chains resulting from the COVID-19 pandemic and governmental responses thereto;

•The severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of business and governmental responses thereto on our operations, personnel and supply chains, and on commercial activity and demand across our business and our customers’ businesses, as well as our inability to predict the extent to which the COVID-19 pandemic will adversely impact our business, financial performance, results of operations, financial position, liquidity, cash flows, the price of our securities and the achievement of our strategic objectives;

•Trends and growth opportunities in relevant markets, including our ability to obtain future project awards;

•The time and costs required to exit and resolve outstanding matters related to our Latin American operations, as well as the business and political climate in Latin America;

•Delays, deferrals, reductions in scope or cancellations of anticipated, pending or existing projects as a result of, among other things, the COVID-19 pandemic, weather, regulatory or permitting issues, environmental processes, project performance issues, claimed force majeure events, protests or other political activity, legal challenges, reductions or eliminations in governmental funding or customer capital constraints;

•The effect of commodity prices and commodity production volumes on our operations and growth opportunities and on our customers’ capital programs and demand for our services;

•The successful negotiation, execution, performance and completion of anticipated, pending and existing contracts;

•Risks associated with operational hazards that arise due to the nature of the services we provide and the conditions in which we operate, including, among others, wildfires and explosions;

•Unexpected costs, liabilities, fines or penalties that may arise from legal proceedings, indemnity obligations, reimbursement obligations associated with letters of credit or bonds, multiemployer pension plans (e.g., underfunding of liabilities, termination or withdrawal liability) or other claims or actions asserted against us, including amounts that are not covered by, or are in excess of the coverage under, our third-party insurance;

•Potential unavailability or cancellation of third-party insurance coverage, as well as the exclusion of coverage for certain losses, potential increases in premiums for coverage deemed beneficial to us, or the unavailability of coverage deemed beneficial to us at reasonable and competitive rates (e.g., coverage for wildfire events);

•Damage to our brands or reputation arising as a result of cyber-security breaches, environmental and occupational health and safety matters, corporate scandal, failure to successfully perform a high-profile project, involvement in a catastrophic event (e.g., fire, explosion) or other negative incidents;

•Disruptions in, or failure to adequately protect, our information technology systems;

•Our dependence on suppliers, subcontractors, equipment manufacturers and other third parties and the impact of the COVID-19 pandemic on these service providers;

•Estimates and assumptions related to our financial results, remaining performance obligations and backlog;

•Our ability to attract and the potential shortage of skilled employees, as well as our ability to retain key personnel and qualified employees;

•Our dependence on fixed price contracts and the potential that we incur losses with respect to these contracts, including as a result of inaccurate estimates of project costs or inability to meet project schedule requirements or achieve guaranteed performance or quality standards for a project;

•Adverse weather conditions, natural disasters and other emergencies, including wildfires, pandemics (including the ongoing COVID-19 pandemic), hurricanes, tropical storms, floods, earthquakes and other geological- and weather-related hazards;

•Our ability to generate internal growth;

•Competition in our business, including our ability to effectively compete for new projects and market share;

•The future development of natural resources;

•The failure of existing or potential legislative actions and initiatives to result in increased demand for our services;

•Fluctuations of prices of certain materials used in our and our customers’ businesses, including as a result of inflation, the imposition of tariffs, governmental regulations affecting the sourcing of certain materials and equipment and other changes in U.S. trade relationships with foreign countries;

•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 our participation in joint ventures or similar structures exposes us to liability or harm to our reputation as a result of acts or omissions by our partners;

•Our inability or failure to comply with the terms of our contracts, which may result in additional costs, unexcused delays, warranty claims, failure to meet performance guarantees, damages or contract terminations;

•The inability or refusal of our customers or third-party contractors to pay for services, which could be attributable to, among other things, the COVID-19 pandemic or challenged energy markets, and which could result in our inability to collect our outstanding receivables, failure to recover amounts billed to, or avoidance of certain payments received from, customers in bankruptcy or failure to recover on change orders or contract claims;

•Budgetary or other constraints that may reduce or eliminate tax incentives or government funding for projects, which may result in project delays or cancellations;

•Our inability to successfully complete our remaining performance obligations or realize our backlog;

•Technological advancements and market developments that could reduce demand for our services;

•Risks associated with operating in international markets, including instability of foreign governments, currency exchange fluctuations, and compliance with unfamiliar foreign legal systems and cultural practices, the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws, and complex U.S. and foreign tax regulations and international treaties;

•Our inability to successfully identify, complete, integrate and realize synergies from acquisitions, including the inability to retain key personnel from acquired businesses;

•The potential adverse impact of acquisitions and investments, including the potential increase in risks already existing in our operations and poor performance or decline in value of acquired businesses or investments;

•The adverse impact of impairments of goodwill, other intangible assets, receivables, long-lived assets or investments;

•Difficulties arising from our decentralized management structure;

•The impact of the unionized portion of our workforce on our operations, including labor stoppages or interruptions due to strikes or lockouts;

•An inability to access sufficient funding to finance desired growth and operations, including our ability to access capital markets on favorable terms, as well as fluctuations in the price and trading volume of our common stock, debt covenant compliance, interest rate fluctuations and other factors affecting our financing and investing activities;

•Our ability to obtain bonds, letters of credit and other project security;

•Risks related to the implementation of new information technology systems;

•New or changed tax laws, treaties or regulations;

•Inability to realize deferred tax assets;

•Significant fluctuations in foreign currency exchange rates; and

•The other risks and uncertainties described elsewhere herein and in Item 1A. Risk Factors of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Annual Report) and as may be detailed from time to time in our other public filings with the U.S. Securities and Exchange Commission (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. Although forward-looking statements reflect our good faith beliefs at the time they are made, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. 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.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)


	June 30, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	212,473	$	184,620
Accounts receivable, net of allowances of $39,713 and $16,546	2,570,457		2,716,083
Contract assets	669,313		453,832
Inventories	62,154		50,472
Prepaid expenses and other current assets	219,538		183,382

Total current assets	3,733,935		3,588,389
Property and equipment, net of accumulated depreciation of $1,461,570 and $1,372,132	1,606,057		1,560,656
Operating lease right-of-use assets	239,721		256,845
Other assets, net	600,819		435,713
Other intangible assets, net of accumulated amortization of $562,274 and $517,574	403,931		435,655
Goodwill	2,136,133		2,121,014

Total assets	$	8,720,596	$	8,398,272
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt and short-term debt	$	11,176	$	14,764
Current portion of operating lease liabilities	81,404		85,134
Accounts payable and accrued expenses	1,535,334		1,509,794
Contract liabilities	503,219		528,864

Total current liabilities	2,131,133		2,138,556
Long-term debt, net of current maturities	1,353,542		1,174,294
Operating lease liabilities, net of current portion	166,280		178,822
Deferred income taxes	187,582		166,407
Insurance and other non-current liabilities	392,265		391,221

Total liabilities	4,230,802		4,049,300
Commitments and Contingencies	0		0
Equity:
Common stock, $0.00001 par value, 600,000,000 shares authorized, 164,880,628 and 162,710,792 shares issued, and 139,197,724 and 138,300,191 shares outstanding	2		2
Additional paid-in capital	2,208,905		2,170,026
Retained earnings	3,454,682		3,264,967
Accumulated other comprehensive loss	(216,563)		(232,997)
Treasury stock, 25,682,904 and 24,410,601 common shares	(960,294)		(857,817)
Total stockholders’ equity	4,486,732		4,344,181
Non-controlling interests	3,062		4,791
Total equity	4,489,794		4,348,972
Total liabilities and equity	$	8,720,596	$	8,398,272

June 30,
2020 December 31,
2019
ASSETS
Current Assets:

Cash and cash equivalents $ 530,670
$ 164,798
Accounts receivable, net of allowances of $14,948 and $9,398 2,370,286
2,747,911
Contract assets 489,803
601,268
Inventories 48,274
55,719
Prepaid expenses and other current assets 205,722
261,290
Total current assets 3,644,755
3,830,986
Property and equipment, net of accumulated depreciation of $1,298,054 and $1,250,197 1,379,687
1,386,654
Operating lease right-of-use assets 275,816
284,369
Other assets, net 386,068
393,264
Other intangible assets, net of accumulated amortization of $469,006 and $437,886 380,309
413,734
Goodwill 2,022,995
2,022,675
Total assets $ 8,089,630
$ 8,331,682
LIABILITIES AND EQUITY
Current Liabilities:

Current maturities of long-term debt and short-term debt $ 71,837
$ 74,869
Current portion of operating lease liabilities 90,358
92,475
Accounts payable and accrued expenses 1,317,976
1,489,559
Contract liabilities 613,188
606,146
Total current liabilities 2,093,359
2,263,049
Long-term debt, net of current maturities 1,315,556
1,292,195
Operating lease liabilities, net of current portion 192,300
196,521
Deferred income taxes 220,689
214,779
Insurance and other non-current liabilities 349,724
311,307
Total liabilities 4,171,628
4,277,851
Commitments and Contingencies

Equity:

Common stock, $.00001 par value, 600,000,000 shares authorized, 161,368,227 and 159,415,540 shares issued, and 137,711,812 and 142,324,318 shares outstanding 2
2
Exchangeable shares, no par value, 0 and 36,183 shares issued and outstanding —
—
Additional paid-in capital 2,063,100
2,024,610
Retained earnings 2,948,180
2,854,271
Accumulated other comprehensive loss (290,049 ) (241,818 )
Treasury stock, 23,656,415 and 17,091,222 common shares (806,804 ) (586,773 )
Total stockholders’ equity 3,914,429
4,050,292
Non-controlling interests 3,573
3,539
Total equity 3,918,002
4,053,831
Total liabilities and equity $ 8,089,630
$ 8,331,682

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues	$	2,999,816	$	2,506,231	$	5,703,397	$	5,270,326
Cost of services (including depreciation)	2,552,105		2,150,967		4,882,796		4,582,866
Gross profit	447,711		355,264		820,601		687,460
Equity in earnings of integral unconsolidated affiliates	7,450		1,045		12,633		1,045
Selling, general and administrative expenses	(270,110)		(227,852)		(513,462)		(458,645)
Amortization of intangible assets	(21,291)		(17,779)		(42,646)		(35,687)
Asset impairment charges	(2,319)		0		(2,319)		0
Change in fair value of contingent consideration liabilities	210		2,238		573		(520)
Operating income	161,651		112,916		275,380		193,653
Interest expense	(13,109)		(8,654)		(25,584)		(22,660)
Interest income	2,909		275		3,026		1,034
Other income (expense), net	8,471		3,247		12,143		(6,580)
Income before income taxes	159,922		107,784		264,965		165,447
Provision for income taxes	40,951		32,989		54,675		49,149


Net income	118,971		74,795		210,290		116,298
Less: Net income attributable to non-controlling interests	1,938		849		3,496		3,666
Net income attributable to common stock	$	117,033	$	73,946	$	206,794	$	112,632

Earnings per share attributable to common stock:
Basic	$	0.83	$	0.53	$	1.48	$	0.79
Diluted	$	0.81	$	0.52	$	1.43	$	0.78

Shares used in computing earnings per share:
Weighted average basic shares outstanding	140,276		139,856		140,199		142,154
Weighted average diluted shares outstanding	144,607		143,521		144,523		145,213

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenues $ 2,506,231
$ 2,839,199
$ 5,270,326
$ 5,646,458
Cost of services (including depreciation) 2,150,967
2,519,694
4,582,866
4,962,972
Gross profit 355,264
319,505
687,460
683,486
Equity in earnings of integral unconsolidated affiliates 1,045
—
1,045
—
Selling, general and administrative expenses (227,852 ) (223,944 ) (458,645 ) (455,852 )
Amortization of intangible assets (17,779 ) (12,610 ) (35,687 ) (25,280 )
Change in fair value of contingent consideration liabilities 2,238
(4,371 ) (520 ) (4,287 )
Operating income 112,916
78,580
193,653
198,067
Interest expense (8,654 ) (15,821 ) (22,660 ) (29,697 )
Interest income 275
267
1,034
576
Other income (expense), net 3,247
6,521
(6,580 ) 65,480
Income before income taxes 107,784
69,547
165,447
234,426
Provision for income taxes 32,989
41,088
49,149
84,932
Net income 74,795
28,459
116,298
149,494
Less: Net income attributable to non-controlling interests 849
1,115
3,666
1,662
Net income attributable to common stock $ 73,946
$ 27,344
$ 112,632
$ 147,832

Earnings per share attributable to common stock:
Basic $ 0.53
$ 0.19
$ 0.79
$ 1.02
Diluted $ 0.52
$ 0.19
$ 0.78
$ 1.01

Shares used in computing earnings per share:
Weighted average basic shares outstanding 139,856
145,935
142,154
145,525
Weighted average diluted shares outstanding 143,521
147,241
145,213
146,865

Cash dividends declared per common share $ 0.05
$ 0.04
$ 0.10
$ 0.08

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	118,971	$	74,795	$	210,290	$	116,298
Other comprehensive income (loss), net of tax provision:
Foreign currency translation adjustment, net of tax of $0, $0, $0 and $0	7,888		34,737		16,420		(48,231)
Other, net of tax of $1, $0, $3 and $0	7		0		14		0
Other comprehensive income (loss)	7,895		34,737		16,434		(48,231)
Comprehensive income	126,866		109,532		226,724		68,067
Less: Comprehensive income attributable to non-controlling interests	1,938		849		3,496		3,666
Total comprehensive income attributable to common stock	$	124,928	$	108,683	$	223,228	$	64,401

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Net income $ 74,795
$ 28,459
$ 116,298
$ 149,494
Other comprehensive income (loss), net of tax provision:
Foreign currency translation adjustment, net of tax of $0, $0, 0 and $0 34,737
15,891
(48,231 ) 34,754
Other, net of tax of $0, $5, $0 and $11 —
(19 ) —
(35 )
Other comprehensive income (loss) 34,737
15,872
(48,231 ) 34,719
Comprehensive income 109,532
44,331
68,067
184,213
Less: Comprehensive income attributable to non-controlling interests 849
1,115
3,666
1,662
Total comprehensive income attributable to common stock $ 108,683
$ 43,216
$ 64,401
$ 182,551

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Cash Flows from Operating Activities:
Net income	$	118,971	$	74,795	$	210,290	$	116,298
Adjustments to reconcile net income to net cash provided by operating activities—

Depreciation	62,757		54,526		124,864		108,936
Amortization of intangible assets	21,291		17,779		42,646		35,687
Asset impairment charges	2,319		0		2,319		0
Impairment of cost method investment	0		9,311		0		9,311
Change in fair value of contingent consideration liabilities	(210)		(2,238)		(573)		520
Equity in (earnings) losses of unconsolidated affiliates	(8,108)		4,784		(13,976)		7,467
Amortization of debt discount and issuance costs	844		588		1,690		1,177
Gain on sale of property and equipment	(4,872)		(1,158)		(9,854)		(1,972)
Provision for credit losses	23,877		1,071		23,920		1,344
Deferred income tax provision (benefit)	14,253		(5,993)		16,747		(1,783)
Non-cash stock-based compensation	23,923		21,980		42,610		36,892
Foreign currency gain	(1,054)		(3,084)		(1,630)		(3,437)
Payments for contingent consideration liabilities	0		(590)		0		(590)
Changes in operating assets and liabilities, net of non-cash transactions	(65,043)		325,708		(124,492)		415,178
Net cash provided by operating activities	188,948		497,479		314,561		725,028
Cash Flows from Investing Activities:
Capital expenditures	(74,898)		(48,148)		(158,384)		(116,257)
Proceeds from sale of property and equipment	11,447		7,826		18,670		12,616
Proceeds from insurance settlements related to property and equipment	273		0		280		198
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired	(35,334)		(1,643)		(68,112)		(24,437)
Proceeds from disposition of businesses	0		8,387		0		10,861
Investments in unconsolidated affiliates and other	(342)		(3,068)		(114,324)		(8,760)
Cash received from investments in unconsolidated affiliates and other entities	2,807		32		3,017		32
Cash paid for intangible assets	(324)		0		(324)		0
Net cash used in investing activities	(96,371)		(36,614)		(319,177)		(125,747)
Cash Flows from Financing Activities:
Borrowings under credit facility	1,055,583		500,727		1,884,079		1,975,179
Payments under credit facility	(1,058,022)		(782,987)		(1,714,840)		(1,954,046)


Payments of other long-term debt	(757)		(537)		(1,614)		(983)
Net repayments of short-term debt, net of borrowings	0		(1,620)		(4,247)		(4,419)

Payments for contingent consideration liabilities	0		(9,410)		(263)		(10,399)
Distributions to non-controlling interests	(4,121)		(1,962)		(5,250)		(3,925)
Payments related to tax withholding for stock-based compensation	(36,572)		(7,687)		(60,493)		(23,573)
Payment of dividends	(8,415)		(7,160)		(17,213)		(14,544)
Repurchase of common stock	(29,449)		0		(48,923)		(200,000)
Net cash provided by (used in) financing activities	(81,753)		(310,636)		31,236		(236,710)






Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	1,276		986		1,287		537
Net increase in cash, cash equivalents and restricted cash	12,100		151,215		27,907		363,108
Cash, cash equivalents and restricted cash, beginning of period	202,615		381,638		186,808		169,745
Cash, cash equivalents and restricted cash, end of period	$	214,715	$	532,853	$	214,715	$	532,853

Three Months Ended Six Months Ended
June 30, June 30,
2020
2019 2020 2019
Cash Flows from Operating Activities:

Net income $ 74,795
$ 28,459
$ 116,298
$ 149,494
Adjustments to reconcile net income to net cash provided by (used in) operating activities—

Depreciation 54,526
53,811
108,936
106,027
Amortization of intangible assets 17,779
12,610
35,687
25,280
Impairment of cost method investment 9,311
—
9,311
—
Change in fair value of contingent consideration liabilities (2,238 ) 4,371
520
4,287
Equity in (earnings) losses of unconsolidated affiliates 4,784
(1,757 ) 7,467
(62,147 )
Amortization of debt issuance costs 588
408
1,177
816
Gain on sale of property and equipment (1,158 ) (2,411 ) (1,972 ) (2,470 )
Provision for credit losses 1,071
416
1,344
3,239
Deferred income tax provision (benefit) (5,993 ) 19,573
(1,783 ) 44,131
Non-cash stock-based compensation 21,980
14,484
36,892
27,496
Foreign currency and other gain (3,084 ) (3,135 ) (3,437 ) (1,918 )
Payments for contingent consideration liabilities (590 ) —
(590 ) —
Changes in operating assets and liabilities, net of non-cash transactions 325,708
(235,493 ) 415,178
(485,649 )
Net cash provided by (used in) operating activities 497,479
(108,664 ) 725,028
(191,414 )
Cash Flows from Investing Activities:

Capital expenditures (48,148 ) (72,775 ) (116,257 ) (141,401 )
Proceeds from sale of property and equipment 7,826
8,550
12,616
19,393
Proceeds from insurance settlements related to property and equipment —
3
198
11
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired (1,643 ) (3,780 ) (24,437 ) (55,333 )
Proceeds from disposition of businesses 8,387
—
10,861
—
Investments in unconsolidated affiliates and other entities (3,068 ) (127 ) (8,760 ) (37,930 )
Cash received from investments in unconsolidated affiliates and other entities 32
—
32
—
Cash paid for intangible assets —
(42 ) —
(67 )
Net cash used in investing activities (36,614 ) (68,171 ) (125,747 ) (215,327 )
Cash Flows from Financing Activities:

Borrowings under credit facility 500,727
1,068,439
1,975,179
2,715,513
Payments under credit facility (782,987 ) (901,396 ) (1,954,046 ) (2,248,838 )
Payments of other long-term debt (537 ) (222 ) (983 ) (483 )
Net repayments of short-term debt, net of borrowings (1,620 ) 7,304
(4,419 ) (15,916 )
Payments for contingent consideration liabilities (9,410 ) —
(10,399 ) —
Distributions to non-controlling interests (1,962 ) (1,092 ) (3,925 ) (1,620 )
Payments related to tax withholding for stock-based compensation (7,687 ) (1,666 ) (23,573 ) (15,344 )
Payment of dividends (7,160 ) (5,830 ) (14,544 ) (11,582 )
Repurchase of common stock —
(159 ) (200,000 ) (20,092 )
Net cash provided by (used in) financing activities (310,636 ) 165,378
(236,710 ) 401,638

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 986
82
537
(36 )
Net increase (decrease) in cash, cash equivalents and restricted cash 151,215
(11,375 ) 363,108
(5,139 )
Cash, cash equivalents and restricted cash, beginning of period 381,638
89,492
169,745
83,256
Cash, cash equivalents and restricted cash, end of period $ 532,853
$ 78,117
$ 532,853
$ 78,117

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)


								Accumulated
				Additional				Other				Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		Treasury		Stockholders’		Controlling		Total
	Shares	Amount		Capital		Earnings		Income (Loss)		Stock		Equity		Interests		Equity
Balance, December 31, 2020	138,300,191	$	2	$	2,170,026	$	3,264,967	$	(232,997)	$	(857,817)	$	4,344,181	$	4,791	$	4,348,972
Other comprehensive income	—	—		—		—		8,539		—		8,539		—		8,539

Stock-based compensation activity	1,368,739	—		13,702		—		—		(55,101)		(41,399)		—		(41,399)
Common stock repurchases	(222,081)	—		—		—		—		(17,710)		(17,710)		—		(17,710)
Dividends declared ($0.06 per share)	—	—		—		(8,429)		—		—		(8,429)		—		(8,429)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(1,129)		(1,129)

Net income	—	—		—		89,761		—		—		89,761		1,558		91,319
Balance, March 31, 2021	139,446,849	2		2,183,728		3,346,299		(224,458)		(930,628)		4,374,943		5,220		4,380,163
Other comprehensive income	—	—		—		—		7,895		—		7,895		—		7,895
Stock-based compensation activity	64,600	—		25,177		—		—		(216)		24,961		—		24,961
Common stock repurchases	(313,725)	—		—		—		—		(29,450)		(29,450)		—		(29,450)
Dividends declared ($0.06 per share)	—	—		—		(8,650)		—		—		(8,650)		—		(8,650)
Distributions to non-controlling interests	—	—		—		—		—		—		—		(4,121)		(4,121)
Other	—	—		—		—		—		—		—		25		25
Net income	—	—		—		117,033		—		—		117,033		1,938		118,971
Balance, June 30, 2021	139,197,724	$	2	$	2,208,905	$	3,454,682	$	(216,563)	$	(960,294)	$	4,486,732	$	3,062	$	4,489,794

Accumulated
Exchangeable Additional Other Total
Common Stock Shares Paid-In Retained Comprehensive Treasury Stockholders' Non-controlling Total
Shares Amount Shares Amount Capital Earnings Income (Loss) Stock Equity Interests Equity
Balance, December 31, 2019 142,324,318
$ 2
36,183
$ —
$ 2,024,610
$ 2,854,271
$ (241,818 ) $ (586,773 ) $ 4,050,292
$ 3,539
$ 4,053,831
Credit loss cumulative effect adjustment —
—
—
—
—
(3,841 ) —
—
(3,841 ) —
(3,841 )
Other comprehensive loss —
—
—
—
—
—
(82,968 ) —
(82,968 ) —
(82,968 )
Acquisitions 121,089
4,329
—
4,329
—
4,329
Stock-based compensation activity 1,124,530
—
—
—
11,444
—
—
(19,750 ) (8,306 ) —
(8,306 )
Exchange of exchangeable shares 36,183
—
(36,183 ) —
—
—
—
—
—
—
—
Common stock repurchases (5,960,134 ) —
—
—
—
—
—
(200,000 ) (200,000 ) —
(200,000 )
Dividends declared —
—
—
—
—
(7,184 ) —
—
(7,184 ) —
(7,184 )
Distributions to non-controlling interests —
—
—
—
—
—
—
—
—
(1,963 ) (1,963 )
Other —
—
—
—
—
(516 ) —
—
(516 ) 293
(223 )
Net income —
—
—
—
—
38,686
—
—
38,686
2,817
41,503
Balance, March 31, 2020 137,645,986
2
—
—
2,040,383
2,881,416
(324,786 ) (806,523 ) 3,790,492
4,686
3,795,178
Other comprehensive income —
—
—
—
—
—
34,737
—
34,737
—
34,737
Stock-based compensation activity 65,826
—
—
—
22,717
—
—
(281 ) 22,436
—
22,436
Dividends declared —
—
—
—
—
(7,182 ) —
—
(7,182 ) —
(7,182 )
Distributions to non-controlling interests —
—
—
—
—
—
—
—
—
(1,962 ) (1,962 )
Net income —
—
—
—
—
73,946
—
—
73,946
849
74,795
Balance, June 30, 2020 137,711,812
$ 2
—
$ —
$ 2,063,100
$ 2,948,180
$ (290,049 ) $ (806,804 ) $ 3,914,429
$ 3,573
$ 3,918,002

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)


											Accumulated
				Exchangeable			Additional				Other				Total		Non-
	Common Stock			Shares			Paid-In		Retained		Comprehensive		Treasury		Stockholders’		Controlling		Total
	Shares	Amount		Shares	Amount		Capital		Earnings		Income (Loss)		Stock		Equity		Interests		Equity

Balance, December 31, 2019	142,324,318	$	2	36,183	$	0	$	2,024,610	$	2,854,271	$	(241,818)	$	(586,773)	$	4,050,292	$	3,539	$	4,053,831
Credit loss cumulative effect adjustment	—	—		—	—		—		(3,841)		—		—		(3,841)				(3,841)
Other comprehensive loss	—	—		—	—		—		—		(82,968)		—		(82,968)		—		(82,968)
Acquisitions	121,089	—		—	—		4,329		—		—		—		4,329				4,329
Stock-based compensation activity	1,124,530	—		—	—		11,444		—		—		(19,750)		(8,306)		—		(8,306)
Exchange of exchangeable shares	36,183	—		(36,183)	—		—		—		—		—		—		—		—
Common stock repurchases	(5,960,134)	—		—	—		—		—				(200,000)		(200,000)		—		(200,000)
Dividends declared ($0.05 per share)	—	—		—	—		—		(7,184)		—		—		(7,184)		—		(7,184)
Distributions to non-controlling interests	—	—		—	—		—		—		—		—		—		(1,963)		(1,963)
Other	—	—		—	—		—		(516)		—		—		(516)		293		(223)
Net income	—	—		—	—		—		38,686		—		—		38,686		2,817		41,503
Balance, March 31, 2020	137,645,986	2		0	0		2,040,383		2,881,416		(324,786)		(806,523)		3,790,492		4,686		3,795,178
Other comprehensive income	—	—		—	—		—		—		34,737		—		34,737		—		34,737
Stock-based compensation activity	65,826	—		—	—		22,717		—		—		(281)		22,436		—		22,436
Dividends declared ($0.05 per share)	—	—		—	—		—		(7,182)		—		—		(7,182)		—		(7,182)
Distributions to non-controlling interests	—	—		—	—		—		—		—		—		—		(1,962)		(1,962)
Net income	—	—		—	—		—		73,946		—		—		73,946		849		74,795
Balance, June 30, 2020	137,711,812	$	2	0	$	0	$	2,063,100	$	2,948,180	$	(290,049)	$	(806,804)	$	3,914,429	$	3,573	$	3,918,002

Accumulated
Exchangeable Series G Additional Other Total
Common Stock Shares Preferred Stock Paid-In Retained Comprehensive Treasury Stockholders' Non-controlling Total
Shares Amount Shares Amount Shares Amount Capital Earnings Income (Loss) Stock Equity Interests Equity
Balance, December 31, 2018 141,103,900
$ 2
486,112
$ —
1
$ —
$ 1,967,354
$ 2,477,291
$ (286,048 ) $ (554,440 ) $ 3,604,159
$ 1,294
$ 3,605,453
Other comprehensive income —
—
—
—
—
—
—
—
18,847
—
18,847
—
18,847
Stock-based compensation activity 903,082
—
—
—
—
—
17,151
—
—
(19,052 ) (1,901 ) —
(1,901 )
Exchange of exchangeable shares 449,929
—
(449,929 ) —
—
—
—
—
—
—
—
—
—
Retirement of preferred stock —
—
—
—
(1 ) —
—
—
—
—
—
—
—
Common stock repurchases (375,536 ) —
—
—
—
—
—
—

(11,953 ) (11,953 ) —
(11,953 )
Dividends declared —
—
—
—
—
—
—
(5,896 ) —
—
(5,896 ) —
(5,896 )
Distributions to non-controlling interests —
—
—
—
—
—
—
—
—
—
—
(528 ) (528 )
Net income —
—
—
—
—
—
—
120,488
—
—
120,488
547
121,035
Balance, March 31, 2019 142,081,375
2
36,183
—
—
—
1,984,505
2,591,883
(267,201 ) (585,445 ) 3,723,744
1,313
3,725,057
Other comprehensive income —
—
—
—
—
—
—
—
15,872
—
15,872
—
15,872
Stock-based compensation activity 85,590
—
—
—
—
—
14,957
—
—
(761 ) 14,196
—
14,196
Dividends declared —
—
—
—
—
—
—
(6,233 ) —
—
(6,233 ) —
(6,233 )
Distributions to non-controlling interests —
—
—
—
—
—
—
—
—
—
—
(1,092 ) (1,092 )
Net income —
—
—
—
—
—
—
27,344
—
—
27,344
1,115
28,459
Balance, June 30, 2019 142,166,965
$ 2
36,183
$ —
—
$ —
$ 1,999,462
$ 2,612,994
$ (251,329 ) $ (586,206 ) $ 3,774,923
$ 1,336
$ 3,776,259

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	~~BUSINESS AND ORGANIZATION:~~

1. BUSINESS AND ORGANIZATION:

Quanta Services, Inc. ~~(Quanta)~~(together with its subsidiaries, Quanta) is a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric ~~power,~~and gas utility, communications, pipeline and energy ~~and communications~~ industries in the United States, Canada, Australia and select other international markets. Quanta reports its results under 2 reportable segments: (1) Electric Power Infrastructure ~~Services~~Solutions and (2) ~~Pipeline~~Underground Utility and ~~Industrial~~ Infrastructure ~~Services.~~Solutions.

Electric Power Infrastructure ~~Services~~Solutions Segment

The Electric Power Infrastructure ~~Services~~Solutions segment provides comprehensive network solutions to customers in the electric power ~~industry.~~and other industries. Services performed by the Electric Power Infrastructure ~~Services~~Solutions segment generally include the design, ~~installation,~~new construction, upgrade and repair and maintenance of electric power transmission and distribution infrastructure and substation facilities, along with other engineering and technical services. This includes solutions that support the implementation of upgrades by utilities to modernize and harden the electric power grid in order to ensure its safety and enhance reliability. In addition, this segment provides engineering and construction services for switchyards and transmission infrastructure needed to interconnect renewable energy generation, including solar, wind, hydro power and backup natural gas generation facilities. This segment also provides emergency restoration services, including the repair of infrastructure damaged by fire and inclement weather; the energized installation, maintenance and upgrade of electric power infrastructure utilizing unique bare hand and hot stick methods and Quanta’s proprietary robotic arm techniques; and the installation of “smart grid” technologies on electric power networks. ~~In addition, this segment provides~~Engineering and construction services that support the development of renewable energy generation, including solar, wind, hydro power and backup natural gas generation facilities, as well as related switchyards and transmission infrastructure. Services related to, among other things, electric vehicle charging infrastructure, micro-grids and battery storage are also performed in this segment. This segment also provides comprehensive ~~communications infrastructure services~~design and construction solutions to wireline and wireless ~~telecommunications~~communications companies, cable multi-system operators and other customers within the communications industry, ~~(including~~including services in connection with 5G wireless ~~deployment); services in connection with the construction of electric power generation facilities;~~deployment; and the design, installation, maintenance and repair of commercial and industrial wiring. This segment also provides aviation services in support of the services described above and includes athe majority of the financial results of Quanta’s postsecondary educational institution, which specializes in pre-apprenticeship training, apprenticeship training and specialized utility task training for electric workers, as well as training for the gas distribution and communications industries.

~~Pipeline~~Underground Utility and ~~Industrial~~ Infrastructure ~~Services~~Solutions Segment

The ~~Pipeline~~Underground Utility and ~~Industrial~~ Infrastructure ~~Services~~Solutions segment provides comprehensive infrastructure solutions, including design, ~~installation,~~engineering, new construction, upgrade and repair and maintenance services, to customers involved in the ~~development,~~ transportation, distribution, storage and processing of natural gas, oil and other products. Services include the upgrade, new construction and repair ~~maintenance~~ and ~~construction~~maintenance of natural gas systems for gas utility customers, as well as pipeline protection, integrity testing, rehabilitation and ~~replacement, and the fabrication of pipeline support systems and related structures and facilities for the pipeline industry.~~replacement. Quanta also provides catalyst replacement services, high-pressure and critical-path turnaround services, instrumentation and electrical services, piping, fabrication and storage tank services to the midstream and downstream industrial energy markets. This segment also provides engineering and construction services for pipeline systems, storage systems and compressor and pump stations and the fabrication of pipeline support systems and related structures and facilities, as well as ~~related~~ trenching, directional boring and mechanized welding services related to the services described above and in connection with our electric power infrastructure services. To a lesser extent, this segment ~~serves~~includes construction services for the offshore energy market and ~~designs, installs~~services in connection with the design, installation and ~~maintains~~maintenance of fueling systems and water and sewer infrastructure.

~~Acquisitions~~

During the six months ended June 30, 2020, Quanta acquired an industrial services business located in Canada that performs catalyst handling services, including changeover and shutdown maintenance, to customers in the refining and chemical industries and an electric power infrastructure business located in the United States that primarily provides underground conduit services. Beginning on the respective acquisition dates, the results of the acquired businesses have been included in Quanta’s consolidated financial statements, with the results of the industrial services business generally included in the Pipeline and Industrial Infrastructure Services segment and the results of the electric power infrastructure business generally included in the Electric Power Infrastructure Services segment.

During the year ended December 31, 2019, Quanta acquired The Hallen Construction Co., Inc. (Hallen), a pipeline and industrial services business located in the United States that specializes in gas distribution and transmission services, and to a lesser extent, underground electric distribution and transmission services. During the year ended December 31, 2019, Quanta also acquired two specialty utility foundation and pole-setting contractors serving the southeast United States; an electric power specialty contracting business located in the United States that provides aerial power line and construction support services; a business located in the United States that provides technical training materials to electric utility workers; an electric power company specializing in project management and, to a lesser extent, water and wastewater projects located in the United States; and an electrical infrastructure services business located in Canada. Beginning on the respective acquisition dates, the results of the

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

acquired businesses have been included in Quanta’s consolidated financial statements, with the results of Hallen generally included in the Pipeline and Industrial Infrastructure Services segment and the results of the other acquired businesses generally included in the Electric Power Infrastructure Services segment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The condensed consolidated financial statements of Quanta include the accounts of Quanta Services, Inc. and its wholly-owned subsidiaries, which are also referred to as its operating units. The condensed consolidated financial statements also include the accounts of certain of Quanta’s investments in joint ventures, which are either consolidated or proportionately ~~consolidated, as discussed in the following summary of significant accounting policies.~~consolidated. Investments in affiliated entities in which Quanta does not have a controlling financial interest, but over which Quanta has significant influence, usually because Quanta holds a voting interest of between 20% and 50%, in the affiliated

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

entity, are accounted for using the equity method. ~~All significant intercompany accounts and transactions have been eliminated in consolidation.~~ Unless the context requires otherwise, references to Quanta include Quanta Services, Inc. and its consolidated subsidiaries.

Interim Condensed Consolidated Financial Information

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP), have been condensed or omitted pursuant to those rules and regulations. Quanta believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations, comprehensive income and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations and comprehensive income for the interim periods are not necessarily indicative of the results for the entire fiscal year. The results of Quanta have historically been subject to significant seasonal fluctuations.

Quanta recommends that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto of Quanta and its consolidated subsidiaries, which contain additional information about Quanta’s policies and are included in Quanta’s 2020 Annual ~~Report on Form 10-K for the year ended~~ ~~December 31, 2019~~ ~~(2019 Annual Report), which was filed with the SEC on February 28, 2020.~~Report.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses recognized during the periods presented. Quanta reviews all significant estimates affecting its consolidated financial statements on a recurring basis and records the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on Quanta’s beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. Estimates are primarily used in Quanta’s assessment of ~~the~~revenue recognition for construction contracts, including contractual change orders and claims; allowance for credit ~~losses,~~losses; valuation of ~~inventory,~~inventory; useful lives of ~~assets,~~assets; fair value assumptions in analyzing goodwill, other intangibles and long-lived asset ~~impairments,~~impairments; equity and other ~~investments,~~investments; purchase price ~~allocations,~~allocations; acquisition-related contingent consideration ~~liabilities,~~liabilities; multiemployer pension plan withdrawal ~~liabilities,~~liabilities; contingent liabilities associated with, among other things, legal proceedings and claims, parent guarantees and indemnity ~~obligations, revenue recognition for construction contracts inclusive of contractual change orders and claims,~~obligations; estimated insurance claim ~~recoveries,~~recoveries; stock-based ~~compensation,~~compensation; operating results of reportable ~~segments,~~segments; provision for income ~~taxes,~~taxes; and uncertain tax positions.

Revenue Recognition

~~Contracts~~

~~Quanta designs, installs, upgrades, repairs and maintains infrastructure for customers in the electric power, energy and communications industries. These~~Quanta’s services may be provided pursuant to master service agreements (MSAs), repair and maintenance contracts and fixed price and non-fixed price ~~installation~~construction contracts. These contracts are classified into three categories based on ~~how~~the methods by which transaction prices are determined and revenue is recognized: unit-price contracts, cost-plus contracts and fixed price contracts. Transaction prices for unit-price contracts are determined on a per unit basis, transaction prices for cost-plus contracts are determined by applying a profit margin to costs incurred on the contracts and transaction prices for fixed price contracts are determined on a lump-sum basis. All of Quanta’s revenues are recognized from contracts with its customers. In addition to the considerations described below, revenue is not recognized unless collectability under the contract is considered probable, the contract has

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~commercial substance and the contract has been approved. Additionally, the contract must contain payment terms, as well as the rights and commitments of both parties.~~

Performance Obligations

A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Most of Quanta’s contracts are considered to have a single performance obligation whereby Quanta is required to integrate complex activities and equipment into a deliverable for a customer. For contracts with multiple performance obligations, Quanta allocates a portion of the total transaction price to each performance obligation using its best estimate of the standalone selling price of the distinct good or service associated with each performance obligation. Standalone selling price is estimated using the expected costs plus a margin.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was approximately ~~$5.18~~$4.43 billion and ~~$5.30~~$3.99 billion, of which ~~61.0%~~76.9% and ~~59.5%~~71.2% were expected to be recognized in the subsequent twelve months. These amounts represent management’s ~~estimate~~estimates of the consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work had not yet ~~begun.~~begun as of such dates. For purposes of calculating remaining performance obligations, Quanta includes all estimated revenues attributable to consolidated joint ventures and variable interest entities, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized and revenues from change orders and claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations are potential orders under MSAs and non-fixed price contracts expected to be completed within one year. Subsequent to June 30, 2020, the project sponsors of an approximately 600-mile natural gas pipeline under construction in the eastern United States announced that they are no longer moving forward with the project. A Quanta subsidiary has been contracted, as part of a joint venture, to construct a portion of this project. Although the joint venture has not received a notice of termination, based on the announcement, Quanta has concluded that the revenues related to the remaining performance obligation associated with the project are no longer probable. As a result, this project has been excluded from remaining performance obligations as of June 30, 2020.

~~Recognition of Revenue Upon Satisfaction of Performance Obligations~~

A transaction price is determined for each contract, and that amount is allocated to each performance obligation within the contract and recognized as revenue when, or as, the performance obligation is satisfied. Quanta generally recognizes revenue over time as it performs its obligations because there is a continuous transfer of control of the deliverable to the customer. Under unit-price contracts with an insignificant amount of partially completed units, Quanta recognizes revenue as units are completed based on contractual pricing amounts. Under unit-price contracts with more than an insignificant amount of partially completed units and fixed price contracts, Quanta recognizes revenues as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Under cost-plus contracts, Quanta recognizes revenue on an input basis, as labor hours are incurred, materials are utilized and services are performed.

Under contracts where Quanta has a right to consideration in an amount that directly corresponds to the value of completed performance, Quanta recognizes revenue in such amount and does not include such performance as a remaining performance obligation. Also, contract consideration is not adjusted for a significant financing component if payment is expected to be collected less than one year from when the services are performed.

Contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. The majority of the materials associated with Quanta’s work are owner-furnished, and therefore not included in contract revenues and costs. Additionally, Quanta may incur incremental costs to obtain certain contracts, such as selling and marketing costs, bid and proposal costs, sales commissions, and legal fees or initial set-up or mobilization costs, certain of which can be capitalized. Such costs were not material during the three and six months ended June 30, 2020 and 2019.

Contract Estimates

Actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety

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(Unaudited)

of factors, including unforeseen or changed circumstances not included in Quanta’s cost estimates or covered by its contracts. ~~The estimating process is based on the professional knowledge and experience of Quanta’s project estimators, project managers and finance professionals.~~ Some of the factors that ~~may lead to~~can result in positive changes in estimates on projects include successful execution through project risks, reduction of estimated project costs or increases of estimated revenues. Some of the factors that can result in negative changes in estimates include concealed or unknown site conditions; changes to or disputes with customers regarding the scope of services; changes in estimates related to the length of time to complete a performance obligation; changes or delays with respect to permitting and regulatory requirements; changes in the cost or availability of equipment, commodities, materials or skilled labor; unanticipated costs or claims due to delays ~~caused~~or failure to perform by customers or third parties; customer failure to provide required materials or equipment; errors in engineering, specifications or designs;

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

project ~~modifications or contract termination;~~modifications; adverse weather conditions, natural disasters, and other emergencies (including the ongoing ~~pandemic as a result of the novel coronavirus disease (COVID-19) that began in 2019)~~COVID-19 pandemic); ~~changes in estimates related to the length of time to complete a performance obligation;~~ and performance and quality issues causing delay (including payment of liquidated damages) or requiring rework or replacement. ~~These factors, along with other risks inherent in performing services under fixed price contracts, are routinely evaluated by management.~~ Any changes in estimates ~~could~~may result in changes to profitability or losses associated with the related performance obligations. For example, estimated costs for a performance obligation may increase from an original estimate and contractual provisions may not allow for adequate compensation or reimbursement for such additional costs.

Changes in estimated revenues, costs and profit are recognized on a cumulative catch-up basis and recorded in the period they are determined to be probable and can be reasonably estimated. ~~Contract losses are recognized in full when they are determined to be probable and can be reasonably estimated.~~

Changes in cost estimates on certain contracts may result in the issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. Quanta determines the probability that costs associated with change orders and claims will be recovered based on, among other things, contractual entitlement, past practices with the customer, specific discussions or preliminary negotiations with the customer and verbal approvals by the customer. Quanta recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reliably estimated. Most of Quanta’s change orders are for services that are not distinct from an existing contract and are accounted for as part of an existing contract on a cumulative catch-up basis. Quanta accounts for a change order as a separate contract if the additional goods or services are distinct from and increase the scope of the contract, and the price of the contract increases by an amount commensurate to Quanta’s standalone selling price for the additional goods or services.

As of June 30, 2020 and December 31, 2019, Quanta had recognized revenues of $147.8 million and $170.0 million related to change orders and claims included as contract price adjustments and that were in the process of being negotiated in the normal course of business. These aggregate amounts, which are included in “Contract assets” in the accompanying condensed consolidated balance sheets, represent management’s estimates of additional contract revenues that have been earned and are probable of collection. However, Quanta’s estimates could change, and the amount ultimately realized could be significantly higher or lower than the estimated amount.

Variable consideration amounts, including performance incentives, early pay discounts and penalties, may also cause changes in contract estimates. The amount of variable consideration is estimated based on the most likely amount that is deemed probable of realization. Contract consideration is adjusted for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty related to the variable consideration is resolved.

~~Changes in contract estimates are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made.~~ Such changes in estimates can result in the recognition of revenue in a current period for performance obligations that were satisfied or partially satisfied in prior periods or the reversal of previously recognized revenue if the ~~current estimate differs from~~currently estimated revenue is less than the previous estimate. The impact of a change in contract estimate is measured as the difference between the revenue or gross profit recognized in the prior period as compared to the revenue or gross profit which would have been recognized had the revised estimate been used as the basis of recognition in the prior period. Changes in estimates can also result in contract losses, which are recognized in full when they are determined to be probable and can be reasonably estimated.

Operating results for the three months ended June 30, 2021 were favorably impacted by 12.8% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at March 31, 2021. The net favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion.

Operating results for the six months ended June 30, 2021 were favorably impacted by 10.8% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at December 31, 2020. The net favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion. Partially offsetting the net favorable impact to gross profit for the six months ended June 30, 2021 was a negative change in estimate of $14.8 million in the three months ended March 31, 2021 associated with a communications project in the United States that arose from challenges with subcontractor performance and site conditions. This project had a total contract value of $109.4 million and was approximately 51% complete as of June 30, 2021.

Operating results for the three and six months ended June 30, 2020 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at the beginning of such periods. Operating results for the six months ended June 30, 2020 included a negative change in contract estimate of $14.1 million related to delays associated with subcontractor performance and severe weather impacts on a larger pipeline transmission project in Canada, which had a contract value of ~~$106~~$115.6 million and was ~~approximately 97%~~ complete as of June 30, ~~2020.~~2021. This negative impact was more than offset by other positive changes in estimates on other projects.

~~Operating results for~~Changes in cost estimates on certain contracts may also result in the ~~three months ended~~issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. As of June 30, ~~2019 were negatively impacted by $20.4~~2021 and December 31, 2020, Quanta had recognized revenues of $181.4 million ~~or 6.4% of gross profit, as a result of aggregate changes in contract estimates~~and $141.2 million related to ~~projects~~change orders and claims included as contract price adjustments that were in ~~progress at March 31, 2019. These changes~~the process of being negotiated in ~~contract estimates include~~ the ~~correction~~normal course of ~~$14.5 million~~business. The largest component of ~~prior period errors~~the revenues recognized is associated with change orders and claims arising from delays on an electric transmission project in Canada, the most significant of which occurred in the first quarter of 2021 due to governmental requirements related to the ~~determination~~COVID-19 pandemic. Compliance with on-site protocols caused challenging scheduling and site conditions, which resulted in delays and negatively impacted productivity. Quanta believes that the contract for this project entitles it to recover certain amounts associated with these delays. The aggregate amounts related to change orders and claims, which are included in “Contract assets” in the accompanying condensed consolidated balance sheets, represent management’s estimates of ~~total estimated project costs~~additional contract revenues that have been earned and are probable of collection. However, Quanta’s estimates could change, and the ~~resulting revenue recognized on a large telecommunications project in Peru that was terminated during 2019. See~~ ~~Legal Proceedings~~ ~~in Note 11 for additional information regarding this project. The prior period errors were determined to~~amount ultimately realized could be ~~immaterial individually and in~~significantly higher or lower than the aggregate to the prior period financial statements. Gross profit during the three months ended June 30, 2019 related to work performed in prior periods was also negatively impacted by $13.9 million of additional costs associated with continued rework and start-up delays on a processing facility project in Texas, which has subsequently been substantially completed. These unfavorable changes were partially offset by an aggregate positive change in contract estimates on other ongoing projects.estimated amount.

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(Unaudited)

Operating results for the six months ended June 30, 2019 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at December 31, 2018. The aggregate change included a negative impact of $9.6 million related to the correction of prior period errors described above and a $22.3 million increase in estimated costs associated with the processing facility construction project in Texas described above. Partially offsetting these changes was a $28.2 million positive impact on gross profit during the six months ended June 30, 2019 associated with work performed in prior periods related to an electrical transmission project in Canada that was completed ahead of schedule during the three months ended March 31, 2019, which resulted in lower costs than previously estimated.

Revenues by Category

The following tables present Quanta’s revenue disaggregated by geographic location, as determined by the job location, and contract type (in thousands):


	Three Months Ended June 30,								Six Months Ended June 30,
	2021				2020				2021				2020
By primary geographic location:
United States	$	2,570,798	85.7	%	$	2,207,876	88.1	%	$	4,776,914	83.7	%	$	4,475,962	85.0	%
Canada	327,159		10.9	%	212,820		8.5	%	741,005		13.0	%	597,045		11.3	%
Australia	62,808		2.1	%	56,077		2.2	%	117,915		2.1	%	107,127		2.0	%
Others	39,051		1.3	%	29,458		1.2	%	67,563		1.2	%	90,192		1.7	%
Total revenues	$	2,999,816	100.0	%	$	2,506,231	100.0	%	$	5,703,397	100.0	%	$	5,270,326	100.0	%

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
By primary geographic location:
United States $ 2,207,876
88.1 % $ 2,561,924
90.3 % $ 4,475,962
85.0 % $ 4,762,539
84.3 %
Canada 212,820
8.5 % 202,221
7.1 % 597,045
11.3 % 687,651
12.2 %
Australia 56,077
2.2 % 36,886
1.3 % 107,127
2.0 % 78,210
1.4 %
Latin America and Other 29,458
1.2 % 38,168
1.3 % 90,192
1.7 % 118,058
2.1 %
Total revenues $ 2,506,231
100.0 % $ 2,839,199
100.0 % $ 5,270,326
100.0 % $ 5,646,458
100.0 %

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
By contract type:
Unit-price contracts $ 918,416
36.6 % $ 1,020,650
35.9 % $ 1,893,067
36.0 % $ 1,915,694
33.9 %
Cost-plus contracts 567,928
22.7 % 1,103,135
38.9 % 1,256,012
23.8 % 2,061,490
36.5 %
Fixed price contracts 1,019,887
40.7 % 715,414
25.2 % 2,121,247
40.2 % 1,669,274
29.6 %
Total revenues $ 2,506,231
100.0 % $ 2,839,199
100.0 % $ 5,270,326
100.0 % $ 5,646,458
100.0 %

~~As described above, under~~


	Three Months Ended June 30,								Six Months Ended June 30,
	2021				2020				2021				2020
By contract type:
Unit-price contracts	$	1,217,724	40.6	%	$	918,416	36.6	%	$	2,194,286	38.5	%	$	1,893,067	36.0	%
Cost-plus contracts	759,485		25.3	%	567,928		22.7	%	1,422,257		24.9	%	1,256,012		23.8	%
Fixed price contracts	1,022,607		34.1	%	1,019,887		40.7	%	2,086,854		36.6	%	2,121,247		40.2	%
Total revenues	$	2,999,816	100.0	%	$	2,506,231	100.0	%	$	5,703,397	100.0	%	$	5,270,326	100.0	%

Under unit-price contracts with more than an insignificant amount of partially completed units and fixed price contracts, revenue is recognized as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately ~~48.4%~~43.9% and ~~49.1%~~48.4% of Quanta’s revenues recognized during the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 were associated with this revenue recognition method, and ~~48.2%~~43.9% and ~~50.5%~~48.2% of Quanta’s revenues recognized during the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were associated with this revenue recognition method.

Contract Assets and Liabilities

With respect to Quanta’s contracts, interim payments are typically received as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. As a result, under fixed price contracts, the timing of revenue recognition and contract billings results in contract assets and contract liabilities. Contract assets represent revenues recognized in excess of amounts billed for fixed price contracts and are current assets that are transferred to accounts receivable when billed or the billing rights become unconditional. Contract assets are not considered a significant financing component as they are intended to protect the customer in the event Quanta does not perform on its obligations under the contract.

Conversely, contract liabilities represent billings in excess of revenues recognized for fixed price contracts. These arise under certain contracts that allow for upfront payments from the customer or contain contractual billing milestones, which result in billings that exceed the amount of revenues recognized for certain periods. Contract liabilities are current liabilities and are not considered a significant financing component, as they are used to meet working capital requirements that are generally higher in the early stages of a contract and are intended to protect Quanta from the other party failing to meet its obligations under the contract. Contract assets and liabilities are recorded on a performance obligation basis at the end of each reporting period.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Contract assets and liabilities consisted of the following (in thousands):

June 30, 2020 December 31, 2019
Contract assets $ 489,803
$ 601,268
Contract liabilities $ 613,188
$ 606,146


	June 30, 2021		December 31, 2020
Contract assets	$	669,313	$	453,832
Contract liabilities	$	503,219	$	528,864

~~As referenced previously, contract~~Contract assets and liabilities fluctuate period to period based on various factors, including, among others, changes in the number and size of projects in progress at period end and variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings, or deferred billings. The ~~decrease~~increase in contract assets from December 31, ~~2019~~2020 to June 30, ~~2020~~2021 was primarily due to ~~a decline~~increased working capital requirements related to the ramp up of two larger electric transmission projects in ~~revenues~~Canada and ~~improved~~the timing of ~~contractual and milestone billings under contracts for certain larger projects.~~the billings.

Revenues were positively impacted by ~~$40.9~~$105.0 million during the six months ended June 30, ~~2020~~2021 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, ~~2019.~~2020. During the six months ended June 30, ~~2020,~~2021, Quanta recognized revenue of approximately ~~$338.3~~$332.6 million related to contract liabilities outstanding at December 31, ~~2019.~~2020.

Current and Long-Term Accounts Receivable ~~Notes Receivable~~ and Allowance for Credit Losses

As described in Note 3, Quanta adopted the new accounting standard for measuring credit losses effective January 1, 2020 utilizing the transition method that allows recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Quanta’s financial results for reporting periods beginning on or after January 1, 2020 are presented under the new standard, while financial results for prior periods continue to be reported in accordance with the prior standard and Quanta’s historical accounting policy. The net cumulative effect due to the adoption of the new standard was a $3.8 million reduction to retained earnings as of January 1, 2020, which represented a $5.1 million increase to allowance for credit losses, net of $1.2 million in deferred income taxes. The adjustment was based on an estimate of expected lifetime credit losses for financial instruments, primarily accounts receivable and contract assets. Although the adoption of the new standard did not have a material impact on Quanta’s condensed consolidated financial statements at the date of adoption, expected credit losses could change as a result of changes in credit loss experience, changes to specific risk characteristics of Quanta’s portfolio of financial assets or changes to management’s expectations of future economic conditions that affect the collectability of Quanta’s financial assets. At the end of each quarter, management reassesses these factors, including any potential effects from the ongoing COVID-19 pandemic.

The assessment of the allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Expected credit losses are estimated by evaluating trends in historical write-off experience and applying historical loss ratios to pools of financial assets with similar risk characteristics. Quanta has determined that it has 1 pool for the purpose of calculating its historical credit loss experience.

Quanta’s historical loss ratio and its determination of risk pools, which are used to calculate expected credit losses, may be adjusted for changes in customer credit concentrations within its portfolio of financial assets, ~~its~~ customers’ ability to pay, and other considerations, such as economic and market changes, changes to the ~~market,~~ regulatory or technological environments affecting ~~its~~ customers and the consistency ~~of the~~between current and forecasted economic conditions ~~relative to the~~and historical ~~period~~economic conditions used to derive historical loss ratios. At the end of each quarter, management reassesses these and other relevant factors, including any potential effects from the currently challenged energy market and the ongoing COVID-19 pandemic.

Additional allowance for credit losses is established for financial asset balances with specific customers where collectability has been determined to be improbable based on customer specific facts and circumstances.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Quanta considers accounts receivable delinquent after 30 days but does not generally consider such amounts delinquent in its credit loss analysis unless the accounts receivable ~~have been outstanding for~~are at least 90 ~~days.~~days past due. In addition to monitoring delinquent accounts, management monitors the credit quality of its receivables by, among other things, obtaining credit ratings of significant customers, assessing economic and market conditions and evaluating material changes to a customer’s business, cash flows and financial condition. Should anticipated recoveries relating to receivables fail to materialize, including anticipated recoveries relating to bankruptcies or other workout situations, Quanta could experience reduced cash flows and losses in excess of current allowances provided.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

For example, in July 2021 Limetree Bay Refining, LLC (Limetree Refining), a customer within Quanta’s Underground Utility and Infrastructure Solutions segment, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as amended, after experiencing operational and financial difficulties and shutting down operations at its refinery. As of the bankruptcy filing date, Quanta had $30.0 million of billed and unbilled receivables for services performed and other costs. Quanta also had $1.5 million of billed and unbilled receivables outstanding from Limetree Bay Terminals, LLC (Limetree Terminals), an affiliate of Limetree Refining that has not filed for bankruptcy. During the three months ended June 30, 2021, Quanta recorded a provision for credit loss of $23.6 million with respect to these receivables based on the current estimated amount of expected loss. Given the uncertainties associated with the bankruptcy proceeding and the financial condition of the customers, the amount of receivables ultimately collected and the ultimate amount of credit loss recognized depends on a number of factors that are subject to change. As such, an additional allowance for credit loss may be recorded in the future, including with respect to the remaining $7.9 million of receivables owed by the customers. See Concentrations of Credit Risk in Note 10 for further discussion of the credit quality of certain other outstanding receivables due from customers that have experienced financial difficulties.

Activity in Quanta’s allowance for credit losses consisted of the following (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Balance at beginning of period $ 14,446
$ 8,476
$ 9,398
$ 5,839
Adoption of new credit loss standard —
—
5,067
—
Charges to bad debt expense 1,071
416
1,344
3,239
Direct write-offs charged against the allowance (569 ) (351 ) (861 ) (537 )
Balance at end of period $ 14,948
$ 8,541
$ 14,948
$ 8,541

Long-term accounts receivable are included within “Other assets, net” in the accompanying condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, long-term accounts receivable were $12.3 million and $12.6 million.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Balance at beginning of period	$	16,449	$	14,446	$	16,546	$	9,398
Cumulative effect of adoption of new credit loss standard	—		—		—		5,067
Provision for credit losses	23,877		1,071		23,920		1,344
Direct write-offs charged against the allowance	(613)		(569)		(753)		(861)
Balance at end of period	$	39,713	$	14,948	$	39,713	$	14,948

Certain contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts are generally due upon completion of the contract and acceptance of the project by the customer. Based on Quanta’s experience in recent years, the majority of these retainage balances are expected to be collected within approximately twelve ~~months.~~months of June 30, 2021. Retainage balances with expected settlement dates within ~~the next~~ twelve months as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$316.7~~$283.0 million and ~~$299.6~~$306.3 million, which are included in “Accounts receivable.” Retainage balances with expected settlement dates beyond ~~the next~~ twelve months of June 30, 2021 and December 31, 2020 were $119.2 million and $88.2 million and are included in “Other assets, net,” ~~and as of June 30, 2020 and December 31, 2019 were $50.6 million and $54.2 million.~~.

Quanta recognizes unbilled receivables for non-fixed price contracts within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed under the terms of the contract until a later date or when amounts arise from routine lags in billing (for example, work completed during one month but not billed until the next month). These balances do not include revenues recognized for work performed under fixed-price contracts, as these amounts are recorded as “Contract assets.” At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, unbilled receivables included in “Accounts receivable” were ~~$523.0~~$643.0 million and ~~$524.3~~$472.3 million. Quanta also recognizes unearned revenues for non-fixed price contracts when cash is received prior to recognizing revenues for the related performance obligation. Unearned revenues, which are included in “Accounts payable and accrued expenses,” were ~~$28.6~~$42.6 million and ~~$33.2~~$53.6 million at June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Cash and Cash Equivalents

Amounts related to Quanta’s cash and cash equivalents based on geographic location of the bank accounts were as follows (in thousands):

June 30, 2020 December 31, 2019
Cash and cash equivalents held in domestic bank accounts $ 480,179
$ 130,771
Cash and cash equivalents held in foreign bank accounts 50,491
34,027
Total cash and cash equivalents $ 530,670
$ 164,798


	June 30, 2021		December 31, 2020
Cash and cash equivalents held in domestic bank accounts	$	176,905	$	156,122
Cash and cash equivalents held in foreign bank accounts	35,568		28,498
Total cash and cash equivalents	$	212,473	$	184,620

Cash consisting of interest-bearing demand deposits is carried at cost, which approximates fair value. Quanta considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents, which are carried at fair value. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, cash equivalents were ~~$459.4~~$140.0 million and ~~$37.8~~$98.0 million and consisted primarily of money market investments and money market mutual funds and are discussed further in the Fair Value Measurements ~~below.~~ section within this Note 2.

Cash and cash equivalents held by joint ventures, which are either consolidated or proportionately consolidated, are available to support joint venture operations, but Quanta cannot utilize those assets to support its other operations. Quanta generally has no right to cash and cash equivalents held by a joint venture other than participating in distributions, to the extent made, and in the event of dissolution. Cash and cash equivalents held by Quanta’s wholly-owned captive insurance company are generally not available for use in support of its other operations. Amounts related to cash and cash equivalents held by joint ventures and the captive insurance company, which are included in Quanta’s total cash and cash equivalents balances, were as follows (in thousands):

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

June 30, 2020 December 31, 2019
Cash and cash equivalents held by domestic joint ventures $ 9,281
$ 6,518
Cash and cash equivalents held by foreign joint ventures 7
16
Total cash and cash equivalents held by joint ventures 9,288
6,534
Cash and cash equivalents not held by joint ventures 521,382
158,264
Total cash and cash equivalents $ 530,670
$ 164,798


	June 30, 2021		December 31, 2020
Cash and cash equivalents held by domestic joint ventures	$	13,871	$	7,714
Cash and cash equivalents held by foreign joint ventures	4,873		3,973
Total cash and cash equivalents held by joint ventures	18,744		11,687
Cash and cash equivalents held by captive insurance company	132,024		85,014
Cash and cash equivalents not held by joint ventures or captive insurance company	61,705		87,919
Total cash and cash equivalents	$	212,473	$	184,620

Goodwill and Other Intangible Assets

Goodwill, net of accumulated impairment losses, represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses and is stated at cost. Quanta has recorded goodwill in connection with its historical acquisitions of businesses. Upon acquisition, these businesses were either combined into one of Quanta’s existing operating units or managed on a stand-alone basis as an individual operating unit. Quanta’s operating units are organized into 2 divisions: the Electric Power Infrastructure Services Division and the Pipeline and Industrial Infrastructure Services Division. As most of the companies acquired by Quanta provide multiple types of services for multiple types of customers, these divisional designations are based on the predominant type of work performed by an operating unit at the point in time the divisional designation is made. Goodwill is required to be measured for impairment at the reporting unit level, which represents the operating segment level or one level below the operating segment level for which discrete financial information is available. Quanta has determined that its individual operating units represent its reporting units for the purpose of assessing goodwill impairment.

Goodwill is not amortized but is tested for impairment annually in the fourth quarter of the fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired. The assessment can be performed by first completing a qualitative assessment on none, some or all of Quanta’s reporting units. Quanta can also bypass the qualitative assessment for any reporting unit in any period and proceed directly to a quantitative impairment test, and then resume the qualitative assessment in any subsequent period. Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic ~~conditions,~~conditions; declining financial ~~performance,~~performance; deterioration in the operational ~~environment, or~~environment; an expectation of selling or disposing of a portion of a reporting ~~unit. Additionally, an interim impairment test of a reporting unit may be triggered by~~unit; a significant change in market, management, business strategy or business climate; a loss of a significant customer; increased competition; a sustained decrease in share price; or a decrease in Quanta’s market capitalization below book value.

If Quanta believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test involves comparing the fair value of each of Quanta’s reporting units with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding charge to “Asset impairment charges” in the condensed consolidated statements of operations. The income tax effect associated with an impairment of tax-deductible goodwill is also considered in the measurement of the goodwill impairment. A goodwill impairment for any reporting unit is limited to the total amount of goodwill allocated to such reporting unit.

Quanta determines the fair value of its reporting units using a weighted combination of the income approach (discounted cash flow method) and market multiples valuation techniques (market guideline transaction method and market guideline public company method), with greater weight placed on the discounted cash flow method because management believes this method results in the most appropriate calculation of fair value and reflects an expectation of market value as determined by a “held and used” model.

Under the discounted cash flow method, Quanta determines fair value based on the estimated future cash flows for each reporting unit, discounted to present value using a risk-adjusted industry weighted average cost of capital, which reflects the overall level of inherent risk for each reporting unit and the rate of return an outside investor would expect to earn. Cash flow projections are derived from budgeted amounts (typically a one-year model) and subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur. A terminal value is derived from a multiple of the reporting unit’s earnings before interest, taxes, depreciation and amortization (EBITDA). The EBITDA multiples for each reporting unit are based on observed purchase transactions for similar businesses adjusted for size, volatility and risk.

Under the market guideline transaction and market guideline public company methods, Quanta determines the estimated fair value for each of its reporting units by applying transaction multiples and public company multiples, respectively, to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using either a one-, two- or three-year average. The transaction multiples are based on observed purchase transactions for similar businesses adjusted for size, volatility and risk. The public company multiples are based on peer group multiples adjusted for size, volatility and risk. For

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

the market guideline public company method, Quanta adds a reasonable control premium, which is estimated as the premium that would be appropriate to convert the reporting unit value to a controlling interest basis.

For Quanta’s annual goodwill impairment assessment performed during the fourth quarter of 2019, Quanta assessed qualitative factors to determine whether it was necessary to perform a quantitative fair value impairment analysis and identified 1 reporting unit for which a quantitative goodwill impairment assessment was deemed appropriate based on financial performance indicators. The subsequent quantitative analysis indicated that the fair value of the reporting unit was in excess of its carrying amount. Accordingly, Quanta did not ~~record~~identify any ~~impairment charges related to goodwill during the fourth quarter of 2019.~~

The determination of a reporting unit’s fair value requires judgment and the use of significant estimates and assumptions. Quanta believes the estimates and assumptions used in its impairment assessments are reasonable and based on available market information obtained from relevant industry sources; however, variations in any of the assumptions could result in materially different calculations of fair value and impairment determinations. Accordingly, management considered the sensitivity of its fair value estimates to changes in certain valuation assumptions. After taking into account a 10% decreasetriggering events in the ~~fair value~~first or second quarters of ~~the reporting unit~~2021, and did 0t recognize any goodwill impairments for ~~which a quantitative impairment test was performed in the fourth quarter of 2019, the reporting unit’s fair value exceeded its carrying amount.~~

If an operating unit experiences prolonged periods of declining revenues, operating margins or both, it may be at risk of failing the quantitative goodwill impairment test. The reporting unit referenced above, for which a quantitative goodwill impairment assessment was performed in the fourth quarter of 2019, experienced declines over the short-term primarily due to losses attributable to a project which are not expected to recur.

Due to the cyclical nature of Quanta’s business, and the other factors described above, the profitability of its individual reporting units may suffer from decreases in customer demand and other factors. These factors may have a disproportionate impact on individual reporting units as compared to Quanta as a whole and might adversely affect the fair value of individual reporting units. If material adverse conditions occur, Quanta’s future estimates of fair value may not support the carrying amount of one or more of its reporting units, and the related goodwill would need to be written down to an amount considered recoverable.

As a result of the currently challenged energy market, including the recent significant decline in commodity prices and volatility in commodity production volumes, the effect of which has been exacerbated by the COVID-19 pandemic, Quanta assessed the expected negative impacts related to its reporting units, particularly reporting units within its Pipeline and Industrial Infrastructure Services Division. Quanta concluded that such impacts are not likely to result in a goodwill impairment for any reporting unit at this time. As a result, 0 goodwill impairment was recognized during the three and six months ended June 30, 2020. However, the potential impact of the energy market challenges and the COVID-19 pandemic is uncertain and depends on numerous factors, and therefore the negative impact on certain of Quanta’s reporting units could increase in future periods. Quanta will continue to monitor the impact of these events and should any of its reporting units suffer additional declines in actual or forecasted financial results, the risk of goodwill impairment would increase.

~~Other Intangible Assets~~2021.

Quanta’s intangible assets include customer ~~relationships, backlog,~~relationships; backlog; trade ~~names,~~names; non-compete ~~agreements,~~agreements; patented rights, ~~and~~ developed technology and process certifications; and curriculum, all of which are subject to amortization, as well as an engineering license, which is not subject to amortization. ~~The fair value of customer relationships is estimated as~~As a result of the ~~date a business is acquired based on~~broader challenges in the ~~value-in-use concept utilizing~~energy market, the ~~income approach, specifically~~effect of which continues to be exacerbated by the ~~multi-period excess earnings method. This method discounts~~COVID-19 pandemic, Quanta assessed the expected negative impact related to present value the projected cash flows attributable to the customer relationships, with consideration given to customer contract renewals and estimated customer attrition rates. The significant estimates used by management in determining the fair values of customer relationshipits intangible assets, include future revenues, discount rates and customer attrition rates. The following table presents the range and weighted average based on acquisition date fair value for discount and attrition rates used in the valuation of customer relationshipparticularly intangible assets associated with reporting units within the Underground Utility and Infrastructure Solutions Division. Quanta concluded that such impact is not likely to result in intangible asset impairments, and therefore 0 intangible asset impairments were recognized during the three and six months ended June 30, 2021.

In connection with its annual goodwill assessment in 2020, Quanta also considered the sensitivity of its fair value estimates to changes in certain valuation assumptions, including with respect to reporting units within Quanta’s Underground Utility and ~~year ended December 31, 2019:~~Infrastructure Solutions Division that have recently been negatively impacted by energy market challenges. The potential future impact of these challenges is uncertain and depends on numerous factors and could continue or increase in future periods. In particular, 2 Canadian pipeline-related businesses and a United States material handling services business

2020 2019
Range Weighted Average Range Weighted Average
Discount rates 20% to 23% 22% 19% to 24% 24%
Customer attrition rates 23% to 41% 29% 5% to 37% 6%

Quanta values backlog for acquired businesses as of the acquisition date based upon the contractual nature of the backlog within each service line, discounted to present value. The values of trade names and curriculum are estimated using the relief-from-royalty method of the income approach, which is based on the assumption that in lieu of ownership, a company would be

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

~~willing~~were identified in the annual goodwill assessment to ~~pay~~have an increased risk of goodwill impairment in the near and medium term due to the currently challenged energy market. After taking into account a ~~royalty for use~~10% decrease in fair value, these reporting units would have had fair values below their carrying amounts as of ~~the trade name or curriculum.~~December 31, 2020. The ~~value of a non-compete agreement is estimated based on the difference between the present value of the prospective cash flows with the agreement in place~~aggregate goodwill and ~~the present value of the prospective cash flows without the agreement in place. The value of the engineering license is based on cash paid to acquire the asset.~~

Quanta amortizes the intangible assets that are subject to amortization based upon the estimated consumption of their economic benefits, or on a straight-line basis if the pattern of economic benefit cannot otherwise be reliably estimated. Intangible assets are reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For instance, a significant change in business climate or a loss of a significant customer, among other things, may trigger the need for interim impairment testing of intangible assets. An impairment loss is recognized if the carrying amount of an intangible asset ~~is not recoverable~~balances for these 3 businesses totaled $101.9 million and ~~its carrying amount exceeds its fair value. As~~$17.5 million as of June 30, 2021. In addition, a specialized industrial services business located in the United States experienced lower demand for certain services during the year ended December 31, 2020, which has continued in 2021, as customers reduced and deferred regularly scheduled maintenance due to lack of demand for refined products, particularly certain transportation-related fuels, as a result of the ~~currently challenged energy market, including~~COVID-19 pandemic. After taking into account a 10% decrease in fair value, the ~~recent significant decline~~reporting unit would have had a fair value in ~~commodity prices~~excess of its carrying amount as of December 31, 2020; however, uncertainty as to the timing and ~~volatility in commodity production volumes,~~extent of recovery of demand for refined products has increased the ~~effect~~risk of ~~which has been exacerbated by the COVID-19 pandemic, Quanta assessed the expected negative impacts related to its intangible assets, particularly intangible assets associated with~~goodwill impairment for this reporting ~~units within the Pipeline~~unit. The goodwill and ~~Industrial Infrastructure Services Division. Quanta concluded that such impacts are not likely to result in~~ intangible asset ~~impairments at~~balances for this ~~time. As a result, 0 intangible asset impairment was recognized during the three~~business were $303.2 million and ~~six months ended~~$46.7 million as of June 30, 2020. However, the potential impact of the energy market challenges and of the COVID-19 pandemic is uncertain and depends on numerous factors, and therefore the negative impact on certain of Quanta’s reporting units and related intangible assets could increase in future periods.2021. Quanta will continue to monitor the ~~impact of~~goodwill associated with these ~~events~~reporting units, and should ~~any of the reporting units~~they suffer additional declines in actual or forecasted financial results, the risk of ~~intangible asset~~goodwill impairment would increase.

~~Leases~~

Lease liabilities are recognized as the present value of the future minimum lease payments over the lease term as of the commencement date. Lease assets are recognized as the present value of future minimum lease payments over the lease term as of the commencement date, plus any initial direct costs incurred and lease payments made, less any lease incentives received.

Quanta determines if an arrangement contains a lease at inception. If an arrangement is considered a lease, Quanta determines at the commencement date whether the lease is an operating or finance lease. Finance leases are leases that meet any of the following criteria: the lease transfers ownership of the underlying asset at the end of the lease term; the lessee is reasonably certain to exercise an option to purchase the underlying asset; the lease term is for the major part of the remaining economic life of the underlying asset (except when the commencement date falls at or near the end of such economic life); the present value of the sum of the lease payments and any additional residual value guarantee by the lessee equals or exceeds substantially all of the fair value of the underlying asset; or the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease that does not meet any of these criteria is considered an operating lease. After the commencement date, lease cost for an operating lease is recognized over the remaining lease term on a straight-line basis, while lease cost for a finance lease is based on the depreciation of the lease asset and interest on the lease liability.

The terms of Quanta’s lease arrangements vary, and certain leases include one or more of the following: renewal option(s), a cancellation option, a residual value guarantee, a purchase option or an escalation clause. An option to extend or terminate a lease is accounted for when assessing a lease term when it is reasonably certain that Quanta will exercise such option. Quanta has made a policy election to classify leases with an initial lease term of 12 months or less as short-term leases, and these leases are not recorded in the accompanying condensed consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised. Lease cost related to short-term leases is recognized on a straight-line basis over the lease term.

Determinations with respect to lease term (including any extension thereof), discount rate, variable lease cost and future minimum lease payments require the use of judgment based on the facts and circumstances related to each lease. Quanta considers various factors, including economic incentives and penalties and business need, to determine the likelihood that a renewal option will be exercised. Unless a renewal option is reasonably certain to be exercised, which is typically at Quanta’s sole discretion, the initial non-cancelable lease term is used. Quanta generally uses its incremental borrowing rates to determine the present value of future minimum lease payments.

Investments in Affiliates and Other Entities

In the normal course of business, Quanta enters into various types of investment arrangements, each having unique terms and conditions. These investments may include equity interests held by Quanta in business entities, including general or limited partnerships, contractual joint ventures, or other forms of equity or profit participation. These investments may also include Quanta’s participation in different financing structures, such as the extension of loans to project-specific entities, the acquisition of convertible notes issued by project specific entities, or other strategic financing arrangements. Quanta also enters into strategic partnerships with customers and infrastructure investors to provide fully integrated infrastructure services on certain projects,

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

including planning and feasibility analyses, engineering, design, procurement, construction and project operation and maintenance. These projects include public-private partnerships and concessions, along with private infrastructure projects such as build, own, operate (and in some cases transfer) and build-to-suit arrangements.

Quanta determines whether investments involve a variable interest entity (VIE) based on the characteristics of the subject entity. If the entity is determined to be a VIE, then management determines if Quanta is the primary beneficiary of the entity and whether or not consolidation of the VIE is required. The primary beneficiary consolidating the VIE must normally have both (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb significant losses of, or the right to receive significant benefits from, the VIE. When Quanta is deemed to be the primary beneficiary, the VIE is consolidated and the other party’s equity interest in the VIE is accounted for as a non-controlling interest. In cases where Quanta determines that it has an undivided interest in the assets, liabilities, revenues and profits of an unincorporated VIE (e.g., a general partnership interest), such amounts are consolidated on a basis proportional to Quanta’s ownership interest in the unincorporated entity.

Investments in entities of which Quanta is not the primary beneficiary, but over which Quanta has the ability to exercise significant influence, are accounted for using the equity method of accounting. Equity method investments are carried at original cost adjusted for Quanta’s proportionate share of the investees’ income, losses and ~~distributions~~distributions. The carrying values for Quanta’s unconsolidated equity method investments were $60.4 million and $44.9 million at June 30, 2021 and December 31, 2020 and are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. Quanta’s share of net income or losses of ~~unconsolidated equity method~~these investments is included within operating income in the accompanying condensed consolidated statements of operations when the investee is operationally integral to the operations of Quanta and is reported as “Equity in earnings (losses) of integral unconsolidated affiliates.” Quanta’s share of net income or losses of unconsolidated equity method investments that are not operationally integral to the operations of Quanta are included in “Other income (expense), net” below operating income in the accompanying condensed consolidated statements of operations. ~~Equity method investments are reviewed for impairment by assessing whether there has been a decline in the fair value~~As of ~~the investment below the carrying amount~~June 30, 2021, Quanta had receivables of $11.6 million and ~~whether any such decline is other-than-temporary. In making this determination, factors such as the ability to recover the carrying amount~~payables of ~~the investment and the inability of the investee to sustain~~$4.3 million from its ~~earnings capacity are evaluated in determining whether a loss in value should be recognized.~~ unconsolidated affiliates.

During the three and six months ended June 30, 2020, Quanta recognized impairment losses of $5.5 million and $8.7 million related to ~~certain~~a non-integral equity method ~~investments~~investment, which were primarily due to the ~~recent declines~~decline in commodity prices and production ~~volumes.~~volumes during 2020. These impairment losses are included in “Other income (expense), net” in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2020.

Investments in entities of which Quanta is not the primary beneficiary, and over which Quanta does not have the ability to exercise significant influence are accounted for using the cost method of accounting. Additionally, certain investments provide for significant influence over the investee, but also include preferential liquidation rights, which precludes accounting for the investments under the equity method. These cost method investments are required to be measured at fair value, with changes in fair value recognized in net income unless the investments do not have readily determinable fair values, in which case the investments are measured at cost minus impairment ~~if any,~~(if any), plus or minus observable price changes in orderly transactions for an identical or similar investment in the same company. Earnings on investments accounted for using the cost method of accounting are recognized as dividends are ~~received.~~declared. These earnings and any impairments of cost method investments are reported in “Other income (expense), net” in the accompanying condensed consolidated statements of operations.

The carrying values for investments accounted for using the cost method of accounting were $129.3 million and $39.5 million at June 30, 2021 and December 31, 2020, and these amounts are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2021, Quanta acquired a minority interest in a broadband technology provider for $90.0 million. This investment includes preferential liquidation rights and is accounted for using the cost method of accounting. During the three months ended March 31, 2021, Quanta also purchased, through its wholly-owned captive insurance company, certain real property, including associated buildings and facilities, that is expected to be developed for its future corporate headquarters. A portion of this property is currently leased to third-party lessees and is expected to continue to be leased to third-party lessees in the future. As a result, an investment in real estate of $23.5 million was recognized at cost for the third-party leased portion of the property and is included in “Other assets, net” in the accompanying condensed consolidated balance sheet at June 30, 2021. Quanta also recognized $9.3 million of cumulative impairments during the three months ended June 30, 2020 to an investment in a water and gas infrastructure contractor. Quanta did not exercise its option to acquire the remaining interest in this business at an agreed price based on a multiple of the company’s earnings during a designated performance period.

See Note 10 for additional information related to investments.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Puerto Rico Joint Venture

During the three months ended June 30, 2020, a joint venture in which Quanta owns a 50% interest, LUMA Energy, LLC (LUMA), was selected for a 15-year operation and maintenance agreement to operate, maintain and modernize the approximately 18,000-mile electric transmission and distribution system in Puerto Rico. ~~The 15-year operation and maintenance period is expected to begin following an approximately one-year transition period, during which~~In June 2021, LUMA ~~will complete numerous~~completed the steps necessary to transition operation and maintenance of the system from the ~~current operator~~owner to LUMA. ~~Pursuant~~The parties subsequently entered into an interim services agreement until the owner emerges from its Title III debt restructuring process, upon which the 15-year operation and maintenance period is scheduled to begin. During the ~~agreement, during the transition~~interim services period, LUMA receives a ~~transition~~fixed annual management fee, payable in monthly installments, and is reimbursed for costs and expenses. During the 15-year operation and maintenance period, LUMA will continue to be reimbursed for costs and expenses and ~~will~~ receive a fixed annual management fee, ~~with~~but will also have the opportunity to receive additional annual performance-based incentive fees. LUMA has not assumed and will not assume ownership of any electric transmission and distribution system assets ~~and will not~~or be responsible for operation of the power generation assets. Quanta’s ownership interest and participation in LUMA is accounted for as an equity method investment due to Quanta’s equal ownership and management of LUMA with its 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 in “Equity in earnings (losses) of integral unconsolidated affiliates.” ~~As of June 30, 2020, Quanta’s investment balance related to LUMA was $0.6 million.~~

As part of Quanta’s investment strategy, Quanta formed a partnership in 2017 with select investors to invest in certain specified infrastructure projects, and wholly-owned subsidiaries of Quanta serve asIncluded within the general partner of this partnership and as a separately operated registered investment adviser that manages the invested capital. As of June 30, 2020, Quanta’s investment balance related to this partnership was $23.9 million. In October 2019, due to certain management changes at the registered

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

investment adviser, the partnership entered into a 180-day period during which the investors and Quanta evaluated the partnership, and at the end of such period in April 2020, the investment period for any future investments ended.

Quanta held a minority ownership interest in a limited partnership that was selected during 2014 to build, own and operate a new 500 kilometer electric transmission line and 2 500 kV substations in Alberta, Canada and accounted for this interest as an equity-method investment. The limited partnership contracted with a Quanta subsidiary to perform the engineering, procurement and construction (EPC) services for the project, and the Quanta subsidiary recognized revenue and related cost of services as performance progressed on the project. However, due to Quanta’s ownership interest, a proportional amount of the EPC profit was deferred until the electric transmission line and related substations were constructed and ownership of the assets was deemed to be transferred to the third-party customer, which occurred in the three months ended March 31, 2019. The deferral of earnings and recognition of such earnings deferral were recorded as components of equity in earnings (losses) of non-integral unconsolidated affiliates, which is included in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. During the three months ended March 31, 2019, deferred earnings of $60.3 million were recognized, the majority of which was attributable to profit earned and deferred in the years ended December 31, 2018 and 2017. During the three months ended December 31, 2019, Quanta sold its minority ownership interest in the limited partnership and recognized a gain of $13.0 million related to the sale.

Quanta owns a 30% interest in a water and gas pipeline infrastructure contractor located in Australia, which includes certain additional earnings and distribution participation rights and preferential liquidation rights. This investment is accounted for using the cost method of accounting and had an investment balance of $11.4 million as of June 30, 2020. Through October 2020, Quanta has the option to acquire the remaining 70% interest of the company at an agreed price based on a multiple of the company’s earnings during a designated performance period that ended April 30, 2020. Based on this option price, Quanta determined that its investment was impaired and recorded an impairment charge of $9.3 million during the three months ended June 30, 2020. Such impairment is included in “Other income (expense), net” in the accompanying condensed consolidated statements of operations.

As a result of the currently challenged energy market, including the recent significant decline in commodity prices and volatility in commodity production volumes, the effect of which has been exacerbated by the COVID-19 pandemic, Quanta assessed the expected negative impacts related to certain of its investments, particularly investments dependent on the energy market. This assessment contributed in part to management’s decision to record the impairments related to certain non-integral equity method investments described above are Quanta’s equity interest in LUMA of $25.0 million and ~~the water~~$10.9 million at June 30, 2021 and ~~gas pipeline infrastructure contractor in Australia described above. Additionally, the potential impact~~December 31, 2020.

Accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the energy market challenges and the COVID-19 pandemic remains uncertain and may change based on numerous factors, which could further negatively impact these and other of Quanta’s investments. Quanta will continue to monitor the potential impacts of these events, and should any investments suffer additional declines in actual or forecasted financial results, additional impairments may be required. See Notes 9 and 11 for additional information related to investments.following (in thousands):


	June 30, 2021		December 31, 2020
Accounts payable, trade	$	879,578	$	798,023
Accrued compensation and related expenses	400,033		378,002
Other accrued expenses	255,723		333,769
Accounts payable and accrued expenses	$	1,535,334	$	1,509,794

Income Taxes

Quanta follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded based on future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled.

Quanta regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs from these estimates, Quanta may not realize deferred tax assets to the extent estimated.

Quanta records reserves for income taxes related to certain tax positions when management considers it more likely than not that additional taxes may be due in excess of amounts reflected on income tax returns filed. When recording these reserves, Quanta assumes that taxing authorities have full knowledge of the position and all relevant facts. Quanta continually reviews exposure to additional tax obligations, and as further information is known or events occur, changes in tax reserves may be recorded. To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and included in the provision for income taxes.

As of June 30, ~~2020,~~2021, the total amount of unrecognized tax benefits relating to uncertain tax positions was ~~$41.4~~$39.1 million, an increase of ~~$0.5~~$5.9 million from December 31, ~~2019. This~~2020. The increase resulted primarily from a ~~$2.2~~$3.5 million increase in reserves for uncertain tax positions expected to be taken in ~~2020, partially offset by~~2021 and a ~~favorable settlement of $1.7~~$2.4 million increase related to ~~certain~~

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~non-U.S. income tax audits.~~prior year positions. Quanta and certain subsidiaries remain under examination by various U.S. state and foreign tax authorities for multiple periods. Quanta believes it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to ~~$6.8~~$13.3 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods.

U.S. federal and state and foreign income tax laws and regulations are voluminous and often ambiguous. As such, Quanta is required to make many subjective assumptions and judgments regarding its tax positions that could materially affect amounts recognized in future consolidated balance sheets, statements of operations and statements of comprehensive income. For example, the Tax Cuts and Jobs Act of 2017 significantly revised the U.S. corporate tax regime which, among other things, resulted in a reduction of Quanta’s current and estimated future effective tax rate and a remeasurement of its deferred tax assets and liabilities.

~~Earnings Per Share~~

Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Exchangeable shares that were issued pursuant to certain of Quanta’s historical acquisitions (as further discussed in Note 9), which were exchangeable on a 1-for-one basis with shares of Quanta common stock, have been included in the calculation of weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the portion of the periods that they were outstanding. Additionally, unvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Diluted earnings per share attributable to common stock is computed using the weighted average number of shares of common stock outstanding during the period adjusted for all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalents would be antidilutive.

~~Insurance~~

Quanta is insured for employer’s liability, workers’ compensation, auto liability and general liability claims. Under these insurance programs, as of June 30, 2020, the deductible for employer’s liability was $5.0 million per occurrence; the deductible for workers’ compensation was $5.0 million per occurrence; and the deductibles for auto liability and general liability were $15.0 million per occurrence. Quanta manages and maintains a portion of its casualty risk through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs. In connection with Quanta’s casualty insurance programs, Quanta is required to issue letters of credit to secure its obligations. Quanta also has 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 $0.8 million per claimant per year.

Losses under all of these insurance programs are accrued based upon Quanta’s 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 Quanta’s 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.

~~Collective Bargaining Agreements~~

Certain of Quanta’s operating units are parties to collective bargaining agreements with unions that represent certain of their employees. The collective bargaining agreements expire at various times and have typically been renegotiated and renewed on terms similar to those in the expiring agreements. The agreements require the operating units to pay specified wages, provide certain benefits to union employees and contribute certain amounts to multiemployer pension plans and employee benefit trusts pursuant to specified rates. Quanta’s multiemployer pension plan contribution rates generally are made to the plans on a “pay-as-you-go” basis based on its union employee payrolls. The location and number of union employees that Quanta employs at any given time and the plans in which they may participate vary depending on Quanta’s need for union resources in connection with its ongoing projects. Therefore, Quanta is unable to accurately predict its union employee payroll and the resulting multiemployer pension plan contribution obligations for future periods.

~~Stock-Based Compensation~~

Quanta recognizes compensation expense for restricted stock units (RSUs) and performance stock units (PSUs) to be settled in common stock based on the fair value of the awards, net of estimated forfeitures. The fair value of RSU awards is determined based on the number of units granted and the closing price of Quanta’s common stock on the date of grant. The grant date fair value of the PSUs is determined as follows: (i) for the portion of the awards based on company performance metrics, by multiplying the number of units granted by the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

awards based on relative total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. An estimate of future forfeitures, based on historical data, is also utilized to determine compensation expense for the period, and these forfeiture estimates are subject to change and may impact the value that will ultimately be recognized as compensation expense. The resulting compensation expense for PSU and time-based RSU awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period, and the resulting compensation expense for performance-based RSU awards is recognized using the graded vesting method over the requisite service period. The compensation expense related to outstanding PSUs can also vary from period to period based on changes in forecasted achievement of established performance goals and the total number of shares of common stock that Quanta anticipates will be issued upon vesting of such PSUs. Payments made by Quanta to satisfy employee tax withholding obligations associated with awards settled in common stock are classified as financing cash flows.

Compensation expense associated with liability-based awards, such as RSUs that are expected to or may settle in cash, is recognized based on a remeasurement of the fair value of the award at the end of each reporting period. Upon settlement, the holders receive for each RSU an amount in cash equal to the fair market value of 1 share of Quanta common stock on the settlement date, as specified in the applicable award agreement. For additional information on Quanta’s RSU and PSU awards, see Note 10.

~~Functional Currency and Translation of Financial Statements~~

The U.S. dollar is the functional currency for the majority of Quanta’s operations, which are primarily located within the United States. The functional currency for Quanta’s foreign operations, which are primarily located in Canada and Australia, is typically the currency of the country where the foreign operating unit is located and transacts the majority of its activities, including billings, financing, payroll and other expenditures. When preparing its consolidated financial statements, Quanta translates the financial statements of its foreign operating units from their functional currency into U.S. dollars. Statements of operations, comprehensive income and cash flows are translated at average monthly rates, while balance sheets are translated at month-end exchange rates. The translation of the balance sheet results in translation gains or losses, which are included as a separate component of equity under “Accumulated other comprehensive income (loss).” Gains and losses arising from transactions not denominated in functional currencies are included within “Other income (expense), net” in the accompanying condensed consolidated statements of operations.

~~Comprehensive Income~~

Components of comprehensive income include all changes in equity during a period except those resulting from changes in Quanta’s capital-related accounts. Quanta records other comprehensive income (loss) for foreign currency translation adjustments related to its foreign operations and for other revenues, expenses, gains and losses that are included in comprehensive income but excluded from net income.

~~Litigation Costs and Reserves~~

Quanta records reserves when the likelihood of incurring a loss is probable and the amount of loss can be reasonably estimated. Costs incurred for litigation are expensed as incurred. See Note 11 for additional information related to legal proceedings and other contingencies.

Fair Value Measurements

For disclosure purposes, qualifying assets and liabilities are categorized into three broad levels based on the priority of the inputs used to determine their fair values. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Certain assumptions and other information as they relate to these qualifying assets and liabilities are described below.

~~Contingent Consideration Liabilities~~. As of June 30, 2020 and December 31, 2019, financial instruments required to be measured at fair value on a recurring basis consisted primarily of Quanta’s liabilities related to contingent consideration associated with certain acquisitions, payable in the event certain performance objectives are achieved by the acquired businesses during designated post-acquisition periods. The liabilities recorded represent the estimated fair values of future amounts payable to the former owners of the acquired businesses and are estimated by management based on entity-specific assumptions that are evaluated on an ongoing basis.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Aggregate fair values of these outstanding and unearned contingent consideration liabilities and their classification in the accompanying condensed consolidated balance sheets were as follows (in thousands):

June 30, 2020 December 31, 2019
Accounts payable and accrued expenses $ 68,466
$ 77,618
Insurance and other non-current liabilities 7,304
6,542
Total contingent consideration liabilities $ 75,770
$ 84,160

The fair values of these liabilities were primarily determined using a Monte Carlo simulation valuation methodology based on probability-weighted performance projections and other inputs, including a discount rate and an expected volatility factor for each acquisition. The expected volatility factors ranged from 20.4% to 30.0% and had a weighted average of 22.6% based on historical asset volatility of selected guideline public companies. Depending on contingent consideration payment terms, the present values of the estimated payments are discounted based on a risk-free rate and/or Quanta’s cost of debt and ranged from 0.2% to 3.9% and had a weighted average of 2.1% based on fair value at acquisition. The fair value determinations incorporate significant inputs not observable in the market. Accordingly, the level of inputs used for these fair value measurements is the lowest level (Level 3). Significant changes in any of these assumptions could result in a significantly higher or lower potential liability.

The majority of Quanta’s contingent consideration liabilities are subject to a maximum outstanding payment amount, which totaled $148.5 million for liabilities with measurement periods that end subsequent to June 30, 2020. One contingent consideration liability is not subject to a maximum payment amount, and such liability had a fair value of $1.0 million as of June 30, 2020.

Quanta’s aggregate contingent consideration liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance in post-acquisition periods and accretion in present value. During the three and six months ended June 30, 2020, Quanta recognized a net decrease of $2.2 million and a net increase $0.5 million in the fair value of its aggregate contingent consideration liabilities. During the three and six months ended June 30, 2019, Quanta recognized net increases of $4.4 million and $4.3 million. These changes are reflected in “Change in fair value of contingent consideration liabilities” in the accompanying condensed consolidated statements of operations. Additionally, Quanta settled certain contingent consideration liabilities with $10.0 million of cash payments during the three months ended June 30, 2020 and $11.0 million of cash payments and the issuance of 4,277 shares of Quanta common stock during the six months ended June 30, 2020.

Goodwill and Other Intangible ~~Assets.~~Assets

~~As discussed in the~~ ~~Goodwill~~ ~~and~~ ~~Other Intangible Assets~~ ~~sections within this Note 2,~~ Quanta has recorded goodwill and identifiable intangible assets in connection with certain of its historical business acquisitions. Quanta utilizes the fair value premise as the primary basis for its impairment valuation procedures. The Goodwill and Other Intangible Assets sections in Note 2 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2020 Annual Report provide information regarding valuation methods, including the income approach, market approach and cost approach, and assumptions used to determine the fair value of these

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

assets based on the appropriateness of each method in relation to the type of asset being valued. Quanta believes that ~~these~~the valuation methods it employs appropriately represent the methods that would be used by other market participants in determining fair value, and periodically engages the services of an independent valuation firm when a new business is acquired to assist management with the valuation process, including assistance with the selection of appropriate valuation methodologies and the development of market-based valuation assumptions. The level of inputs used for these fair value measurements is the lowest level (Level 3).

Investments ~~and Financial Instruments.~~ ~~Quanta also uses~~

Equity investments with readily determinable fair values are measured at fair value, ~~measurements~~with changes in ~~connection with the valuation of its investments~~fair value recognized in ~~private company equity interests and financial instruments. These valuations require significant management judgment due to the absence of~~net income. In cases where those readily determinable values are quoted market prices, the ~~inherent lack~~level of ~~liquidity and their long-term nature. Typically, the initial costs of~~input used for these investments are considered to represent fair market value, as such amounts are negotiated between willing market participants. On a quarterly basis, Quanta performs an evaluation of its investments to determine if an other-than-temporary decline in the value of each investment has occurred and whether the recorded amount of each investment will be recoverable. If an other-than-temporary decline in the value of an investment occurs, a fair value ~~analysis~~measurements is ~~performed to determine~~ the ~~degree to which the investment is impaired and~~highest level (Level 1). Equity investments without readily determinable fair values are measured on a ~~corresponding charge to earnings is recorded during the period.~~nonrecurring basis. These types of fair market value assessments are similar to other nonrecurring fair value measures used by Quanta, which include the use of significant judgments and available relevant market data. Such market data may include observations of the valuation of comparable companies, risk-adjusted discount rates and an evaluation of the expected performance of the underlying portfolio asset, including historical and projected levels of profitability or cash flows. In addition, a variety of additional factors may be reviewed by management, including, but not limited to, contemporaneous financing and sales transactions with third parties, changes in market outlook and the third-party financing environment. The level of inputs used for these fair value measurements is the lowest level (Level 3).

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~Quanta has investments accounted for using the equity and cost methods of accounting. Quanta utilizes the fair value premise as the basis for its impairment valuation and recognizes impairment if there are sufficient indicators that the fair value of the investment is less than its carrying value.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~Financial Instruments

~~(Unaudited)~~

~~Other.~~The carrying amounts of cash equivalents, accounts receivable, ~~and~~contract assets, accounts payable, ~~and~~ accrued expenses and contract liabilities approximate fair value due to the short-term nature of these instruments. All of Quanta’s cash equivalents were categorized as Level 1 assets at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, as all values were based on unadjusted quoted prices for identical assets in an active market that Quanta has the ability to access.

Long-term Debt

The carrying amount of variable rate debt, ~~also~~which includes borrowings under Quanta’s senior credit facility, approximates fair value. The fair value of Quanta’s 2.900% Senior Notes due October 1, 2030 was $1.04 billion at June 30, 2021. The fair value of the senior notes is based on the quoted market prices for the same issue and are categorized as Level 1 liabilities. See Note 6 for additional information regarding Quanta’s senior credit facility and the senior notes.

3. NEW ACCOUNTING PRONOUNCEMENTS:

Adoption of New Accounting Pronouncements

In June 2016, the FASB issued an update for measuring credit losses on most financial assets and certain other instruments that are not measured at fair value through net income. The update amended the impairment model to utilize an expected credit loss methodology in place of the incurred loss methodology for financial instruments, including accounts receivable and contract assets, and off-balance sheet credit exposures. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which often results in earlier recognition of losses. The update also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.

Quanta adopted the new accounting standard for measuring credit losses effective January 1, 2020 utilizing the transition method that allows recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Quanta’s financial results for reporting periods beginning on or after January 1, 2020 are presented under the new standard, while financial results for prior periods continue to be reported in accordance with the prior standard and Quanta’s historical accounting policy. The net cumulative effect due to the adoption of the new standard was a $3.8 million reduction to retained earnings as of January 1, 2020, which represented a $5.1 million increase to allowance for credit losses, net of $1.2 million in deferred income taxes. The adjustment was based on an estimate of expected lifetime credit losses for financial instruments, primarily accounts receivable and contract assets. Although the adoption of the new standard did not have a material impact on Quanta’s condensed consolidated financial statements at the date of adoption, expected credit losses could change as a result of changes to credit loss experience, specific risk characteristics of Quanta’s portfolio of financial assets or management’s expectations of future economic conditions that affect the collectability of Quanta’s financial assets. Management continues to periodically assess these factors, including any potential effects from the COVID-19 pandemic, and incorporate any changes in its estimate of credit losses.

In August 2018, the FASB issued an update that amends the disclosure requirements related to fair value measurements. Pursuant to this update, certain disclosure requirements will be removed, such as the valuation processes for Level 3 fair value measurements, and other disclosure requirements will be modified or added, including a new requirement to disclose the range and weighted average (or a more reasonable and rational method to reflect the distribution) of significant unobservable inputs used to develop Level 3 fair value measurements. Quanta adopted this guidance effective January 1, 2020, and it did not have a material impact on its condensed consolidated financial statements or disclosures.

~~Accounting Standards Not Yet Adopted~~

In December 2019, the FASB issued an update that, among other things, amends the guidance related to accounting for tax law changes when an entity has a year-to-date loss in an interim period and provides guidance on how to evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. This update is effective for interim and annual periods beginning after December 15, 2020, ~~and~~with certain amendments ~~should be~~ applied prospectively ~~while~~and other amendments ~~should be~~ applied on a modified retrospective basis. Quanta ~~is evaluating the potential~~adopted this update effective January 1, 2021, and it did not have a material impact ~~of this guidance~~ on ~~its~~Quanta’s condensed consolidated financial statements ~~and will adopt~~at the ~~guidance effective January 1, 2021.~~date of adoption.

In January 2020, the FASB issued an update that clarified the ~~interactions between accounting~~applicable guidance ~~to account~~ for ~~certain~~measurement of the fair value of equity ~~securities relating to increasing or decreasing~~and cost method investments when there is a change in the level of ownership or degree of ~~influence and forward contracts and purchased options. This~~influence. Quanta adopted this update is effective for interim and annual periods beginning after December 15, 2020, and it will be applied prospectively. Quanta is evaluating the potential impact of this guidance on its consolidated financial statements and will adopt the guidance effective January 1, ~~2021.~~2021 and will prospectively apply this update.


4.	~~ACQUISITIONS:~~

4. ACQUISITIONS:

During the six months ended June 30, ~~2020,~~2021, Quanta acquired an industrial services business located in Canada that performs catalyst handling services, such as changeover and shutdown maintenance, for customers in the refining and chemical industries and an electric power infrastructurea business located in the United States that designs, develops and holds a certification for the manufacture of personal protective breathing equipment and related monitoring devices primarily ~~provides underground conduit services. The aggregate consideration for these acquisitions was $19.4 million paid or payable~~used in ~~cash, subject to certain adjustments,~~the refining and ~~116,812 shares of Quanta common stock, which had~~petrochemical industries, including in connection with catalyst services, and a ~~fair value of $4.2 million as of the respective acquisition dates. Beginning~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

business located in the United States that primarily provides horizontal directional drilling services. The aggregate consideration for these acquisitions was $23.5 million paid in cash.

onDuring the year ended December 31, 2020, Quanta acquired a contractor located in the United States that provides electric power distribution, transmission and substation maintenance and construction, directional boring and emergency restoration services; a professional engineering business located in the United States that provides infrastructure engineering and design services to electric utilities, gas utilities and communications services companies, as well as permitting and utility locating services; a business located in the United States that provides aviation services primarily for the utility industry; an electric power infrastructure business located in the United States that primarily provides underground conduit services; a business located in the United States that specializes in the deployment of short- and long-haul fiber optic cable and utilities; an industrial services business located in Canada that performs catalyst handling services, including changeover and shutdown maintenance, for customers in the refining and chemical industries; and a business located in the United States that provides heavy, civil, industrial and energy related services and specializes in the construction and maintenance of pipelines and metering stations. The aggregate consideration for these acquisitions was $359.6 million paid or payable in cash (subject to certain adjustments) and 1,334,469 shares of Quanta common stock, which had a fair value of $57.1 million as of the respective acquisition ~~dates,~~dates. Additionally, one of the acquisitions includes the potential payment of up to $6.9 million of contingent consideration, payable if the acquired business achieves certain performance objectives over a five-year post-acquisition period. Based on the estimated fair value of the contingent consideration, Quanta recorded $2.3 million of liabilities as of the acquisition date.

The results of the acquired businesses have been included in Quanta’s consolidated financial statements beginning on the respective acquisition dates, with the results of the manufacturing business, the industrial services business and the business specializing in construction and maintenance of pipelines and metering stations generally included in the ~~Pipeline~~Underground Utility and ~~Industrial~~ Infrastructure ~~Services~~Solutions segment and the results of the ~~electric power infrastructure business generally included in the Electric Power Infrastructure Services segment.~~

On August 30, 2019, Quanta acquired Hallen, a pipeline and industrial services business located in the United States that specializes in gas distribution and transmission services, and to a lesser extent, underground electric distribution and transmission services. During the year ended December 31, 2019, Quanta also acquired two specialty utility foundation and pole-setting contractors serving the southeast United States; an electric power specialty contracting business located in the United States that provides aerial power line and construction support services; a business located in the United States that provides technical training materials to electric utility workers; an electric power company specializing in project management and, to a lesser extent, water and wastewater projects located in the United States; and an electrical infrastructure services business located in Canada. The aggregate consideration for these acquisitions was $395.3 million paid or payable in cash, subject to certain adjustments, and 60,860 shares of Quanta common stock, which had a fair value of $1.8 million as of the respective acquisition date. A portion of the cash consideration in connection with the Hallen acquisition was placed in an escrow account, which, subject to certain conditions, could be utilized to reimburse Quanta for obligations associated with certain contingent liabilities assumed by Quanta in the transaction. See ~~Legal Proceedings — Hallen Acquisition Assumed Liability~~ in Note 11 for additional information related to these liabilities. Beginning on the respective acquisition dates, the results of the acquired businesses have been included in Quanta’s consolidated financial statements, with the results of Hallen generally included in the Pipeline and Industrial Infrastructure Services segment and the results of the other acquiredremaining businesses generally included in the Electric Power Infrastructure ~~Services~~Solutions segment.

The following table summarizes the aggregate consideration paid or payable as of June 30, ~~2020~~2021 for the acquisitions completed in ~~2020~~the six months ended June 30, 2021 and ~~2019~~the year ended December 31, 2020 and presents the allocation of these amounts to net tangible and identifiable intangible assets based on their estimated fair values as of the respective acquisition dates, inclusive of any purchase price adjustments. These allocations require significant use of estimates and are based on information that was available to management at the time these condensed consolidated financial statements were prepared. Quanta uses a variety of information to estimate fair values, including quoted market prices, carrying amounts and valuation techniques such as discounted cash flows. When deemed appropriate, third-party appraisal firms are engaged to assist in fair value determination of fixed assets, intangible assets and certain other assets and liabilities.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Quanta is finalizing its fair value assessments for the acquired assets and assumed liabilities related to businesses acquired subsequent to June 30, ~~2019,~~2020, and further adjustments to the purchase price allocations may occur. As of June 30, ~~2020,~~2021, the estimated fair values of the net assets acquired were preliminary, with possible updates primarily related to ~~pre-acquisition contingent liabilities, as further described in~~ ~~Legal Proceedings — Hallen Acquisition Assumed Liability~~ ~~in Note 11,~~tax estimates and ~~tax estimates.~~inventory. Consideration amounts are also subject to the finalization of closing working capital adjustments. The aggregate consideration paid or payable for businesses acquired between June 30, ~~2019~~2020 and June 30, ~~2020~~2021 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of ~~$76.7~~$228.8 million to net tangible assets, ~~$190.0~~$102.0 million to identifiable intangible assets and ~~$102.7~~$85.5 million to ~~goodwill~~goodwill. The following table summarizes the fair value of total consideration transferred

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

or estimated to be transferred and the fair value of assets acquired and liabilities assumed as of June 30, 2021 for acquisitions completed in the year-to-date periods shown below (in thousands).

2020 2019
Consideration:
Cash paid or payable $ 19,377
$ 395,258
Value of Quanta common stock issued 4,158
1,791
Contingent consideration 2,250
—
Fair value of total consideration transferred or estimated to be transferred $ 25,785
$ 397,049

Accounts receivable $ 4,888
$ 112,142
Contract assets —
11,869
Other current assets 1,691
14,290
Property and equipment 6,233
60,133
Other assets —
149
Identifiable intangible assets 4,561
192,786
Contract liabilities —
(11,856 )
Other current liabilities (1,174 ) (73,698 )
Deferred tax liabilities, net (483 ) (12,455 )
Other long-term liabilities —
(5,345 )
Total identifiable net assets 15,716
288,015
Goodwill 10,069
112,173
Fair value of net assets acquired 25,785
400,188
Bargain purchase gain —
(3,139 )
Fair value of total consideration transferred or estimated to be transferred $ 25,785
$ 397,049


	June 30, 2021		December 31, 2020
Consideration:
Cash paid or payable	$	23,500	$	359,575
Value of Quanta common stock issued	0		57,119
Contingent consideration	0		2,250
Fair value of total consideration transferred or estimated to be transferred	$	23,500	$	418,944

Accounts receivable	$	1,111	$	74,492
Contract assets	0		8,919
Other current assets	5,740		53,302
Property and equipment	1,552		143,276
Other assets	0		14
Identifiable intangible assets	9,746		96,827
Contract liabilities	0		(3,750)
Other current liabilities	(4,841)		(35,112)
Deferred tax liabilities, net	(1,975)		(3,185)


Total identifiable net assets	11,333		334,783
Goodwill	12,167		84,161
Fair value of net assets acquired	$	23,500	$	418,944

Goodwill represents the amount by which the purchase price for an acquired business exceeds the net fair value of the assets acquired and liabilities ~~assumed,~~assumed.

The acquisitions completed in the six months ended June 30, 2021 and a bargain purchase gain results when the amount of the net fair value of the assets acquired and liabilities assumed exceeds the purchase price for an acquired business. The acquisition of the electrical infrastructure services business in Canada that occurred during the year ended December 31, ~~2019 included the recognition of a bargain purchase gain of $3.1 million, which was recorded in “Other income (expense), net” in the accompanying condensed consolidated statements of operations.~~

~~The acquisitions completed in~~ 2020 ~~and 2019~~ strategically expanded Quanta’s domestic and international ~~pipeline~~underground utility and ~~industrial~~infrastructure solutions and domestic ~~and international~~ electric power ~~service offerings,~~infrastructure solutions, which Quanta believes contributes to the recognition of goodwill. Approximately ~~$3.8~~$1.8 million and $72.5 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in ~~2020,~~the six months ended June 30, 2021 and ~~$82.1 million is expected to be deductible for income tax purposes related to acquisitions completed in 2019.~~the year ended December 31, 2020.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Quanta’s intangible assets include customer relationships; backlog; trade names; non-compete agreements; patented rights, developed technology, and process certifications; and curriculum, all of which are subject to amortization, as well as an engineering license, which is not subject to amortization. The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in ~~2020~~the six months ended June 30, 2021 as of the acquisition ~~dates~~date and the related weighted average amortization periods by type (in thousands, except for weighted average amortization periods, which are in years).


	Estimated Fair Value		Weighted Average Amortization Period in Years		Estimated Fair Value		Weighted Average Amortization Period in Years
Customer relationships	$	3,180	4.4	Customer relationships	$	218	3.0
Backlog	205		1.0

Trade names	349		15.0	Trade names	50		2.0
Non-compete agreements	827		5.0	Non-compete agreements	450		5.0
Total intangible assets subject to amortization related to acquisitions completed in 2020	$	4,561	5.2
Patented rights, developed technology, and process certifications				Patented rights, developed technology, and process certifications	9,028		3.5
Total intangible assets subject to amortization				Total intangible assets subject to amortization	$	9,746	3.6

The significant estimates used by management in determining the fair value of customer relationship intangible assets include future revenues, discount rates and customer attrition rates. The following table includes the discount rates and customer attrition rates used to determine the fair value of customer relationship intangible assets for businesses acquired during the six months ended June 30, 2021 and the year ended December 31, 2020 as of the respective acquisition dates:


	2021	2020
	Rates		Range	Weighted Average
Discount rates	22%		19% to 25%	20%
Customer attrition rates	25%		10% to 43%	13%

The following unaudited supplemental pro forma results of operations for Quanta, which ~~incorporates~~incorporate the acquisitions completed in ~~2020~~the three and ~~2019,~~six months ended June 30, 2021 and 2020, have been provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors (in thousands, except per share amounts).

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenues $ 2,506,231
$ 2,996,243
$ 5,273,181
$ 5,964,481
Gross profit 355,264
351,820
688,666
748,918
Selling, general and administrative expenses 227,852
235,433
458,954
479,288
Amortization of intangible assets 17,779
18,798
35,845
37,858
Net income 74,795
36,875
116,799
166,291
Net income attributable to common stock 73,946
35,760
113,133
164,629

Earnings per share:
Basic $ 0.53
$ 0.24
$ 0.80
$ 1.13
Diluted $ 0.52
$ 0.24
$ 0.78
$ 1.12


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues	$	3,000,377	$	2,580,496	$	5,705,185	$	5,421,711
Gross profit	$	449,073	$	374,134	$	823,767	$	726,406
Selling, general and administrative expenses	$	(271,073)	$	(238,802)	$	(515,784)	$	(480,854)
Amortization of intangible assets	$	(21,952)	$	(22,398)	$	(43,988)	$	(45,083)
Net income	$	118,703	$	76,355	$	209,758	$	119,136
Net income attributable to common stock	$	116,765	$	75,506	$	206,262	$	115,470

Earnings per share attributable to common stock:
Basic	$	0.83	$	0.54	$	1.47	$	0.81
Diluted	$	0.81	$	0.52	$	1.43	$	0.79

The pro forma combined results of operations for the three and six months ended June 30, 2021 and 2020 ~~and~~were prepared by adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2021 as if they occurred January 1, 2020. The pro forma combined results of operations for the three and six months ended June 30, ~~2019~~2020 were prepared by also adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2020 as if they occurred January 1, 2019. The pro forma amounts for the three months ended June 30, 2020 are the same as the historical results since there were no acquisitions in the three months ended June 30, 2020. The pro forma combined results of operations for the three and six months ended June 30, 2019 were prepared by also adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2019 as if they occurred January 1, 2018. These pro forma combined historical results were adjusted for the following: a reduction of interest expense as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

expense as a result of the cash consideration paid; an increase in amortization expense due to the incremental intangible assets recorded; elimination of inter-company sales; changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies; an increase in the number of outstanding shares of Quanta common stock; and reclassifications to conform the acquired businesses’ presentation to Quanta’s accounting policies. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs or any cost savings or other synergies that resulted or may result from the acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.

Revenues of ~~approximately $5.9~~$1.2 million and income before income taxes of ~~approximately $0.9~~$0.3 million, which included 0$0.2 million of acquisition-related costs, related to the acquisitions completed in 2021 are included in Quanta’s condensed consolidated results of operations for the three months ended June 30, ~~2020~~2021. Revenues of $1.2 million and income before income taxes of $0.1 million, which included $0.4 million of acquisition-related costs, related to the acquisitions completed in 2021 are included in Quanta’s condensed consolidated results of operations for the six months ended June 30, 2021. Revenues of $5.9 million and income before income taxes of $0.9 million, which included 0 acquisition-related costs, related to the acquisitions completed in 2020 are included in Quanta’s condensed consolidated results of operations for the three months ended June 30, 2020. Revenues of ~~approximately~~ $7.8 million and a ~~nominal~~0minal amount of loss before income taxes, which included $0.8 million of acquisition-related costs, related to the acquisitions completed in 2020 are included in Quanta’s condensed consolidated results of operations for the six months ended June 30, ~~2020 related to the acquisitions completed in~~ 2020. ~~Revenues of approximately $14.3 million and income before income taxes of approximately $5.1 million, which included 0 acquisition-related costs, are included in Quanta’s~~

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

consolidated results of operations for the three months ended June 30, 2019 related to the acquisitions completed in 2019. Revenues of approximately $21.7 million and income before income taxes of approximately $4.1 million, which included $2.4 million of acquisition-related costs, are included in Quanta’s consolidated results of operations for the six months ended June 30, 2019 related to the acquisitions completed in 2019.

In July ~~2020,~~2021, Quanta acquired a ~~professional engineering~~business located in Canada that provides front-end land services for infrastructure development projects in Canada and the United States and a communications services business located in the United States that ~~provides infrastructure engineering~~performs data center connection services. The aggregate consideration for these acquisitions included approximately $35.0 million paid or payable in cash, subject to certain adjustments, and ~~design services to electric utilities, gas utilities and communications services companies, as well as permitting and utility locating services.~~the issuance of 32,822 shares of common stock, which had a fair value of approximately $2.9 million at the acquisition date. Beginning on the acquisition ~~date,~~dates, the results of the acquired ~~business~~businesses will generally be included in the ~~Electrical~~Electric Power Infrastructure ~~Services~~Solutions segment.

~~5. GOODWILL AND OTHER INTANGIBLE ASSETS:~~

As described in Note 2, Quanta’s operating units are organized into one of Quanta’s 2 internal divisions, and accordingly the goodwill associated with the operating units has been aggregated on a divisional basis in the table below. These divisions are closely aligned with Quanta’s reportable segments, and operating units are assigned to a division based on the predominant type of work performed. From time to time, an operating unit may be reorganized between divisions if warranted due to changes in its predominant business.

~~A summary of changes in Quanta��s goodwill is as follows (in thousands):~~

Electric Power Infrastructure Services
Division

Pipeline and Industrial Infrastructure Services
Division
Total
Balance at December 31, 2018:
Goodwill $ 1,313,078
$ 683,284
$ 1,996,362
Accumulated impairment —
(96,483 ) (96,483 )
1,313,078 586,801 1,899,879

Goodwill related to acquisitions completed in 2019 43,183
67,200
110,383
Purchase price allocation adjustments 1,503
—
1,503
Foreign currency translation adjustments 7,399
3,511
10,910

Balance at December 31, 2019:
Goodwill 1,365,163
753,938
2,119,101
Accumulated impairment —
(96,426 ) (96,426 )
1,365,163
657,512
2,022,675

Goodwill related to acquisitions completed in 2020 3,768
6,301
10,069
Purchase price allocation adjustments 1,771
19
1,790
Foreign currency translation adjustments (7,532 ) (4,007 ) (11,539 )

Balance at June 30, 2020:
Goodwill 1,363,170
756,046
2,119,216
Accumulated impairment —
(96,221 ) (96,221 )
$ 1,363,170
$ 659,825
$ 2,022,995

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Quanta’s intangible assets and the remaining weighted average amortization periods related to its intangible assets subject to amortization were as follows (in thousands except for weighted average amortization periods, which are in years):

As of As of
June 30, 2020 December 31, 2019
Remaining Weighted Average Amortization Period in Years
Intangible
Assets

Accumulated
Amortization

Intangible
Assets, Net

Intangible
Assets

Accumulated
Amortization

Intangible
Assets, Net
Customer relationships 6.0 $ 531,823
$ (240,578 ) $ 291,245
$ 532,808
$ (213,915 ) $ 318,893
Backlog 2.3 143,615
(141,212 ) 2,403
144,704
(141,580 ) 3,124
Trade names 14.3 93,007
(29,087 ) 63,920
93,396
(26,145 ) 67,251
Non-compete agreements 3.0 43,718
(34,446 ) 9,272
43,281
(32,868 ) 10,413
Patented rights and developed technology 2.3 22,440
(21,173 ) 1,267
22,719
(20,682 ) 2,037
Curriculum 7.9 11,712
(2,510 ) 9,202
11,712
(2,696 ) 9,016
Total intangible assets subject to amortization 7.3 846,315
(469,006 ) 377,309
848,620
(437,886 ) 410,734
Engineering license 3,000
—
3,000
3,000
—
3,000
Total intangible assets $ 849,315
$ (469,006 ) $ 380,309
$ 851,620
$ (437,886 ) $ 413,734

Amortization expense for intangible assets was $17.8 million and $12.6 million for the three months ended June 30, 2020 and 2019 and $35.7 million and $25.3 million for the six months ended June 30, 2020 and 2019.

~~The estimated future aggregate amortization expense of intangible assets subject to amortization as of June 30, 2020 is set forth below (in thousands):~~

Year Ending December 31:
Remainder of 2020 $ 35,354
2021 68,450
2022 63,434
2023 54,714
2024 41,758
Thereafter 113,599
Total $ 377,309

6.5. PER SHARE INFORMATION:

The amounts used to compute basic and diluted earnings per share attributable to common stock consisted of the following (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Amounts attributable to common stock:
Net income attributable to common stock $ 73,946
$ 27,344
$ 112,632
$ 147,832

Weighted average shares:
Weighted average shares outstanding for basic earnings per share attributable to common stock 139,856
145,935
142,154
145,525
Effect of dilutive unvested non-participating stock-based awards 3,665
1,306
3,059
1,340
Weighted average shares outstanding for diluted earnings per share attributable to common stock 143,521
147,241
145,213
146,865

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Amounts attributable to common stock:
Net income attributable to common stock	$	117,033	$	73,946	$	206,794	$	112,632

Weighted average shares outstanding:
Weighted average shares outstanding for basic earnings per share attributable to common stock	140,276		139,856		140,199		142,154
Effect of dilutive unvested non-participating stock-based awards	4,331		3,665		4,324		3,059
Weighted average shares outstanding for diluted earnings per share attributable to common stock	144,607		143,521		144,523		145,213

Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Exchangeable shares that were issued pursuant to certain of Quanta’s historical acquisitions (as further discussed in Note 9), which are exchangeable on a one-for-one basis with shares of Quanta common stock, have been included in the calculation of weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the portion of the periods that they were outstanding. Additionally, unvestedUnvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock included 0.6 million and 1.5 million weighted average participating securities for the three months ended June 30, 2021 and 2020 and 0.8 million and 1.9 million weighted average participating securities for the ~~three and~~ six months ended June 30, ~~2020~~2021 and ~~3.0 million and 2.9 million weighted average participating securities for the three and six months ended June 30, 2019.~~2020.

For purposes of calculating diluted earnings per share attributable to common stock, there were no adjustments required to derive Quanta’s net income attributable to common stock. Diluted earnings per share attributable to common stock is computed using the weighted average number of shares of common stock outstanding during the period adjusted for all

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalents would be antidilutive.

6. DEBT OBLIGATIONS:

Quanta’s long-term debt obligations consisted of the following (in thousands):

June 30, 2020 December 31, 2019
Borrowings under senior secured credit facility $ 1,361,841
$ 1,346,290
Other long-term debt 22,391
13,275
Finance leases 1,400
957
Total long-term debt obligations 1,385,632
1,360,522
Less — Current maturities of long-term debt 70,076
68,327
Total long-term debt obligations, net of current maturities $ 1,315,556
$ 1,292,195


	June 30, 2021		December 31, 2020
2.900% Senior Notes due 2030	$	1,000,000	$	1,000,000
Borrowings under senior credit facility	323,281		148,508
Other long-term debt	51,254		46,981
Finance leases	2,412		2,228
Unamortized discount and debt issuance costs related to senior notes	(12,229)		(12,892)
Total long-term debt obligations	1,364,718		1,184,825
Less — Current maturities of long-term debt	11,176		10,531
Total long-term debt obligations, net of current maturities	$	1,353,542	$	1,174,294

Quanta’s current maturities of long-term debt and short-term debt consisted of the following (in thousands):


	June 30, 2021		December 31, 2020
Short-term debt	$	0	$	4,233
Current maturities of long-term debt	11,176		10,531
Current maturities of long-term debt and short-term debt	$	11,176	$	14,764

June 30, 2020 December 31, 2019
Short-term debt $ 1,761
$ 6,542
Current maturities of long-term debt 70,076
68,327
Current maturities of long-term debt and short-term debt $ 71,837
$ 74,869
2.900% Senior Notes

In September 2020, Quanta issued $1.00 billion aggregate principal amount of the senior notes and received proceeds of $986.7 million from the offering, net of the original issue discount, underwriting discounts and debt issuance costs. Interest on our 2.900% senior notes due October 2030 in the amount of $14.5 million is payable semi-annually in arrears on April 1 and October 1 of each year. The maturity date for the senior notes is October 1, 2030.

Senior ~~Secured~~ Credit Facility

Quanta ~~has~~is a party to a credit agreement with various lenders that provides for ~~(i)~~$2.51 billion of aggregate revolving commitments and has a ~~$2.14 billion revolving credit facility and (ii) a term loan facility with term loans in the aggregate initial principal amount~~maturity date of ~~$1.29 billion. In addition,~~September 22, 2025. Additionally, subject to the conditions specified in the credit agreement, Quanta has the option to increase the capacity of the credit ~~facility,~~facility.

As of June 30, 2021, Quanta had $323.3 million of outstanding revolving loans under its senior credit facility. Of the total outstanding borrowings, $171.0 million were denominated in Canadian dollars, $121.5 million were denominated in U.S. dollars and $30.8 million were denominated in Australian dollars. As of June 30, 2021, Quanta also had $301.6 million of letters of credit issued under the ~~form of an increase in the revolving~~senior credit facility, ~~incremental term loans or a combination thereof, from time to time, upon receipt~~ of ~~additional commitments from new or existing lenders by up to an additional (i) $400.0~~which $91.0 million ~~plus (ii) additional amounts so long as~~were denominated in currencies other than the ~~Incremental Leverage Ratio Requirement (as defined in the credit agreement) is satisfied at the time~~U.S. dollar, primarily Canadian dollars. As of such increase. The Incremental Leverage Ratio Requirement requires, among other things, after giving pro forma effect to such increase and the use of proceeds therefrom, compliance with the credit agreement’s financial covenants as of the most recent fiscal quarter end for which financial statements were required to be delivered and that Quanta’s Consolidated Leverage Ratio (as defined below) does not exceed 2.5 to 1.0,June 30, 2021, subject to the ~~conditions specified in~~applicable sublimits, the ~~credit agreement.~~

~~Borrowings~~remaining $1.89 billion of available commitments under the credit agreement are to be used to refinance existing indebtedness and for working capital, capital expenditures, acquisitions and other general corporate purposes. The maturity date for both the revolvingsenior credit facility ~~and the term loan facility is October 31, 2022, and Quanta is required to make quarterly principal payments on the term loan facility as described below.~~

~~With respect to the revolving credit facility, subject to compliance with the financial covenants described below, the entire amount~~was available ~~may be used by Quanta~~ for ~~revolving~~ loans ~~and~~or issuing new letters of credit in U.S. dollars and certain alternative currencies. ~~Up to $600.0 million may be used by certain subsidiaries~~

Borrowings under the senior credit facility and the applicable interest rates were as follows (dollars in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Maximum amount outstanding	$	576,993		$	1,742,995		$	576,993		$	2,023,326
Average daily amount outstanding	$	449,132		$	1,481,378		$	332,409		$	1,465,994
Weighted-average interest rate	1.90		%	1.65		%	1.99		%	2.37		%

As of June 30, 2021, Quanta ~~for revolving loans and letters~~was in compliance with all of the financial covenants under the credit including in certain alternative currencies, up to $100.0 million may be used for swing line loans in U.S. dollars, up to $50.0 million may be used for swing line loans in Canadian dollars and up to $50.0 million may be used for swing line loans in Australian dollars.agreement governing the senior credit facility.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Quanta borrowed $600.0 million under the term loan facility in October 2018 and $687.5 million under the term loan facility in September 2019 and used the majority of such proceeds to repay outstanding revolving loans under the credit agreement. As of June 30, 2020, Quanta had $1.36 billion of borrowings outstanding under the credit agreement, which included $1.21 billion borrowed under the term loan facility and $152.6 million of outstanding revolving loans. Of the total outstanding borrowings, $1.21 billion were denominated in U.S. dollars, $111.9 million were denominated in Canadian dollars and $40.7 million were denominated in Australian dollars. Quanta also had $374.7 million of letters of credit issued under the revolving credit facility, of which $254.8 million were denominated in U.S. dollars and $119.9 million were denominated in currencies other than the U.S. dollar, primarily Canadian and Australian dollars as of such date. As of June 30, 2020, the remaining $1.61 billion of available commitments under the revolving credit facility was available for additional revolving loans or letters of credit in U.S. dollars and certain alternative currencies.

~~Borrowings under the credit facility and the applicable interest rates were as follows (dollars in thousands):~~

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Maximum amount outstanding under the credit facility during the period $ 1,742,995
$ 1,637,602
$ 2,023,326
$ 1,637,602
Average daily amount outstanding under the credit facility $ 1,481,378
$ 1,524,763
$ 1,465,994
$ 1,395,349
Weighted-average interest rate 1.65 % 3.88 % 2.37 % 3.90 %

Revolving loans borrowed in U.S. dollars bear interest, at Quanta’s option, at a rate equal to either (i) the Eurocurrency Rate (as defined in the credit agreement) plus 1.125% to 2.000%, as determined based on Quanta’s Consolidated Leverage Ratio, or (ii) the Base Rate (as described below) plus 0.125% to 1.000%, as determined based on Quanta’s Consolidated Leverage Ratio. Revolving loans borrowed in any currency other than U.S. dollars bear interest at a rate equal to the Eurocurrency Rate plus 1.125% to 2.000%, as determined based on Quanta’s Consolidated Leverage Ratio. Additionally, standby or commercial letters of credit issued under the credit agreement are subject to a letter of credit fee of 1.125% to 2.000%, based on Quanta’s Consolidated Leverage Ratio, and Performance Letters of Credit (as defined in the credit agreement) issued under the credit agreement in support of certain contractual obligations are subject to a letter of credit fee of 0.675% to 1.150%, based on Quanta’s Consolidated Leverage Ratio. The Base Rate equals the highest of (i) the Federal Funds Rate (as defined in the credit agreement) plus 0.5%, (ii) the prime rate publicly announced by Bank of America, N.A. and (iii) the Eurocurrency Rate plus 1.00%.

Term loans bear interest at rates generally consistent with the revolving loans borrowed in U.S. dollars, except that the additional amount over the Eurocurrency Rate is 1.125% to 1.875%, as determined based on Quanta’s Consolidated Leverage Ratio. Quanta made quarterly principal payments of $7.5 million on the term loan through September 2019 and is currently required to make quarterly principal payments of $16.1 million on the term loans on the last business day of each March, June, September and December. The aggregate outstanding principal amount of all outstanding term loans must be paid on the maturity date; however, Quanta may voluntarily prepay that amount from time to time, in whole or in part, without premium or penalty.

~~Quanta is also subject to a commitment fee of 0.20% to 0.40%, based on its Consolidated Leverage Ratio, on any unused availability under the revolving credit facility.~~

Consolidated Leverage Ratio is the ratio of Quanta’s Consolidated Funded Indebtedness to Consolidated EBITDA (as those terms are defined in the credit agreement). For purposes of calculating Quanta’s 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. Consolidated Interest Coverage Ratio is the ratio of (i) Consolidated EBIT (as defined in the credit agreement) for the four fiscal quarters most recently ended to (ii) Consolidated Interest Expense (as defined in the credit agreement) for such period (excluding all interest expense attributable to capitalized loan costs and the amount of fees paid in connection with the issuance of letters of credit on behalf of Quanta during such period).

The credit agreement contains certain covenants, including (i) a maximum Consolidated Leverage Ratio of 3.0 to 1.0 (except that in connection with certain permitted acquisitions in excess of $200.0 million, such ratio is 3.5 to 1.0 for the fiscal quarter in which the acquisition is completed and the two subsequent fiscal quarters) and (ii) a minimum Consolidated Interest Coverage Ratio of 3.0 to 1.0. As of June 30, 2020, Quanta was in compliance with all of the financial covenants under the credit agreement.

Subject to certain exceptions, (i) all borrowings under the credit agreement are secured by substantially all the assets of Quanta and Quanta’s wholly owned U.S. subsidiaries and by a pledge of all of the capital stock of Quanta’s wholly owned U.S. subsidiaries and 65% of the capital stock of direct foreign subsidiaries of Quanta’s wholly owned U.S. subsidiaries and (ii) Quanta’s wholly owned U.S. subsidiaries guarantee the repayment of all amounts due under the credit agreement. Subject to certain

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

conditions, all collateral will automatically be released from the liens securing the obligations under the credit agreement at any time Quanta maintains 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.).

The credit agreement also limits certain acquisitions, mergers and consolidations, indebtedness, asset sales and prepayments of indebtedness and, subject to certain exceptions, prohibits liens on Quanta’s assets. The credit agreement allows cash payments for dividends and stock repurchases subject to compliance with the following requirements (including after giving effect to the dividend or stock repurchase): (i) no default or event of default under the credit agreement; (ii) continued compliance with the financial covenants in the credit agreement; and (iii) at least $100.0 million of availability under the revolving credit facility and/or cash and cash equivalents on hand.

The credit agreement provides for customary events of default and generally contains cross-default provisions with Quanta’s underwriting, continuing indemnity and security agreement with its sureties and certain other debt instruments exceeding $150.0 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, the lenders may declare all amounts outstanding and accrued and unpaid interest immediately due and payable, require that Quanta provide cash collateral for all outstanding letter of credit obligations, terminate the commitments under the credit agreement, and foreclose on the collateral.

8.7. LEASES:

Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. As of June 30, 2020, the majority of Quanta’s leases had remaining lease terms not exceeding ten years. Certain leases include options to extend their terms in increments of up to five years and/or options to terminate. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):


		Three Months Ended				Six Months Ended
		June 30,				June 30,
Lease cost	Classification	2021		2020		2021		2020
Finance lease cost:
Amortization of lease assets	Depreciation (1)	$	230	$	260	$	474	$	462
Interest on lease liabilities	Interest expense	23		17		50		34
Operating lease cost	Cost of services and Selling, general and administrative expenses	26,947		29,975		54,723		59,712
Short-term and variable lease cost (2)	Cost of services and Selling, general and administrative expenses	160,342		147,953		318,241		318,318
Total lease cost		$	187,542	$	178,205	$	373,488	$	378,526

Three Months Ended Six Months Ended
June 30, June 30,
Lease cost Classification 2020 2019 2020 2019
Finance lease cost:
Amortization of lease assets
Depreciation ⁽¹⁾
$ 260
$ 283
$ 462
$ 656
Interest on lease liabilities Interest expense 17
18
34
39
Operating lease cost Cost of services and Selling, general and administrative expenses 29,975
30,377
59,712
60,735
Short-term and variable lease cost ⁽²⁾
Cost of services and Selling, general and administrative expenses 147,953
194,630
318,318
394,928
Total lease cost $ 178,205
$ 225,308
$ 378,526
$ 456,358


⁽¹⁾	~~Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.~~

⁽²⁾

~~Short-term lease cost includes both leases and rentals with initial terms of one year or less.~~Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.

(2) Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant and primarily relates to real estate leases and consists of common area maintenance charges, real estate taxes, insurance and other variable costs.

Quanta has entered into ~~lease~~ arrangements ~~for real property and facilities~~ with certain related parties ~~typically an employee~~to lease certain real property and facilities. Typically, the parties are employees of Quanta who isare also the former ~~owner~~owners of ~~a business~~businesses acquired by Quanta, ~~that continues~~and the real properties and facilities continue to ~~utilize~~be utilized by Quanta subsequent to the ~~leased premises.~~acquisitions. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to ~~five~~10 years, subject to renewal options. Related party lease expense was ~~$4.3~~$3.2 million and ~~$4.0~~$4.3 million for the three months ended June 30, 2021 and 2020 and ~~2019~~$8.0 million and $8.7 ~~million and $8.1~~ million for the six months ended June 30, ~~2020~~2021 and ~~2019.~~

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~The components of leases in the accompanying condensed consolidated balance sheet were as follows (in thousands):~~

Lease type Classification June 30, 2020 December 31, 2019
Assets:
Operating lease right-of-use assets Operating lease right-of-use assets $ 275,816
$ 284,369
Finance lease assets Property and equipment, net of accumulated depreciation 1,593
1,043
Total lease assets $ 277,409
$ 285,412
Liabilities:
Current:
Operating Current portion of operating lease liabilities $ 90,358
$ 92,475
Finance Current maturities of long-term debt and short-term debt 489
440

Non-current:
Operating Operating lease liabilities, net of current portion 192,300
196,521
Finance Long-term debt, net of current maturities 911
517
Total lease liabilities $ 284,058
$ 289,953

Certain of Quanta’s equipment rental agreements contain purchase options pursuant to which the purchase price is offset by a portion of the rental payments. When rental purchase options are exercised and a substantive benefit is deemed to be transferred to a third-party lessor, the transaction is deemed to be a financing transaction for accounting purposes. This results in the recognition of an asset equal to the purchase price being recorded in “Property, plant and equipment, net of accumulated depreciation,” and the recognition of a corresponding liability in “Current maturities of long-term debt and short-term debt” and “Long-term debt, net of current maturities.” As of June 30, 2020 and December 31, 2019, the assets recorded, net of accumulated depreciation, totaled $21.1 million and $11.8 million.2020.

Future minimum lease payments for operating and finance leases were as follows (in thousands):

As of June 30, 2020
Operating Leases Finance Leases Total
Remainder of 2020 $ 53,636
$ 330
$ 53,966
2021 86,556
469
87,025
2022 61,429
343
61,772
2023 41,816
247
42,063
2024 25,036
122
25,158
Thereafter 41,034
—
41,034
Total future minimum operating and finance lease payments $ 309,507
$ 1,511
$ 311,018
Less imputed interest (26,849 ) (111 ) (26,960 )
Total lease liabilities $ 282,658
$ 1,400
$ 284,058

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~


	As of June 30, 2021
	Operating Leases		Finance Leases		Total
Remainder of 2021	$	48,043	$	585	$	48,628
2022	76,476		842		77,318
2023	55,090		618		55,708
2024	34,195		386		34,581
2025	22,640		102		22,742
Thereafter	32,987		0		32,987
Total future minimum operating and finance lease payments	$	269,431	$	2,533	$	271,964
Less imputed interest	(21,747)		(121)		(21,868)
Total lease liabilities	$	247,684	$	2,412	$	250,096

Future minimum lease payments for short-term leases, which are not recorded in the condensed consolidated balance sheets due to Quanta’s accounting policy election, were ~~$21.9~~$21.7 million as of June 30, ~~2020.~~2021. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future rental amounts.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The weighted average remaining lease terms and discount rates were as follows:

As of June 30, ~~2020~~2021

Weighted average remaining lease term (in years):

Operating leases

~~4.31~~4.16

Finance leases

~~3.14~~2.96

Weighted average discount rate:

Operating leases

~~4.2~~4.1

Finance leases

~~4.2~~3.9

Quanta has also guaranteed the residual value onunder certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. AtAs of June 30, ~~2020,~~2021, the maximum guaranteed residual value of this equipment was ~~$808.8~~$889.5 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.

As of June 30, ~~2020,~~2021, Quanta had additional operating lease obligations of $5.7 million for leases that had not yet commenced ~~of $8.0 million. These operating leases will~~but that are expected to commence in ~~2020 with~~the third and fourth quarters of 2021 and have lease terms of one to ~~ten~~seven years.

~~9. EQUITY:~~

~~Exchangeable Shares~~

In connection with certain prior acquisitions of Canadian businesses, the former owners of the acquired businesses received exchangeable shares of certain Canadian subsidiaries of Quanta, which could be exchanged at the option of the holders for Quanta common stock on a 1-for-one basis. All holders of exchangeable shares had rights equivalent to Quanta common stockholders with respect to dividends and other economic rights. During the six months ended June 30, 2020 and 2019, a nominal amount and 0.4 million exchangeable shares were exchanged for Quanta common stock, and as of June 30, 2020, 0 exchangeable shares remained outstanding.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

~~Treasury Stock~~

~~General.~~ ~~Treasury stock is recorded at cost. Under Delaware law, treasury stock is not counted for quorum purposes or entitled to vote.~~

~~Shares withheld for tax withholding obligations.~~ The tax withholding obligations of employees upon vesting of RSUs and PSUs settled in common stock are typically satisfied by Quanta making tax payments and withholding the number of vested shares having a value on the date of vesting equal to the tax withholding obligation. For the settlement of these liabilities, Quanta withheld a nominal amount and 0.1 million of Quanta common stock during the three months ended June 30, 2020 and 2019, which had a market value of $0.5 million and $0.8 million, and withheld 0.6 million and 0.5 million of Quanta common stock during the six months ended June 30, 2020 and 2019, which had a market value of $23.7 million and $16.1 million. These shares and the related costs to acquire them were accounted for as adjustments to the balance of treasury stock.

~~Notional amounts recorded related to deferred compensation plans.~~ For RSUs and PSUs that vest but the settlement of which is deferred under a deferred compensation plan, Quanta records a notional amount to “Treasury stock” and an offsetting amount to “Additional paid-in capital” (APIC). At vesting, only shares withheld for tax liabilities other than income taxes are added to outstanding treasury shares, as the shares of Quanta common stock associated with deferred stock-based awards are not issued until settlement of the award. Upon settlement of the deferred stock-based awards and issuance of the associated Quanta common stock, the original accounting entry is reversed. The net amounts recorded to treasury stock related to the deferred compensation plans were $0.1 million and a nominal amount during the three months ended June 30, 2020 and 2019 and $3.6 million and $3.7 million during the six months ended June 30, 2020 and 2019.

8. EQUITY:

Stock ~~repurchases.~~ During the third quarter of 2018, Quanta’s Board of Directors approved a stock repurchase program that authorizes Quanta to purchase, from time to time through June 30, 2021, up to $500.0 million of its outstanding common stock (the 2018 Repurchase Program).repurchases

Quanta repurchased the following shares of common stock in the open market under the stock repurchase programs (in thousands):

Quarter ended: Shares Amount
June 30, 2020 —
$ —
March 31, 2020 5,960
$ 200,000
December 31, 2019 —
$ —
September 30, 2019 —
$ —
June 30, 2019 —
$ —
March 31, 2019 376
$ 11,954


Quarter ended:	Shares	Amount
June 30, 2021	314	$	29,450
March 31, 2021	222	$	17,710
December 31, 2020	720	$	49,949
September 30, 2020	0	$	0
June 30, 2020	0	$	0
March 31, 2020	5,960	$	200,000

As of June 30, 2021, Quanta is authorized to repurchase up to an additional $489.6 million in shares of common stock through June 30, 2023 under its existing stock repurchase program. Quanta’s policy is to record a stock repurchase as of the trade date; however, the payment of cash related to the repurchase is made on the settlement date of the trade. During the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, cash payments related to stock repurchases were ~~NaN~~$29.4 million and ~~$0.2 million,~~none, and during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, cash payments related to stock repurchases were ~~$200.0~~$48.9 million and ~~$20.1~~$200.0 million.

As of June 30, 2020, $86.8 million remained under the 2018 Repurchase Program. Repurchases under the 2018 Repurchase Program may be implemented through open market repurchases or privately negotiated transactions, at management’s discretion, based on market and business conditions, applicable contractual and legal requirements, including restrictions under Quanta’s senior secured credit facility, and other factors. Quanta is not obligated to acquire any specific amount of common stock, and the 2018 Repurchase Program may be modified or terminated by Quanta’s Board of Directors at any time at its sole discretion and without notice.

~~Non-controlling Interests~~

Quanta holds interests in various entities through both joint venture entities that provide infrastructure-related services under specific customer contracts, either directly or through subcontracting relationships, and other equity investments in partially owned entities that own and operate certain infrastructure assets, including investments entered into through the partnership structure Quanta formed with certain infrastructure investors. Quanta has determined that certain of these joint ventures where Quanta provides the majority of the infrastructure services, which management believes most significantly influences the economic performance of such joint ventures, are VIEs. Management has concluded that Quanta is the primary beneficiary of these joint ventures and has accounted for each on a consolidated basis. The other parties’ equity interests in these joint ventures have been

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

accounted for as “Non-controlling interests” in Quanta’s condensed consolidated balance sheets. Net income attributable to the other participants in the amounts of $0.8 million and $1.1 million for the three months ended June 30, 2020 and 2019 and $3.7 million and $1.7 million for the six months ended June 30, 2020 and 2019 has been accounted for as a reduction of net income in deriving “Net income attributable to common stock” in Quanta’s condensed consolidated statements of operations.

The carrying amount of the investments in VIEs held by Quanta was $12.0 million and $12.0 million at June 30, 2020 and December 31, 2019. The carrying amount of investments held by the non-controlling interests in these VIEs at June 30, 2020 and December 31, 2019 was $3.6 million and $3.5 million. During the three months ended June 30, 2020 and 2019, net distributions to non-controlling interests were $2.0 million and $1.1 million. During the six months ended June 30, 2020 and 2019, net distributions to non-controlling interests were $3.9 million and $1.6 million. There were no other material changes in equity as a result of transfers to/from the non-controlling interests during the three and six months ended June 30, 2020 or 2019. See Note 11 for further disclosures related to Quanta’s joint venture arrangements.

Dividends

Quanta declared the following cash dividends and cash dividend equivalents during ~~2019~~2020 and the first six months of ~~2020~~2021 (in thousands, except per share amounts):


Declaration	Record	Payment	Dividend		Dividends
Date	Date	Date	Per Share		Declared


May 27, 2021	July 1, 2021	July 15, 2021	$	0.06	$	8,650
March 25, 2021	April 6, 2021	April 15, 2021	$	0.06	$	8,429
December 11, 2020	January 4, 2021	January 15, 2021	$	0.06	$	8,933
August 26, 2020	October 1, 2020	October 15, 2020	$	0.05	$	7,244
May 28, 2020	July 1, 2020	July 15, 2020	$	0.05	$	7,182
March 26, 2020	April 6, 2020	April 15, 2020	$	0.05	$	7,184

Declaration Record Payment Dividend Dividends
Date Date Date Per Share Declared
May 28, 2020 July 1, 2020 July 15, 2020 $ 0.05
$ 7,182
March 26, 2020 April 6, 2020 April 15, 2020 $ 0.05
$ 7,184
December 11, 2019 January 2, 2020 January 16, 2020 $ 0.05
$ 7,371
August 28, 2019 October 1, 2019 October 15, 2019 $ 0.04
$ 5,564
May 24, 2019 July 1, 2019 July 15, 2019 $ 0.04
$ 6,233
March 21, 2019 April 5, 2019 April 19, 2019 $ 0.04
$ 5,896

~~A significant majority of the dividends declared were paid on the corresponding payment dates. Holders of RSUs awarded~~

9. STOCK-BASED COMPENSATION:

Quanta has stock-based compensation awards outstanding under 2 equity incentive plans, the Quanta Services, Inc. 2011 Omnibus Equity Incentive Plan (the 2011 Plan) generally received cash dividend equivalent payments equal to the cash dividend payable on account of the underlying Quanta common stock. Holders of exchangeable shares of certain Canadian subsidiaries of Quanta received a cash dividend per exchangeable share equal to the cash dividend per share paid to Quanta common stockholders. Holders of RSUs awarded underand the Quanta Services, Inc. 2019 Omnibus Equity Incentive ~~Plan (the 2019 Plan)~~Plan. For descriptions and ~~holders of unearned and unvested PSUs awarded under the 2011 Plan and the 2019 Plan receive cash dividend equivalent payments only~~further information regarding these plans, refer to the extent such RSUs and PSUs become earned and/or vest. Additionally, cash dividend equivalent payments related to certain stock-based awards that have been deferred pursuant to the terms of a deferred compensation plan maintained by Quanta are recorded as liabilities in such plans until the deferred awards are settled.

The declaration, payment and amount of future cash dividends will be at the discretion of Quanta’s Board of Directors after taking into account various factors, including Quanta’s financial condition, results of operations, cash flows from operations; current and anticipated capital requirements and expansion plans; the current and potential impactNote 12 of the ~~COVID-19 pandemic~~Notes to Consolidated Financial Statements in Item 8. Financial Statements and ~~other market, industry, economic and political conditions; income tax laws then~~Supplementary Data in ~~effect; and the requirements of Delaware law. In addition, as discussed in Note 7, Quanta’s credit agreement restricts the payment of cash dividends unless certain conditions are met.~~

~~10. STOCK-BASED COMPENSATION:~~

~~Stock Incentive Plans~~

The 2019 Plan was approved by Quanta’s stockholders in May 2019 and provides for the award of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, RSUs, stock bonus awards, performance compensation awards (including cash bonus awards) or any combinationPart II of the foregoing. Current and prospective employees, directors, officers, advisors or consultants of Quanta or its affiliates are eligible to participate in the 2019 Plan. Subject to certain adjustments, the maximum number of shares available for issuance under the 2019 Plan is 7,466,592 shares, plus any shares underlying share-settling awards previously awarded pursuant to the 2011 Plan that are ultimately forfeited, canceled, expired or settled in cash subsequent to stockholder approval of the 2019 Plan. All awards subsequent to stockholder approval of the 2019 Plan have been and will be made pursuant to the 2019 Plan and applicable award agreements. Awards made under the 2011 Plan prior to approval of the 2019 Plan remain subject to the terms of the 2011 Plan and applicable award agreements.2020 Annual Report.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

RSUs to be Settled in Common Stock

~~During~~A summary of the ~~three months ended June 30, 2020 and 2019, Quanta granted a nominal amount and 0.1 million shares of~~activity for RSUs to be settled in common stock ~~with weighted average grant date fair values of $35.90 and $36.50. During~~for the six months ended June 30, 2021 and 2020 ~~and 2019, Quanta granted 1.9 million and 1.6 million shares of RSUs to be settled~~is set forth below (shares in ~~common stock, with weighted average grant date fair values of $39.03 and $35.86.~~ thousands):


	2021		2020
	RSUs	Weighted Average Grant Date Fair Value (Per share)	RSUs	Weighted Average Grant Date Fair Value (Per share)
Unvested at January 1	3,869	$37.57	3,265	$35.34
Granted	929	$82.57	1,890	$39.03
Vested	(1,375)	$36.85	(1,168)	$35.79
Forfeited	(85)	$44.60	(79)	$36.02
Unvested at period ended June 30	3,338	$50.26	3,908	$36.98

The grant date fair value for RSUs to be settled in common stock is based on the ~~market value~~closing price of ~~Quanta~~Quanta’s common stock on the date of grant. RSU awards to be settled in common stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in three equal annual installments following the date of grant. Holders of RSUs to be settled in common stock awarded under the 2011 Plan generally are entitled to receive a cash dividend equivalent payment equal to any cash dividend payable on account of the underlying Quanta common stock on the payment date of any such dividend. Holders of RSUs to be settled in common stock awarded under the 2019 Plan are also entitled to cash dividend equivalent payments in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the RSUs vest, such that the dividend equivalent payments are subject to forfeiture.

~~During each of the three months ended June 30, 2020 and 2019, vesting activity consisted of approximately 0.1 million~~The approximate fair values of RSUs settled in common stock ~~with an approximate fair value at the time of vesting of $2.2 million and $3.1 million. During each of~~during the six months ended June 30, 2021 and 2020 ~~and 2019, vesting activity consisted of approximately 1.2 million RSUs settled in common stock with an approximate fair value at the time of vesting of $45.9~~were $115.1 million and ~~$44.6~~$45.9 million.

~~During the three months ended June 30, 2020 and 2019, Quanta recognized $14.2 million and $12.6 million of non-cash stock-based compensation expense related to RSUs to be settled in common stock.~~ During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, Quanta recognized ~~$26.2~~$31.6 million and ~~$23.9~~$26.2 million of non-cash stock-based compensation expense related to RSUs to be settled in common stock. Such expense is recorded in “Selling, general and administrative expenses.” As of June 30, ~~2020~~,2021, there was ~~$101.9~~$116.0 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of ~~2.57~~2.39 years.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

PSUs to be Settled in Common Stock

PSUs provide for the issuance of shares of common stock upon vesting, which occurs at the end of a three-year performance period based on achievement of certain company performance metrics established by the Compensation Committee of Quanta’s Board of Directors, including financial and operational goals and Quanta’s total shareholder return as compared to a predetermined group of peer companies. The final number of shares of common stock issuable upon vesting of PSUs can range from 0% to 200%A summary of the number of PSUs initially granted, depending on the level of achievement, as determined by the Compensation Committee of Quanta’s Board of Directors. Holders of PSUs are entitled to cash dividend equivalent payments in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the PSUs vest, such that the dividend equivalent payments are subject to forfeiture.

During the three months ended June 30, 2020 and 2019, Quanta granted 0 and a nominal amount of PSUs to be settled in common stock. During the six months ended June 30, 2020 and 2019, Quanta granted 0.4 million and 0.3 million ofactivity for PSUs to be settled in common stock ~~with a weighted average grant date fair value of $34.56~~for the six months ended June 30, 2021 and ~~$40.15 per unit.~~ 2020 is set forth below (shares in thousands):


	2021		2020
	PSUs	Weighted Average Grant Date Fair Value (Per share)	PSUs	Weighted Average Grant Date Fair Value (Per share)
Unvested at January 1	1,047	$37.65	848	$33.20
Granted	174	$90.44	436	$34.56
Vested	(268)	$38.28	(238)	$17.48
Forfeited	(11)	$36.90	0	N/A
Unvested at June 30	942	$47.27	1,046	$37.34

The grant date fair value ~~of the~~for PSUs ~~was~~is determined as follows: (i) for the portion of the awards based on company financial and operational performance metrics, by ~~multiplying the number of units granted by~~utilizing the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the awards based on total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. The Monte Carlo simulation valuation methodology applied the following key inputs:

2020 2019
Valuation date price based on March 26, 2020 and March 8, 2019 closing stock prices of Quanta common stock $31.49 $35.19
Expected volatility 34 % 25 %
Risk-free interest rate 0.35 % 2.43 %
Term in years 2.76
2.81


	2021		2020
Valuation date price based on March 25, 2021 and March 26, 2020 closing stock prices of Quanta common stock	$83.48		$31.49
Expected volatility	36	%	34	%
Risk-free interest rate	0.26	%	0.35	%
Term in years	2.77		2.76

Quanta recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted achievement of the company financial and operational performance metrics and forecasted performance with respect to relative total shareholder return, multiplied by the completed portion of the three-year period and the fair value of the total number of shares of common stock that Quanta anticipates will be issued based on such achievement. During the three months ended June 30, 2020 and 2019, Quanta recognized $7.8 million and $1.9 million in compensation expense associated with PSUs. During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, Quanta recognized ~~$10.7~~$11.0 million and ~~$3.6~~$10.7 million in compensation expense associated with PSUs. Such expense

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

is recorded in “Selling, general and administrative expenses.” During ~~the three months ended June 30, 2020 and 2019, 0 PSUs vested, and 0 shares of common stock were issued in connection with PSUs. During~~both the six months ended June 30, 2021 and 2020, ~~0.2 million PSUs vested, and~~ 0.5 ~~million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs. During the six months ended June 30, 2019, 0.2 million PSUs vested, and 0.4~~ million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs.

RSUs to be Settled in Cash

Certain RSUs granted by Quanta are settled solely in cash. These cash-settled RSUs are intended to provide plan participants with cash performance incentives that are substantially equivalent to the risks and rewards of stock ownership in Quanta, typically vest in three equal annual installments following the date of grant, and are subject to forfeiture under certain conditions, primarily termination of service. Additionally, subject to certain restrictions, Quanta’s non-employee directors may elect to settle a portion of their RSU awards in cash. For RSUs settled in cash, the holders receive for each vested RSU an amount in cash equal to the fair market value of 1 share of Quanta common stock on the settlement date, as specified in the applicable award agreement.

Compensation expense related to RSUs to be settled in cash was ~~$1.6~~$8.4 million and ~~$1.1 million for the three months ended June 30, 2020 and 2019 and~~ $2.7 ~~million and $3.7~~ million for the six months ended June 30, ~~2020~~2021 and ~~2019.~~2020. Such expense is recorded in “Selling, general and administrative expenses.” RSUs that are anticipated to be settled in cash are not included in the calculation of weighted average shares outstanding for earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid ~~$0.2~~$7.9 million and ~~$2.1 million to settle liabilities related to cash-settled RSUs in the three months ended June 30, 2020 and 2019 and~~ $3.5 ~~million and $5.0~~ million to settle liabilities related to cash-settled RSUs in the six months ended June 30, ~~2020~~2021 and ~~2019.~~2020. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were ~~$2.4~~$7.6 million and ~~$4.3~~$8.7 million at June 30, ~~2020~~2021 and December 31, ~~2019~~2020.

~~11.~~10. COMMITMENTS AND CONTINGENCIES:

Investments in Affiliates and Other Entities

As described in ~~Notes~~Note 2, ~~and 9,~~ Quanta holds investments in various entities, including joint venture entities that provide infrastructure-related services under specific customer contracts and partially owned entities that own, operate and/or maintain certain infrastructure assets. Losses incurred by these entities are generally shared ratably based on the percentage ownership of the participants in these structures. However, in Quanta’s joint venture structures that provide infrastructure-related services, each participant is typically jointly and severally liable for all of the obligations of the joint venture entity pursuant to the contract with the customer, as a general partner or through a parent guarantee, and therefore Quanta can be liable for full performance of the contract with the customer. In circumstances where Quanta’s participation in a joint venture qualifies as a general partnership, the joint venture partners are jointly and severally liable for all obligations of the joint venture, including obligations owed to the customer or any other person or entity. Quanta is not aware of circumstances that would lead to future claims against it for material amounts in connection with these joint and several liabilities. Additionally, typically each joint venture participant agrees to indemnify the other participant for any liabilities incurred in excess of what the other participant is obligated to bear under the respective joint venture agreement or in accordance with the scope of work subcontracted to each

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

participant. It is possible, however, that Quanta could be required to pay or perform obligations in excess of its share if another participant is unable or refuses to pay or perform its share of the obligations. Quanta is not aware of circumstances that would lead to future claims against it for material amounts that would not be indemnified. However, to the extent any such claims arise, they could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations orand cash flows.

As described in Note 2, Quanta formed a partnership in 2017 with select investors to invest in certain specified infrastructure projects, and wholly owned subsidiaries of Quanta serve as the general partner of this partnership and as a separately operated registered investment adviser that manages the invested capital. Quanta’s investment balance related to this partnership was $23.9 million as of June 30, 2020. In October 2019, due to certain management changes at the registered investment adviser, the partnership entered into a 180-day period during which the investors and Quanta evaluated the partnership, and at the end of such period in April 2020, the investment period for any future investments ended.

~~Contingent Consideration Liabilities~~

As discussed in further detail in Note 2, Quanta is obligated to pay contingent consideration amounts to the former owners of certain acquired businesses in the event that such acquired businesses achieve specified performance objectives. As of June 30, 2020 and December 31, 2019, the estimated fair value of Quanta’s contingent consideration liabilities totaled $75.8 million and $84.2 million.

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

Committed Expenditures

Quanta has capital commitments for the expansion of its equipment fleet in order to accommodate manufacturer lead times on certain types of vehicles. As of June 30, ~~2020~~,2021, Quanta had ~~$34.1~~$72.4 million and $35.3 million of production orders with expected delivery dates in ~~2020.~~the third and fourth quarters of 2021 and in 2022. Although Quanta has committed to purchase these vehicles at the time of their delivery, Quanta anticipates that the majority of these orders will be assigned to third party leasing companies and made available under certain master equipment lease agreements, thereby releasing Quanta from its ~~capital~~equipment purchase commitments.

Legal Proceedings

Quanta is 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, property damage, breach of contract, negligence or gross negligence, ~~and/or property damages,~~environmental liabilities, wage and hour and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, Quanta records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, Quanta discloses matters for which management believes a material loss is at least reasonably possible. Except as otherwise stated below, none of these proceedings are expected to have a material adverse effect on Quanta’s consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.

Peru Project Dispute.

In 2015, Redes Andinas de Comunicaciones S.R.L. (Redes), a majority-owned subsidiary of Quanta, entered into two separate contracts with an agency of the Peruvian Ministry of Transportation and Communications (MTC), currently Programa Nacional de Telecomunicaciones (PRONATEL), as successor to Fondo de Inversion en Telecomunicaciones (FITEL), pursuant to which Redes would design, construct and operate certain telecommunication networks in rural regions of Peru. The aggregate consideration provided for in the contracts was approximately $248 million, consisting of approximately $151 million to be paid during the construction period and approximately $97 million to be paid during a 10-year post-construction operation and maintenance period. At the beginning of the project, FITEL made advance payments totaling approximately $87 million to Redes, which were secured by two on-demand advance payment bonds posted by Redes to guarantee proper use of the payments in the execution of the project. Redes also provided two on-demand performance bonds in the aggregate amount of $25 million to secure performance of its obligations under the contracts.

During the construction phase, the project experienced numerous challenges and delays, primarily related to issues which Quanta believes were outside of the control of and not attributable to Redes, including, among others, weather-related issues, local opposition to the project, permitting delays, the inability to acquire clear title to certain required parcels of land and other delays which Quanta believes were attributable to FITEL/PRONATEL. In response to various of these challenges and delays, Redes requested and received multiple extensions to certain contractual deadlines and relief from related liquidated damages. However, in April 2019, PRONATEL provided notice to Redes claiming that Redes was in default under the contracts due to the delays and that PRONATEL would terminate the contracts if the alleged defaults were not cured. Redes responded by claiming that it was not in default, as the delays were due to events not attributable to Redes, and therefore PRONATEL was not entitled to terminate the contracts. PRONATEL subsequently terminated the contracts for alleged cause prior to completion of Redes’ scope of work, exercised the on-demand performance bonds and advance payment bonds against Redes, and indicated its intention to claim damages, including a verbal allegation of approximately $45 million of liquidated damages under the ~~contracts, although it has not formally submitted~~contracts. In August 2020, Redes received a formal claim from PRONATEL for liquidated damages in the amount of ~~its claim to Redes.~~approximately $41 million, which represents the U.S. dollar equivalent of the amount asserted based on the June 30, 2021 exchange rate.

In May 2019, Redes filed for arbitration before the Court of International Arbitration of the International Chamber of Commerce (ICC) against PRONATEL and the MTC. In the arbitration, Redes claims that PRONATEL: ~~(i)~~ breached and

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

wrongfully terminated the contracts; ~~(ii)~~ wrongfully executed the advance payment bonds and the performance bonds; and ~~(iii)~~ is not entitled to the alleged amount of liquidated damages. In addition, Redes is seeking compensation for all damages arising from PRONATEL’s actions, including but not limited to (i) repayment of the amounts collected by PRONATEL under the advance payment bonds and the performance bonds; (ii) payment of amounts owed for work completed by Redes under the contracts; (iii) lost income in connection with Redes’ future operation and maintenance of the networks; and (iv) other related costs and damages to Redes as a result of the breach and improper termination of the ~~contracts.~~contracts (including construction costs caused by the delays and costs related to the transfer of the networks). The amount claimed by Redes in this arbitration is approximately $190 million. In May 2021, PRONATEL and the MTC filed their counter memorial and counterclaims in the ICC arbitration, requesting: (i) that Redes’ claims for breach of contract be rejected; (ii) a declaration that the execution of the advance payment bonds and the performance bonds was valid, and that the funds may be applied towards any debt owed by Redes; (iii) a declaration that the liquidated damages asserted by PRONATEL apply; (iv) that Redes’ claim for payment of amounts owed for work completed as a result of contractual reconciliation of balances be rejected and that any reconciliation of balances approved by the arbitration panel exclude the funds from the performance bonds; (v) that Redes’ claims for damages be rejected; (vi) a declaration that the contract terminations by PRONATEL were valid; and (vii) that Redes reimburse all funds it received from PRONATEL. In addition, PRONATEL alleges that Redes did not satisfy the contractual requirements for the transfer of the networks, which Redes disputes. In July 2021, Redes filed its statement of defense in reply to the counter memorial and counterclaims of PRONATEL and the MTC, in which it disputes all claims made by PRONATEL and the MTC and maintains the positions on its claims against PRONATEL and the MTC in the arbitration. The arbitration hearing on the merits is presently scheduled to take place in November 2021.

As of the date of the contract terminations, Redes had ~~recognized revenues~~incurred costs of approximately $157 million related to the design and construction of the project and had received approximately $100 million of payments (inclusive of the approximately $87 million advance payments). Furthermore, upon completion of the transfer of the networks (as completed at the time of the contract terminations) to PRONATEL, which iswas required upon termination of the contracts and ~~is expected to be~~was completed in ~~the~~

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~~third quarter of~~ 2020, PRONATEL and the MTC ~~will~~are able to possess the networks, for which PRONATEL has paid approximately $100 million while also collecting approximately $112 million of bond proceeds. Quanta believes that PRONATEL’s actions represent an abuse of power and unfair and inequitable treatment and that PRONATEL and the MTC have been unjustly enriched. Specifically, under the terms of the contracts, the advance payment bonds were to be exercised only if it is determined that Redes did not use the advance payments for their intended purpose, in which case Redes would be obligated to return the portion of the advance payments not properly used. In connection with PRONATEL exercising the bonds, Redes was not afforded the opportunity to provide evidence of its proper use of the advance payments for project expenditures. Redes has incurred substantially more than the advance payment amounts in the execution of the project, and Quanta believes Redes has used the advance payment amounts for their intended purpose.

Quanta also reserves the right to seek full compensation for the loss of its investment under other applicable legal regimes, including investment treaties and customary international law, as well as to seek resolution through direct discussions with PRONATEL or the MTC.

~~Quanta~~ believes Redes is entitled to all amounts described in ~~the~~its claims above and intends to vigorously pursue those claims in the pending ICC arbitration ~~proceeding and/or additional arbitration proceedings.~~proceeding. However, as a result of the contract terminations and the inherent uncertainty involved in arbitration proceedings and recovery of amounts owed, there can be no assurance that Redes will prevail on those claims or in defense of liquidated damages claims or any other claims ~~that may be~~ asserted by PRONATEL. As a result, during the three months ended June 30, 2019, Quanta recorded a charge to earnings of $79.2 million, which included a reduction of previously recognized earnings on the project, a reserve against a portion of the project costs incurred through the project termination date, an accrual for a portion of the alleged liquidated damages, and the estimated costs to complete the project turnover and close out the project. The reduction of previously recognized earnings on the project ~~during the three months ended June 30, 2019~~ included $14.5 million related to the correction of prior period errors associated with the determination of total estimated project costs and the resulting revenue recognized. Quanta assessed the materiality of the prior period errors and determined that the errors were immaterial individually and in the aggregate to its previously issued financial statements.

As of June 30, ~~2020,~~2021, after taking into account the above charge, Quanta had a contract receivable of approximately $120 million related to the project, which includes the approximately $87 million PRONATEL collected through exercise of the advance payment bonds. The contract receivable from PRONATEL is included in “Other assets, net” in the accompanying condensed consolidated balance sheet as of June 30, ~~2020.~~2021.

Quanta also reserves the right to seek full compensation for the loss of its investment under applicable legal regimes, including investment treaties and customary international law, as well as to seek resolution through direct discussions with PRONATEL or the MTC. In connection with these rights, in May 2020 Quanta’s Dutch subsidiary delivered to the Peruvian government an official notice of dispute arising from the termination of the contracts and related acts by PRONATEL (which are attributable to Peru) under the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Peru (Investment Treaty). The Investment Treaty protects Quanta’s subsidiary’s indirect ownership stake in Redes and the project, and provides for rights and remedies distinct from the ICC

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arbitration. In December 2020, Quanta’s Dutch subsidiary filed a request for the institution of an arbitration proceeding against Peru with the International Centre for Settlement of Investment Disputes (ICSID) related to Peru’s breach of the Investment Treaty, which was registered by ICSID in January 2021. In the ICSID arbitration, Quanta’s Dutch subsidiary claims, without limitation, that Peru: (i) treated the subsidiary’s investment in Redes and the project unfairly and inequitably; and (ii) effectively expropriated the subsidiary’s investment in Redes and the project. In addition, Quanta’s Dutch subsidiary is seeking full compensation for all damages arising from Peru’s actions, including but not limited to (i) the fair market value of the investment and/or lost profits; (ii) attorneys’ fees and arbitration costs; (iii) other related costs and damages and (iv) pre- and post-award interest.

If Quanta is not successful in ~~the~~these pending ~~or future~~ arbitration proceedings, this matter could result in an additional significant loss that could have a material adverse effect on Quanta’s consolidated results of operations and cash flows. However, based on the information currently available and the ~~preliminary~~ status of the pending arbitration ~~proceeding,~~proceedings, Quanta is not able to determine a range of reasonably possible additional loss, if any, with respect to this matter.

Maurepas Project Dispute.

During the third quarter of 2017, Maurepas Pipeline, LLC (Maurepas) notified QPS Engineering, LLC (QPS), a subsidiary of Quanta, of its claim for liquidated damages allegedly arising from delay in mechanical completion of a project in Louisiana. Quanta disputes the claim and believes that QPS is not responsible for liquidated damages under the contract terms, and in June 2019 QPS filed suit against SemGroup Corporation (now Energy Transfer LP), the parent company of Maurepas, under the parent guarantee issued to secure payment from Maurepas on the project. QPS is seeking to recover $22 million that it believes has been wrongfully withheld, which represents the maximum liability for liquidated damages pursuant to the contract terms. In July and August 2018, QPS also received notice from Maurepas claiming certain warranty defects on the project. In July 2019, Maurepas filed suit against QPS and Quanta, pursuant to a parent guarantee, for damages related to the alleged warranty defects and for a declaratory judgment related to the liquidated damages claim, subsequently claiming approximately $59 million in damages related to a portion of the alleged warranty defects. The lawsuits relating to these claims have been consolidated and are pending in the Tulsa County District Court in Oklahoma. Quanta is continuing to evaluate the claimed warranty defects and, if they exist, the appropriate remedy. At this time, Quanta disputes the extent of the alleged defects or has not been able to substantiate them.

As of June 30, ~~2020,~~2021, Quanta had recorded an accrual with respect to this matter based on ~~the~~its current estimated amount of probable loss. ~~However, based~~Based on the information currently available, including documentation received in the discovery process, Quanta ~~cannot estimate~~estimates the range of additional reasonably possible loss in connection with this ~~matter. If, upon~~matter is between no additional loss and the amount claimed by Maurepas with respect to the alleged warranty defects and liquidated damages, less the accrued amount. Upon final resolution of this matter, ~~Quanta is unsuccessful,~~ any liquidated damages or warranty defect damages in excess of Quanta’s current loss accrual would be recorded as additional costs on the project.

Lorenzo Benton v. Telecom Network Specialists, Inc., et al.

In June 2006, plaintiff Lorenzo Benton filed a class action complaint in the Superior Court of California, County of Los Angeles, alleging various wage and hour violations against Telecom Network Specialists (TNS), a former subsidiary of Quanta. Quanta retained liability associated with this matter pursuant to the terms of Quanta’s sale of TNS in December 2012. Benton represents a class of workers that includes all persons who worked on certain TNS projects, including individuals that TNS retained through numerous staffing agencies. The plaintiff class in this matter

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is seeking damages for unpaid wages, penalties associated with the failure to provide meal and rest periods and overtime wages, interest and attorneys’ fees. In January 2017, the trial court granted a summary judgment motion filed by the plaintiff class and found that TNS was a joint employer of the class members and that it failed to provide adequate meal and rest breaks and failed to pay overtime wages. During 2019 and 2020, the parties filed additional summary judgment and other motions and a bench trial on liability and damages was held. ~~As of July 2020, liability~~Liability and damages ~~for significantly all claims had~~have been determined by the trial court, with the amount of liability for TNS, ~~determined to be approximately $8.8 million. This amount includes damages and~~including interest ~~though~~through the date of the trial court’s orders, ~~but does not include attorneys’ fees or costs, which are yet~~determined to be ~~determined.~~approximately $9.5 million. Quanta believes the court’s decisions on liability and damages are not supported by controlling law and continues to contest its liability and the damage calculation asserted by the plaintiff class in this matter. The amount determined by the trial court includes damages and interest, but does not include attorneys’ fees or costs. In July 2021, the plaintiff class filed a motion for approval of approximately $37.0 million in attorneys’ fees.

Additionally, in November 2007, TNS filed cross complaints for indemnity and breach of contract against the staffing agencies, which employed many of the individuals in question. In December 2012, the trial court heard cross-motions for summary judgment filed by TNS and the staffing agencies pertaining to TNS’s demand for indemnity. The court denied TNS’s motion and granted the motions filed by the staffing agencies; however, the California Appellate Court reversed the trial court’s

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decision in part and instructed the trial court to reconsider its ruling. In February 2017, the court denied a new motion for summary judgment filed by the staffing companies and has since stated that the staffing companies would be liable to TNS for any damages owed to the class members that the staffing companies employed. However, Quanta currently believes that, due to solvency issues, any contribution from the staffing companies may not be substantial.

The final amount of liability, if any, payable in connection with this matter remains the subject of pending litigation and will ultimately depend on various factors, including the outcome of Quanta’s appeal of the trial court’s rulings on liability and damages, ~~the~~a final determination with respect to any attorneys’ fees or additional costs or damages owed by Quanta, and the solvency of the staffing agencies. Based on review and analysis of the trial court’s rulings on liability, Quanta does not believe, at this time, that it is probable this matter will result in a material loss. However, if Quanta is unsuccessful in this litigation and the staffing agencies are unable to fund damages owed to class members, Quanta believes the range of reasonably possible loss to Quanta upon final resolution of this matter could be up to approximately ~~$8.8~~$9.5 million, plus ~~additional interest and~~the final amount of any attorneys’ fees and expenses awarded of the plaintiff class.

Hallen Acquisition Assumed Liability.

In August 2019, in connection with the acquisition of The Hallen Construction Co., Inc. (Hallen), Quanta assumed certain contingent liabilities associated with a March 2014 natural gas-fed explosion and fire in the Manhattan borough of New York City, New York. The incident resulted in, among other things, loss of life, personal injury and the destruction of ~~two~~2 buildings and other property damage. After investigation, the National Transportation Safety Board determined that the probable cause of the incident was the failure of certain natural gas infrastructure installed by Consolidated Edison, Inc. (Con Ed) and the failure of certain sewer infrastructure maintained by the City of New York. Pursuant to a contract with Con Ed, Hallen had performed certain work related to such natural gas infrastructure and agreed to indemnify Con Ed for certain claims, liabilities and costs associated with its work. Numerous lawsuits are pending in New York state courts related to the incident, which generally name Con Ed, the City of New York and Hallen as defendants. These lawsuits are at various preliminary stages and generally seek unspecified damages and, in some cases, punitive damages, for wrongful death, personal injury, property damage and business interruption.

Hallen’s liabilities associated with this matter are expected to be covered under applicable insurance policies or contractual remedies negotiated by Quanta with the former owners of Hallen. As of June 30, ~~2020,~~2021, Quanta had not recorded an accrual for any probable and estimable loss related to this matter. However, the ultimate amount of liability in connection with this matter remains subject to uncertainties associated with pending litigation, including, among other things, the apportionment of liability among the defendants and other responsible parties and the likelihood and amount of potential damages claims. As a result, this matter could result in a loss that is in excess of, or not covered by, such insurance or contractual remedies, which could have a material adverse effect on Quanta’s consolidated financial condition, results of operations and cash flows.

Concentrations of Credit Risk

Quanta is subject to concentrations of credit risk related primarily to its cash and cash equivalents and its net receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and contract assets net of advanced billings with the same customer. Substantially all of Quanta’s cash and cash equivalents are managed by what it believes to be high credit quality financial institutions. In accordance with Quanta’s investment policies, these institutions are authorized to invest cash and cash equivalents in a diversified portfolio of what Quanta believes to be high quality cash and cash equivalent investments, which consist primarily of interest-bearing demand deposits, money market investments and money market mutual funds. Although Quanta does not currently believe the principal amount of these cash and cash equivalents is subject to any material risk of loss, changes in economic conditions could impact the interest income Quanta receives from these investments. In addition, Quanta grants credit under normal payment terms, generally without collateral, to its customers, which include electric power, communications and energy companies, governmental entities, general contractors, and builders, owners and managers of commercial and industrial properties located primarily in the United States, Canada and Australia. While Quanta generally has certain statutory lien rights with respect to services provided, Quanta is subject to potential credit risk related to business, economic and financial market

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conditions that affect these customers and locations, which has been heightened as a result of the unfavorable and uncertain economic and financial market conditions resulting from the ongoing COVID-19 pandemic and the ~~significant decline in commodity prices and volatility in commodity production volumes.~~currently challenged energy market. Some of Quanta’s customers have experienced significant financial difficulties (including bankruptcy), and customers may experience financial difficulties in the future. These difficulties expose Quanta to increased risk related to collectability of billed and unbilled receivables and contract assets for services Quanta has performed.

For example, a customer within Quanta’s Underground Utility and Infrastructure Solutions segment encountered financial difficulties during 2020 that resulted in nonpayment of $27.5 million of receivables, plus accrued interest. As a result

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of the nonpayment, Quanta decided to foreclose the liens on ~~January 29, 2019, PG&E, one~~the pipeline asset in order to recover the outstanding amount. Quanta believes that the value of the pipeline asset is in excess of the amount owed. However, the ultimate outcome remains uncertain and is based on a number of assumptions that are potentially subject to change, and the amount ultimately collected could be materially less than the amount owed.

Additionally, in July 2021 Limetree Refining, a customer within Quanta’s ~~largest customers,~~Underground Utility and Infrastructure Solutions segment, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as ~~amended.~~amended, after experiencing operational and financial difficulties and shutting down operations at its refinery. As of the bankruptcy filing date, Quanta had ~~$165~~$30.0 million of billed and unbilled ~~receivables. During the bankruptcy case, the bankruptcy court approved the assumption by PG&E of certain contracts with subsidiaries of~~receivables for services performed and other costs. Quanta ~~pursuant to which PG&E paid $128~~also had $1.5 million of ~~Quanta’s pre-petition~~billed and unbilled receivables asoutstanding from Limetree Terminals, an affiliate of June 30, 2020. PG&E subsequently assumed its remaining contracts with Quanta’s subsidiaries as part of its Chapter 11 plan of reorganization, which was confirmed by the bankruptcy court in June 2020. Quanta also sold $36 million of its pre-petition receivables to a third party duringLimetree Refining that has not filed for bankruptcy. During the three months ended ~~December 31, 2019 in exchange~~June 30, 2021, Quanta recorded a provision for ~~cash consideration~~credit loss of ~~$34~~$23.6 million with respect to these receivables based on the current estimated amount of expected loss. Given the uncertainties associated with the bankruptcy proceeding and the financial condition of the customers, the amount of receivables ultimately collected and the ultimate amount of credit loss recognized depends on a number of factors that are subject to ~~certain claim disallowance provisions,~~change. As such, an additional allowance for credit loss may be recorded in the ~~occurrence of which could result in Quanta’s obligation~~future, including with respect to ~~repurchase some or all of the pre-petition receivables sold. Quanta expects~~ the remaining $1$7.9 million of ~~pre-petition~~ receivables ~~to be sold or ultimately collected under~~owed by the ~~terms of the plan of reorganization.~~customers.

At June 30, ~~2020 and~~2021, the net receivable position of 1 customer within Quanta’s Electric Power Infrastructure Solutions segment, when combined with the net receivable position of a joint venture in which such customer owns a 50% interest, represented 13.4% of Quanta’s consolidated net receivable position. At December 31, ~~2019,~~2020, 0 customer represented 10% or more of Quanta’s consolidated net receivable position. NaN customer represented 10% or more of Quanta’s consolidated revenues for the three and six months ended June 30, 2021 or 2020. ~~PG&E,~~

Insurance

Quanta is insured for, among other things, employer’s liability, workers’ compensation, auto liability, aviation and general liability claims. Quanta manages and maintains a ~~customer within Quanta’s Electric Power Infrastructure Services segment, represented 13.3% and 11.5%~~portion of ~~Quanta’s consolidated revenues~~its casualty risk through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs. Deductibles for the ~~three~~employer’s liability and ~~six months ended~~workers’ compensation programs are $5.0 million per occurrence, and deductibles for the auto liability and general liability programs are $15.0 million per occurrence. Quanta also has 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 $0.8 million per claimant per year.

As of June 30, ~~2019.~~

~~Insurance~~

~~As discussed in Note 2, Quanta is insured~~2021 and December 31, 2020, the gross amount accrued for employer’s liability, workers’ compensation, auto liability, general liability, and group health ~~claims. As of June 30, 2020 and December 31, 2019, the gross amount accrued for insurance~~ claims totaled ~~$298.4~~$303.7 million and ~~$287.6~~$319.5 million, with ~~$220.1~~$224.8 million and ~~$212.9~~$238.0 million considered to be long-term and included in “Insurance and other non-current liabilities.” Related insurance recoveries/receivables as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$31.6~~$26.1 million and ~~$35.1~~$35.6 million, of which ~~$0.3~~$0.4 million and ~~$0.3~~$0.4 million are included in “Prepaid expenses and other current assets” and ~~$31.3~~$25.7 million and ~~$34.8~~$35.2 million are included in “Other assets, net.”

Quanta renews its insurance policies on an annual basis, and therefore deductibles and levels of insurance coverage may change in future periods. In addition, insurers may cancel Quanta’s coverage or determine to exclude certain items from coverage, including wildfires, or Quanta may elect not to obtain certain types or incremental levels of insurance based on the potential benefits considered relative to the cost of such insurance, or coverage may not be available at reasonable and competitive rates. In any such event, Quanta’s overall risk exposure would increase, which could negatively affect its results of operations, financial condition and cash flows. For example, due to the increased occurrence and future risk of wildfires in California and other areas in the western United States, Australia and other locations, insurers have reduced coverage availability and increased the cost of insurance coverage for such events in recent years. As a result, Quanta’s level of insurance coverage for wildfire events has decreased, including in connection with recent annual insurance renewals, and the current level of coverage may not be sufficient to cover potential losses in connection with these events. Additionally, Quanta’s third-party insurers could decide to further reduce, exclude or increase the cost of coverage for wildfires or other events in connection with insurance renewals in the future.

Letters of Credit

Certain of Quanta’s vendors require letters of credit to ensure reimbursement for amounts they are disbursing on Quanta’s behalf, such as to beneficiaries under its insurance programs. In addition, from time to time, certain customers require Quanta to post letters of credit to ensure payment of subcontractors and vendors and guarantee performance under contracts. Such letters of credit are generally issued by a bank or similar financial institution, typically pursuant to Quanta’s senior ~~secured~~ credit facility. Each letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit if the holder claims that Quanta

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has failed to perform specified actions. If this were to occur, Quanta would be required to reimburse the issuer of the letter of credit. Depending on the circumstances of such a reimbursement, Quanta may also be required to record a charge to earnings for the reimbursement.

As of June 30, ~~2020~~,2021, Quanta had ~~$374.7~~$301.6 million in outstanding letters of credit under its senior ~~secured~~ credit facility securing its casualty insurance program and various other contractual commitments. These are irrevocable stand-by letters of credit with maturities generally expiring at various times throughout ~~2020~~2021 and ~~2021.~~2022. Quanta expects to renew the majority of the letters of credit related to the casualty insurance program for subsequent one-year periods upon maturity. Quanta is not aware of any claims currently asserted or threatened under any of these letters of credit that are material, individually or in the aggregate. However, to the extent payment is required for any such claims, the amount paid could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations orand cash flows.

~~Performance~~ Bonds and Parent Guarantees

Many customers, particularly in connection with new construction, require Quanta to post performance and payment bonds. These bonds provide a guarantee that Quanta will perform under the terms of a contract and pay its subcontractors and vendors. ~~If Quanta fails to perform,~~In certain circumstances, the customer may demand that the surety make payments or provide services under the bond, and Quanta must reimburse the surety for any expenses or outlays it incurs. Under Quanta’s underwriting, continuing indemnity and security agreement with its sureties, Quanta has granted security interests in certain of its assets as collateral for its obligations to the sureties. Subject to certain conditions and consistent with terms of the credit agreement for Quanta’s senior secured credit facility, these security interests will be automatically released if Quanta maintains a credit rating that meets two of the following three

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conditions: (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. Quanta may also be required to post letters of credit ~~or other collateral~~ in favor of the sureties, ~~or Quanta’s customers in the future,~~ which would reduce the borrowing availability under its senior ~~secured~~ credit facility. Quanta has not been required to make any material reimbursements to its sureties for bond-related costs except ~~related to~~in connection with the exercise of ~~certain~~approximately $112 million advance payment and performance bonds in ~~connection with~~2019 related to the terminated telecommunications project ~~located~~ in Peru, as set forth in Legal Proceedings - Peru Project Dispute above. However, to the extent further reimbursements are required, the amounts could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations orand cash flows. As of June 30, 2021, Quanta is not aware of any outstanding material obligations for payments related to bond obligations.

Performance bonds expire at various times ranging from mechanical completion of a project to a period extending beyond contract completion in certain circumstances, and ~~as such~~therefore a determination of maximum potential amounts outstanding requires ~~the use of~~ certain estimates and assumptions. Such amounts can also fluctuate from period to period based upon the mix and level of Quanta’s bonded operating activity. As of June 30, ~~2020~~,2021, the total amount of the outstanding performance bonds was estimated to be approximately ~~$3.0 billion~~.$3.9 billion. Quanta’s estimated maximum exposure ~~as it relates~~related to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a performance bond generally extinguishes concurrently with the expiration of its related contractual obligation. The estimated cost to complete these bonded projects was approximately $1.1 billion as of June 30, ~~2020~~.2021.

Additionally, from time to time, Quanta guarantees certain obligations and liabilities of its subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, joint venture arrangements and contractor licenses. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. For example, with respect to customer contracts, a guarantee may cover a variety of obligations and liabilities arising during the ordinary course of the subsidiary’s business or operations, including, among other things, warranty and breach of contract claims, third party and environmental liabilities arising from the subsidiary’s work and for which it is responsible, liquidated damages, or indemnity claims. Quanta is not aware of any claims under any ~~of these~~ guarantees that are material, except as set forth in Legal Proceedings – Maurepas Project Dispute above. To the extent a subsidiary incurs a material obligation or liability and Quanta has guaranteed the performance or payment of such obligation or liability, the recovery by a customer or other counterparty or a third party will not be limited to the assets of the subsidiary. As a result, responsibility under the guarantee could exceed the amount recoverable from the subsidiary alone and could materially and adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.

~~Employment Agreements~~

Quanta has various employment agreements with certain executives and other employees, which provide for compensation, other benefits and, under certain circumstances, severance payments and post-termination stock-based compensation benefits. Certain employment agreements also contain clauses that require the potential payment of specified amounts to such employees upon the occurrence of a defined change in control event.

Collective Bargaining Agreements and Multiemployer Pension Plans

Certain of Quanta’s operating units are parties to collective bargaining agreements with unions that represent certain of their employees. The collective bargaining agreements expire at various times and have typically been renegotiated and renewed on terms similar to those in the expiring agreements. From time to time, Quanta is a party to grievance and arbitration actions based on claims arising out of the collective bargaining agreements. The agreements require the operating units to pay specified wages, provide certain benefits to union employees and contribute certain amounts to multiemployer pension plans and employee benefit trusts. Quanta’s multiemployer pension plan contribution rates generally are made to the plans on a “pay-as-you-go” basis based on its union employee payrolls. The location and number of union employees that Quanta employs at any given time and the plans in which they may participate vary depending on Quanta’s need for union resources in connection

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with its ongoing projects. Therefore, Quanta is unable to accurately predict its union employee payroll and the resulting multiemployer pension plan contribution obligations for future periods.

The Pension Protection Act of 2006 ~~also added special funding~~may require Quanta to make additional contributions to its multiemployer pension plans if they become underfunded, and ~~operational rules generally applicable to plan years beginning after 2007 for multiemployer plans that are classified as “endangered,” “seriously endangered” or “critical” status~~these additional contributions will be determined based on ~~multiple factors (including, for example,~~Quanta’s union employee payrolls. Certain plans to which Quanta contributes or may contribute in the ~~plan’s funded percentage, the plan’s cash flow position and whether the plan is projected to experience a minimum funding deficiency). Plans in these classifications must~~future may adopt measures to improve their funded status through a funding improvement or rehabilitation plan, as applicable, which may require additional contributions from employers (e.g., a surcharge on benefit contributions) and/or modifications to retiree benefits. ~~Certain plans to which Quanta contributes or may contribute in the future are in “endangered,” “seriously endangered” or “critical” status.~~ The amount, if any, that Quanta may be obligated to contribute to these plans cannot be reasonably estimated due to uncertainty regarding the amount

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of future work involving covered union employees, future contribution levels and possible surcharges on plan contributions.

Quanta may be subject to additional liabilities imposed by law as a result of its participation in multiemployer defined benefit pension plans. ~~For example, the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, imposes certain~~These liabilities upon an employer who is a contributor to a multiemployer pension plan if the employer withdraws or is deemed to have withdrawn from the plan or the plan is terminated or experiences a mass withdrawal. These liabilitiesmay include an allocable share of the unfunded vested benefits in the plan for all plan participants, not ~~merely~~only the benefits payable to a contributing employer’s own retirees. As a result, participating employers may bear a higher proportion of liability for unfunded vested benefits if other participating employers cease to contribute or withdraw, with the reallocation of liability being more acute in cases when a withdrawn employer is insolvent or otherwise fails to pay its withdrawal liability. Quanta is not aware of any material withdrawal liabilities that have been incurred or asserted and that remain outstanding as a result of a withdrawal by Quanta from a multiemployer defined benefit pension plan. However, Quanta’s future contribution obligations and potential withdrawal liability exposure could vary based on the investment and actuarial performance of the multiemployer pension plans to which it contributes and other factors, which could be negatively impacted as a result of the unfavorable and uncertain economic and financial market conditions resulting from the ongoing COVID-19 pandemic and related issues. Quanta has been subject to significant withdrawal liabilities in the past, including in connection with its withdrawal from the Central States, Southeast and Southwest Areas Pension Plan. To the extent Quanta is subject to material withdrawal liabilities in the future, such liability could adversely affect its business, financial condition, results of operations orand cash flows.

Deferred Compensation Plans

Quanta made matching contributions to the eligible participants’ accounts under deferred compensation plans of $0.3 million and $0.2 million during the three months ended June 30, 2021 and 2020. Quanta made matching contributions to the eligible participants’ accounts under the deferred compensation plans of $0.8 million and $0.7 million during the six months ended June 30, 2021 and 2020. Quanta made 0 discretionary contributions during the six months ended June 30, 2021 and 2020. At June 30, 2021 and December 31, 2020, obligations under these plans, including amounts contributed by Quanta, were $68.2 million and $58.2 million and were included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. Quanta maintains investments to contribute to future obligations related to these deferred compensation plans. At June 30, 2021 and December 31, 2020, these investments were primarily comprised of company-owned life insurance policies, had fair market values of $68.6 million and $56.5 million and were included in “Other assets, net” in the accompanying condensed consolidated balance sheets.

During the three months ended June 30, 2021 and 2020, the fair market value of assets associated with our deferred compensation plan increased $3.9 million and $6.5 million. During the six months ended June 30, 2021 and 2020, the fair market value of assets associated with our deferred compensation plan increased $5.5 million and decreased $0.9 million. These changes in fair market value of the assets are recorded in “Other income (expense), net” and were largely offset by corresponding changes in the fair market value of the liabilities associated with our deferred compensation plan, which are recorded in “Selling, general and administrative expenses.” During the three months ended June 30, 2021 and 2020, the fair market value of deferred compensation liabilities increased $3.6 million and $6.4 million. During the six months ended June 30, 2021 and 2020, the fair market value of deferred compensation liabilities increased $6.0 million and decreased $1.4 million.

Indemnities

Quanta generally indemnifies its customers for the services it provides under its contracts and other specified liabilities, which may subject Quanta to indemnity claims and liabilities and related litigation. Additionally, in connection with certain acquisitions and dispositions, Quanta has indemnified various parties against specified liabilities that those parties might incur in the future. The indemnities under acquisition or disposition agreements are usually contingent upon the other party incurring liabilities that reach specified thresholds. Quanta is not aware of any indemnity claims in connection with its indemnity obligations that are material. However, to the extent indemnification is required, the amount could adversely affect Quanta’s consolidated business, financial condition, results of operations orand cash flows.

In the normal course of Quanta’s acquisition transactions, Quanta obtains rights to indemnification from the sellers or former owners of acquired businesses for certain risks, liabilities and obligations arising from their operations prior ~~operations,~~to the date

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

of acquisition, such as performance, operational, safety, workforce or tax issues, some of which Quanta may not have discovered during due diligence. However, the indemnities may not cover all of Quanta’s exposure for such pre-acquisition matters, or the indemnitors may be unwilling or unable to pay amounts owed to Quanta. Accordingly, Quanta may incur expenses for which it is not reimbursed, and such amounts could be material and could have a material adverse effect on Quanta’s business or consolidated financial condition, results of operations and cash flows. Quanta is currently in the process of pursuing indemnity for certain pre-acquisition obligations associated with non-U.S. payroll taxes of a business acquired by Quanta in 2013. As of June 30, 2020, the indemnification asset amounted to $1.9 million. Additionally,For example, Quanta has obtained certain indemnification rights from the former owners of Hallen with respect to contingent liabilities that were assumed in connection with the acquisition, as set forth in Legal Proceedings — Hallen Acquisition Assumed Liability above.

Residual Value Guarantees

~~12.~~Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of June 30, 2021, the maximum guaranteed residual value of this equipment was $889.5 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.

11. SEGMENT INFORMATION:

Quanta presents its operations under 2 reportable segments: (1) Electric Power Infrastructure ~~Services~~Solutions and (2) ~~Pipeline~~Underground Utility and ~~Industrial~~ Infrastructure ~~Services.~~Solutions. This structure is generally based on the broad end-user markets for Quanta’s services. See Note 1 for additional information regarding Quanta’s reportable segments.

Quanta’s segment results are derived from the types of services provided across its operating units in each of its end user markets. Quanta’s entrepreneurial business model allows multiple operating units to serve the same or similar customers and to provide a range of services across end user markets. Quanta’s operating units are organized into one of 2 internal divisions: the Electric Power Infrastructure ~~Services~~Solutions Division and the ~~Pipeline~~Underground Utility and ~~Industrial~~ Infrastructure ~~Services~~Solutions Division. These internal divisions are closely aligned with the reportable segments, and operating units are assigned to divisions based on the predominant type of work performed.

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 Quanta’s market strategies. Classification of operating unit revenues by type of work for segment reporting purposes can require judgment on the part of management. Quanta’s operating units may perform joint projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, Quanta performs joint trenching projects to install

~~QUANTA SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

~~(Unaudited)~~

distribution lines for electric power and natural gas customers.

In addition, Quanta’s integrated operations and common administrative support for its operating units require that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs (e.g., facility costs), indirect operating expenses (e.g., depreciation), and general and administrative costs. Certain corporate costs are not allocated and include payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs and amortization related to intangible assets.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Summarized financial information for Quanta’s reportable segments is presented in the following table (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenues:

Electric Power Infrastructure Services $ 1,792,918
$ 1,734,336
$ 3,559,945
$ 3,398,359
Pipeline and Industrial Infrastructure Services 713,313
1,104,863
1,710,381
2,248,099
Consolidated revenues $ 2,506,231
$ 2,839,199
$ 5,270,326
$ 5,646,458
Operating income (loss):

Electric Power Infrastructure Services $ 183,896
$ 92,935
$ 312,654
$ 254,552
Pipeline and Industrial Infrastructure Services 21,250
69,943
52,527
110,642
Corporate and non-allocated costs (92,230 ) (84,298 ) (171,528 ) (167,127 )
Consolidated operating income $ 112,916
$ 78,580
$ 193,653
$ 198,067
Depreciation:

Electric Power Infrastructure Services $ 28,987
$ 26,714
$ 57,700
$ 51,965
Pipeline and Industrial Infrastructure Services 21,432
22,734
42,967
45,289
Corporate and non-allocated costs 4,107
4,363
8,269
8,773
Consolidated depreciation $ 54,526
$ 53,811
$ 108,936
$ 106,027


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues:
Electric Power Infrastructure Solutions	$	2,147,775	$	1,792,918	$	4,207,895	$	3,559,945
Underground Utility and Infrastructure Solutions	852,041		713,313		1,495,502		1,710,381
Consolidated revenues	$	2,999,816	$	2,506,231	$	5,703,397	$	5,270,326
Operating income (loss):
Electric Power Infrastructure Solutions (1)	$	236,899	$	183,896	$	435,934	$	312,654
Underground Utility and Infrastructure Solutions	23,937		21,250		32,750		52,527
Corporate and Non-Allocated Costs	(99,185)		(92,230)		(193,304)		(171,528)
Consolidated operating income	$	161,651	$	112,916	$	275,380	$	193,653
Depreciation:
Electric Power Infrastructure Solutions	$	37,084	$	28,987	$	73,729	$	57,700
Underground Utility and Infrastructure Solutions	21,138		21,432		42,225		42,967
Corporate and Non-Allocated Costs	4,535		4,107		8,910		8,269
Consolidated depreciation	$	62,757	$	54,526	$	124,864	$	108,936

(1) As of December 31, 2020, Quanta ~~has concluded to pursue an orderly~~had substantially completed the exit of its operations in Latin America. Electric Power Infrastructure Services revenues included $2.4 million and a negative $20.8 million related to Latin American operations for the three months ended June 30, 2020 and 2019 and $7.1 million and $7.0 million related to Latin American operations for the six months ended June 30, 2020 and 2019. Latin American revenues forFor the three and six months ended June 30, ~~2019 reflect the reversal of $48.8 million of revenues in connection with the terminated telecommunications project in Peru, a portion of which related to prior periods.~~2020, Electric Power Infrastructure ~~Services~~Solutions operating income included $15.2 million and ~~$79.3~~$31.5 million of operating losses related to Latin American operations for the three months ended June 30, 2020 and 2019 and $31.5 million and $79.9 million of operating losses related to Latin American operations for the six months ended June 30, 2020 and 2019.operations.

Separate measures of Quanta’s assets and cash flows by reportable segment, including capital expenditures, are not produced or utilized by management to evaluate segment performance. Quanta’s fixed assets, which are held at the operating unit level, include operating machinery, equipment and vehicles, office equipment, buildings and leasehold improvements, and are used on an interchangeable basis across its reportable segments. As such, for reporting purposes, total depreciation expense is allocated each quarter among Quanta’s reportable segments based on the ratio of each reportable segment’s revenue contribution to consolidated revenues.

Foreign Operations

During the three months ended June 30, ~~2020~~2021 and ~~2019~~,2020, Quanta derived ~~$298.4~~$429.0 million and ~~$277.3~~$298.4 million of its revenues from foreign operations. During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, Quanta derived ~~$794.4~~$926.5 million and ~~$883.9~~$794.4 million of its revenues from foreign operations. Of Quanta’s foreign revenues, ~~71%~~76% and ~~73%~~71% were earned in Canada during the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 and ~~75%~~80% and ~~78%~~75% were earned in Canada during the six months ended June 30, ~~2020~~2021 and ~~2019.~~2020. In addition, Quanta held property and equipment of ~~$297.4~~$331.6 million and ~~$314.1~~$336.4 million in foreign countries, primarily Canada, as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

~~13.~~12. SUPPLEMENTAL CASH FLOW INFORMATION:

The net effects of changes in operating assets and liabilities, net of non-cash transactions, on cash flows from operating activities are as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Accounts and notes receivable	$	76,512	$	237,790	$	112,033	$	360,120
Contract assets	(150,148)		83,677		(212,426)		100,049
Inventories	(5,709)		2,500		(6,144)		(1,868)
Prepaid expenses and other current assets	(52,297)		(33,600)		(42,349)		50,478
Accounts payable and accrued expenses and other non-current liabilities	63,982		22,649		59,202		(87,745)
Contract liabilities	3,595		19,283		(25,630)		6,397
Other, net	(978)		(6,591)		(9,178)		(12,253)
Net change in operating assets and liabilities, net of non-cash transactions	$	(65,043)	$	325,708	$	(124,492)	$	415,178

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Accounts and notes receivable $ 237,790
$ (56,322 ) $ 360,120
$ (215,791 )
Contract assets 83,677
(107,165 ) 100,049
(101,898 )
Inventories 2,500
13,091
(1,868 ) 42,087
Prepaid expenses and other current assets (33,600 ) (73,235 ) 50,478
(102,574 )
Accounts payable and accrued expenses and other non-current liabilities 22,649
44,543
(87,745 ) (22,135 )
Contract liabilities 19,283
67,390
6,397
44,010
Other, net ⁽¹⁾
(6,591 ) (123,795 ) (12,253 ) (129,348 )
Net change in operating assets and liabilities, net of non-cash transactions $ 325,708
$ (235,493 ) $ 415,178
$ (485,649 )

⁽¹⁾The amounts for the three and six months ended June 30, 2019 include the payment of $87 million of on-demand advance payment bonds and $25 million of on-demand performance bonds exercised in connection with the terminated telecommunications project in Peru. See ~~Legal Proceedings – Peru Project Dispute~~ ~~in Note 11 for additional information on this matter.~~

~~A reconciliation~~Reconciliations of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts shown in the statements of cash flows isare as follows (in thousands):


	June 30,
	2021		2020
Cash and cash equivalents	$	212,473	$	530,670
Restricted cash included in “Prepaid expenses and other current assets”	1,460		1,266
Restricted cash included in “Other assets, net”	782		917
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	214,715	$	532,853


	June 30,					March 31,
	2020		2019			2021		2020
Cash and cash equivalents	$	530,670	$	73,356	Cash and cash equivalents	$	200,218	$	377,205
Restricted cash included in “Prepaid expenses and other current assets”	1,266		3,733		Restricted cash included in “Prepaid expenses and other current assets”	1,518		3,514
Restricted cash included in “Other assets, net”	917		1,028		Restricted cash included in “Other assets, net”	879		919
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	532,853	$	78,117	Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	202,615	$	381,638



	June 30, 2020			December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	530,670		$	164,798
Accounts receivable, net of allowances of $14,948 and $9,398	2,370,286			2,747,911
Contract assets	489,803			601,268
Inventories	48,274			55,719
Prepaid expenses and other current assets	205,722			261,290
Total current assets	3,644,755			3,830,986
Property and equipment, net of accumulated depreciation of $1,298,054 and $1,250,197	1,379,687			1,386,654
Operating lease right-of-use assets	275,816			284,369
Other assets, net	386,068			393,264
Other intangible assets, net of accumulated amortization of $469,006 and $437,886	380,309			413,734
Goodwill	2,022,995			2,022,675
Total assets	$	8,089,630		$	8,331,682
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt and short-term debt	$	71,837		$	74,869
Current portion of operating lease liabilities	90,358			92,475
Accounts payable and accrued expenses	1,317,976			1,489,559
Contract liabilities	613,188			606,146
Total current liabilities	2,093,359			2,263,049
Long-term debt, net of current maturities	1,315,556			1,292,195
Operating lease liabilities, net of current portion	192,300			196,521
Deferred income taxes	220,689			214,779
Insurance and other non-current liabilities	349,724			311,307
Total liabilities	4,171,628			4,277,851
Commitments and Contingencies
Equity:
Common stock, $.00001 par value, 600,000,000 shares authorized, 161,368,227 and 159,415,540 shares issued, and 137,711,812 and 142,324,318 shares outstanding	2			2
Exchangeable shares, no par value, 0 and 36,183 shares issued and outstanding	—			—
Additional paid-in capital	2,063,100			2,024,610
Retained earnings	2,948,180			2,854,271
Accumulated other comprehensive loss	(290,049		)	(241,818		)
Treasury stock, 23,656,415 and 17,091,222 common shares	(806,804		)	(586,773		)
Total stockholders’ equity	3,914,429			4,050,292
Non-controlling interests	3,573			3,539
Total equity	3,918,002			4,053,831
Total liabilities and equity	$	8,089,630		$	8,331,682



																		Accumulated
					Exchangeable				Series G				Additional					Other						Total
	Common Stock				Shares				Preferred Stock				Paid-In		Retained			Comprehensive			Treasury			Stockholders'			Non-controlling			Total
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Earnings			Income (Loss)			Stock			Equity			Interests			Equity
Balance, December 31, 2018	141,103,900		$	2	486,112		$	—	1		$	—	$	1,967,354	$	2,477,291		$	(286,048	)	$	(554,440	)	$	3,604,159		$	1,294		$	3,605,453
Other comprehensive income	—		—		—		—		—		—		—		—			18,847			—			18,847			—			18,847
Stock-based compensation activity	903,082		—		—		—		—		—		17,151		—			—			(19,052		)	(1,901		)	—			(1,901		)
Exchange of exchangeable shares	449,929		—		(449,929	)	—		—		—		—		—			—			—			—			—			—
Retirement of preferred stock	—		—		—		—		(1	)	—		—		—			—			—			—			—			—
Common stock repurchases	(375,536	)	—		—		—		—		—		—		—						(11,953		)	(11,953		)	—			(11,953		)
Dividends declared	—		—		—		—		—		—		—		(5,896		)	—			—			(5,896		)	—			(5,896		)
Distributions to non-controlling interests	—		—		—		—		—		—		—		—			—			—			—			(528		)	(528		)
Net income	—		—		—		—		—		—		—		120,488			—			—			120,488			547			121,035
Balance, March 31, 2019	142,081,375		2		36,183		—		—		—		1,984,505		2,591,883			(267,201		)	(585,445		)	3,723,744			1,313			3,725,057
Other comprehensive income	—		—		—		—		—		—		—		—			15,872			—			15,872			—			15,872
Stock-based compensation activity	85,590		—		—		—		—		—		14,957		—			—			(761		)	14,196			—			14,196
Dividends declared	—		—		—		—		—		—		—		(6,233		)	—			—			(6,233		)	—			(6,233		)
Distributions to non-controlling interests	—		—		—		—		—		—		—		—			—			—			—			(1,092		)	(1,092		)
Net income	—		—		—		—		—		—		—		27,344			—			—			27,344			1,115			28,459
Balance, June 30, 2019	142,166,965		$	2	36,183		$	—	—		$	—	$	1,999,462	$	2,612,994		$	(251,329	)	$	(586,206	)	$	3,774,923		$	1,336		$	3,776,259



	June 30, 2020		December 31, 2019
Contract assets	$	489,803	$	601,268
Contract liabilities	$	613,188	$	606,146



	Electric Power Infrastructure Services Division			Pipeline and Industrial Infrastructure Services Division			Total
Balance at December 31, 2018:
Goodwill	$	1,313,078		$	683,284		$	1,996,362
Accumulated impairment	—			(96,483		)	(96,483		)
	1,313,078			586,801			1,899,879

Goodwill related to acquisitions completed in 2019	43,183			67,200			110,383
Purchase price allocation adjustments	1,503			—			1,503
Foreign currency translation adjustments	7,399			3,511			10,910

Balance at December 31, 2019:
Goodwill	1,365,163			753,938			2,119,101
Accumulated impairment	—			(96,426		)	(96,426		)
	1,365,163			657,512			2,022,675

Goodwill related to acquisitions completed in 2020	3,768			6,301			10,069
Purchase price allocation adjustments	1,771			19			1,790
Foreign currency translation adjustments	(7,532		)	(4,007		)	(11,539		)

Balance at June 30, 2020:
Goodwill	1,363,170			756,046			2,119,216
Accumulated impairment	—			(96,221		)	(96,221		)
	$	1,363,170		$	659,825		$	2,022,995



	As of								As of
	June 30, 2020								December 31, 2019
	Remaining Weighted Average Amortization Period in Years	Intangible Assets		Accumulated Amortization			Intangible Assets, Net		Intangible Assets		Accumulated Amortization			Intangible Assets, Net
Customer relationships	6.0	$	531,823	$	(240,578	)	$	291,245	$	532,808	$	(213,915	)	$	318,893
Backlog	2.3	143,615		(141,212		)	2,403		144,704		(141,580		)	3,124
Trade names	14.3	93,007		(29,087		)	63,920		93,396		(26,145		)	67,251
Non-compete agreements	3.0	43,718		(34,446		)	9,272		43,281		(32,868		)	10,413
Patented rights and developed technology	2.3	22,440		(21,173		)	1,267		22,719		(20,682		)	2,037
Curriculum	7.9	11,712		(2,510		)	9,202		11,712		(2,696		)	9,016
Total intangible assets subject to amortization	7.3	846,315		(469,006		)	377,309		848,620		(437,886		)	410,734
Engineering license		3,000		—			3,000		3,000		—			3,000
Total intangible assets		$	849,315	$	(469,006	)	$	380,309	$	851,620	$	(437,886	)	$	413,734



Year Ending December 31:
Remainder of 2020	$	35,354
2021	68,450
2022	63,434
2023	54,714
2024	41,758
Thereafter	113,599
Total	$	377,309



	June 30, 2020		December 31, 2019
Borrowings under senior secured credit facility	$	1,361,841	$	1,346,290
Other long-term debt	22,391		13,275
Finance leases	1,400		957
Total long-term debt obligations	1,385,632		1,360,522
Less — Current maturities of long-term debt	70,076		68,327
Total long-term debt obligations, net of current maturities	$	1,315,556	$	1,292,195



Lease type	Classification	June 30, 2020		December 31, 2019
Assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	275,816	$	284,369
Finance lease assets	Property and equipment, net of accumulated depreciation	1,593		1,043
Total lease assets		$	277,409	$	285,412
Liabilities:
Current:
Operating	Current portion of operating lease liabilities	$	90,358	$	92,475
Finance	Current maturities of long-term debt and short-term debt	489		440

Non-current:
Operating	Operating lease liabilities, net of current portion	192,300		196,521
Finance	Long-term debt, net of current maturities	911		517
Total lease liabilities		$	284,058	$	289,953



	As of June 30, 2020
	Operating Leases			Finance Leases			Total
Remainder of 2020	$	53,636		$	330		$	53,966
2021	86,556			469			87,025
2022	61,429			343			61,772
2023	41,816			247			42,063
2024	25,036			122			25,158
Thereafter	41,034			—			41,034
Total future minimum operating and finance lease payments	$	309,507		$	1,511		$	311,018
Less imputed interest	(26,849		)	(111		)	(26,960		)
Total lease liabilities	$	282,658		$	1,400		$	284,058



	2020		2019
Valuation date price based on March 26, 2020 and March 8, 2019 closing stock prices of Quanta common stock	$31.49		$35.19
Expected volatility	34	%	25	%
Risk-free interest rate	0.35	%	2.43	%
Term in years	2.76		2.81


	December 31,					December 31,
	2019		2018			2020		2019
Cash and cash equivalents	$	164,798	$	78,687	Cash and cash equivalents	$	184,620	$	164,798
Restricted cash included in “Prepaid expenses and other current assets”	4,026		3,286		Restricted cash included in “Prepaid expenses and other current assets”	1,275		4,026
Restricted cash included in “Other assets, net”	921		1,283		Restricted cash included in “Other assets, net”	913		921
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	169,745	$	83,256	Total cash, cash equivalents, and restricted cash reported in the statements of cash flows	$	186,808	$	169,745


~~Item 2.~~	Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.


•	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.~~



	Three Months Ended June 30,										Change
	2020					2019					$			%
Revenues	$	2,506,231		100.0	%	$	2,839,199		100.0	%	$	(332,968	)	(11.7	)%
Cost of services (including depreciation)	2,150,967			85.8		2,519,694			88.7		(368,727		)	(14.6	)%
Gross profit	355,264			14.2		319,505			11.3		35,759			11.2	%
Equity in earnings of integral unconsolidated affiliates	1,045			—		—			—		1,045			*
Selling, general and administrative expenses	(227,852		)	(9.1	)	(223,944		)	(7.9	)	(3,908		)	1.7	%
Amortization of intangible assets	(17,779		)	(0.7	)	(12,610		)	(0.4	)	(5,169		)	41.0	%
Change in fair value of contingent consideration liabilities	2,238			0.1		(4,371		)	(0.2	)	6,609			*
Operating income	112,916			4.5		78,580			2.8		34,336			43.7	%
Interest expense	(8,654		)	(0.3	)	(15,821		)	(0.6	)	7,167			(45.3	)%
Interest income	275			—		267			—		8			3.0	%
Other income (expense), net	3,248			0.1		6,521			0.2		(3,273		)	(50.2	)%
Income before income taxes	107,785			4.3		69,547			2.4		38,238			55.0	%
Provision for income taxes	32,989			1.3		41,088			1.4		(8,099		)	(19.7	)%
Net income	74,796			3.0		28,459			1.0		46,337			162.8	%
Less: Net income attributable to non-controlling interests	849			—		1,115			—		(266		)	(23.9	)%
Net income attributable to common stock	$	73,947		3.0	%	$	27,344		1.0	%	$	46,603		170.4	%


	June 30, 2021				December 31, 2020
	12 Month		Total		12 Month		Total
Electric Power Infrastructure Solutions
Remaining performance obligations	$	2,670,925	$	3,606,635	$	2,511,157	$	3,547,838
Estimated orders under MSAs and short-term, non-fixed price contracts	3,833,348		9,031,931		3,559,443		7,433,445
Backlog	$	6,504,273	$	12,638,566	$	6,070,600	$	10,981,283

Underground Utility and Infrastructure Solutions
Remaining performance obligations	$	734,392	$	820,554	$	327,205	$	437,544
Estimated orders under MSAs and short-term, non-fixed price contracts	1,740,227		3,518,472		1,868,820		3,713,607
Backlog	$	2,474,619	$	4,339,026	$	2,196,025	$	4,151,151

Total
Remaining performance obligations	$	3,405,317	$	4,427,189	$	2,838,362	$	3,985,382
Estimated orders under MSAs and short-term, non-fixed price contracts	5,573,575		12,550,403		5,428,263		11,147,052
Backlog	$	8,978,892	$	16,977,592	$	8,266,625	$	15,132,434



	June 30, 2020
Total capacity available for revolving loans and letters of credit	$	2,135,000
Less:
Borrowings of revolving loans under our senior secured credit facility	152,622
Letters of credit outstanding under our senior secured credit facility	374,700
Available commitments under senior secured credit facility for issuing revolving loans or new letters of credit	1,607,678
Plus:
Cash and cash equivalents	530,670
Total available commitments under senior secured credit facility and cash and cash equivalents	$	2,138,348


	June 30, 2021
Total capacity available for revolving loans and letters of credit	$	2,510,000
Less:
Borrowings of revolving loans	323,281
Letters of credit outstanding	301,600
Available commitments for issuing revolving loans or new letters of credit	1,885,119
Plus:
Cash and cash equivalents	212,473
Total available commitments under senior credit facility and cash and cash equivalents	$	2,097,592


~~(2)~~	Amount represents cash interest expense on the liabilities associated with financing transactions from the exercise of our equipment rental purchase options and on fixed-rate, long-term debt, which does not include borrowings under our senior secured credit facility.


~~(3)~~	~~Amount represents short-term borrowings recorded on our June 30, 2020 condensed consolidated balance sheet.~~


~~(4)~~	Amounts represent undiscounted operating lease obligations at June 30, 2020. The operating lease obligations recorded on our June 30, 2020 condensed consolidated balance sheet represent the present value of these amounts.


~~(5)~~	Amounts represent undiscounted operating leases obligations that have not commenced as of June 30, 2020. The operating leases obligations will be recorded on our consolidated balance sheet beginning on the commencement date of each lease.


~~(6)~~	Amounts represent undiscounted finance lease obligations at June 30, 2020. The finance lease obligations recorded on our June 30, 2020 condensed consolidated balance sheet represent the present value of these amounts.


~~(7)~~	Amounts represent short-term lease obligations that are not recorded on our June 30, 2020 condensed consolidated balance sheet due to our accounting policy election. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because we are unable to accurately predict future rental amounts.


~~(9)~~	Amount represents capital committed for the expansion of our vehicle fleet. Although we have committed to the purchase of these vehicles at the time of their delivery, we expect that these orders will be assigned to third-party leasing companies and made available to us under certain of our master equipment lease agreements.


~~(10)~~	~~Amount represents outstanding capital commitments associated with investments in unconsolidated affiliates.~~


•	~~The other risks and uncertainties described elsewhere herein and in Item 1A.~~ ~~Risk Factors~~ ~~of Part II of this Quarterly Report, Item 1A.~~ ~~Risk Factors~~ ~~of Part I of our 2019 Annual Report and as may be detailed from time to time in our other public filings with the SEC.~~


~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk.~~


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds.~~



Period	Total Number of Shares Purchased ⁽¹⁾⁽²⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs ⁽¹⁾
April 1 - 30, 2020
Open Market Stock Repurchases ⁽¹⁾	—	$	—	—	$	86,756,136
Tax Withholdings ⁽²⁾	—	$	—	—
May 1 - 31, 2020
Open Market Stock Repurchases ⁽¹⁾	—	$	—	—	$	86,756,136
Tax Withholdings ⁽²⁾	10,752	$	34.06	—
June 1 - 30, 2020
Open Market Stock Repurchases ⁽¹⁾	—	$	—	—	$	86,756,136
Tax Withholdings ⁽²⁾	2,532	$	38.26	—
Total	13,284			—	$	86,756,136


Period	Total Number of Shares Purchased (1)(2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs (1)
April 1 - 30, 2021
Open Market Stock Repurchases (1)	103,821	$	94.55	103,821	$	509,281,135
Tax Withholding Obligations (2)	349	$	87.34	—
May 1 - 31, 2021
Open Market Stock Repurchases (1)	97,528	$	95.86	97,528	$	499,932,034
Tax Withholding Obligations (2)	3,384	$	92.60	—
June 1 - 30, 2021
Open Market Stock Repurchases (1)	112,376	$	91.51	112,376	$	489,648,012
Tax Withholding Obligations (2)	2,362	$	96.73	—
Total	319,820			313,725	$	489,648,012