| Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2016 |
| Accounting Policies [Abstract] | |
| Principles of Consolidation | Principles of Consolidation
The 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 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.
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%, 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. |
| Use of Estimates and Assumptions | Use of Estimates and Assumptions
The preparation of financial statements in conformity with
US 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 allowance for
doubtful accounts, valuation of inventory, useful lives of assets,
fair value assumptions in analyzing goodwill, other intangibles and
long-lived asset impairments, equity and other investments, loan
receivables, purchase price allocations, liabilities for
self-insured and other claims and guarantees, multiemployer pension
plan withdrawal liabilities, revenue recognition for construction
contracts inclusive of contractual change orders and claims,
share-based compensation, operating results of reportable segments,
as well as the provision for income taxes and the calculation of
uncertain tax positions. |
| Cash and Cash Equivalents | Cash and Cash Equivalents
Quanta had cash and cash equivalents of $112.2 million and
$128.8 million as of December 31, 2016 and 2015. 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 December 31, 2016 and 2015, cash equivalents
were $8.8 million and $1.4 million and consisted
primarily of money market investments and money market mutual funds
and are discussed further in Fair Value Measurements |
| Current and Long-Term Accounts and Notes Receivable and Allowance for Doubtful Accounts | Current and Long-Term Accounts and Notes Receivable and
Allowance for Doubtful Accounts
Quanta provides an allowance for doubtful accounts when collection
of an account or note receivable is considered doubtful, and
receivables are written off against the allowance when deemed
uncollectible. Inherent in the assessment of the allowance for
doubtful accounts are certain judgments and estimates regarding,
among other factors, the customer’s access to capital, the
customer’s willingness or ability to pay, general economic
and market conditions, the ongoing relationship with the customer
and uncertainties related to the resolution of disputed matters.
Quanta considers accounts receivable delinquent after 30 days
but does not generally include delinquent accounts in its analysis
of the allowance for doubtful accounts unless the accounts
receivable have been outstanding for at least 90 days. In addition
to balances that have been outstanding for 90 days or more,
Quanta also includes accounts receivable balances that relate to
customers in bankruptcy or with other known difficulties in its
analysis of the allowance for doubtful accounts. Material changes
in Quanta’s customers’ business or cash flows, which
may be impacted by negative economic and market conditions, could
affect Quanta’s ability to collect amounts due from them. As
of December 31, 2016 and 2015, Quanta had allowances for
doubtful accounts on current receivables of approximately
$2.8 million and $5.2 million. Long-term accounts
receivable are included within other assets.
Should customers experience financial difficulties or file for
bankruptcy, or should anticipated recoveries relating to
receivables in existing bankruptcies or other workout situations
fail to materialize, Quanta could experience reduced cash flows and
losses in excess of current allowances provided.
The balances billed but not paid by customers pursuant to retainage
provisions in certain contracts are generally due upon completion
of the contracts and acceptance by the customer. Based on
Quanta’s experience with similar contracts in recent years,
the majority of the retainage balances at each balance sheet date
are expected to be collected within the next twelve months. Current
retainage balances as of December 31, 2016 and 2015 were
approximately $231.0 million and $250.1 million and were
included in accounts receivable. Retainage balances with settlement
dates beyond the next twelve months were included in other assets,
net, and as of December 31, 2016 and 2015 were
$5.2 million and $4.5 million.
Within accounts receivable, Quanta recognizes unbilled receivables
in 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; costs have been incurred but are yet
to be billed under cost-reimbursement type contracts; or amounts
arise from routine lags in billing (for example, work completed one
month but not billed until the next month). These balances do not
include revenues accrued for work performed under fixed-price
contracts as these amounts are recorded as costs and estimated
earnings in excess of billings on uncompleted contracts. At
December 31, 2016 and 2015, the balances of unbilled
receivables included in accounts receivable were approximately
$206.8 million and $233.6 million. |
| Inventories | Inventories
Inventories consist primarily of parts and supplies held for use in
the ordinary course of business, which are valued by Quanta at the
lower of cost or market as determined by using either the
first-in, first-out |
| Property and Equipment | Property and Equipment
Property and equipment are stated at cost, and depreciation is
computed using the straight-line method, net of estimated salvage
values, over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset.
Depreciation expense related to property and equipment was
approximately $170.2 million, $162.8 million and
$141.1 million for the years ended December 31, 2016,
2015 and 2014, respectively.
Accrued capital expenditures were $12.7 million and
$5.8 million as of December 31, 2016 and 2015. The impact
of these items has been excluded from Quanta’s capital
expenditures on its consolidated statements of cash flows due to
their non-cash
Expenditures for repairs and maintenance are charged to expense
when incurred. Expenditures for major renewals and betterments,
which extend the useful lives of existing equipment, are
capitalized and depreciated over the adjusted remaining useful
lives of the assets. Upon retirement or disposition of property and
equipment, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is
reflected in selling, general and administrative expenses.
Management reviews long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount may
not be realizable. Quanta also recorded asset impairments primarily
related to certain international renewable energy services
operations of $8.0 million in 2016 and $6.6 million in
2015. The 2016 impairment was primarily due to a pending
disposition of certain international renewable energy services
operations, and the 2015 impairment was based on the estimated
future undiscounted cash flows for the asset group as compared to
their carrying value.
When an evaluation is required, the estimated future undiscounted
cash flows associated with the asset group are compared to the
asset group’s carrying amount to determine if an impairment
of such asset group is necessary. The effect of any impairment
involves expensing the difference between the fair value of such
asset group and its carrying value in the period incurred. |
| Other Assets, Net | Other Assets, Net
Other assets, net consists primarily of long-term receivables, debt
issuance costs, equity and other investments, refundable security
deposits for leased properties and insurance claims in excess of
deductibles that are due from Quanta’s insurers. |
| Debt Issuance Costs | Debt Issuance Costs
Capitalized debt issuance costs related to Quanta’s credit
facility and any other debt outstanding at a given balance sheet
date are included in other assets, net and are amortized into
interest expense on a straight-line basis over the terms of the
respective agreements giving rise to the debt issuance costs, which
Quanta believes approximates the effective interest rate method.
During 2015, Quanta incurred $3.8 million of debt issuance
costs related to the amendment and restatement of its credit
agreement and recorded a nominal charge to interest expense for the
write-off |
| Goodwill and Other Intangibles | Goodwill and Other Intangibles
Quanta has recorded goodwill in connection with its historical
acquisitions of companies. Upon acquisition, these companies were
either combined into one of Quanta’s existing operating units
or managed on a stand-alone basis as an individual operating unit.
Goodwill recorded in connection with these acquisitions is subject
to an annual assessment for impairment, which Quanta performs at
the operating unit level for each operating unit that carries a
balance of goodwill. Each of Quanta’s operating units is
organized into one of two internal divisions: the Electric Power
Infrastructure Services Division and the Oil and Gas 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 each 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
impairments.
Quanta has the option to first assess qualitative factors to
determine whether it is necessary to perform the two-step
Quanta’s goodwill impairment assessment is performed
at year-end, two-step
Quanta determines the fair value of its reporting units using a
weighted combination of the discounted cash flow, market multiple
and market capitalization valuation approaches, with heavier
weighting on the discounted cash flow method, as in
management’s opinion, this method currently results in the
most accurate calculation of a reporting unit’s fair value.
Determining the fair value of a reporting unit requires judgment
and the use of significant estimates and assumptions. Such
estimates and assumptions include, among others, revenue growth
rates, operating margins, discount rates, weighted average costs of
capital and future market conditions. Quanta believes the estimates
and assumptions used in its impairment assessments are reasonable
and based on available market information, but variations in any of
the assumptions could result in materially different calculations
of fair value and determinations of whether or not an impairment is
indicated.
Under the discounted cash flow method, Quanta determines fair value
based on the estimated future cash flows of each reporting unit,
discounted to present value using risk-adjusted industry discount
rates, which reflect the overall level of inherent risk of a
reporting unit and the rate of return an outside investor would
expect to earn. Cash flow projections are derived from budgeted
amounts and operating forecasts (typically a one-year
Under the market multiple and market capitalization approaches,
Quanta determines the estimated fair value of each of its reporting
units by applying transaction multiples 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. For the market capitalization approach, Quanta adds a
reasonable control premium, which is estimated as the premium that
would be received in a sale of the reporting unit in an orderly
transaction between market participants.
The projected cash flows and estimated levels of EBITDA by
reporting unit were used to determine fair value under the three
approaches discussed herein. The following table presents the
significant estimates used by management in determining the fair
values of Quanta’s reporting units at December 31, 2016,
2015 and 2014:
2016 2015 2014
Years of cash flows before terminal value 5 5 5
Discount rates 12.5% to 14.5% 12.0% to 16.0% 12.0% to 14.0%
EBITDA multiples 5.5 to 7.0 5.0 to 6.5 5.0 to 6.0
Weighting of three approaches:
Discounted cash flows 70% 70% 70%
Market multiple 15% 15% 15%
Market capitalization 15% 15% 15%
For recently acquired reporting units, a step one impairment test
may indicate an implied fair value that is substantially similar to
the reporting unit’s carrying value. Such similarities in
value are generally an indication that management’s estimates
of future cash flows associated with the recently acquired
reporting unit remain relatively consistent with the assumptions
that were used to derive its initial fair value.
During the fourth quarter of 2016, a two-step
As discussed generally above, when evaluating the 2016 step one
impairment test results, management considered many factors in
determining whether or not an impairment of goodwill for any
reporting unit was reasonably likely to occur in future periods,
including future market conditions and the economic environment in
which Quanta’s reporting units were operating. Additionally,
management considered the sensitivity of its fair value estimates
to changes in certain valuation assumptions. After taking into
account a 10% decrease in the fair value of each of Quanta’s
reporting units, two reporting units within Quanta’s Oil and
Gas Infrastructure Division had fair values below their respective
carrying values. Quanta recorded asset impairment charges for these
reporting units in 2015. The fair values determined in 2016 for
these reporting units were consistent with the fair values
determined in 2015, accordingly the fair values approximate the
current carrying values. Circumstances such as market declines,
unfavorable economic conditions, the loss of a major customer or
other factors could increase the risk of impairment of goodwill in
future periods.
If an operating unit experiences prolonged periods of declining
revenues, operating margins or both, it may be at risk of failing
step one of the goodwill impairment test. Certain operating units
have experienced declines over the short-term due to challenging
macroeconomic conditions in certain geographic areas and low oil
and natural gas prices, which have negatively impacted customer
spending and resulted in project cancellations and delays.
Additionally, customer capital spending has been constrained as a
result of an increasingly complex regulatory and permitting
environment. Certain operating units within Quanta’s Oil and
Gas Infrastructure Services Division that primarily operate within
the midstream and smaller-scale transmission market have continued
to be negatively impacted by these factors. Goodwill and intangible
assets associated with the operating units within Quanta’s
Oil and Gas Infrastructure Services Division that have been
significantly impacted by the factors mentioned above were
approximately $68.0 million and $11.9 million at
December 31, 2016. Quanta monitors these conditions and others
to determine if it is necessary to perform step one of the
fair-value based impairment test for one or more operating units
prior to the annual impairment assessment. No interim impairment
charges were recorded during 2016. Although Quanta is not aware of
circumstances that would lead to a goodwill impairment at a
reporting unit currently, circumstances such as a continued market
decline, the loss of a major customer or other factors could impact
the valuation of goodwill in the future.
The goodwill analysis performed for each reporting unit was based
on estimates and comparisons obtained from the electric power and
oil and gas industries. Quanta assigned a higher weighting to the
discounted cash flow approach in all periods to reflect increased
expectations of market value being determined from a “held
and used” model. As stated previously, cash flows are derived
from budgeted amounts and operating forecasts that have been
evaluated by management. In connection with the 2016 assessment,
reporting unit growth rates during the cash flow projection period
varied from negative 2% to positive 24%.
Quanta’s intangible assets include customer relationships,
backlog, trade names, non-compete value-in-use
Quanta amortizes intangible assets based upon the estimated
consumption of the economic benefits of each intangible asset, or
on a straight-line basis if the pattern of economic benefits
consumption cannot otherwise be reliably estimated. Intangible
assets subject to amortization are reviewed for impairment and are
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 would be recognized if the carrying
amount of an intangible asset is not recoverable and its carrying
amount exceeds its fair value.
During the fourth quarter of 2015, management concluded that
goodwill was impaired at two reporting units in Quanta’s Oil
and Gas Infrastructure Services Division. Accordingly, Quanta
recorded a $39.8 million non-cash non-compete |
| Investments in Affiliates and Other Entities | 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
determines whether such 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 of a VIE that most significantly affect the
VIE’s economic performance and (ii) the obligation to
absorb losses of the VIE or the right to receive benefits from the
VIE, in either case that could potentially be significant to 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
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. Quanta’s share of net income or losses from
unconsolidated equity investments is included in equity in earnings
(losses) of unconsolidated affiliates in the consolidated
statements of operations when applicable. Equity investments are
reviewed for impairment by assessing whether any decline in the
fair value of the investment below the carrying value is other than
temporary. In making this determination, factors such as the
ability to recover the carrying amount of the investment and the
inability of the investee to sustain an earnings capacity are
evaluated in determining whether a loss in value should be
recognized. Any impairment losses related to investments would be
recognized in other expense. Equity method investments are carried
at original cost and are included in other assets, net in the
consolidated balance sheet and are adjusted for Quanta’s
proportionate share of the investees’ income, losses and
distributions. |
| Revenue Recognition | Revenue Recognition
Through its Electric Power Infrastructure Services and Oil and Gas
Infrastructure Services segments, Quanta designs, installs and
maintains networks for customers in the electric power and oil and
gas industries. These services may be provided pursuant to master
service agreements, repair and maintenance contracts and fixed
price and non-fixed
Revenues from fixed price contracts are recognized using
the percentage-of-completion
Actual revenues and project costs can vary, sometimes
substantially, from previous estimates due to changes in a variety
of factors including unforeseen circumstances not included in
Quanta’s cost estimates or covered by its contracts for which
it cannot obtain adequate compensation, including concealed or
unknown environmental conditions; changes in the cost of equipment,
commodities, materials or labor; unanticipated costs or claims due
to customer-caused delays, customer failure to provide required
materials or equipment, errors in engineering, specifications or
designs, project modifications, or contract termination and
Quanta’s inability to obtain reimbursement for such costs or
recover on such claims; weather conditions; and quality issues
requiring rework or replacement. These factors, along with other
risks inherent in performing fixed price contracts may cause actual
revenues and gross profits for a project to differ from previous
estimates and could result in reduced profitability or losses on
projects. Changes in these factors may result in revisions to costs
and income, and their effects are recognized in the period in which
the revisions are determined. These factors are routinely evaluated
on a project by project basis throughout the project term, and the
impact of corresponding revisions in management’s estimates
of contract value, contract cost and contract profit are recorded
as necessary in the period in which the revisions are determined.
Provisions for losses on uncompleted contracts are made in the
period in which such losses are determined to be probable and the
amount can be reasonably estimated.
During 2016 and 2015, Quanta experienced performance issues on a
power plant project in Alaska that resulted in an increase of the
estimated total costs necessary to complete the project. During the
construction and commissioning phases, the project experienced
third party engineering deficiencies that changed Quanta’s
planned scope of work and performance failures by other contractors
operating onsite. These issues resulted in higher than expected
production costs associated with quality deficiencies and a related
impact on production sequencing. Additionally, late in the second
quarter of 2016, Quanta experienced a claimed force majeure event
that further disrupted project timing and provided the customer and
its insurance providers with a notice of the event in order to seek
schedule relief and cost recovery. During the years ended
December 31, 2016 and 2015, Quanta recognized project losses
of $54.8 million and $44.9 million. Quanta is in the
process of developing potential claims for damages that may have
resulted from the third party engineering and other contractor
performance issues; however, no revenues or cost recovery has been
reflected in Quanta’s estimate of total project losses at
December 31, 2016. This project had a contract value of
$202 million at December 31, 2016 and was substantially
completed during the fourth quarter of 2016. As this project
continues through the close out phase, it is possible that
additional performance issues or other unforeseen circumstances
could occur and result in the recognition of additional losses on
this project; however, such amounts cannot currently be
estimated.
Overall, Quanta’s operating results for the year ended
December 31, 2016 were impacted by less than 5% as a result of
aggregate changes in contract estimates related to projects that
were in progress at December 31, 2015. Included in the
operating results for the year ended December 31, 2016 were
losses from the project described above, offset by the aggregate
positive impact of numerous individually immaterial changes in
project profitability generally due to better than expected
performance for projects that were ongoing at December 31,
2015. Quanta’s operating results for the year ended
December 31, 2015 and 2014 were impacted by numerous
individually immaterial changes in contract estimates related to
projects that were in progress at December 31, 2014 and 2013;
however, the aggregate impact was less than 5%.
The current asset “Costs and estimated earnings in excess of
billings on uncompleted contracts” represents revenues
recognized in excess of amounts billed for fixed price contracts.
The current liability “Billings in excess of costs and
estimated earnings on uncompleted contracts” represents
billings in excess of revenues recognized for fixed price
contracts.
Quanta may incur costs subject to change orders, whether approved
or unapproved by the customer, and/or claims related to certain
contracts. Quanta determines the probability that such costs will
be recovered based upon evidence such as past practices with the
customer, specific discussions or preliminary negotiations with the
customer or verbal approvals. Quanta treats items as costs of
contract performance in the period incurred if it is not probable
that the costs will be recovered or will recognize revenue if it is
probable that the contract price will be adjusted and can be
reliably estimated.
As of December 31, 2016 and 2015, Quanta had recognized
revenues of approximately $137.8 million and
$137.2 million related to change orders and/or claims that had
been included as contract price adjustments on certain contracts
which were in the process of being negotiated in the normal course
of business.
These aggregate contract price adjustments represent
management’s best estimate of additional contract revenues
which have been earned and which management believes are probable
of collection. The amounts ultimately realized by Quanta upon final
acceptance by its customers could be higher or lower than such
estimated amounts; however, such amounts cannot currently be
estimated. |
| Income Taxes | Income Taxes
Quanta follows the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are recorded
for 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. 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 in those instances where Quanta considers it more likely
than not that additional taxes may be due in excess of amounts
reflected on income tax returns filed. When recording reserves for
expected tax consequences of uncertain positions, 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 December 31, 2016, the total amount of unrecognized tax
benefits relating to uncertain tax positions was
$35.2 million, a decrease from December 31, 2015 of
$19.3 million. This decrease in unrecognized tax benefits
resulted primarily from a $23.4 million decrease due to
expiration of certain federal and state statute of limitations,
partially offset by a $4.2 million increase due to tax
positions to be taken for 2016. Although the IRS completed its
examination related to tax years 2010, 2011 and 2012 during 2016,
certain subsidiaries remain under examination by various U.S.
state, Canadian and other 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
$12.3 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 are 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 its
future consolidated balance sheets and statements of operations and
comprehensive income. |
| Earnings Per Share | Earnings Per Share
Basic earnings per share is computed using the weighted average
number of common shares outstanding during the period, and diluted
earnings per share is computed using the weighted average number of
common shares 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. |
| Self-Insurance | Self-Insurance
Quanta is insured for employer’s liability, workers’
compensation, auto liability and general liability claims. Under
these programs, the deductible for employer’s liability is
$1.0 million per occurrence, the deductible for workers’
compensation is $5.0 million per occurrence, and the
deductibles for auto liability and general liability are
$10.0 million per occurrence. Quanta is generally self-insured
for all claims that do not exceed the amount of the applicable
deductible. 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
$0.4 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 | Collective Bargaining Agreements
Some of Quanta’s operating units are parties to various
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 their union employees and contribute certain amounts to
multiemployer pension plans and employee benefit trusts.
Quanta’s multiemployer pension plan contribution rates
generally are specified in the collective bargaining agreements
(usually on an annual basis), and contributions are made to the
plans on a “pay-as-you-go” |
| Stock-Based Compensation | Stock-Based Compensation
Quanta recognizes compensation expense for restricted stock,
restricted stock units (RSUs) and performance units to be settled
in common stock based on the fair value of the awards at the date
of grant, net of estimated forfeitures. The fair value of
restricted stock awards, RSUs and performance units to be settled
in common stock is determined based on the number of shares, RSUs
or performance units granted and the closing price of
Quanta’s common stock on the date of grant. An estimate of
future forfeitures is required in determining the period expense.
Quanta uses historical data to estimate the forfeiture rate;
however, these estimates are subject to change and may impact the
value that will ultimately be recognized as compensation expense.
The resulting compensation expense from time-based RSU and
performance unit awards is recognized on a straight-line basis over
the requisite service period, which is generally the vesting
period, while compensation expense from performance-based RSU
awards is recognized using the graded vesting method over the
requisite service period. The cash flows resulting from the tax
deductions in excess of the compensation expense recognized for
restricted stock, RSUs and performance units to be settled in
common stock and stock options (excess tax benefit) 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 on the
settlement date of one share of Quanta common stock, as specified
in the applicable award agreement. For additional information on
Quanta’s restricted stock, RSUs, and performance unit awards,
see Note 12. |
| Functional Currency and Translation of Financial Statements | 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 in which the foreign
operating unit is located. Generally, the currency in which the
operating unit transacts the majority of its activities, including
billings, financing, payroll and other expenditures, would be
considered the functional currency. The treatment of foreign
currency translation gains or losses is dependent upon
management’s determination of the functional currency of each
operating unit. In preparing the 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 |
| Derivatives | Derivatives
From time to time, Quanta enters into forward currency contracts
that qualify as derivatives in order to hedge the risks associated
with fluctuations in foreign currency exchange rates related to
certain forecasted foreign currency denominated transactions.
Quanta does not enter into derivative transactions for speculative
purposes; however, for accounting purposes, certain transactions
may not meet the criteria for cash flow hedge accounting. For a
hedge to qualify for cash flow hedge accounting treatment, a hedge
must be documented at the inception of the contract, with the
objective and strategy stated, along with an explicit description
of the methodology used to assess hedge effectiveness. The dates
(or periods) for the expected forecasted events and the nature of
the exposure involved (including quantitative measures of the size
of the exposure) must also be documented. At the inception of the
hedge and on an ongoing basis, the hedge must be deemed to be
“highly effective” at minimizing the risk of the
identified exposure. Effectiveness measures relate the gains or
losses of the derivative to changes in the cash flows associated
with the hedged item, and the forecasted transaction must be
probable of occurring.
For forward contracts that qualify as cash flow hedges, Quanta
accounts for the change in fair value of the forward contracts
directly in equity as part of accumulated other comprehensive
income (loss). Any ineffective portion of cash flow hedges is
recognized in earnings in the period in which ineffectiveness
occurs. For instance, if a forward contract is discontinued as a
cash flow hedge because it is probable that the original forecasted
transaction will not occur by the end of the originally specified
time period, the related amounts in accumulated other comprehensive
income (loss) would be reclassified to other income (expense) in
the consolidated statement of operations in the period such
determination is made. When a forecasted transaction occurs, the
portion of the accumulated gain or loss applicable to the
forecasted transaction is reclassified from equity to earnings.
Changes in fair value related to transactions that do not meet the
criteria for cash flow hedge accounting are recorded in the
consolidated statements of operations and are included in other
income (expense). |
| Comprehensive Income | 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 | 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. Further details
are presented in Note 15. |
| Fair Value Measurements | Fair Value Measurements
The carrying values of cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value due to
the short-term nature of these instruments. The carrying value of
variable rate debt also approximates fair value. 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). All of Quanta’s
cash equivalents were categorized as Level 1 assets at
December 31, 2016 and 2015, as all values were based on
unadjusted quoted prices for identical assets in an active market
that Quanta has the ability to access.
In connection with Quanta’s acquisitions, identifiable
intangible assets acquired typically include goodwill, backlog,
customer relationships, trade names, covenants not-to-compete,
Quanta also uses fair value measurements in connection with the
valuation of its investments in private company equity interests
and financing instruments. These valuations require significant
management judgment due to the absence of quoted market prices, the
inherent lack of liquidity and the long-term nature of such assets.
Typically, the initial costs of 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
realizable. If an other-than-temporary decline in the value of an
investment occurs, a fair value analysis would be performed to
determine the degree to which the investment was impaired and a
corresponding charge to earnings would be recorded during the
period. These types of fair market value assessments are similar to
other nonrecurring fair value measures used by Quanta, which
include the use of significant judgment 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. |
| Adoption of New Accounting Pronouncements | Adoption of New Accounting Pronouncements
In February 2015, the FASB issued an update which amends
consolidation guidance, including amending the guidance related to
determining whether an entity is a variable interest entity (VIE).
The guidance may be applied using a modified retrospective approach
whereby the entity records a cumulative effect of adoption at the
beginning of the fiscal year of initial application. A reporting
entity may also apply the amendments on a full retrospective basis.
Quanta adopted this guidance effective January 1, 2016, and
the adoption of the update did not have a significant impact on
Quanta’s consolidated financial statements or related
disclosures.
In April 2015, the FASB issued an update that requires debt
issuance costs related to a recognized debt liability to be
presented in the balance sheet as a direct deduction from the
carrying amount of that debt liability, consistent with the
presentation of debt discounts and premiums. The update is required
to be adopted retroactively for all periods presented. In August
2015, the FASB issued another update that states that the
Securities Exchange Commission (SEC) staff would not object to an
entity deferring and presenting debt issuance costs as an asset and
subsequently amortizing the deferred debt issuance costs ratably
over the term of the line-of-credit line-of-credit
In April 2015, the FASB issued an update that provides guidance to
customers about whether a cloud computing arrangement includes a
software license. If a cloud computing arrangement includes a
software license, then the customer should account for the software
license element of the arrangement consistent with the acquisition
of other software licenses. If a cloud computing arrangement does
not include a software license, the customer should account for the
arrangement as a service contract. An entity can elect to adopt the
amendments either prospectively to all arrangements entered into or
materially modified after the effective date or retrospectively.
Quanta adopted this guidance effective January 1, 2016, and
the adoption of the update did not have a significant impact on
Quanta’s consolidated financial statements or related
disclosures.
In September 2015, the FASB issued an update that requires an
acquiring company to recognize adjustments to provisional amounts
that are identified during the measurement period in the reporting
period in which such adjustments are determined. An acquiring
company must record any effect on earnings from changes in
depreciation or amortization or other income effects, calculated as
if the accounting had been completed at the acquisition date. The
acquiring company must also present separately on the face of the
income statement or disclose in the notes the amount recorded in
current-period earnings that would have been recorded in previous
reporting periods if the adjustment had been recognized as of the
acquisition date. The update is required to be adopted
prospectively to adjustments that occur after the effective date
with earlier application permitted for financial statements that
have not yet been issued. Quanta adopted this guidance effective
January 1, 2016, and the adoption of the update did not have a
significant impact on Quanta’s consolidated financial
statements or related disclosures.
In August 2014, the FASB issued guidance to address the diversity
in practice in determining when there is substantial doubt about an
entity’s ability to continue as a going concern and when and
how an entity must disclose certain relevant conditions and events.
This update requires an entity to evaluate whether there are
conditions or events, considered in the aggregate, that raise
substantial doubt about the entity’s ability to continue as a
going concern for a period of one year after the date that the
financial statements are issued (or available to be issued). If
such conditions or events exist, an entity should disclose that
there is substantial doubt about the entity’s ability to
continue as a going concern for a period of one year after the date
that the financial statements are issued (or available to be
issued), along with the principal conditions or events that raise
substantial doubt, management’s evaluation of the
significance of those conditions or events in relation to the
entity’s ability to meet its obligations and
management’s plans that are intended to mitigate those
conditions or events. This guidance will impact the disclosure and
presentation of any substantial doubt by Quanta about its ability
to continue as a going concern, if such substantial doubt were to
exist. Quanta adopted this guidance on December 31, 2016, and
the adoption of the update did not have a significant impact on its
consolidated financial statements or related disclosures but would
have an impact if such a substantial doubt were to exist in the
future.
In January 2017, the FASB issued an update that amended SEC
guidance within the Accounting Standards Codification that related
to disclosing the impact that recently issued accounting standards
will have on a registrant’s financial statements when such
standards are adopted in future periods. Quanta has followed the
guidance in this amendment within this note to the consolidated
financial statements. |
| Accounting Standards Not Yet Adopted | Accounting Standards Not Yet Adopted
In May 2014, the FASB issued an update that supersedes most current
revenue recognition guidance, as well as some cost recognition
guidance. The update requires that the recognition of revenue
related to the transfer of goods or services to customers reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. This update also requires new
qualitative and quantitative disclosures about the nature, amount,
timing and uncertainty of revenues and cash flows arising from
customer contracts, including significant judgments and changes in
judgments, information about contract balances and performance
obligations, and assets recognized from costs incurred to obtain or
fulfill a contract. In July 2015, the FASB affirmed its proposal to
defer the effective date until fiscal years beginning on or after
December 15, 2017. The guidance can be applied on a full
retrospective or modified retrospective basis whereby the entity
records a cumulative effect of initially applying this update at
the date of initial application.
Quanta is currently evaluating the potential impact of this update
on its consolidated financial statements, as well as the impact of
its selected transition method as Quanta continues through the
implementation process. In addition, Quanta continues to monitor
activity related to the new standard as well as working with
various non-authoritative groups regarding industry clarifications
and interpretations, which may impact Quanta’s considerations
and conclusions. Significant areas of ongoing consideration include
the impact of termination for convenience provisions on the
duration of contracts and accounting for mobilization-related costs
and uninstalled materials. While Quanta is still evaluating the
requirements of this update, it currently does not expect the
update to materially affect its results of operations, financial
position or cash flows. This preliminary conclusion is based on
Quanta’s belief that it will generally continue to recognize
revenues from long-term service contracts over time as services are
performed and the underlying obligation to the customer is
fulfilled. Quanta has identified and is in the process of
implementing changes to its processes and internal controls to meet
the reporting and disclosure requirements of this update and will
adopt this update effective January 1, 2018.
In July 2015, the FASB issued an update that requires inventory to
be measured at the lower of either cost or net realizable value.
When evidence exists that the net realizable value of inventory is
lower than its cost, the difference will be recognized as a loss in
earnings in the period in which it occurs. The update is required
to be adopted prospectively and is effective for interim and annual
reporting periods beginning after December 15, 2016, although
early adoption is permitted. The adoption of the update is not
anticipated to have a significant impact on Quanta’s
consolidated financial statements or related disclosures.
In January 2016, the FASB issued an update that addresses certain
aspects of recognition, measurement, presentation, and disclosure
of financial instruments to provide users of financial statements
with more decision-useful information. The new standard is
effective for interim and annual periods beginning after
December 15, 2017. Early adoption is permitted for financial
statements of fiscal years or interim periods that have not been
previously issued. Quanta is evaluating the impact of the new
standard on its consolidated financial statements and will adopt
the new standard by January 1, 2018.
In February 2016, the FASB issued an update that requires companies
to recognize on the balance sheet the contractual right to use
assets and liabilities corresponding to the rights and obligations
created by lease contracts. The new standard is effective for
interim and annual periods beginning after December 15, 2018.
Early adoption is permitted for financial statements of fiscal
years or interim periods that have not been previously issued.
While Quanta continues to evaluate the effect of the standard on
its consolidated financial statements, it is anticipated that the
adoption of the standard will materially impact its statement of
financial position.
In March 2016, the FASB issued an update that will amend the
accounting for share-based payments in several key areas, including
the treatment and cash flow presentation of tax effects related to
the settlement of share-based payments and the accounting for
forfeitures of share-based awards. The new guidance will require
companies with share-based payments to record all tax effects
related thereto at settlement (or expiration) through income tax
expense on the statement of operations rather than through
additional paid-in
In June 2016, the FASB issued an update that will change the way
companies measure credit losses for most financial assets and
certain other instruments that are not measured at fair value
through net income. The update will require companies to use an
“expected loss” model for instruments measured at
amortized cost and to record allowances for available-for-sale
In August 2016, the FASB issued an update intended to standardize
the classification of certain transactions on the statement of cash
flows. These transactions include contingent consideration payments
made after a business combination, proceeds from the settlement of
corporate-owned life insurance policies and distributions received
from equity method investments. The new standard is effective for
interim and annual reporting periods beginning after
December 15, 2017, although early adoption is permitted, and
requires application using a retrospective transition method.
Quanta is currently evaluating the potential impact of this
authoritative guidance on its consolidated financial statements and
will adopt this guidance by January 1, 2018.
In October 2016, the FASB issued an update that will require a
reporting entity to recognize the tax expense from the sale of an
asset in the seller’s tax jurisdiction when the transfer
occurs, even though the pre-tax
In October 2016, the FASB issued an update that will amend the
consolidation guidance related to how a reporting entity that is
the single decision maker of a VIE should treat indirect interests
in the VIE held through related parties that are under common
control with the reporting entity when determining whether it is
the primary beneficiary of a VIE. A reporting entity has an
indirect interest in a VIE if it has a direct interest in a related
party that, in turn, has a direct interest in the VIE. The new
standard is effective for interim and annual reporting periods
beginning after December 15, 2016, although early adoption is
permitted. Since Quanta has already adopted a related update, it
will be required to apply the amendments in this update
retrospectively to all relevant prior periods beginning with the
fiscal year in which the amendments in the prior update were
initially applied. Quanta will adopt this guidance on
January 1, 2017, and the adoption of the update is not
anticipated to have a significant impact on its consolidated
financial statements or related disclosures.
In November 2016, the FASB issued an update intended to standardize
the classification of restricted cash and cash equivalents
transactions on the statement of cash flows. The new standard is
effective for interim and annual reporting periods beginning after
December 15, 2017, although early adoption is permitted. The
retrospective transition method will be required for this new
guidance. Quanta is currently evaluating the potential impact of
this authoritative guidance on its consolidated financial
statements and will adopt this guidance by January 1,
2018.
In January 2017, the FASB issued an update intended to clarify the
definition of a business to assist entities with evaluation of
whether transactions should be accounted for as acquisitions or
disposals of assets or businesses. The new definition requires that
when substantially all of the fair value of the gross assets
acquired or disposed of is concentrated in a single identifiable
asset or group of similar identifiable assets, the asset or group
is not a business. The update will require that to be considered a
business, a set of assets and activities must include, at a
minimum, an input and a substantive process that together
significantly contribute to the ability to create output.
Additionally, the update will remove the evaluation of whether a
market participant could replace missing elements in order to
consider the set of assets and activities a business, will provide
more stringent criteria for sets without outputs and will narrow
the definition of output. The new standard is effective for interim
and annual reporting periods beginning after December 15,
2017, although early adoption is permitted for certain
transactions. The prospective transition method will be required
for this new guidance. Quanta is currently evaluating the potential
impact of this authoritative guidance on its consolidated financial
statements and will adopt this guidance by January 1,
2018.
Also in January 2017, the FASB issued an update intended to
simplify the subsequent measurement of goodwill by eliminating the
second step in the current two-step two-step |
| Repurchase of Common Stock | During the third quarter of 2015, Quanta’s board of directors
approved a stock repurchase program authorizing Quanta to purchase,
from time to time through February 28, 2017, up to
$1.25 billion of its outstanding common stock (the 2015
Repurchase Program). Repurchases under the 2015 Repurchase Program
can be made in open market or privately negotiated transactions,
including pursuant to an accelerated share repurchase arrangement,
an issuer repurchase plan or otherwise, at management’s
discretion, based on market and business conditions, applicable
contractual and legal requirements and other factors. The 2015
Repurchase Program does not obligate Quanta to acquire any specific
amount of common stock and may be modified or terminated by
Quanta’s board of directors at any time at its sole
discretion and without notice. During 2015, Quanta repurchased
19.2 million shares of its common stock at a cost of
$449.9 million in the open market under the 2015 Repurchase
Program.
Also during the third quarter of 2015, Quanta entered into an
accelerated share repurchase arrangement (the ASR) to repurchase
$750.0 million of its common stock under the 2015 Repurchase
Program. Under the terms of the ASR, Quanta paid
$750.0 million to JPMorgan Chase Bank, National Association,
London Branch (JPMorgan) and initially received 25.7 million
shares of its common stock. The fair market value of these
25.7 million shares at the time of delivery was approximately
$600.0 million, and the repurchased shares and the related
cost to acquire them were accounted for as an adjustment to the
balance of treasury stock during the quarter ended
September 30, 2015, reducing the weighted-average number of
basic and diluted common shares used to calculate Quanta’s
earnings per share. The $150.0 million remaining under the ASR
was recorded as an adjustment to additional paid-in
During the fourth quarter of 2013, Quanta’s board of
directors approved a stock repurchase program authorizing Quanta to
purchase, from time to time through December 31, 2016, up to
$500.0 million of its outstanding common stock. During the
year ended December 31, 2015, Quanta repurchased
14.3 million shares of its common stock at a cost of
$406.5 million in the open market and completed this
program. |
| Segment Reporting | Quanta presents its operations under two reportable segments:
(1) Electric Power Infrastructure Services and (2) Oil
and Gas Infrastructure Services. This structure is generally based
on the broad end-user
Quanta’s segment results are derived from the types of
services provided across its operating units in each of the end
user markets described above. Quanta’s entrepreneurial
business model allows each of its 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 two internal divisions, namely, the Electric Power
Infrastructure Services Division and the Oil and Gas Infrastructure
Services Division. These internal divisions are closely aligned
with the reportable segments described above based on their
operating units’ predominant type of work.
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. These classifications of
Quanta’s operating unit revenues by type of work for segment
reporting purposes can at times require judgment on the part of
management. Quanta’s operating units may perform joint
infrastructure service projects for customers in multiple
industries, deliver multiple types of network services under a
single customer contract or provide service across industries. For
example, Quanta performs joint trenching projects to install
distribution lines for electric power and natural gas
customers.
In addition, Quanta’s integrated operations and common
administrative support at each of its operating units require that
certain allocations of shared and indirect costs, such as facility
costs and indirect operating expenses, including depreciation and
general and administrative costs, be made to determine operating
segment profitability. Corporate costs, such as payroll and
benefits, employee travel expenses, facility costs, professional
fees, acquisition costs and amortization related to intangible
assets are not allocated. |
