| Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
| Mar. 31, 2017 |
| 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. |
| Interim Condensed Consolidated Financial Information | Interim Condensed Consolidated Financial
Information These unaudited condensed consolidated financial
statements have been prepared pursuant to the rules of the
Securities and Exchange Commission (SEC). Certain information and
footnote disclosures, normally included in annual financial
statements prepared in accordance with accounting principles
generally accepted in the United States (US 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 subsidiaries included in Quanta’s Annual
Report on Form 10-K for the year ended December 31, 2016,
which was filed with the SEC on March 1, 2017. |
| Reclassifications | Reclassifications Quanta reclassified certain prior period amounts
related to stock-based compensation on the statement of cash flows
to conform to the current period presentation under a recently
adopted accounting update. |
| 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 $106.5
million and $112.2 million as of March 31, 2017 and
December 31, 2016. 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 March 31,
2017 and December 31, 2016, cash equivalents were $8.1 million
and $8.8 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 March 31, 2017 and
December 31, 2016, Quanta had allowances for doubtful accounts
on current receivables of $5.0 million and $2.8 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 March 31, 2017
and December 31, 2016 were $253.0 million and $231.0 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 March 31, 2017 and
December 31, 2016 were $9.4 million and $5.2 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 March 31, 2017 and December 31, 2016, the balances of
unbilled receivables included in accounts receivable were $296.7
million and $206.8 million. |
| 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 fair value-based impairment test described below. 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. Otherwise, no further testing is required. Quanta can
choose to perform the qualitative assessment on none, some or all
of its reporting units. Quanta can also bypass the qualitative
assessment for any reporting unit in any period and proceed
directly to step one of the impairment test, and then resume the
qualitative assessment in any subsequent period. Qualitative
indicators including deterioration in macroeconomic conditions,
declining financial performance, or a sustained decrease in share
price, among other things, may trigger the need for annual or
interim impairment testing of goodwill associated with one or all
of the reporting units. Quanta’s goodwill impairment assessment is
performed at year-end, or more frequently if events or
circumstances arise which indicate that goodwill may be impaired.
For instance, a decrease in Quanta’s market capitalization
below book value, a significant change in business climate or loss
of a significant customer, as well as the qualitative indicators
referenced above, may trigger the need for interim impairment
testing of goodwill for one or all of its reporting units. The
first step of the two-step fair value based test involves comparing
the fair value of each of Quanta’s reporting units with its
carrying value, including goodwill. If the carrying value of the
reporting unit exceeds its fair value, the second step is
performed. The second step compares the carrying amount of the
reporting unit’s goodwill to the implied fair value of its
goodwill. If the implied fair value of goodwill is less than the
carrying amount, an impairment loss would be recorded as a
reduction to goodwill with a corresponding charge to operating
expense. 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 model) plus an estimate of later period cash flows, all of
which are evaluated by management. Subsequent period cash flows are
developed for each reporting unit using growth rates that
management believes are reasonably likely to occur, along with a
terminal value derived from the reporting unit’s earnings
before interest, taxes, depreciation and amortization (EBITDA). The
EBITDA multiples for each reporting unit are based on trailing
twelve-month comparable industry data. 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. 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
fair-value based goodwill impairment analysis was performed for
each of Quanta’s reporting units, and no reporting units were
evaluated solely on a qualitative basis. Step one of the analysis
indicated that the implied fair value of each of Quanta’s
reporting units, other than recently acquired reporting units and
the reporting units that recorded goodwill impairment charges in
2015, was substantially in excess of its carrying value. 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 $69.8
million and $11.7 million at March 31, 2017. 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 the three months
ended March 31, 2017. 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. Quanta’s intangible assets include customer
relationships, backlog, trade names, non-compete agreements,
patented rights and developed technology, all subject to
amortization. The value of customer relationships is estimated as
of the date a business is acquired based on the value-in-use
concept utilizing the income approach, specifically the excess
earnings method. The excess earnings analysis consists of
discounting 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
importance or lack thereof of existing customer relationships to
Quanta’s business plan, income taxes and required rates of
return. Quanta values backlog for acquired businesses as of the
acquisition date based upon the contractual nature of the backlog
within each service line, using the income approach to discount
back to present value the cash flows attributable to the backlog.
The value of trade names is estimated using the relief-from-royalty
method of the income approach. This approach is based on the
assumption that in lieu of ownership, a company would be willing to
pay a royalty in order to exploit the related benefits of this
intangible asset. 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. |
| 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 also
enters into strategic partnerships with customers and
infrastructure investors to provide fully integrated infrastructure
services on certain projects, including planning and feasibility
analysis, engineering, design, procurement, construction financing
and investment and project operation and maintenance. These
projects include public-private partnerships, private
infrastructure projects and concessions, along with build, own,
operate and transfer and build to suit arrangements. As part of
this strategy, Quanta formed a partnership with select
infrastructure investors that provides $750 million of capital
available to invest in certain of these infrastructure projects,
including $60 million from Quanta. Wholly owned subsidiaries of
Quanta serve as the general partner of this partnership and as a
separately operating registered investment adviser to manage the
invested capital. 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 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. 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, oil and gas and communications industries. These services
may be provided pursuant to master service agreements, repair and
maintenance contracts and fixed price and non-fixed price
installation contracts. Pricing under these contracts may be
competitive unit price, cost-plus/hourly (or time and materials
basis) or fixed price (or lump sum basis), and the final terms and
prices of these contracts are frequently negotiated with the
customer. Under unit-based contracts, the utilization of an
output-based measurement is appropriate for revenue recognition.
Under these contracts, Quanta recognizes revenue as units are
completed based on pricing established between Quanta and the
customer for each unit of delivery, which best reflects the pattern
in which the obligation to the customer is fulfilled. Under
cost-plus/hourly and time and materials type contracts, Quanta
recognizes revenue on an input basis, as labor hours are incurred
and services are performed. Revenues from fixed price contracts are recognized
using the percentage-of-completion method, measured by the
percentage of costs incurred to date to total estimated costs for
each contract. These contracts provide for a fixed amount of
revenues for the entire project. Such contracts provide that the
customer accept completion of progress to date and compensate
Quanta for services rendered, which may be measured in terms of
units installed, hours expended, costs incurred to date compared to
total estimated contract costs or some other measure of progress.
Contract costs include all direct materials, labor and subcontract
costs and those indirect costs related to contract performance,
such as indirect labor, supplies, tools, repairs and depreciation
costs. Much of the material associated with Quanta’s work is
owner-furnished and is therefore not included in contract revenues
and costs. The cost estimation process is based on professional
knowledge and experience of Quanta’s engineers, project
managers and financial professionals. Changes in job performance,
job conditions and final contract settlements are factors that
influence management’s assessment of total contract value and
the total estimated costs to complete those contracts and
therefore, Quanta’s profit recognition. 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. Overall, Quanta’s operating results for the
three months ended March 31, 2017 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,
2016. Included within the operating results for the three
months ended March 31, 2017 were losses from the natural gas
pipeline project discussed in more detail below, which were largely
offset by positive changes in estimates resulting from better than
expected performance on an unrelated natural gas pipeline project.
Quanta’s operating results for the three months ended
March 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; however; included in
those changes was the impact of a loss on a power plant project in
Alaska, which is further described below. As noted above, Quanta experienced weather delays
on a natural gas transmission project during the three months ended
March 31, 2017, that resulted in an increase of the estimated
total costs necessary to complete the project. During the three
months ended March 31, 2017, Quanta recognized losses on the
project of $16.5 million. Quanta is in the process of developing
potential claims; however, no revenues or cost recovery has been
reflected in Quanta’s estimate of total project losses at
March 31, 2017. At March 31, 2017, this project was
approximately 85% complete. As this project continues, it is
possible that additional delays or other unforeseen circumstances
could occur and result in the recognition of additional losses;
however, such amounts cannot currently be 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 three months ended March 31, 2016,
Quanta recognized project losses of $21.3 million. This project was
substantially completed during the fourth quarter of 2016. 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 March 31, 2017 and December 31,
2016, Quanta had recognized revenues of $147.1 million and
$137.8 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 March 31, 2017, the total amount of
unrecognized tax benefits relating to uncertain tax positions was
$36.4 million, an increase from December 31, 2016 of $1.2
million. This increase in unrecognized tax benefits resulted
primarily from tax positions to be taken for 2017. Although the
Internal Revenue Service completed its examination related to tax
years 2010, 2011 and 2012 during the year ended December 31,
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
$13.4 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 attributable to common
stock is computed using the weighted average number of common
shares outstanding during the period, and diluted earnings per
share attributable to common stock 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” 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 the projects Quanta has ongoing at
that time and the need for union resources in connection with those
projects. Therefore, Quanta is unable to accurately predict the
union employee payroll and the amount of the resulting
multiemployer pension plan contribution obligation for future
periods. |
| 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. Payments made by Quanta to satisfy
employees’ 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 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, RSU and
performance unit awards, see Note 9. |
| 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 exchange rates. The translation
of the balance sheet results in translation gains or losses, which
are included as a separate component of equity under the caption
“Accumulated other comprehensive income (loss).” Gains
and losses arising from transactions which are not denominated in
the operating units’ functional currencies are included
within other income (expense) in the statements of operations. |
| 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 10. |
| 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 March 31, 2017 and December 31, 2016, 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, patented rights and developed technology. Quanta
utilizes the fair value premise as the primary basis for its
valuation procedures, which is a market-based approach to determine
the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants. Quanta periodically engages the services of an
independent valuation firm when a new business is acquired to
assist management with this valuation process, including assistance
with the selection of appropriate valuation methodologies and the
development of market-based valuation assumptions. Based on these
considerations, management utilizes various valuation methods,
including an income approach, a market approach and a cost
approach, to determine the fair value of intangible assets acquired
based on the appropriateness of each method in relation to the type
of asset being valued. The assumptions used in these valuation
methods are analyzed and compared, where possible, to available
market data, such as industry-based weighted average costs of
capital and discount rates, trade name royalty rates, public
company valuation multiples and recent market acquisition
multiples. In accordance with its annual impairment test during the
quarter ended December 31, 2016, the carrying amounts of such
assets, including goodwill, were compared to their fair values. The
level of inputs used for these fair value measurements is the
lowest level (Level 3). Quanta uses the assistance of third party
specialists to develop valuation assumptions. Quanta believes that
these valuation methods appropriately represent the methods that
would be used by other market participants in determining fair
value. 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 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.
Quanta adopted this guidance effective January 1, 2017, and
the adoption of the update did not have a significant impact on
Quanta’s consolidated financial statements or related
disclosures. In March 2016, the FASB issued an update that
amends 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
requires 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 capital (APIC) within equity. This
update also requires excess tax benefits to be classified as an
operating activity on the statement of cash flows rather than
reclassified as a financing activity and requires cash paid by an
employer when withholding shares for taxes to be presented as a
financing activity. The update also allows companies to either
account for forfeitures of share-based payments as they occur or to
estimate forfeitures. This guidance is required to be applied
prospectively except for the requirement to classify cash paid when
withholding shares for the employee portion of taxes as a financing
activity, which requires retrospective application. Quanta adopted
this guidance effective January 1, 2017 and will continue to
estimate forfeitures of share-based payments. Quanta anticipates
increased volatility of income tax expense after adoption of this
guidance, and during the three months ended March 31, 2017
recorded an income tax benefit of $4.9 million related to the
settlement of share-based awards. APIC was not adjusted for amounts
recorded prior to 2017, and therefore Quanta’s retained
earnings were not affected by the adoption of this guidance as of
January 1, 2017. Additionally, $6.1 million was reclassified
from an operating activity to a financing activity on the statement
of cash flows for the three months ended March 31, 2016
associated with cash paid by Quanta to satisfy tax withholding
obligations for share-settled awards. In October 2016, the FASB issued an update that
amends 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. Quanta
adopted this guidance on January 1, 2017, and the adoption of
the update did not have a significant impact on its consolidated
financial statements or related disclosures.
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. Quanta
currently anticipates adopting the update using the modified
retrospective transition method, which may result in a
cumulative-effect adjustment recorded in retained earnings as of
the beginning of the period of adoption. 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. 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 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 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
(AFS) debt securities rather than reduce the carrying amounts. The
update will also require 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. Companies will apply this
standard’s provisions as a cumulative-effect adjustment to
retained earnings as of the beginning of the first reporting period
in which the guidance is effective. The new standard is effective
for interim and annual reporting periods beginning after
December 15, 2019, although early adoption is permitted for
annual reporting periods beginning after December 15, 2018.
Quanta is currently evaluating the potential impact of this
authoritative guidance on its consolidated financial statements and
will adopt this guidance by January 1, 2020. 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 effects of that
transaction are eliminated in consolidation. Any deferred tax asset
that arises in the buyer’s jurisdiction would also be
recognized at the time of the transfer. The new guidance will not
apply to intra-entity transfers of inventory. The income tax
consequences from the sale of inventory from one member of a
consolidated entity to another will continue to be deferred until
the inventory is sold to a third party. The new standard is
effective for interim and annual reporting periods beginning after
December 15, 2017, although early adoption is permitted. The
modified retrospective method will be required for transition to
the new guidance, with a cumulative-effect adjustment recorded in
retained earnings as of the beginning of the period of adoption.
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 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 goodwill
impairment test. The update will require an entity to perform its
annual, or interim, goodwill impairment test by comparing the fair
value of a reporting unit with its carrying amount. An entity will
recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value, if
applicable. Additionally, the update will eliminate the requirement
that a reporting unit with a zero or negative carrying amount
perform a qualitative assessment and the second step of the
two-step goodwill impairment test and will instead require
disclosure of the amount of goodwill allocated to each reporting
unit with a zero or negative carrying amount of net assets. This
update is effective for public entities for interim and annual
reporting periods beginning after December 15, 2019, although
early adoption is permitted for interim and annual goodwill
impairment tests performed on testing dates after January 1,
2017. 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,
2020. |
| Repurchase of Common Stock | During the third quarter of 2015, Quanta’s
board of directors approved a stock repurchase program that
authorized 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 were made in open market and privately
negotiated transactions, including pursuant to an accelerated share
repurchase arrangement and an issuer repurchase plan. 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. During the third quarter of 2015, Quanta also
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 $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 third quarter of 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 APIC during the
third quarter of 2015 and was reclassified from APIC to treasury
stock upon final settlement of the ASR on April 12, 2016. At
final settlement and based on the final volume-weighted average
share price during the term of the ASR, minus a discount and
subject to other adjustments pursuant to the terms and conditions
of the ASR, Quanta received 9.4 million additional shares of
its common stock from JPMorgan. The 2015 Repurchase Program ended
on February 28, 2017, and Quanta repurchased a total of
54.3 million shares of its common stock at a cost of $1.20
billion under the 2015 Repurchase Program. No common stock was
repurchased in the three months ended March 31, 2017 or 2016
under any repurchase programs. |
| 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 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
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. |
