(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to . | ||
Commission file no. 001-13831 |
Delaware | 74-2851603 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | x | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | o |
Emerging growth company | o | ||
Page | ||
September 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net of allowances of $6,662 and $4,465 | ||||||||
Contract assets | ||||||||
Inventories | ||||||||
Prepaid expenses and other current assets | ||||||||
Total current assets | ||||||||
Property and equipment, net of accumulated depreciation of $1,086,424 and $981,275 | ||||||||
Other assets, net | ||||||||
Other intangible assets, net of accumulated amortization of $364,023 and $335,507 | ||||||||
Goodwill | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities: | ||||||||
Current maturities of long-term debt and short-term debt | $ | $ | ||||||
Accounts payable and accrued expenses | ||||||||
Contract liabilities | ||||||||
Total current liabilities | ||||||||
Long-term debt and notes payable, net of current maturities | ||||||||
Deferred income taxes | ||||||||
Insurance and other non-current liabilities | ||||||||
Total liabilities | ||||||||
Commitments and Contingencies | ||||||||
Equity: | ||||||||
Common stock, $.00001 par value, 600,000,000 shares authorized, 157,280,496 and 155,219,154 shares issued, and 148,720,481 and 153,342,326 shares outstanding | ||||||||
Exchangeable shares, no par value, 486,112 shares issued and outstanding | ||||||||
Series G Preferred Stock, $.00001 par value, 1 share authorized, issued and outstanding | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Treasury stock, 8,560,015 and 1,876,828 common shares | ( | ) | ( | ) | ||||
Total stockholders’ equity | ||||||||
Non-controlling interests | ||||||||
Total equity | ||||||||
Total liabilities and equity | $ | $ | ||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues | $ | $ | $ | $ | ||||||||||||
Cost of services (including depreciation) | ||||||||||||||||
Gross profit | ||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||
Amortization of intangible assets | ||||||||||||||||
Change in fair value of contingent consideration liabilities | ( | ) | ( | ) | ||||||||||||
Operating income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Interest income | ||||||||||||||||
Other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income before income taxes | ||||||||||||||||
Provision for income taxes | ||||||||||||||||
Net income | ||||||||||||||||
Less: Net income attributable to non-controlling interests | ||||||||||||||||
Net income attributable to common stock | $ | $ | $ | $ | ||||||||||||
Earnings per share attributable to common stock: | ||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||
Diluted | $ | $ | $ | $ | ||||||||||||
Shares used in computing earnings per share: | ||||||||||||||||
Weighted average basic shares outstanding | ||||||||||||||||
Weighted average diluted shares outstanding | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Other comprehensive income (loss), net of tax provision: | ||||||||||||||||
Foreign currency translation adjustment, net of tax of $0, $0, $0 and $0 | ( | ) | ||||||||||||||
Other comprehensive income (loss) | ( | ) | ||||||||||||||
Comprehensive income | ||||||||||||||||
Less: Comprehensive income attributable to non-controlling interests | ||||||||||||||||
Total comprehensive income attributable to Quanta stockholders | $ | $ | $ | $ | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities— | ||||||||||||||||
Depreciation | ||||||||||||||||
Amortization of intangible assets | ||||||||||||||||
Change in fair value of contingent consideration liabilities | ( | ) | ( | ) | ||||||||||||
Equity in losses of unconsolidated affiliates | ||||||||||||||||
Amortization of debt issuance costs | ||||||||||||||||
(Gain) loss on sale of property and equipment | ( | ) | ( | ) | ( | ) | ||||||||||
Foreign currency (gain) loss | ( | ) | ( | ) | ||||||||||||
Provision for doubtful accounts | ||||||||||||||||
Deferred income tax (benefit) provision | ( | ) | ( | ) | ||||||||||||
Non-cash stock-based compensation | ||||||||||||||||
Changes in operating assets and liabilities, net of non-cash transactions | ( | ) | ( | ) | ( | ) | ||||||||||
Net cash provided by operating activities | ||||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Proceeds from sale of property and equipment | ||||||||||||||||
Proceeds from insurance settlements related to property and equipment | ||||||||||||||||
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Investments in unconsolidated affiliates | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Cash received from (paid for) other investments, net | ( | ) | ( | ) | ( | ) | ||||||||||
Cash paid for intangible assets | ( | ) | ||||||||||||||
Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Borrowings under credit facility | ||||||||||||||||
Payments under credit facility | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Payments on other long-term debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net borrowings (repayments) of short-term debt | ( | ) | ||||||||||||||
Distributions to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Payments related to tax withholding for share-based compensation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Exercise of stock options | ||||||||||||||||
Repurchase of common stock | ( | ) | ( | ) | ||||||||||||
Net cash provided by financing activities | ||||||||||||||||
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | ( | ) | ||||||||||||||
Net decrease in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Cash, cash equivalents and restricted cash, beginning of period | ||||||||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | $ | $ | ||||||||||||
1. |
2018 | 2017 | |||
Discount rates | 20% to 27% | 17% to 25% | ||
Customer attrition rates | 20% to 33% | 15% to 78% | ||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2018 | September 30, 2018 | |||||||
By primary geographic location: | ||||||||
United States | $ | $ | ||||||
Canada | ||||||||
Australia | ||||||||
Latin America and Other | ||||||||
Total revenues | $ | $ | ||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2018 | September 30, 2018 | |||||||
By contract type: | ||||||||
Unit-price contracts | $ | $ | ||||||
Fixed price contracts | ||||||||
Cost-plus contracts | ||||||||
Total revenues | $ | $ | ||||||
September 30, 2018 | December 31, 2017 | |||||||
Contract assets | $ | $ | ||||||
Contract liabilities | $ | $ | ||||||
4. |
2018 | 2017 | |||||||||||
All Acquisitions | Stronghold | Other Acquisitions | ||||||||||
Consideration: | ||||||||||||
Cash paid or payable | $ | $ | $ | |||||||||
Value of Quanta common stock issued | ||||||||||||
Contingent consideration | ||||||||||||
Fair value of total consideration transferred or estimated to be transferred | $ | $ | $ | |||||||||
Accounts receivable | $ | $ | $ | |||||||||
Contract assets | ||||||||||||
Other current assets | ||||||||||||
Property and equipment | ||||||||||||
Other assets | ||||||||||||
Identifiable intangible assets | ||||||||||||
Contract liabilities | ( | ) | ( | ) | ( | ) | ||||||
Other current liabilities | ( | ) | ( | ) | ( | ) | ||||||
Deferred tax liabilities, net | ( | ) | ||||||||||
Other long-term liabilities | ( | ) | ||||||||||
Total identifiable net assets | ||||||||||||
Goodwill | ||||||||||||
$ | $ | $ | ||||||||||
Estimated Fair Value | Weighted Average Amortization Period in Years | |||||
Customer relationships | $ | |||||
Backlog | ||||||
Trade names | ||||||
Non-compete agreements | ||||||
Curriculum | ||||||
Total intangible assets subject to amortization acquired in 2018 acquisitions | $ | |||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues | $ | $ | $ | $ | ||||||||||||
Gross profit | $ | $ | $ | $ | ||||||||||||
Selling, general and administrative expenses | $ | $ | $ | $ | ||||||||||||
Amortization of intangible assets | $ | $ | $ | $ | ||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Net income attributable to common stock | $ | $ | $ | $ | ||||||||||||
Earnings per share attributable to common stock: | ||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||
Diluted | $ | $ | $ | $ | ||||||||||||
Electric Power Infrastructure Services Division | Oil and Gas Infrastructure Services Division | Total | ||||||||||
Balance at December 31, 2017: | ||||||||||||
Goodwill | $ | $ | $ | |||||||||
Accumulated impairment | ( | ) | ( | ) | ||||||||
Goodwill recorded related to 2018 acquisitions | ||||||||||||
Purchase price allocation adjustments | ||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||
Balance at September 30, 2018: | ||||||||||||
Goodwill | ||||||||||||
Accumulated impairment | ||||||||||||
$ | $ | $ | ||||||||||
As of | As of | As of | ||||||||||||||||||||||||
September 30, 2018 | December 31, 2017 | September 30, 2018 | ||||||||||||||||||||||||
Intangible Assets | Accumulated Amortization | Intangible Assets, Net | Intangible Assets | Accumulated Amortization | Intangible Assets, Net | Remaining Weighted Average Amortization Period in Years | ||||||||||||||||||||
Customer relationships | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Backlog | ( | ) | ( | ) | ||||||||||||||||||||||
Trade names | ( | ) | ( | ) | ||||||||||||||||||||||
Non-compete agreements | ( | ) | ( | ) | ||||||||||||||||||||||
Patented rights and developed technology | ( | ) | ( | ) | ||||||||||||||||||||||
Curriculum | ( | ) | ||||||||||||||||||||||||
Total intangible assets subject to amortization | ( | ) | ( | ) | ||||||||||||||||||||||
Engineering license | — | — | ||||||||||||||||||||||||
Total intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||
For the Fiscal Year Ending December 31, | ||||
Remainder of 2018 | $ | |||
2019 | ||||
2020 | ||||
2021 | ||||
2022 | ||||
Thereafter | ||||
Total | $ | |||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Amounts attributable to common stock: | ||||||||||||||||
Net income attributable to common stock | $ | $ | $ | $ | ||||||||||||
Weighted average shares: | ||||||||||||||||
Weighted average shares outstanding for basic earnings per share attributable to common stock | ||||||||||||||||
Effect of dilutive unvested non-participating stock-based awards | ||||||||||||||||
Weighted average shares outstanding for diluted earnings per share attributable to common stock | ||||||||||||||||
September 30, 2018 | December 31, 2017 | |||||||
Borrowings under senior secured credit facility | $ | $ | ||||||
Other long-term debt, interest rate of 2.4% | ||||||||
Capital leases, interest rates ranging from 2.5% to 3.8% | ||||||||
Total long-term debt obligations | ||||||||
Less — Current maturities of long-term debt | ||||||||
Total long-term debt obligations, net of current maturities | $ | $ | ||||||
September 30, 2018 | December 31, 2017 | |||||||
Short-term debt | $ | $ | ||||||
Current maturities of long-term debt | ||||||||
Current maturities of long-term debt and short-term debt | $ | $ | ||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Maximum amount outstanding under the credit facility during the period | $ | $ | $ | $ | ||||||||||||
Average daily amount outstanding under the credit facility | $ | $ | $ | $ | ||||||||||||
Weighted-average interest rate | % | % | % | % | ||||||||||||
2018 | 2017 | |||||
Valuation date stock price based on the February 28, 2018 and March 22, 2017 closing stock prices | $ | $ | ||||
Expected volatility | % | % | ||||
Risk-free interest rate | % | % | ||||
Term in years | ||||||
Operating Leases | ||||
Year Ending December 31 — | ||||
Remainder of 2018 | $ | |||
2019 | ||||
2020 | ||||
2021 | ||||
2022 | ||||
Thereafter | ||||
Total minimum lease payments | $ | |||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Electric Power Infrastructure Services | $ | $ | $ | $ | ||||||||||||
Oil and Gas Infrastructure Services | ||||||||||||||||
Consolidated | $ | $ | $ | $ | ||||||||||||
Operating income (loss): | ||||||||||||||||
Electric Power Infrastructure Services | $ | $ | $ | $ | ||||||||||||
Oil and Gas Infrastructure Services | ||||||||||||||||
Corporate and non-allocated costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Consolidated | $ | $ | $ | $ | ||||||||||||
Depreciation: | ||||||||||||||||
Electric Power Infrastructure Services | $ | $ | $ | $ | ||||||||||||
Oil and Gas Infrastructure Services | ||||||||||||||||
Corporate and non-allocated costs | ||||||||||||||||
Consolidated | $ | $ | $ | $ | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Accounts and notes receivable | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Contract assets | ( | ) | ( | ) | ( | ) | ||||||||||
Inventories | ( | ) | ( | ) | ||||||||||||
Prepaid expenses and other current assets | ( | ) | ( | ) | ||||||||||||
Accounts payable and accrued expenses and other non-current liabilities | ||||||||||||||||
Contract liabilities | ( | ) | ||||||||||||||
Other, net | ( | ) | ( | ) | ( | ) | ||||||||||
Net change in operating assets and liabilities, net of non-cash transactions | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
September 30, | ||||||||
2018 | 2017 | |||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash included in “Prepaid expenses and other current assets” | ||||||||
Restricted cash included in “Other assets, net” | ||||||||
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows | $ | $ | ||||||
June 30, | ||||||||
2018 | 2017 | |||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash included in “Prepaid expenses and other current assets” | ||||||||
Restricted cash included in “Other assets, net” | ||||||||
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows | $ | $ | ||||||
December 31, | ||||||||
2017 | 2016 | |||||||
Cash and cash equivalents | $ | |||||||
Restricted cash included in “Prepaid expenses and other current assets” | ||||||||
Restricted cash included in “Other assets, net” | ||||||||
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows | $ | $ | ||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Cash (paid) received during the period for — | ||||||||||||||||
Interest paid | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Income taxes paid | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Income tax refunds | $ | $ | $ | $ | ||||||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
September 30, 2018 | ||||||||
12 Month | Total | |||||||
Electric Power Infrastructure Services | ||||||||
Remaining performance obligations | $ | 2,099,072 | $ | 3,074,140 | ||||
Estimated orders under MSAs and short-term, non-fixed price contracts | 2,129,050 | 4,842,752 | ||||||
Backlog | 4,228,122 | 7,916,892 | ||||||
Oil and Gas Infrastructure Services | ||||||||
Remaining performance obligations | 2,034,165 | 2,217,898 | ||||||
Estimated orders under MSAs and short-term, non-fixed price contracts | 1,221,918 | 2,080,157 | ||||||
Backlog | 3,256,083 | 4,298,055 | ||||||
Total | ||||||||
Remaining performance obligations | 4,133,237 | 5,292,038 | ||||||
Estimated orders under MSAs and short-term, non-fixed price contracts | 3,350,968 | 6,922,909 | ||||||
Backlog | $ | 7,484,205 | $ | 12,214,947 | ||||
Backlog as of | Backlog as of | |||||||||||||||
September 30, 2018 | December 31, 2017 | |||||||||||||||
12 Month | Total | 12 Month | Total | |||||||||||||
Electric Power Infrastructure Services | $ | 4,228,122 | $ | 7,916,892 | $ | 4,032,379 | $ | 7,359,237 | ||||||||
Oil and Gas Infrastructure Services | 3,256,083 | 4,298,055 | 2,413,817 | 3,818,470 | ||||||||||||
Total backlog | $ | 7,484,205 | $ | 12,214,947 | $ | 6,446,196 | $ | 11,177,707 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||
Revenues | $ | 2,985,281 | 100.0 | % | $ | 2,609,307 | 100.0 | % | $ | 8,059,205 | 100.0 | % | $ | 6,987,851 | 100.0 | % | ||||||||||||
Cost of services (including depreciation) | 2,559,451 | 85.7 | 2,258,676 | 86.6 | 6,998,956 | 86.8 | 6,068,867 | 86.8 | ||||||||||||||||||||
Gross profit | 425,830 | 14.3 | 350,631 | 13.4 | 1,060,249 | 13.2 | 918,984 | 13.2 | ||||||||||||||||||||
Selling, general and administrative expenses | 224,040 | 7.5 | 201,224 | 7.7 | 645,566 | 8.0 | 571,656 | 8.2 | ||||||||||||||||||||
Amortization of intangible assets | 10,623 | 0.3 | 8,979 | 0.3 | 31,535 | 0.5 | 22,035 | 0.3 | ||||||||||||||||||||
Change in fair value of contingent consideration liabilities | (1,394 | ) | — | — | — | (7,673 | ) | (0.1 | ) | — | — | |||||||||||||||||
Operating income | 192,561 | 6.5 | 140,428 | 5.4 | 390,821 | 4.8 | 325,293 | 4.7 | ||||||||||||||||||||
Interest expense | (9,219 | ) | (0.4 | ) | (6,058 | ) | (0.2 | ) | (25,175 | ) | (0.2 | ) | (14,294 | ) | (0.2 | ) | ||||||||||||
Interest income | 322 | — | 196 | — | 1,128 | — | 647 | — | ||||||||||||||||||||
Other income (expense), net | (15,498 | ) | (0.5 | ) | (2,371 | ) | (0.1 | ) | (37,899 | ) | (0.5 | ) | (3,814 | ) | (0.1 | ) | ||||||||||||
Income before income taxes | 168,166 | 5.6 | 132,195 | 5.1 | 328,875 | 4.1 | 307,832 | 4.4 | ||||||||||||||||||||
Provision for income taxes | 43,267 | 1.4 | 42,346 | 1.7 | 90,659 | 1.1 | 105,183 | 1.5 | ||||||||||||||||||||
Net income | 124,899 | 4.2 | 89,849 | 3.4 | 238,216 | 3.0 | 202,649 | 2.9 | ||||||||||||||||||||
Less: Net income attributable to non-controlling interests | 348 | — | 536 | — | 1,686 | 0.1 | 1,232 | — | ||||||||||||||||||||
Net income attributable to common stock | $ | 124,551 | 4.2 | % | $ | 89,313 | 3.4 | % | $ | 236,530 | 2.9 | % | $ | 201,417 | 2.9 | % | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Electric Power Infrastructure Services | $ | 1,617,736 | 54.2 | % | $ | 1,504,752 | 57.7 | % | $ | 4,756,416 | 59.0 | % | $ | 4,024,983 | 57.6 | % | ||||||||||||
Oil and Gas Infrastructure Services | 1,367,545 | 45.8 | 1,104,555 | 42.3 | 3,302,789 | 41.0 | 2,962,868 | 42.4 | ||||||||||||||||||||
Consolidated revenues from external customers | $ | 2,985,281 | 100.0 | % | $ | 2,609,307 | 100.0 | % | $ | 8,059,205 | 100.0 | % | $ | 6,987,851 | 100.0 | % | ||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||
Electric Power Infrastructure Services | $ | 179,181 | 11.1 | % | $ | 150,054 | 10.0 | % | $ | 466,087 | 9.8 | % | $ | 362,769 | 9.0 | % | ||||||||||||
Oil and Gas Infrastructure Services | 96,067 | 7.0 | 58,508 | 5.3 | 149,953 | 4.5 | % | 165,076 | 5.6 | |||||||||||||||||||
Corporate and non-allocated costs | (82,687 | ) | N/A | (68,134 | ) | N/A | (225,219 | ) | N/A | (202,552 | ) | N/A | ||||||||||||||||
Consolidated operating income | $ | 192,561 | 6.5 | % | $ | 140,428 | 5.4 | % | $ | 390,821 | 4.8 | % | $ | 325,293 | 4.7 | % | ||||||||||||
Total | Remainder of 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | ||||||||||||||||||||||
Long-term debt - principal (1) | $ | 954,165 | $ | 39 | $ | 1,609 | $ | — | $ | — | $ | 952,517 | $ | — | ||||||||||||||
Long-term debt - cash interest (2) | 16 | 10 | 6 | — | — | — | — | |||||||||||||||||||||
Short-term debt (3) | 20,344 | 20,344 | — | — | — | — | — | |||||||||||||||||||||
Operating lease obligations | 342,440 | 36,728 | 108,640 | 73,024 | 48,174 | 28,395 | 47,479 | |||||||||||||||||||||
Capital lease obligations (4) | 1,188 | 203 | 752 | 118 | 115 | — | — | |||||||||||||||||||||
Equipment purchase commitments | 31,541 | 30,209 | 1,332 | — | — | — | — | |||||||||||||||||||||
Capital commitment related to investments in unconsolidated affiliates | 38,539 | 14,003 | 24,536 | — | — | — | — | |||||||||||||||||||||
Total | $ | 1,388,233 | $ | 101,536 | $ | 136,875 | $ | 73,142 | $ | 48,289 | $ | 980,912 | $ | 47,479 | ||||||||||||||
(1) | Amounts were recorded in our September 30, 2018 condensed consolidated balance sheet and included $952.5 million of outstanding revolving loans under our senior secured credit facility, which bear interest at variable market rates. Assuming the principal amount outstanding at September 30, 2018 remained outstanding and the interest rate in effect at September 30, 2018 remained the same, the annual cash interest expense with respect to our senior secured credit facility would be approximately $35.4 million, payable for the remainder of the term of such credit facility, which matures in October 2022. Additionally, as of October 10, 2018, the effective date of the amendment to our senior secured credit facility, there were $992.5 million of outstanding borrowings under the credit agreement, which included $600.0 million borrowed under the new term loan facility and $392.5 million of outstanding revolving loans, all of which bear interest at variable market rates. Assuming the principal amount outstanding at October 10, 2018 remained outstanding and the interest rate in effect at October 10, 2018 remained the same, the annual cash interest expense with respect to our senior secured credit facility would be approximately $36.0 million, payable for the remainder of the term of such credit facility, which matures in October 2022. In addition, we are required to make quarterly amortization payments on the term borrowings of $7.5 million, which are due on the last business day of each March, June, September and December, beginning in December 2018. Such amortization payments are not included in the table above since they were not contractual obligations as of September 30, 2018. |
(2) | Amounts relate to cash interest expense on our fixed-rate long-term debt, which excludes our senior secured credit facility. |
(3) | Amounts were recorded in our September 30, 2018 condensed consolidated balance sheet. |
(4) | Principal amounts of capital lease obligations were recorded in our September 30, 2018 condensed consolidated balance sheet. |
• | Projected revenues, net income, earnings per share, margins, weighted average shares outstanding, capital expenditures, tax rates and other projections of operating or financial results; |
• | Expectations regarding our business or financial outlook, growth, trends or opportunities in particular markets; |
• | The expected value of contracts or intended contracts with customers; |
• | Future capital allocation initiatives; |
• | The scope, services, term and results of any projects awarded or expected to be awarded for services to be provided by us; |
• | The development of larger electric transmission and oil and natural gas pipeline projects and the level of oil, natural gas and natural gas liquids prices and their impact on our business or demand for our services; |
• | The impact of existing or potential legislation or regulation, including the Tax Act; |
• | Potential opportunities that may be indicated by bidding activity or similar discussions with customers; |
• | The future demand for and availability of labor resources in the industries we serve; |
• | The expected realization of performance obligations or backlog; |
• | The potential benefits from investments or acquisitions; |
• | The expected outcome of pending or threatened litigation; |
• | Beliefs and assumptions about the collectability of receivables; |
• | The business plans or financial condition of our customers; |
• | Our plans and strategies; |
• | Possible recovery on pending or contemplated change orders or other claims against customers or third parties; and |
• | The current economic and regulatory conditions and trends in the industries we serve. |
• | Market conditions; |
• | The effects of industry, economic, financial or political conditions outside our control, including weakness in the capital markets; |
• | Quarterly variations in our operating results; |
• | Trends and growth opportunities in relevant markets; |
• | Delays, reductions in scope or cancellations of anticipated, pending or existing projects, including as a result of weather, regulatory or permitting issues, environmental processes, project performance issues, claimed force majeure events, protests or other political activity, legal challenges or our customers’ capital constraints; |
• | The successful negotiation, execution, performance and completion of anticipated, pending and existing contracts, including the ability to obtain future project awards; |
• | Our dependence on suppliers, subcontractors, equipment manufacturers and other third-party contractors; |
• | Our ability to attract and the potential shortage of skilled employees and our ability to retain key personnel and qualified employees; |
• | Our dependence on fixed price contracts and the potential to incur losses with respect to these contracts; |
• | Estimates relating to revenue recognition; |
• | Adverse weather conditions or events; |
• | Our ability to generate internal growth; |
• | Competition in our business, including our ability to effectively compete for new projects and market share; |
• | The effect of natural gas, natural gas liquids and oil prices on our operations and growth opportunities and on our customers’ capital programs and demand for our services; |
• | The future development of natural resources; |
• | The failure of existing or potential legislative actions and initiatives to result in demand for our services; |
• | Fluctuations of prices of certain materials used in our business, including any increase in prices as a result of the imposition of tariffs on such materials; |
• | Unexpected costs or liabilities that may arise from pending or threatened litigation, indemnity obligations or other claims or actions asserted against us, including liabilities, costs, fines or penalties for which we are not covered by third-party insurance; |
• | The outcome of pending or threatened litigation; |
• | Risks relating to the potential unavailability or cancellation of third-party insurance, the exclusion of coverage for certain losses, and potential increases in premiums for coverage deemed beneficial to us; |
• | Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are replaced on less favorable terms; |
• | Loss of customers with whom we have long-standing or significant relationships; |
• | The potential that participation in joint ventures or similar structures exposes us to liability and/or harm to our reputation for acts or omissions by our partners; |
• | Our inability or failure to comply with the terms of our contracts, which may result in additional costs, unexcused delays, warranty claims, failure to meet performance guarantees, damages or contract terminations; |
• | The inability or refusal of our customers to pay for services, including failure to collect our outstanding receivables; |
• | The failure to recover on payment claims against project owners or third-party contractors or to obtain adequate compensation for customer-requested change orders; |
• | The failure of our customers to comply with regulatory requirements applicable to their projects, which may result in project delays and cancellations; |
• | Budgetary or other constraints that may reduce or eliminate tax incentives or government funding for projects, which may result in project delays or cancellations; |
• | Estimates and assumptions in determining our financial results, remaining performance obligations and backlog; |
• | Our ability to successfully complete our performance obligations or realize our backlog; |
• | Risks associated with operating in international markets, including instability of foreign governments, currency fluctuations, tax and investment strategies, as well as compliance with foreign legal systems and cultural practices, the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws; |
• | Our ability to successfully identify, complete, integrate and realize synergies from acquisitions; |
• | The potential adverse impact resulting from uncertainty surrounding acquisitions and investments, including the ability to retain key personnel from acquired businesses, the potential increase in risks already existing in our operations and poor performance or decline in value of our investments in infrastructure assets; |
• | The adverse impact of impairments of goodwill, other intangible assets, receivables, long-lived assets or investments; |
• | Our growth outpacing our decentralized management and infrastructure; |
• | Requirements relating to governmental regulation and changes thereto; |
• | Inability to enforce our intellectual property rights or the obsolescence of such rights; |
• | Risks related to the implementation of new information technology solutions; |
• | The impact of our unionized workforce on our operations, including labor stoppages or interruptions due to strikes or lockouts; |
• | Potential liabilities and other adverse effects arising from cybersecurity, environmental and occupational health and safety matters; |
• | The cost of borrowing, availability of cash and credit, fluctuations in the price and volume of our common stock, debt covenant compliance, interest rate fluctuations and other factors affecting our financing and investing activities; |
• | The ability to access sufficient funding to finance desired growth and operations; |
• | Our ability to obtain performance bonds; |
• | Our ability to meet the regulatory requirements applicable to us and our subsidiaries, including the Sarbanes-Oxley Act of 2002; |
• | Rapid technological and other structural changes that could reduce the demand for our services; |
• | New or changed tax laws, treaties or regulations; |
• | Legislative or regulatory changes that result in increased costs, including with respect to labor and healthcare costs; |
• | Significant fluctuations in foreign currency exchange rates; and |
• | The other risks and uncertainties described elsewhere herein and in Item 1A. Risk Factors of Part I of our 2017 Annual Report and as may be detailed from time to time in our other public filings with the SEC. |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk. |
Item 4. | Controls and Procedures. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs(1) | ||||||||||
July 1-31, 2018 | ||||||||||||||
Open Market Stock Repurchases (1) | 298,417 | $ | 33.53 | 298,417 | $ | 46,086,742 | ||||||||
Tax Withholdings (2) | 7,830 | $ | 33.40 | — | ||||||||||
August 1-31, 2018 | ||||||||||||||
Open Market Stock Repurchases(1) | — | $ | — | — | $ | 46,086,742 | ||||||||
Tax Withholdings (2) | 5,671 | $ | 33.99 | — | ||||||||||
September 1-30, 2018 | ||||||||||||||
Open Market Stock Repurchases(1) | 402,211 | $ | 34.17 | 402,211 | $ | 532,342,135 | ||||||||
Total | 714,129 | 700,628 | $ | 532,342,135 | ||||||||||
(1) | Includes shares repurchased as of the trade date of such repurchases. On May 25, 2017, we issued a press release announcing that our board of directors approved a stock repurchase program that authorized us to purchase, from time to time through June 30, 2020, up to $300.0 million of our outstanding common stock (the 2017 Repurchase Program). Additionally, on September 4, 2018, we issued a press release announcing that our board of directors approved a stock repurchase program that authorizes us to purchase, from time to time through June 30, 2021, up to $500.0 million of our outstanding common stock (the 2018 Repurchase Program). Repurchases under these programs can be made in open market and privately negotiated transactions, at our discretion, based on market and business conditions, applicable contractual and legal requirements and other factors. These programs do not obligate us to acquire any specific amount of common stock and may be modified or terminated by our board of directors at any time at its sole discretion and without notice. As of September 30, 2018, we had repurchased 7.6 million shares of our common stock under the 2017 Repurchase Program at a cost of $267.7 million, and therefore $500.0 million remained under the 2018 Repurchase Program and $32.3 million remained authorized for repurchase under the 2017 Repurchase Program. During October 2018, we repurchased an additional 2.7 million shares of our common stock in the open market at a cost of $86.3 million under these programs and completed the 2017 Repurchase Program. |
(2) | Includes shares purchased from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock unit and performance unit awards or the settlement of previously vested but deferred restricted stock unit awards. |
Item 6. | Exhibits. |
Exhibit No. | Description | |||
3.1 | ||||
3.2 | ||||
3.3 | ||||
10.1 | ||||
10.2 | ||||
31.1 | * | |||
31.2 | * | |||
32.1 | * | |||
101.INS | * | XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||
101.SCH | * | XBRL Taxonomy Extension Schema Document | ||
101.CAL | * | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.LAB | * | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | * | XBRL Taxonomy Extension Presentation Linkbase Document | ||
101.DEF | * | XBRL Taxonomy Extension Definition Linkbase Document | ||
* | Filed or furnished herewith |
By: | /s/ JERRY K. LEMON | |
Jerry K. Lemon Chief Accounting Officer | ||
(Principal Accounting Officer) | ||
Dated: November 7, 2018 | By: | /s/ EARL C. AUSTIN, JR. | |
Earl C. Austin, Jr. | |||
President, Chief Executive Officer and Chief Operating Officer | |||
(Principal Executive Officer) | |||
Dated: November 7, 2018 | By: | /s/ DERRICK A. JENSEN | |
Derrick A. Jensen | |||
Chief Financial Officer | |||
(Principal Financial Officer) | |||
/s/ EARL C. AUSTIN, JR. | ||
Earl C. Austin, Jr. | ||
President, Chief Executive Officer and Chief Operating Officer | ||
/s/ DERRICK A. JENSEN | ||
Derrick A. Jensen | ||
Chief Financial Officer | ||
Document and Entity Information - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2018 |
Nov. 01, 2018 |
|
| Document Information [Line Items] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Sep. 30, 2018 | |
| Document Fiscal Year Focus | 2018 | |
| Document Fiscal Period Focus | Q3 | |
| Trading Symbol | PWR | |
| Entity Registrant Name | QUANTA SERVICES INC | |
| Entity Central Index Key | 0001050915 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Emerging Growth Company | false | |
| Entity Small Business | false | |
| Common Stock | ||
| Document Information [Line Items] | ||
| Entity Common Stock, Shares Outstanding | 146,030,722 | |
| Exchangeable Shares Associated with Series G Preferred Stock | ||
| Document Information [Line Items] | ||
| Entity Common Stock, Shares Outstanding | 449,929 | |
| Exchangeable Shares Not Associated with Preferred Stock | ||
| Document Information [Line Items] | ||
| Entity Common Stock, Shares Outstanding | 36,183 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 2,985,281 | $ 2,609,307 | $ 8,059,205 | $ 6,987,851 |
| Cost of services (including depreciation) | 2,559,451 | 2,258,676 | 6,998,956 | 6,068,867 |
| Gross profit | 425,830 | 350,631 | 1,060,249 | 918,984 |
| Selling, general and administrative expenses | 224,040 | 201,224 | 645,566 | 571,656 |
| Amortization of intangible assets | 10,623 | 8,979 | 31,535 | 22,035 |
| Change in fair value of contingent consideration liabilities | (1,394) | 0 | (7,673) | 0 |
| Operating income | 192,561 | 140,428 | 390,821 | 325,293 |
| Interest expense | (9,219) | (6,058) | (25,175) | (14,294) |
| Interest income | 322 | 196 | 1,128 | 647 |
| Other income (expense), net | (15,498) | (2,371) | (37,899) | (3,814) |
| Income before income taxes | 168,166 | 132,195 | 328,875 | 307,832 |
| Provision for income taxes | 43,267 | 42,346 | 90,659 | 105,183 |
| Net income | 124,899 | 89,849 | 238,216 | 202,649 |
| Less: Net income attributable to non-controlling interests | 348 | 536 | 1,686 | 1,232 |
| Net income attributable to common stock | $ 124,551 | $ 89,313 | $ 236,530 | $ 201,417 |
| Earnings per share attributable to common stock: | ||||
| Basic (in dollars per share) | $ 0.82 | $ 0.57 | $ 1.54 | $ 1.29 |
| Diluted (in dollars per share) | $ 0.81 | $ 0.56 | $ 1.52 | $ 1.28 |
| Shares used in computing earnings per share: | ||||
| Weighted average basic shares outstanding (in shares) | 152,562 | 157,484 | 154,087 | 155,796 |
| Weighted average diluted shares outstanding (in shares) | 153,687 | 158,620 | 155,198 | 156,793 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Net income | $ 124,899 | $ 89,849 | $ 238,216 | $ 202,649 |
| Other comprehensive income (loss), net of tax provision: | ||||
| Foreign currency translation adjustment, net of tax of $0, $0, $0 and $0 | 10,838 | 38,980 | (34,299) | 79,486 |
| Other comprehensive income (loss) | 10,838 | 38,980 | (34,299) | 79,486 |
| Comprehensive income | 135,737 | 128,829 | 203,917 | 282,135 |
| Less: Comprehensive income attributable to non-controlling interests | 348 | 536 | 1,686 | 1,232 |
| Total comprehensive income attributable to Quanta stockholders | $ 135,389 | $ 128,293 | $ 202,231 | $ 280,903 |
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Foreign currency translation adjustment, tax | $ 0 | $ 0 | $ 0 | $ 0 |
Business and Organization |
9 Months Ended |
|---|---|
Sep. 30, 2018 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Business and Organization | BUSINESS AND ORGANIZATION: Quanta Services, Inc. (Quanta) is a leading provider of specialty contracting services, offering infrastructure solutions primarily to the electric power, oil and gas and communication industries in the United States, Canada, Australia, Latin America and select other international markets. Quanta reports its results under two reportable segments: (1) Electric Power Infrastructure Services and (2) Oil and Gas Infrastructure Services. Electric Power Infrastructure Services Segment The Electric Power Infrastructure Services segment provides comprehensive network solutions to customers in the electric power industry. Services performed by the Electric Power Infrastructure Services segment generally include the design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities along with other engineering and technical services. This segment also provides emergency restoration services, including the repair of infrastructure damaged by inclement weather, the energized installation, maintenance and upgrade of electric power infrastructure utilizing unique bare hand and hot stick methods and Quanta’s proprietary robotic arm technologies, and the installation of “smart grid” technologies on electric power networks. In addition, this segment designs, installs and maintains renewable energy generation facilities, consisting of solar, wind and certain types of natural gas generation facilities, and related switchyards and transmission infrastructure. To a lesser extent, the segment also provides comprehensive communications infrastructure services to wireline, fiber and wireless carrier customers within the communications industry; services in connection with the construction of electric power generation facilities; the design, installation, maintenance and repair of commercial and industrial wiring; and the installation of traffic networks and cable and control systems for light rail lines. This segment also includes Quanta’s postsecondary educational institution that provides pre-apprenticeship training and programs for experienced linemen. Oil and Gas Infrastructure Services Segment The Oil and Gas Infrastructure Services segment provides comprehensive network solutions to customers involved in the development, transportation, storage and processing of natural gas, oil and other pipeline products. Services performed by the Oil and Gas Infrastructure Services segment generally include the design, installation, repair and maintenance of pipeline transmission and distribution systems, gathering systems, production systems, storage systems and compressor and pump stations, as well as related trenching, directional boring and mechanized welding services. In addition, this segment’s services include pipeline protection, integrity testing, rehabilitation and replacement, and fabrication of pipeline support systems and related structures and facilities. Quanta also serves the offshore and inland water energy markets, primarily providing services to oil and gas exploration platforms, including mechanical installation (or “hook-ups”), electrical and instrumentation, pre-commissioning and commissioning, coatings, shallow water pipeline installation, fabrication and marine asset repair. Additionally, Quanta provides high-pressure and critical-path turnaround services to the downstream and midstream energy markets and instrumentation and electrical services, piping, fabrication and storage tank services. To a lesser extent, this segment designs, installs and maintains fueling systems, as well as water and sewer infrastructure. Acquisitions During the nine months ended September 30, 2018, Quanta acquired an electrical infrastructure services business specializing in substation construction and relay services, a postsecondary educational institution that provides pre-apprenticeship training and programs for experienced linemen and two communications infrastructure services businesses, all of which are located in the United States. The results of the acquired businesses have generally been included in Quanta’s Electric Power Infrastructure Services segment and consolidated financial statements beginning on the acquisition dates. On July 20, 2017, Quanta acquired Stronghold, Ltd. and Stronghold Specialty, Ltd. (collectively Stronghold), a specialized services business located in the United States that provides high-pressure and critical-path solutions to the downstream and midstream energy markets. The results of the acquired business are generally included in Quanta’s Oil and Gas Infrastructure Services segment and have been included in Quanta’s consolidated financial statements beginning on the acquisition date. During the year ended December 31, 2017, Quanta also acquired a communications infrastructure services contractor and an electrical and communications contractor, both of which are located in the United States. The results of these acquired businesses are generally included in Quanta’s Electric Power Infrastructure Services segment and have been included in Quanta’s consolidated financial statements beginning on the respective acquisition dates.
|
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The condensed consolidated financial statements of Quanta include the accounts of Quanta Services, Inc. and its wholly owned subsidiaries, which are also referred to as its operating units. The condensed consolidated financial statements also include the accounts of certain of Quanta’s investments in joint ventures, which are either consolidated or proportionately consolidated, as discussed in the following summary of significant accounting policies. 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 These unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (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 consolidated subsidiaries included in Quanta’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 28, 2018. Reclassifications Quanta reclassified certain prior period amounts related to restricted cash and proceeds from the settlement of insurance claims related to property and equipment in the accompanying condensed consolidated statements of cash flows to conform to the current period presentation under recently adopted accounting updates. See Note 3 for further details regarding these updates. Certain reclassifications have also been made to Quanta’s condensed consolidated statements of operations for 2017 to conform to classifications for 2018. Additionally, the amounts previously reported as “Costs and estimated earnings in excess of billings on uncompleted contracts” and “Billings in excess of costs and estimated earnings on uncompleted contracts” on Quanta’s condensed consolidated balance sheets have been included in the newly titled “Contract assets” and “Contract liabilities” in accordance with the newly adopted revenue recognition guidance discussed below and in Note 3. 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, acquisition-related contingent consideration liabilities, liabilities for insurance and other claims and guarantees, multiemployer pension plan withdrawal liabilities, contingent 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 Quanta had cash and cash equivalents of $113.5 million and $138.3 million as of September 30, 2018 and December 31, 2017. 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 September 30, 2018 and December 31, 2017, cash equivalents were $55.2 million and $7.1 million, and consisted primarily of money market investments and money market mutual funds and are discussed further in Fair Value Measurements below. As of September 30, 2018 and December 31, 2017, cash and cash equivalents held in domestic bank accounts were $79.3 million and $83.1 million, and cash and cash equivalents held in foreign bank accounts were $34.2 million and $55.2 million. As of September 30, 2018 and December 31, 2017, cash and cash equivalents held by joint ventures, which are either consolidated or proportionately consolidated, were $12.4 million and $16.7 million, of which $11.9 million and $10.0 million related to domestic joint ventures. Cash and cash equivalents held by the joint ventures are available to support joint venture operations, but Quanta cannot utilize those assets to support its other operations. Quanta generally has no right to the joint ventures’ cash and cash equivalents other than participating in distributions and in the event of dissolution. Current and Long-Term Accounts Receivable, 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. 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 customers’ businesses or cash flows, which may be impacted by negative economic and market conditions, could affect Quanta’s ability to collect amounts due. As of September 30, 2018 and December 31, 2017, Quanta had allowances for doubtful accounts on current receivables of $6.7 million and $4.5 million. Should anticipated recoveries relating to receivables fail to materialize, Quanta could experience reduced cash flows and losses in excess of current allowances provided. Long-term accounts receivable are included within “Other assets, net” in the accompanying condensed consolidated balance sheets. Some contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts 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 September 30, 2018 and December 31, 2017 were $297.8 million and $300.5 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 September 30, 2018 and December 31, 2017 were $96.1 million and $41.9 million. Quanta recognizes unbilled receivables within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed under the terms of the contract until a later date, 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 revenue recognized for work performed under fixed-price contracts, as these amounts are recorded as “Contract assets.” At September 30, 2018 and December 31, 2017, the balances of unbilled receivables included in “Accounts receivable” were $460.3 million and $303.9 million. Goodwill Quanta has recorded goodwill in connection with its historical acquisitions of businesses. Upon acquisition, these businesses were either combined into one of Quanta’s existing operating units or managed on a stand-alone basis as an individual operating unit. An annual assessment for impairment is performed for each operating unit that carries a balance of goodwill. Quanta’s operating units are 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 an operating unit at the point in time the divisional designation is made. Goodwill is required to be measured for impairment at the reporting unit level, which represents the operating segment level or one level below the operating segment level for which discrete financial information is available. Quanta has determined that its individual operating units represent its reporting units for the purpose of assessing goodwill impairments. An annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value. The income tax effect associated with an impairment of tax deductible goodwill is also considered in the measurement of the goodwill impairment. Quanta has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative 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. 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 the quantitative 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 annual goodwill impairment assessment is performed in the fourth quarter of its fiscal year, 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 a reporting unit. The quantitative impairment test involves comparing the fair value of each of Quanta’s reporting units with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding charge to “Asset impairment charges” in the consolidated statements of operations. Any goodwill impairment is limited to the total amount of goodwill allocated to that reporting unit. 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 because management believes this method results in the most accurate calculation of fair value. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions, including 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 quantitative impairment test may indicate a fair value that is substantially similar to the reporting unit’s carrying amount. 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 2017, a quantitative fair-value based goodwill impairment analysis indicated that the fair value of each of Quanta’s reporting units, with the exception of two reporting units in its Oil and Gas Infrastructure Services Division, was in excess of its carrying amount. Quanta recorded a $57.0 million non-cash charge in the fourth quarter of 2017 for the impairment of goodwill associated with a reporting unit that provides material handling services, which achieved lower operating margins than anticipated during 2017 and is expected to continue to face a highly competitive environment in its select markets, and a reporting unit that provides marine and offshore services, which has experienced prolonged periods of reduced revenues and operating margins and is expected to continue to experience lower levels of activity in the U.S. Gulf of Mexico and other offshore markets. Assuming a 10% decrease in the fair value of each of Quanta’s reporting units, one additional reporting unit within Quanta’s Oil and Gas Infrastructure Services Division would have had a fair value below its carrying amount. Circumstances such as market declines, unfavorable economic conditions, loss of a major customer or other factors could increase the risk of impairment of goodwill for this reporting unit in future periods. If an operating unit experiences prolonged periods of declining revenues, operating margins or both, it may be at risk of failing the quantitative goodwill impairment test. 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, including the reporting units referenced above, have continued to be negatively impacted by these factors. Goodwill and intangible assets associated with these operating units were $49.4 million and $12.7 million at September 30, 2018. Quanta monitors these conditions and others to determine if it is necessary to perform the quantitative 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 nine months ended September 30, 2018. Although Quanta is not aware of circumstances that would lead to additional goodwill impairments at this time, 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. Other Intangible Assets Quanta’s intangible assets include customer relationships, backlog, trade names, non-compete agreements, patented rights and developed technology and curriculum, which are all subject to amortization, as well as an engineering license, which is not 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 multi-period excess earnings method. This analysis discounts 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 following table presents the significant estimates used by management in determining the fair values of customer relationships associated with acquisitions in the nine months ended September 30, 2018 and year ended December 31, 2017:
Quanta values backlog for acquired businesses as of the acquisition date based upon the contractual nature of the backlog within each service line, discounted to present value. The values of trade names and curriculum are estimated using the relief-from-royalty method of the income approach, which is based on the assumption that in lieu of ownership, a company would be willing to pay a royalty for use of the trade name and curriculum. The value of a non-compete agreement is estimated based on the difference between the present value of the prospective cash flows with the agreement in place and the present value of the prospective cash flows without the agreement in place. The value of the engineering license is based on cash paid to acquire the asset. Quanta amortizes intangible assets subject to amortization based upon the estimated consumption of their economic benefits, or on a straight-line basis if the pattern of economic benefit cannot otherwise be reliably estimated. Intangible assets are reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For instance, a significant change in business climate or a loss of a significant customer, among other things, may trigger the need for interim impairment testing of intangible assets. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. Intangible asset impairments are included within “Asset impairment charges” in the consolidated statements of operations, when applicable. During the fourth quarter of 2017, Quanta recorded an impairment charge of $1.1 million related to a customer relationship intangible asset, which primarily resulted from a strategic decision to restructure a business within a reporting unit in the Oil and Gas Infrastructure Services Division. 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 analyses, engineering, design, procurement, construction and project operation and maintenance. These projects include public-private partnerships and concessions, along with private infrastructure projects such as build, own, operate (and in some cases transfer) and build-to-suit arrangements. As part of this strategy, Quanta formed a partnership with select investors that provides up to $1.0 billion of capital, including approximately $80.0 million from Quanta, available to invest in certain of these infrastructure projects through August 2024. Wholly owned subsidiaries of Quanta serve as the general partner of this partnership and as a separately operated registered investment adviser that manages the invested capital. Quanta determines whether investments involve a variable interest entity (VIE) based on the characteristics of the subject entity. If the entity is determined to be a VIE, then management determines if Quanta is the primary beneficiary of the entity and whether or not consolidation of the VIE is required. The primary beneficiary consolidating the VIE must normally have both (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb significant losses of or the right to receive significant benefits from, the VIE. When Quanta is deemed to be the primary beneficiary, the VIE is consolidated and the other party’s equity interest in the VIE is accounted for as a non-controlling interest. In cases where Quanta determines that it has an undivided interest in the assets, liabilities, revenues and profits of an unincorporated VIE (e.g., a general partnership interest), such amounts are consolidated on a basis proportional to Quanta’s ownership interest in the unincorporated entity. Investments in entities of which Quanta is not the primary beneficiary, but over which Quanta has the ability to exercise significant influence, are accounted for using the equity method of accounting. Quanta’s share of net income or losses from unconsolidated equity investments is reported as equity in earnings (losses) of unconsolidated affiliates, which is included in “Other income (expense)” in the accompanying condensed consolidated statements of operations. Equity investments are reviewed for impairment by assessing whether any decline in the fair value of the investment below the carrying amount 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 equity in earnings (losses) of unconsolidated affiliates. Equity method investments are carried at original cost adjusted for Quanta’s proportionate share of the investees’ income, losses and distributions and are included in “Other assets, net” in Quanta’s accompanying condensed consolidated balance sheets. Quanta has a minority ownership interest in a limited partnership that was selected during 2014 to build, own and operate a new electric transmission line and two substations in Alberta, Canada and has accounted for this interest as an equity-method investment. The limited partnership contracted with a Quanta subsidiary to perform the engineering, procurement and construction (EPC) services for the project, and the Quanta subsidiary recognizes revenue and related cost of services as performance progresses on the project. However, due to Quanta’s ownership interest, a proportional amount of the EPC profit is deferred until the electric transmission line and related substations are constructed and ownership of the assets is deemed to be transferred to the third party customer, which is expected to occur in 2019. The profit deferral has been recorded as a decrease to the equity method investment and as a component of equity in earnings (losses) of unconsolidated affiliates, which is included in “Other income (expense)” in the accompanying condensed consolidated statements of operations. Because the profit deferral is greater than the amount invested, the net amount has been included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. See Notes 8 and 10 for additional disclosures related to investments. During the three months ended September 30, 2018, Quanta acquired a 30% equity interest in a water and gas pipeline infrastructure contractor located in Australia for $22.2 million. This investment includes an option to acquire the remaining equity of the company through 2020 and provides for certain additional earnings and distribution participation rights during a designated 25-month post-investment period, as well as preferential liquidation rights. Quanta’s equity interest has been recorded at cost and will be adjusted for impairment, if any, plus or minus observable changes in the value of the company’s equity. Earnings on this investment will be recognized as distributions are received. Revenue Recognition As discussed in Note 3, effective January 1, 2018, Quanta adopted new revenue recognition guidance using the modified retrospective transition method, applying the guidance to contracts with customers that were not substantially complete as of such date. Quanta’s financial results for reporting periods after January 1, 2018 are presented under the new guidance, while financial results for prior periods will continue to be reported in accordance with the prior guidance and Quanta’s historical accounting policy. The net cumulative adjustment due to adoption of the new guidance was a $1.8 million reduction to retained earnings as of January 1, 2018, which primarily related to certain contracts that are now accounted for as a single performance obligation but were previously accounted for separately for revenue recognition purposes. Quanta does not anticipate significant changes to the pattern of revenue recognition for contracts with customers and does not believe that the guidance surrounding the identification of contracts and performance obligations or the measurement of variable consideration will have a material impact on revenue recognition under its customary contractual arrangements. Contracts Quanta designs, installs, upgrades, repairs and maintains infrastructure for customers in the electric power, oil and gas and communications industries. These services may be provided pursuant to master service agreements (MSAs), repair and maintenance contracts and fixed price and non-fixed price installation contracts. These contracts are classified into three categories based on how transaction prices are determined and revenue is recognized: unit-based contracts, cost-plus contracts and fixed price contracts. Transaction prices for unit-based contracts are determined on a per unit basis, transaction prices for cost-plus contracts are determined by applying a profit margin to costs incurred on the contracts and transaction prices for fixed price contracts are determined on a lump-sum basis. All of Quanta’s revenues are recognized from contracts with its customers. In addition to the considerations described below, revenue is not recognized unless collectability under the contract is considered probable, the contract has commercial substance and the contract has been approved. Additionally, the contract must contain payment terms, as well as the rights and commitments of both parties. Performance Obligations A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Most of Quanta’s contracts are considered to have a single performance obligation whereby Quanta is required to integrate complex activities and equipment into a deliverable for the customer. For contracts with multiple performance obligations, Quanta allocates the transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The standalone selling price is estimated using the expected costs plus a margin approach for each performance obligation. At September 30, 2018, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was estimated to be approximately $5.29 billion, of which 78.1% was expected to be recognized in the subsequent twelve months. This amount represents management’s estimate of the consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work has not yet begun. For purposes of calculating remaining performance obligations, Quanta includes all estimated revenues attributable to consolidated joint ventures and VIEs, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized and revenues from change orders and claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations were potential orders under MSAs and non-fixed price contracts expected to be completed within one year. Recognition of Revenue Upon Satisfaction of Performance Obligations A transaction price is determined for each contract, and that amount is allocated to each performance obligation within the contract and recognized as revenue when, or as, the performance obligation is satisfied. Quanta generally recognizes revenue over time as it performs its obligations because there is a continuous transfer of control of the deliverable to the customer. Quanta believes that the following methods provide a faithful depiction of when performance obligations under its contracts with customers are satisfied. Under unit-based contracts with an insignificant amount of partially completed units, Quanta recognizes revenue as units are completed based on contractual pricing amounts. Under unit-based contracts with more than an insignificant amount of partially completed units and fixed price contracts, Quanta recognizes revenues as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Under cost-plus contracts, Quanta recognizes revenue on an input basis, as labor hours are incurred, materials are utilized and services are performed. Contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. The majority of the materials associated with Quanta’s work are owner-furnished, and therefore not included in contract revenues and costs. Additionally, Quanta may incur incremental costs to obtain certain contracts, such as selling and marketing costs, bid and proposal costs, sales commissions, and legal fees or initial set-up or mobilization costs, certain of which can be capitalized under the newly adopted revenue recognition guidance. Such costs were not material during the three and nine months ended September 30, 2018. Contract Estimates Actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen or changed circumstances not included in Quanta’s cost estimates or covered by its contracts. The estimating process is based on the professional knowledge and experience of Quanta’s engineers, project managers and financial professionals. Some of the factors that may lead to changes in estimates include concealed or unknown environmental conditions; changes in the cost of equipment, commodities, materials or labor; unanticipated costs or claims due to delays caused by customers or third parties; customer failure to provide required materials or equipment; errors in engineering, specifications or designs; project modifications or contract termination; weather conditions; changes in estimates related to the length of time to complete a performance obligation; and performance and quality issues requiring rework or replacement. These factors, along with other risks inherent in performing services under fixed price contracts, are routinely evaluated by management. Any changes in estimates could result in changes in profitability or losses associated with the related performance obligations. For example, estimated costs for a performance obligation may increase from the original estimate and contractual provisions may not allow for adequate compensation or reimbursement for such additional costs. Changes in estimated revenues, costs and profit are recorded in the period they are determined to be probable and can be reasonably estimated. Changes in cost estimates on certain contracts may result in the issuance of change orders and/or claims, which may be approved or unapproved by the customer. Quanta determines the probability that such costs will be recovered based on, among other things, contractual entitlement, past practices with the customer, specific discussions or preliminary negotiations with the customer or verbal approvals by the customer. Quanta recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reliably estimated. Most of Quanta’s change orders are for services that are not distinct from an existing contract and are accounted for as part of an existing contract on a cumulative catch-up basis. Quanta accounts for a change order as a separate contract if the additional goods or services are distinct from and increase the scope of the contract, and the price of the contract increases by an amount commensurate to Quanta’s standalone selling price for the additional goods or services. As of September 30, 2018 and December 31, 2017, Quanta had recognized revenues of $118.3 million and $144.0 million related to change orders and claims included as contract price adjustments and that were in the process of being negotiated in the normal course of business. These aggregate amounts, which were included in “Contract assets” in the accompanying condensed consolidated balance sheets, represent management’s estimates of additional contract revenues that had been earned and were probable of collection. The amount ultimately realized by Quanta cannot currently be determined but could be significantly higher or lower than the estimated amount. Variable consideration amounts, including performance incentives, early pay discounts and penalties, may also cause changes in contract estimates. The amount of variable consideration is estimated based on the most likely amount that is deemed probable of realization. Contract consideration is adjusted for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty related to the variable consideration is resolved. Changes in contract estimates are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the current estimate differs from the previous estimate. The impact of a change in estimate is measured as the difference between the revenue or gross profit recognized in the prior period as compared to the revenue or gross profit which would have been recognized had the revised estimate been used as the basis of recognition in the prior period. During the three and nine months ended September 30, 2018, revenues were favorably impacted by $47.2 million and $71.0 million as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2018 and December 31, 2017, respectively. Quanta’s operating results for the three months ended September 30, 2018 were favorably impacted by $30.7 million, or 7.2% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2018. Quanta’s operating results for the nine months ended September 30, 2018 were negatively impacted by $4.6 million, or 0.4% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2017. Certain projects were materially impacted by changes to total estimated contract revenues and/or costs during the three and nine months ended September 30, 2018. Quanta successfully executed through project procurement, winter schedule challenges and productivity risks on an electrical transmission project in Canada, resulting in reductions to the estimated total costs necessary to complete the project. These changes in estimates resulted in favorable impacts to gross profit related to work performed in prior periods of $47.1 million and $47.2 million for the three and nine months ended September 30, 2018. Quanta experienced engineering and production delays on an ongoing processing facility construction project in Texas, which resulted in additional estimated construction costs and liquidated damages payable to the customer. These changes in estimates resulted in unfavorable impacts to gross profit related to work performed in prior periods of $18.8 million and $20.6 million during the three and nine months ended September 30, 2018. At September 30, 2018, this project had a contract value of approximately $150 million, was approximately 82% complete and is expected to be completed in the first half of 2019. Quanta also experienced a partial collapse of an underground borehole for a natural gas pipeline project in the northeast United States resulting in additional estimated costs to complete the project. These changes in estimates resulted in unfavorable impacts to gross profit related to work performed in prior periods of $10.8 million and $7.6 million during the three and nine months ended September 30, 2018. See Insurance in Note 10 for additional disclosure related to an estimated insurance recovery associated with this project. Additionally, a natural gas pipeline construction project in the northeast United States experienced weather delays and project performance issues resulting in additional estimated construction costs. These changes in estimates resulted in unfavorable impacts to gross profit related to work performed in prior periods of $6.2 million and $16.4 million during the three and nine months ended September 30, 2018. At September 30, 2018, this project had a contract value of approximately $50 million and was approximately 98% complete. Quanta’s operating results for the three months ended September 30, 2017 were negatively impacted by $2.8 million, or 0.8% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2017. Quanta’s operating results for the nine months ended September 30, 2017 were favorably impacted by $24.4 million, or 2.7% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2016. Revenues by Category The following tables present Quanta’s revenue disaggregated by geographic location and contract type for the three and nine months ended September 30, 2018 (in thousands):
Contract Assets and Liabilities With respect to Quanta’s contracts, interim payments are typically received as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. As a result, under fixed price contracts the timing of revenue recognition and contract billings results in contract assets and contract liabilities. Contract assets represent revenues recognized in excess of amounts billed for fixed price contracts and are current assets that are transferred to accounts receivable when billed or the billing rights become unconditional. Contract assets are not considered a significant financing component as the intent is to protect the customer in the event Quanta does not perform on its obligations under the contract. Conversely, contract liabilities represent billings in excess of revenues recognized for fixed price contracts. These arise under certain contracts that allow for upfront payments from the customer or contain contractual billing milestones, which result in billings that exceed the amount of revenues recognized for certain periods. Contract liabilities are current liabilities and are not considered a significant financing component, as they are used to meet working capital requirements that are generally higher in the early stages of a contract and protect Quanta from the other party failing to meet its obligations under the contract. Contract assets and liabilities are recorded on a performance obligation basis at the end of each reporting period. Contract assets and liabilities consisted of the following (in thousands):
The increase in contract assets was primarily due to an increase in revenues on various large diameter pipeline projects. The increase in contract liabilities was primarily due to an advanced billing position at September 30, 2018 related to a large diameter pipeline project that had no contract liabilities associated with it at December 31, 2017, partially offset by normal fluctuations in the mix of projects and billing terms. During the three and nine months ended September 30, 2018, Quanta recognized revenue of approximately $32 million and $375 million related to contract liabilities outstanding at December 31, 2017. Quanta recognizes unbilled receivables for non-fixed price contracts within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed until a later date, costs have been incurred but are yet to be billed or if amounts arise from routine lags in billing. Quanta also recognizes unearned revenues for non-fixed price contracts when cash is received prior to recognizing revenues for the related performance obligation. Unearned revenues, which are included in “Accounts payable and accrued expenses,” were $20.0 million and $16.0 million at September 30, 2018 and December 31, 2017. Impairment losses recognized on contract assets were not material for the three and nine months ended September 30, 2018. Practical Expedients and Exemptions Quanta utilizes certain practical expedients and exemptions associated with the new revenue recognition guidance. For example, Quanta elected the modified retrospective transition method, which allowed the guidance to be applied only to contracts that were not considered substantially complete as of January 1, 2018. Additionally, in cases where Quanta has a right to consideration from a customer in an amount that corresponds directly with the value of Quanta’s performance completed to date, Quanta recognizes revenue in the amount to which it has a right to invoice and does not disclose such performance as a remaining performance obligation. Also, contract consideration is not adjusted for the effects of a significant financing component if payment is expected to be collected less than one year from when the services are performed. Income Taxes Quanta follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded based on future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. Quanta regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs from these estimates, Quanta may not realize deferred tax assets to the extent estimated. Quanta records reserves for income taxes related to certain tax positions 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 these reserves, Quanta assumes that taxing authorities have full knowledge of the position and all relevant facts. Quanta continually reviews exposure to additional tax obligations, and as further information is known or events occur, changes in tax reserves may be recorded. To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and included in the provision for income taxes. As of September 30, 2018, the total amount of unrecognized tax benefits relating to uncertain tax positions was $30.9 million, a decrease from December 31, 2017 of $5.3 million. This decrease resulted primarily from the expiration of the statute of limitations for the 2014 tax year. Quanta and certain subsidiaries remain under examination by various U.S. state and 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 $7.7 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, consolidated statements of operations and consolidated statements of comprehensive income. For example, the Tax Cuts and Jobs Act of 2017 (the Tax Act), among other things, significantly revised the U.S. corporate tax regime and resulted in a reduction of Quanta’s future effective tax rate and a remeasurement of its deferred tax assets and liabilities. While Quanta has substantially completed its provisional analysis of the effects of the Tax Act and recorded a reasonable estimate of such effects, the net one-time benefits and calculation of income tax expense related to the Tax Act may differ, possibly materially, due to, among other things, further refinement of Quanta’s calculations, changes in interpretations and assumptions made, additional regulatory guidance, and actions and related accounting policy decisions resulting from the Tax Act. Quanta will complete its analysis of the Tax Act over the one-year measurement period ending December 22, 2018, and any adjustments during the measurement period will be included within “Net income” as an adjustment to “Provision for income taxes” on Quanta’s consolidated statement of operations in the reporting period when such adjustments are determined. Certain of the pending items and the potential changes to Quanta’s provisional analysis are described in further detail below. The Tax Act imposed a tax on global intangible low-taxed income (GILTI), and it is unclear if GILTI should be included in the period in which it is incurred or whether deferred tax assets and liabilities should be recognized for basis differences expected to reverse as GILTI in future years. Quanta continues to analyze the impacts of the GILTI provision; however, due to the complexity of the new rules, Quanta’s analysis is not yet complete. Accordingly, Quanta has not yet made an accounting policy election related to GILTI. The Tax Act also lowered the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries, limited and eliminated certain tax deductions and created new taxes on certain foreign-sourced earnings. Consequently, for the year ended December 31, 2017, Quanta recorded one-time net tax benefits of $70.1 million, including $85.3 million of tax benefits associated with the remeasurement of U.S. federal deferred tax assets and liabilities based on expected future rates (generally 21%), partially offset by an estimated $15.2 million transition tax on post-1986 earnings and profits of certain foreign subsidiaries. This net tax benefit was Quanta’s provisional estimate, utilizing the information that was available at the time. As permitted by and in accordance with the guidance issued by the SEC and codified by the Financial Accounting Standards Board (FASB), Quanta may adjust its provisional estimates in reporting periods throughout 2018 as it completes its analysis and as more information becomes available, and these adjustments may affect earnings. During the three months ended September 30, 2018, Quanta recorded $5.0 million of additional benefit related to the remeasurement of U.S. federal deferred tax assets and liabilities, as the estimate of such amount was revised in connection with the preparation and filing of Quanta’s 2017 income tax returns . While the remeasurement of U.S. deferred tax assets and liabilities is deemed to be complete at September 30, 2018, Quanta’s accounting for the transition tax has not been finalized. Although Quanta was able to reasonably estimate certain effects of the repatriation transition tax and recorded provisional adjustments based on those estimates, no additional measurement-period adjustments have been made during 2018 because Quanta’s analysis of deferred foreign income is not complete. Quanta expects to complete its accounting within the prescribed measurement period. For the year ended December 31, 2017, an additional one-time tax benefit of $26.7 million was recorded in connection with entity restructuring and recapitalization transactions completed by Quanta, which was partially offset by an $8.5 million decrease in the production activity-related tax benefit that resulted from acceleration of certain deductions into 2017. During the three months ended September 30, 2018, the estimated benefit associated with entity restructuring and recapitalization transactions was decreased by $1.8 million based on actual 2017 earnings and profit balances. Earnings Per Share Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Exchangeable shares that were issued pursuant to certain of Quanta’s historical acquisitions (as further discussed in Note 8), which are exchangeable on a one-for-one basis with shares of Quanta common stock, have been included in the calculation of weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the portion of the periods that they were outstanding. Additionally, unvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the three and nine months ended September 30, 2018 included 2.6 million and 2.5 million weighted average participating securities. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the three and nine months ended September 30, 2017 included 2.3 million and 2.5 million weighted average participating securities. Diluted earnings per share attributable to common stock is computed using the weighted average number of shares of common stock outstanding during the period adjusted for all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalents would be antidilutive. Insurance Quanta is insured for employer’s liability, workers’ compensation, auto liability and general liability claims. Under these 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 manages and maintains a portion of its casualty risk through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs. 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 $0.5 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 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 obligations for future periods. 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, net of estimated forfeitures. The fair value of these awards is generally determined based on the number of shares or units granted and the closing price of Quanta’s common stock on the date of grant, with the exception of performance units with market-based metrics, the fair value of which is determined using a Monte Carlo simulation valuation methodology. An estimate of future forfeitures, based on historical data, is utilized to determine the period expense. Such estimates are subject to change and may impact the value that will ultimately be recognized as compensation expense. The resulting compensation expense for performance unit and time-based RSU awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period, and the resulting compensation expense for performance-based RSU awards is recognized using the graded vesting method over the requisite service period. The compensation expense related to outstanding performance units can also vary from period to period based on changes in the total number of shares of common stock that Quanta anticipates will be issued upon vesting of such performance units. Payments made by Quanta to satisfy employee tax withholding obligations associated with awards settled in common stock are classified as financing cash flows. Compensation expense associated with liability-based awards, such as RSUs that are expected to or may settle in cash, is recognized based on a remeasurement of the fair value of the award at the end of each reporting period. Upon settlement, the holders receive for each RSU an amount in cash equal to the fair market value 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 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, Australia and Latin America, is typically the currency of the country where the foreign operating unit is located and transacts the majority of its activities, including billings, financing, payroll and other expenditures. The treatment of foreign currency translation gains or losses is dependent upon management’s determination of the functional currency, and when preparing its consolidated financial statements, Quanta translates the financial statements of its foreign operating units from their functional currency into U.S. dollars. Statements of operations, comprehensive income and cash flows are translated at average monthly rates, while balance sheets are translated at month-end exchange rates. The translation of the balance sheet results in translation gains or losses, which are included as a separate component of equity under “Accumulated other comprehensive income (loss).” Gains and losses arising from transactions not denominated in functional currencies are included within “Other income (expense)” in the accompanying condensed consolidated statements of operations. Comprehensive Income Components of comprehensive income include all changes in equity during a period except those resulting from changes in Quanta’s capital-related accounts. Quanta records other comprehensive income (loss) for foreign currency translation adjustments related to its foreign operations and for other revenues, expenses, gains and losses that are included in comprehensive income but excluded from net income. Litigation Costs and Reserves Quanta records reserves when the likelihood of incurring a loss is probable and the amount of loss can be reasonably estimated. Costs incurred for litigation are expensed as incurred. Further details are presented in Note 10. Fair Value Measurements For disclosure purposes, qualifying assets and liabilities are categorized into three broad levels based on the priority of the inputs used to determine their fair values. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Certain assumptions and other information as they relate to these qualifying assets and liabilities are described below. Contingent Consideration Liabilities. As of September 30, 2018 and December 31, 2017, financial instruments required to be measured at fair value on a recurring basis consisted primarily of Quanta’s liabilities related to contingent consideration associated with certain acquisitions, the payment of which is contingent upon the future performance of the acquired businesses and, if earned, would be payable to the former owners of the acquired businesses. The liabilities recorded represent the estimated fair values of future amounts payable to the former owners, and the fair values are estimated by management based on entity-specific assumptions that are evaluated on an ongoing basis. As of September 30, 2018 and December 31, 2017, the aggregate fair value of these outstanding and unearned contingent consideration liabilities totaled $74.3 million and $65.7 million, which was included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. The fair value of contingent consideration liabilities as of September 30, 2018 was primarily determined using a Monte Carlo simulation valuation methodology based on probability-weighted performance projections and other inputs, including a discount rate and an expected volatility factor for each acquisition. The expected volatility factors ranged from 23.0% to 30.0% based on historical asset volatility of selected guideline public companies. Depending on contingent consideration payment terms, the present value of the estimated payments are discounted based on a risk-free rate and/or Quanta’s cost of debt, ranging from 2.1% to 3.6%.The fair value determinations incorporate significant inputs not observable in the market. Accordingly, the level of inputs used for these fair value measurements is the lowest level (Level 3). Significant changes in any of these assumptions could result in a significantly higher or lower potential liability. Quanta expects a significant portion of these liabilities to be settled by late 2020 or early 2021. The majority of Quanta’s contingent consideration liabilities are subject to a maximum payment amount, which aggregated to $157.3 million as of September 30, 2018. One contingent consideration liability for which the fair value as of September 30, 2018 was $1.0 million is not subject to a maximum payout amount. Quanta’s aggregate contingent consideration liabilities can change due to additional business acquisitions, payments to settle outstanding liabilities, changes in the fair value of amounts owed based on actual and forecasted performance, and foreign currency translation gains or losses. During the three and nine months ended September 30, 2018, acquisitions increased Quanta’s aggregate contingent consideration liabilities by $2.8 million and $16.5 million as of the respective acquisition dates. During the three and nine months ended September 30, 2017, the acquisition of Stronghold increased Quanta’s aggregate contingent consideration liabilities by $51.1 million. During the three and nine months ended September 30, 2018, Quanta recognized net decreases in the fair value of contingent consideration liabilities of $1.4 million and $7.7 million. The change in fair value of contingent consideration liabilities has been reflected in operating income on Quanta’s condensed consolidated statements of operations. Goodwill and Other Intangible Assets. As discussed in the Goodwill and Other Intangible Assets sections within this Note 2 above, Quanta has recorded goodwill and identifiable intangible assets in connection with certain of its historical business acquisitions. Quanta utilizes the fair value premise as the primary basis for its impairment valuation procedures. The Goodwill and Other Intangible Assets sections provide information regarding valuation methods, including the income approach, market approach and cost approach, and assumptions used to determine fair values of these assets based on the appropriateness of each method in relation to the type of asset being valued. Quanta believes that these valuation methods appropriately represent the methods that would be used by other market participants in determining fair value, and periodically engages the services of an independent valuation firm when a new business is acquired to assist management with this valuation process, including assistance with the selection of appropriate valuation methodologies and the development of market-based valuation assumptions. The level of inputs used for these fair value measurements is the lowest level (Level 3). Investments and Financial Instruments. Quanta also uses fair value measurements in connection with the valuation of its investments in private company equity interests and financial 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 recoverable. 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. The level of inputs used for these fair value measurements is the lowest level (Level 3). Other. The carrying amounts of cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair value due to the short-term nature of these instruments. The carrying amount of variable rate debt also approximates fair value. All of Quanta’s cash equivalents were categorized as Level 1 assets at September 30, 2018 and December 31, 2017, as all values were based on unadjusted quoted prices for identical assets in an active market that Quanta has the ability to access. Additionally, during the nine months ended September 30, 2018, Quanta recorded a $3.3 million charge associated with the exchange of a construction barge for an industrial property, and during the nine months ended September 30, 2017, Quanta recorded a $1.9 million charge associated with the planned disposition of the same construction barge, which was not consummated.
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New Accounting Pronouncements |
9 Months Ended |
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Sep. 30, 2018 | |
| New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
| New Accounting Pronouncements | NEW ACCOUNTING PRONOUNCEMENTS: Adoption of New Accounting Pronouncements In May 2014, the FASB issued an update that superseded most revenue recognition guidance, as well as certain cost recognition guidance. The update, together with other clarifying updates, 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. The update also requires additional 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, and information about contract balances and performance obligations. Quanta adopted the new revenue recognition guidance using the modified retrospective transition method effective January 1, 2018, applying the guidance to contracts that were not substantially complete as of such date. Quanta’s financial results for reporting periods after January 1, 2018 have been and will be presented under the new guidance, while financial results for prior periods will continue to be reported in accordance with the prior guidance and Quanta’s historical accounting policy. The net cumulative adjustment resulting from adoption was a $1.8 million reduction to retained earnings as of January 1, 2018, which primarily related to certain contracts that are now accounted for as a single performance obligation but were previously accounted for separately for revenue recognition purposes. Quanta has not experienced significant changes to the pattern of revenue recognition for its contracts, the identification of contracts and performance obligations or the measurement of variable consideration. For the three and nine months ended September 30, 2018, the impact related to the adoption of the new revenue recognition guidance on revenues, contract assets and contract liabilities was immaterial. Quanta has also expanded its discussion in Note 2 above to address the quantitative and qualitative disclosure requirements of the new revenue recognition standard. 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. This update requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus observable price changes in orderly transactions for an identical or a similar investment of the same company. Quanta adopted the new standard effective January 1, 2018. Quanta’s equity investments that are within the scope of this update do not have readily determinable fair values. Accordingly, Quanta continues to measure these investments at cost less any impairments and also considers changes resulting from any observable price changes as described above. The new standard is not expected to have a material impact on Quanta’s consolidated financial statements in the near-term based on the equity investments held at the time of adoption. In August 2016, the FASB issued an update intended to standardize the classification of certain transactions on the statements of cash flows. These transactions include contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies and distributions received from equity method investments. The new standard requires application using a retrospective transition method. Quanta adopted this guidance effective January 1, 2018, and the changes did not have a material impact on its consolidated financial statements. In October 2016, the FASB issued an update that requires 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 should be recognized at the time of the transfer. The new guidance does 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. Quanta adopted this guidance effective January 1, 2018 utilizing the modified retrospective method, and the changes did not have a material impact on its consolidated financial statements. 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 guidance requires net cash withdrawn from (deposited to) restricted cash to be removed from investing activities. Additionally, restricted cash balances for each period are included with “Cash and cash equivalents” in order to obtain beginning and ending balances for condensed consolidated statement of cash flow purposes, and any activity between “Cash and cash equivalents” and restricted cash is no longer reported on Quanta’s condensed consolidated statements of cash flows. Quanta adopted this guidance effective January 1, 2018 utilizing the retrospective transition method, and the changes did not have a material impact on its consolidated financial statements. See Note 12 for reconciliations of “Cash and cash equivalents” and restricted cash. In January 2017, the FASB issued an update intended to clarify whether transactions should be accounted for as acquisitions or disposals of assets or businesses. 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 requires, among other things, 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 removes the evaluation of whether a market participant could replace missing elements in order to consider the set of assets and activities a business, provides more stringent criteria for sets without outputs and narrows the definition of output. Quanta adopted this guidance effective January 1, 2018 utilizing the prospective transition method, and the changes did not materially impact its consolidated financial statements. In May 2017, the FASB issued an update providing guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. A modification should be accounted for unless the following characteristics of the award are unchanged: the fair value, the vesting conditions and the classification as an equity instrument or a liability instrument. Quanta adopted this guidance effective January 1, 2018 using the prospective transition method, and the changes did not materially impact its consolidated financial statements. In June 2018, the FASB issued an update that expands the scope of share-based payment accounting to include share-based payment transactions for acquiring goods and services from non-employees. Quanta adopted this guidance effective August 31, 2018, and the change did not materially impact Quanta’s consolidated financial statements. Accounting Standards Not Yet Adopted In February 2016, the FASB issued an update that requires the recognition of operating lease right-of-use assets and the corresponding lease liabilities on the balance sheet. The new standard is effective for interim and annual periods beginning after December 15, 2018. In July 2018, the FASB issued an update that provides entities a choice between the previously required modified retrospective transition method and another transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. While Quanta continues to evaluate the effect of this standard on its consolidated financial statements, it is anticipated that adoption will result in a significant amount of lease right-of-use assets and corresponding lease liabilities being recorded on its consolidated balance sheets. Quanta has established a cross-functional team to implement this standard and is in the process of evaluating arrangements that will be subject to the standard, is implementing software to meet the reporting and disclosure requirements of the standard and is assessing the impact of the standard on its processes and internal controls. The standard is not expected to have a material impact on Quanta’s compliance with the financial covenants under its senior secured credit facility. Quanta will adopt this guidance effective January 1, 2019 and will apply the transition method that allows the recognition of a cumulative-effect adjustment to retained earnings on such date. 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 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. Quanta is currently evaluating the potential impact of this authoritative guidance on its consolidated financial statements and will adopt this guidance effective January 1, 2020. In August 2017, the FASB issued an update that amends and simplifies existing guidance for presenting the economic effects of risk management activities in the financial statements. The update is effective for interim and annual periods beginning after December 15, 2018. The amended presentation and disclosure guidance is required only prospectively, but certain amendments, if applicable, could require a cumulative-effect adjustment. Quanta is evaluating the impact of this new standard on its consolidated financial statements and will adopt the new standard effective January 1, 2019; however, as of September 30, 2018, Quanta had no hedging relationships outstanding. In August 2018, the FASB issued an update that amends certain disclosure requirements related to fair value measurements. Certain disclosure requirements will be removed, such as the valuation processes for Level 3 fair value measurements, and other disclosure requirements will be modified or added, including a new requirement to disclose the range and weighted average (or a more reasonable and rational method to reflect the distribution) of significant unobservable inputs used to develop Level 3 fair value measurements. This update is effective for interim and annual periods beginning after December 15, 2019. Certain amendments, including the disclosure of the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements, should be applied prospectively, while other amendments should be applied retrospectively. Quanta is evaluating the impact of this new standard on its consolidated financial statements and will adopt the new standard effective January 1, 2020. Also in August 2018, the FASB issued an update that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Entities can choose to adopt the new guidance prospectively or retrospectively. This update is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. Quanta does not expect this update to materially impact its consolidated financial statements and will adopt the new standard by January 1, 2020.
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| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions | ACQUISITIONS: During the nine months ended September 30, 2018, Quanta acquired an electrical infrastructure services business specializing in substation construction and relay services, a postsecondary educational institution that provides pre-apprenticeship training and programs for experienced linemen and two communications infrastructure services businesses, all of which are located in the United States. The aggregate consideration for these acquisitions was $105.5 million paid or payable in cash, subject to certain adjustments, and 679,668 shares of Quanta common stock, which had a fair value of approximately $22.9 million as of the respective acquisition dates. Additionally, the acquisitions of the postsecondary educational institution and one of the communications infrastructure services businesses include the potential payment of up to $18.0 million of contingent consideration, payable if the acquired businesses achieve certain performance objectives over three-year and five-year post-acquisition periods. Based on the estimated fair value of this contingent consideration, Quanta recorded $16.5 million of liabilities as of the respective acquisition dates. The results of the acquired businesses have generally been included in Quanta’s Electric Power Infrastructure Services segment and consolidated financial statements beginning on the respective acquisition dates. On July 20, 2017, Quanta acquired Stronghold, a specialized services business located in the United States that provides high-pressure and critical-path solutions to the downstream and midstream energy markets. The aggregate consideration included $351.0 million in cash, subject to certain adjustments, and 2,693,680 shares of Quanta common stock, which had a fair value of $81.3 million at the acquisition date. Additionally, the acquisition includes the potential payment of up to $100.0 million of contingent consideration, payable if the acquired business achieves certain performance objectives over a three-year post-acquisition period. Based on the estimated fair value of this contingent consideration, Quanta recorded a $51.1 million liability as of the acquisition date. The results of the acquired business have generally been included in Quanta’s Oil and Gas Infrastructure Services segment and consolidated financial statements since the acquisition date. During the year ended December 31, 2017, Quanta also acquired a communications infrastructure services business and an electrical and communications business, both of which are located in the United States. The aggregate consideration for these acquisitions consisted of $12.0 million paid or payable in cash, subject to certain adjustments, and 288,666 shares of Quanta common stock, which had a fair value of $8.3 million as of the respective acquisition dates. The results of the acquired businesses have generally been included in Quanta’s Electric Power Infrastructure Services segment and consolidated financial statements since the respective acquisition dates. Quanta is in the process of finalizing its assessments of the fair values of the acquired assets and assumed liabilities related to businesses acquired subsequent to September 30, 2017, and further adjustments to the purchase price allocations may occur. As of September 30, 2018, the estimated fair values of the net assets acquired were preliminary, with possible updates primarily related to certain tax estimates. The aggregate purchase consideration of the businesses acquired subsequent to September 30, 2017 through September 30, 2018 was allocated to acquired assets and assumed liabilities, which resulted in allocations of $37.5 million to net tangible assets, $52.4 million to identifiable intangible assets and $55.0 million to goodwill. The following table summarizes the aggregate consideration paid or payable as of September 30, 2018 for the 2018 acquisitions and 2017 acquisitions and presents the allocation of these amounts to net tangible and identifiable intangible assets based on their estimated fair values as of the respective acquisition dates, inclusive of any purchase price adjustments. These allocations require significant use of estimates and are based on information that was available to management at the time these consolidated financial statements were prepared. Quanta uses a variety of information to estimate fair values, including quoted market prices, carrying amounts and valuation techniques such as discounted cash flows. When deemed appropriate, third-party appraisal firms are engaged to assist in fair value determination of fixed assets, intangible assets and certain other assets and liabilities (in thousands).
Goodwill represents the amount by which the purchase price for an acquired business exceeds the net fair value of the assets acquired and liabilities assumed. The 2018 and 2017 acquisitions strategically expanded Quanta’s domestic electric power, oil and gas and communications service offerings, which Quanta believes contributes to the recognition of the goodwill. In connection with the 2018 acquisitions, as of the acquisition dates, goodwill of $55.0 million was recorded for the acquired businesses that were included within Quanta’s Electric Power Infrastructure Services Division. In connection with the 2017 acquisitions, as of the acquisition dates and inclusive of purchase price adjustments, goodwill of $5.9 million was recorded for the acquired businesses that were included within Quanta’s Electric Power Infrastructure Services Division, and goodwill of $296.5 million was recorded for Stronghold, which is included within Quanta’s Oil and Gas Infrastructure Services Division. Goodwill of $21.6 million related to the 2018 acquisitions is expected to be deductible for income tax purposes, and goodwill of $302.5 million related to the 2017 acquisitions is expected to be deductible for income tax purposes. The following table summarizes the estimated fair values of identifiable intangible assets for the 2018 acquisitions as of the acquisition dates and the related weighted average amortization periods by type (in thousands, except for weighted average amortization periods, which are in years).
The following unaudited supplemental pro forma results of operations have been provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors (in thousands, except per share amounts):
The pro forma combined results of operations for the three and nine months ended September 30, 2018 and 2017 were prepared by adjusting the historical results of Quanta to include the historical results of the 2018 acquisitions as if they occurred January 1, 2017 and the historical results of the 2017 acquisitions as if they occurred January 1, 2016. These pro forma combined historical results were adjusted for the following: a reduction of interest expense as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest expense as a result of the cash consideration paid; an increase in amortization expense due to the incremental intangible assets recorded; changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies; an increase in the number of outstanding shares of Quanta common stock; and reclassifications to conform the acquired businesses’ presentation to Quanta’s accounting policies. The pro forma results of operations do not include any adjustments to eliminate the impact of acquisition-related costs or any cost savings or other synergies that resulted or may result from the acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future. Revenues of approximately $12.9 million and a loss before income taxes of approximately $5.1 million, which included $5.0 million of acquisition-related costs, were included in Quanta’s consolidated results of operations for the three months ended September 30, 2018 related to the 2018 acquisitions. Revenues of approximately $32.2 million and a loss before income taxes of approximately $11.7 million, which included $11.0 million of acquisition-related costs, were included in Quanta’s consolidated results of operations for the nine months ended September 30, 2018 related to the 2018 acquisitions.
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Goodwill and Other Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS: A summary of changes in Quanta’s goodwill is as follows (in thousands):
Also, as described in Note 2, Quanta’s operating units are organized into one of Quanta’s two internal divisions, and accordingly the goodwill associated with the operating units has been aggregated on a divisional basis in the table above. These divisions are closely aligned with Quanta’s reportable segments, and operating units are assigned to a division based on the predominant type of work performed. From time to time, an operating unit may be reorganized between divisions if warranted due to changes in its predominant business. Quanta’s intangible assets and the remaining weighted average amortization periods related to Quanta’s intangible assets subject to amortization were as follows (in thousands except for weighted average amortization periods, which are in years):
Amortization expense for intangible assets was $10.6 million and $9.0 million for the three months ended September 30, 2018 and 2017 and $31.5 million and $22.0 million for the nine months ended September 30, 2018 and 2017. The estimated future aggregate amortization expense of intangible assets subject to amortization as of September 30, 2018 is set forth below (in thousands):
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Per Share Information |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Per Share Information | PER SHARE INFORMATION: The amounts used to compute basic and diluted earnings per share attributable to common stock for the three and nine months ended September 30, 2018 and 2017 are illustrated below (in thousands):
Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Exchangeable shares that were issued pursuant to certain of Quanta’s historical acquisitions (as further discussed in Note 8), which are exchangeable on a one-for-one basis with shares of Quanta common stock, have been included in the calculation of weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the portion of the periods that they were outstanding. Additionally, unvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for each of the three and nine months ended September 30, 2018 included 2.6 million and 2.5 million weighted average participating securities. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the three and nine months ended September 30, 2017 included 2.3 million and 2.5 million weighted average participating securities. For purposes of calculating diluted earnings per share attributable to common stock, there were no adjustments required to derive Quanta’s net income attributable to common stock. Diluted earnings per share attributable to common stock is computed using the weighted average number of shares of common stock outstanding during the period adjusted for all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalents would be antidilutive.
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Debt Obligations |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Obligations | DEBT OBLIGATIONS: Quanta’s long-term debt obligations consisted of the following (in thousands):
Quanta’s current maturities of long-term debt and short-term debt consisted of the following (in thousands):
Senior Secured Credit Facility On December 18, 2015, Quanta entered into an amended and restated credit agreement with various lenders that provided for a $1.81 billion senior secured revolving credit facility. On October 10, 2018, Quanta entered into an amendment to the credit agreement that, among other things, (i) increased the amount of revolving commitments thereunder by $175.0 million, resulting in an aggregate revolving credit facility of up to $1.99 billion, and (ii) provided for a new term loan facility with total term loan commitments of $600.0 million. See Note 13 for additional information related to the term loan facility, including interest rates and required amortization payments, and the other changes to the credit agreement pursuant to the October 2018 amendment. The maturity date for both the revolving credit facility and the term loan facility is October 31, 2022. With respect to the revolving credit facility, the entire amount available may be used by Quanta for revolving loans and letters of credit in U.S. dollars and certain alternative currencies, up to $600.0 million may be used by certain subsidiaries of Quanta for revolving loans and letters of credit in certain alternative currencies, up to $100.0 million may be used for swing line loans in U.S. dollars, up to $50.0 million may be used for swing line loans in Canadian dollars and up to $30.0 million (increased to $50.0 million pursuant to the October 2018 amendment) may be used for swing line loans in Australian dollars. In addition, subject to the conditions specified in the credit agreement, Quanta has the option to increase the capacity of the credit facility, in the form of additional revolving loan or term loan commitments, by up to $400.0 million, from time to time, upon receipt of additional commitments from new or existing lenders. Borrowings under the credit agreement are to be used to refinance existing indebtedness and for working capital, capital expenditures and other general corporate purposes. As of September 30, 2018, Quanta had $449.9 million of outstanding letters of credit and bank guarantees under the credit facility, $242.3 million of which were denominated in U.S. dollars and $207.6 million of which were denominated in currencies other than the U.S. dollar, primarily Canadian and Australian dollars. Quanta also had $952.5 million of outstanding revolving loans under the credit facility, $772.4 million of which were denominated in U.S. dollars, $100.7 million of which were denominated in Canadian dollars and $79.4 million of which were denominated in Australian dollars. The remaining capacity under the revolving credit facility as of September 30, 2018 was $407.6 million, all of which was available for revolving loans or new letters of credit or bank guarantees. Borrowings under the credit facility and the applicable interest rates during the three months ended September 30, 2018 and 2017 were as follows (dollars in thousands):
Beginning on November 20, 2017, amounts borrowed as revolving loans in U.S. dollars bear interest, at Quanta’s option, at a rate equal to either (i) the Eurocurrency Rate (as defined in the credit agreement) plus 1.125% to 2.000%, as determined based on Quanta’s Consolidated Leverage Ratio (as described below), or (ii) the Base Rate (as described below) plus 0.125% to 1.000%, as determined based on Quanta’s Consolidated Leverage Ratio. Amounts borrowed as revolving loans under the credit agreement in any currency other than U.S. dollars bear interest at a rate equal to the Eurocurrency Rate plus 1.125% to 2.000%, as determined based on Quanta’s Consolidated Leverage Ratio. Additionally, standby or commercial letters of credit issued under the credit agreement are subject to a letter of credit fee of 1.125% to 2.000%, based on Quanta’s Consolidated Leverage Ratio, and Performance Letters of Credit (as defined in the credit agreement) issued under the credit agreement in support of certain contractual obligations are subject to a letter of credit fee of 0.675% to 1.150%, based on Quanta’s Consolidated Leverage Ratio. From December 18, 2015 through November 19, 2017, interest rates for revolving loans and letter of credit fees were generally consistent with those set forth above, other than the maximum additional interest rates and fee percentages, which were 0.125% higher. Quanta is also subject to a commitment fee of 0.20% to 0.40%, based on its Consolidated Leverage Ratio, on any unused availability under the credit agreement. Consolidated Leverage Ratio is the ratio of Quanta’s Consolidated Funded Indebtedness to Consolidated EBITDA (as those terms are defined in the credit agreement). For purposes of calculating Quanta’s Consolidated Leverage Ratio, Consolidated Funded Indebtedness is reduced by available cash and cash equivalents (as defined in the credit agreement) in excess of $25.0 million. Base Rate equals the highest of (i) the Federal Funds Rate (as defined in the credit agreement) plus 0.5%, (ii) the prime rate publicly announced by Bank of America, N.A. and (iii) the Eurocurrency Rate plus 1.00%. Consolidated Interest Coverage Ratio is the ratio of (i) Consolidated EBIT (as defined in the credit agreement) for the four fiscal quarters most recently ended to (ii) Consolidated Interest Expense (as defined in the credit agreement) for such period (excluding all interest expense attributable to capitalized loan costs and the amount of fees paid in connection with the issuance of letters of credit on behalf of Quanta during such period). Subject to certain exceptions, (i) all borrowings under the credit agreement are secured by substantially all the assets of Quanta and Quanta’s wholly owned U.S. subsidiaries and by a pledge of all of the capital stock of Quanta’s wholly owned U.S. subsidiaries and 65% of the capital stock of direct foreign subsidiaries of Quanta’s wholly owned U.S. subsidiaries and (ii) Quanta’s wholly owned U.S. subsidiaries guarantee the repayment of all amounts due under the credit agreement. Subject to certain conditions, all collateral will automatically be released from the liens at any time Quanta maintains an Investment Grade Rating (defined in the credit agreement as two of the following three conditions being met: (i) a corporate credit rating that is BBB- or higher by Standard & Poor’s Rating Services, (ii) a corporate family rating that is Baa3 or higher by Moody’s Investors Services, Inc. or (iii) a corporate credit rating that is BBB- or higher by Fitch Ratings, Inc.). The credit agreement contains certain covenants, including (i) a maximum Consolidated Leverage Ratio of 3.0 to 1.0 (except that in connection with certain permitted acquisitions in excess of $200.0 million, such ratio is 3.5 to 1.0 for the fiscal quarter in which the acquisition is completed and the two subsequent fiscal quarters) and (ii) a minimum Consolidated Interest Coverage Ratio of 3.0 to 1.0. As of September 30, 2018, Quanta was in compliance with all of the covenants in the credit agreement. The credit agreement also limits certain acquisitions, mergers and consolidations, indebtedness, asset sales and prepayments of indebtedness and, subject to certain exceptions, prohibits liens on Quanta’s assets. The credit agreement allows cash payments for dividends and stock repurchases subject to compliance with the following requirements (after giving effect to the dividend or stock repurchase): (i) no default or event of default under the credit agreement; (ii) continued compliance with the financial covenants in the credit agreement; and (iii) at least $100.0 million of availability under the revolving credit facility and/or cash and cash equivalents on hand. The credit agreement provides for customary events of default and contains cross-default provisions with Quanta’s underwriting, continuing indemnity and security agreement with its sureties and certain other debt instruments exceeding $100.0 million (increased to $150.0 million pursuant to the October 2018 amendment) in borrowings or availability. If an Event of Default (as defined in the credit agreement) occurs and is continuing, on the terms and subject to the conditions set forth in the credit agreement, the lenders may declare all amounts outstanding and accrued and unpaid interest immediately due and payable, require that Quanta provide cash collateral for all outstanding letter of credit obligations, terminate the commitments under the credit agreement, and foreclose on the collateral. Other Facilities Quanta has also entered into certain unsecured and uncommitted bilateral credit agreements with various lenders that may be utilized for, among other things, the issuance of letters of credit or bank guarantees and overdraft protection. As of September 30, 2018, Quanta had $2.6 million of letters of credit and bank guarantees outstanding under these facilities.
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Equity |
9 Months Ended |
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Sep. 30, 2018 | |
| Equity [Abstract] | |
| Equity | EQUITY: Exchangeable Shares and Preferred Stock In connection with certain prior acquisitions of Canadian businesses, the former owners of the acquired businesses received exchangeable shares of certain Canadian subsidiaries of Quanta, which may be exchanged at the option of the holders for Quanta common stock on a one-for-one basis. The holders of exchangeable shares can make an exchange only once in any calendar quarter and must exchange a minimum of either 50,000 shares or, if less, the total number of remaining exchangeable shares registered in the name of the holder making the request. Additionally, in connection with two of such acquisitions, Quanta issued one share of Quanta Series F preferred stock and one share of Quanta Series G preferred stock to voting trusts on behalf of the respective holders of the exchangeable shares issued in such acquisitions. The one share of Quanta Series F preferred stock was subsequently redeemed and retired effective October 6, 2017. All holders of exchangeable shares have rights equivalent to Quanta common stockholders with respect to dividends and other economic rights. Additionally, the share of Quanta Series G preferred stock provides the holder of the associated exchangeable shares voting rights in Quanta common stock equivalent to the number of exchangeable shares outstanding. During the three months ended September 30, 2018 and 2017 and the nine months ended September 30, 2018, no exchangeable shares were exchanged for Quanta common stock. During the nine months ended 2017, 2.5 million exchangeable shares were exchanged for Quanta common stock. As of September 30, 2018, the Quanta Series G preferred stock remained outstanding and 0.5 million exchangeable shares remained outstanding, of which 0.4 million were associated with the Quanta Series G preferred stock. Treasury Stock General Treasury stock is recorded at cost. Under Delaware corporate law, treasury stock is not counted for quorum purposes or entitled to vote. Shares withheld for tax withholding obligations The tax withholding obligations of employees upon vesting of restricted stock, RSUs and performance units settled in common stock are typically satisfied by Quanta making such tax payments and withholding the number of vested shares having a value on the date of vesting equal to the tax withholding obligation. For the settlement of these employee tax liabilities, Quanta withheld 0.4 million and 0.5 million shares of Quanta common stock during the nine months ended September 30, 2018 and 2017, with a total market value of $14.7 million and $18.2 million. These shares and the related costs to acquire them were accounted for as adjustments to the balance of treasury stock. Notional amounts recorded related to deferred compensation plans For RSUs and performance units that vest but the settlement of which is deferred under Quanta’s deferred compensation plans, Quanta records a notional amount to “Treasury stock” and an offsetting amount to “Additional paid-in capital” (APIC). However, no shares are added to outstanding treasury stock at vesting as the shares of Quanta common stock associated with deferred equity awards are not issued. Upon settlement of the deferred equity awards and issuance of the associated Quanta common stock, the original accounting entry is reversed. There were no amounts recorded to treasury stock and APIC related to the deferred compensation plans during the three months ended September 30, 2018 and 2017, and the net amounts recorded to treasury stock and APIC related to the deferred compensation plans during the nine months ended September 30, 2018 and 2017 were $3.3 million and $3.4 million. Stock repurchases During the second quarter of 2017, Quanta’s board of directors approved a stock repurchase program that authorized Quanta to purchase, from time to time through June 30, 2020, up to $300.0 million of its outstanding common stock (the 2017 Repurchase Program). During the third quarter of 2018, Quanta’s board of directors approved an additional stock repurchase program that authorizes Quanta to purchase, from time to time through June 30, 2021, up to $500.0 million of its outstanding common stock (the 2018 Repurchase Program). Repurchases under these programs can be made in open market and privately negotiated transactions. During the three and nine months ended September 30, 2018, Quanta repurchased 0.7 million and 6.3 million shares of its common stock in the open market at a cost of $23.8 million and $217.7 million under the 2017 Repurchase Program. During 2017, Quanta repurchased 1.4 million shares of its common stock in the open market at a cost of $50.0 million under the 2017 Repurchase Program. Non-controlling Interests Quanta holds interests in various entities through both joint venture entities that provide infrastructure services under specific customer contracts, either directly or through subcontracting relationships, and other equity investments in partially owned entities that own and operate certain infrastructure assets, including investments that may be entered into through the partnership structure Quanta has formed with certain infrastructure investors. Quanta has determined that certain of these joint ventures where Quanta provides the majority of the infrastructure services, which management believes most significantly influences the economic performance of such joint ventures, are VIEs. Management has concluded that Quanta is the primary beneficiary of these joint ventures and has accounted for each on a consolidated basis. The other parties’ equity interests in these joint ventures have been accounted for as “Non-controlling interests” in Quanta’s condensed consolidated balance sheets. Net income attributable to the other participants in the amounts of $0.3 million and $0.5 million for the three months ended September 30, 2018 and 2017 and $1.7 million and $1.2 million for the nine months ended September 30, 2018 and 2017 has been accounted for as a reduction of net income in deriving “Net income attributable to common stock” in Quanta’s condensed consolidated statements of operations. The carrying amount of the investments held by Quanta in all of its VIEs was $9.7 million and $7.8 million at September 30, 2018 and December 31, 2017. The carrying amount of investments held by the non-controlling interests in these VIEs at September 30, 2018 and December 31, 2017 was $1.4 million and $4.1 million. During the three months ended September 30, 2018 and 2017, net distributions to non-controlling interests were $1.3 million and $0.4 million. During the nine months ended September 30, 2018 and 2017, net distributions to non-controlling interests were $2.9 million and $1.8 million. There were also discharges of notes receivable from a joint venture partner of $0.5 million and $1.4 million during the three and nine months ended September 30, 2018. There were no other changes in equity as a result of transfers to/from the non-controlling interests during the three and nine months ended September 30, 2018 or 2017. See Note 10 for further disclosures related to Quanta’s joint venture arrangements.
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Equity-Based Compensation |
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-Based Compensation | EQUITY-BASED COMPENSATION: Stock Incentive Plans On May 19, 2011, Quanta’s stockholders approved the 2011 Omnibus Equity Incentive Plan (the 2011 Plan). The 2011 Plan provides for the award of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock, RSUs, stock bonus awards, performance compensation awards (including performance units and cash bonus awards) or any combination of the foregoing. The purpose of the 2011 Plan is to attract and retain key personnel and provide participants with additional performance incentives by increasing their proprietary interest in Quanta. Employees, directors, officers, consultants or advisors of Quanta or its affiliates are eligible to participate in the 2011 Plan, as are prospective employees, directors, officers, consultants or advisors of Quanta who have agreed to serve Quanta in those capacities. An aggregate of 13,300,000 shares of Quanta common stock may be issued pursuant to awards granted under the 2011 Plan. Quanta also has a Restricted Stock Unit Plan (the RSU Plan), pursuant to which RSUs may be awarded to certain employees and consultants of Quanta’s Canadian operations. The 2011 Plan and the RSU Plan are referred to as the Plans. RSUs to be Settled in Common Stock During each of the three months ended September 30, 2018 and 2017, Quanta granted 0.2 million of RSUs to be settled in common stock under the 2011 Plan with weighted average grant date fair values of $33.73 and $32.76. During the nine months ended September 30, 2018 and 2017, Quanta granted 1.5 million and 1.4 million of RSUs to be settled in common stock under the 2011 Plan with weighted average grant date fair values of $34.43 and $37.20. The grant date fair value for RSUs to be settled in common stock is based on the market value of Quanta common stock on the date of grant. RSU awards to be settled in common stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in equal installments over a two-year, three-year or five-year period following the date of grant. Holders of RSUs to be settled in common stock are entitled to receive a cash dividend equivalent payment equal to any cash dividend payable on account of common shares. During the three months ended September 30, 2018 and 2017, vesting activity consisted of nominal amounts of RSUs settled in common stock with approximate fair values at the time of vesting of $1.5 million and $1.1 million. During the nine months ended September 30, 2018 and 2017, vesting activity consisted of 1.4 million and 1.5 million of RSUs settled in common stock with an approximate fair value at the time of vesting of $47.7 million and $55.4 million. During the three months ended September 30, 2018 and 2017, Quanta recognized $10.4 million and $9.9 million of non-cash stock compensation expense related to RSUs to be settled in common stock. During the nine months ended September 30, 2018 and 2017, Quanta recognized $32.4 million and $31.2 million of non-cash stock compensation expense related to RSUs to be settled in common stock. Such expense is recorded in selling, general and administrative expenses. As of September 30, 2018, there was $51.9 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 1.96 years. Performance Units to be Settled in Common Stock Performance units awarded pursuant to the 2011 Plan provide for the issuance of shares of common stock upon vesting. These performance units cliff-vest at the end of a three-year performance period based on achievement of certain performance metrics established by Quanta’s compensation committee, including company performance goals and, with respect to certain awards, Quanta’s total shareholder return as compared to a predetermined group of peer companies. The final number of shares of common stock issuable upon vesting of performance units can range from 0% to 200% of the number of performance units initially granted, depending on the level of achievement, as determined by Quanta’s compensation committee. During the three months ended September 30, 2018 and 2017, Quanta did not grant any performance units to be settled in common stock under the 2011 Plan. During each of the nine months ended September 30, 2018 and 2017, Quanta granted 0.3 million performance units to be settled in common stock under the 2011 Plan with a weighted average grant date fair value of $12.24 and $17.63 per unit. The grant date fair values for awards of performance units with market-based metrics, which were granted in the nine months ended September 30, 2018 and 2017, were determined using a Monte Carlo simulation valuation methodology using the following key inputs:
Quanta recognizes expense related to performance units with market-based metrics based on the probability of achievement of the underlying performance metrics, multiplied by the portion of the three-year period that has expired and the fair value of the total number of shares of common stock that Quanta anticipates will be issued based on such achievement. Quanta recognizes expense related to performance units without market-based metrics based on the portion of the three-year period that has expired multiplied by the fair value of the total number of shares of common stock that Quanta anticipates will be issued. During the three months ended September 30, 2018 and 2017, Quanta recognized $1.2 million and $1.0 million in compensation expense associated with performance units. During the nine months ended September 30, 2018 and 2017, Quanta recognized $7.4 million and $3.2 million in compensation expense associated with performance units. Such expense is recorded in selling, general and administrative expenses. During each of the three months ended September 30, 2018 and 2017, no performance units vested, and no shares of common stock were issued in connection with performance units. During each of the nine months ended September 30, 2018 and 2017, 0.1 million performance units vested, and 0.1 million shares of common stock were issued in connection with performance units. RSUs to be Settled in Cash Certain RSUs granted by Quanta under the Plans are settled solely in cash. These cash-settled RSUs are intended to provide plan participants with cash performance incentives that are substantially equivalent to the risks and rewards of equity ownership in Quanta, typically vest in equal installments over a two-year or three-year period following the date of grant, and are subject to forfeiture under certain conditions, primarily termination of service. Additionally, subject to certain restrictions, Quanta’s non-employee directors may elect to cash settle a portion of their RSU awards, which generally vest upon conclusion of the director service year. For RSUs settled in cash, the holders receive for each vested RSU an amount in cash equal to the fair market value of one share of Quanta common stock on the settlement date, as specified in the applicable award agreement. Compensation expense related to RSUs to be settled in cash was $1.2 million and $2.3 million for the three months ended September 30, 2018 and 2017 and $4.0 million and $6.2 million for the nine months ended September 30, 2018 and 2017. Such expense is recorded in selling, general and administrative expenses. RSUs that are anticipated to be settled in cash are not included in the calculation of earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid $0.1 million and $1.4 million to settle liabilities related to cash-settled RSUs in the three months ended September 30, 2018 and 2017 and $6.1 million and $7.5 million to settle liabilities related to cash-settled RSUs in the nine months ended September 30, 2018 and 2017. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $2.5 million and $4.6 million at September 30, 2018 and December 31, 2017.
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES: Investments in Affiliates and Other Entities As described in Note 8, Quanta holds investments in various entities, including joint venture entities that provide infrastructure services under specific customer contracts and partially owned entities that own and operate certain infrastructure assets constructed by Quanta. Losses incurred by these entities are generally shared ratably based on the percentage ownership of the participants in these structures. However, in Quanta’s joint venture structures that provide infrastructure services, each participant is typically jointly and severally liable for all of the obligations of the joint venture entity pursuant to the contract with the customer, as a general partner or through a parent guarantee and, therefore, can be liable for full performance of the contract with the customer. In circumstances where Quanta’s participation in a joint venture qualifies as a general partnership, the joint venture partners are jointly and severally liable for all of the obligations of the joint venture, including obligations owed to the customer or any other person or entity. Quanta is not aware of circumstances that would lead to future claims against it for material amounts in connection with these joint and several liabilities. Additionally, in the joint venture structures entered into by Quanta, typically each party indemnifies the other party for any liabilities incurred in excess of the liabilities such other party is obligated to bear under the respective joint venture agreement or in accordance with the scope of work subcontracted to each party. It is possible, however, that Quanta could be required to pay or perform obligations in excess of its share if the other party is unable or refuses to pay or perform its share of the obligations. Quanta is not aware of circumstances that would lead to future claims against it for material amounts that would not be indemnified. As described in Note 2, Quanta has also formed a partnership with select infrastructure investors that provides up to $1.0 billion of capital, including approximately $80.0 million from Quanta, available to invest in certain specified infrastructure projects through August 2024. Additionally, as of September 30, 2018, Quanta had outstanding capital commitments associated with investments in unconsolidated affiliates related to planned oil and gas infrastructure projects of $14.8 million, of which $14.0 million is expected to be paid in 2018. The remaining $0.8 million of these capital commitments is anticipated to be paid by May 31, 2022. During 2014, a limited partnership in which Quanta is a partner was selected for an engineering, procurement and construction (EPC) electric transmission project in Canada to construct approximately 500 kilometers of transmission line and two 500 kV substations. A subsidiary of Quanta, engaged by the limited partnership, is contracted to provide turnkey EPC services for the entire project. As of September 30, 2018, Quanta made aggregate contributions to this unconsolidated affiliate of $65.0 million, received $62.7 million as a return of capital and had outstanding additional capital commitments associated with this project of $24.5 million, which are anticipated to be paid in 2019. Leases Quanta leases certain land, buildings and equipment under non-cancelable lease agreements, including related party leases. The terms of these agreements vary from lease to lease, and certain leases include renewal options and escalation clauses. The following schedule shows the future minimum lease payments under these leases as of September 30, 2018 (in thousands):
Rent expense related to operating leases was $77.4 million and $67.4 million for the three months ended September 30, 2018 and 2017 and $229.2 million and $200.2 million for the nine months ended September 30, 2018 and 2017. Quanta has guaranteed the residual value on certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of termination of such leases. At September 30, 2018, the maximum guaranteed residual value was $668.2 million. Quanta believes that no significant payments will be made as a result of the difference between the fair market value of the leased equipment and the guaranteed residual value; however, there can be no assurance that significant payments will not be required in the future. Contingent Consideration Liabilities As discussed in further detail in Note 2, Quanta is obligated to pay contingent consideration amounts to the former owners of certain acquired businesses in the event that such acquired businesses achieve specified performance objectives. As of September 30, 2018 and December 31, 2017, the estimated fair value of Quanta’s contingent consideration liabilities totaled $74.3 million and $65.7 million. Committed Expenditures Quanta has capital commitments for the expansion of its vehicle fleet in order to accommodate manufacturer lead times on certain types of vehicles. As of September 30, 2018, $30.2 million of production orders were issued with expected delivery dates in 2018, and $1.3 million of production orders were issued with expected delivery dates in 2019. Although Quanta has committed to purchase these vehicles at the time of their delivery, Quanta anticipates that the majority of these orders will be assigned to third party leasing companies and made available to Quanta under certain of its master equipment lease agreements, thereby releasing Quanta from its capital commitments. Legal Proceedings Quanta is from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract and/or property damages, employment-related damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, Quanta records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, Quanta discloses matters for which management believes a material loss is at least reasonably possible. Except as otherwise stated below, none of these proceedings are expected to have a material adverse effect on Quanta’s consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation. Maurepas Project Dispute. During the third quarter of 2017, Maurepas Pipeline, LLC (Maurepas) notified QPS Engineering, LLC (QPS), a subsidiary of Quanta, of Maurepas’ assertion of a claim for liquidated damages allegedly arising from delay in mechanical completion of a project in Louisiana. Quanta disputes the claim and believes that QPS is not responsible for liquidated damages under the contract terms. The matter remains subject to contractual dispute resolution measures; however, either party may choose to institute a formal legal proceeding upon completion of such measures. If, upon final resolution of this matter, Quanta is unsuccessful, any such liquidated damages would be recorded by QPS as additional costs on the project, and Quanta believes the range of reasonably possible loss could be up to $22.0 million, which is the maximum liability for liquidated damages pursuant to the contract terms. In July and August 2018, Quanta received notice from Maurepas claiming certain warranty defects on the project. Quanta is evaluating the claimed defects, and based on the information currently available, no estimate of possible loss related to these claims can be determined. Lorenzo Benton v. Telecom Network Specialists, Inc., et al. In June 2006, plaintiff Lorenzo Benton filed a class action complaint in the Superior Court of California, County of Los Angeles, alleging various wage and hour violations against Telecom Network Specialists (TNS), a former subsidiary of Quanta. Quanta retained liability associated with this matter pursuant to the terms of Quanta’s sale of TNS in December 2012. Benton represents a class of workers that includes all persons who worked on certain TNS projects, including individuals that TNS retained through numerous staffing agencies. The plaintiff class in this matter is seeking damages for unpaid wages, penalties associated with the failure to provide meal and rest periods and overtime wages, interest and attorneys’ fees. In January 2017, the trial court granted a summary judgment motion filed by the plaintiff class and found that TNS was a joint employer of the class members and that it failed to provide adequate meal and rest breaks and failed to pay overtime wages. In February 2018, a hearing was held on a final motion for summary judgment on damages filed by the plaintiff class seeking approximately $11.1 million for its claims; however, a final determination regarding the amount of damages was not made. Quanta believes the court’s decision on liability is not supported by controlling law and continues to contest its liability and the damage calculation asserted by the plaintiff class in this matter. Additionally, in November 2007, TNS filed cross complaints for indemnity and breach of contract against the staffing agencies, which employed many of the individuals in question. In December 2012, the trial court heard cross-motions for summary judgment filed by TNS and the staffing agencies pertaining to TNS’s demand for indemnity. The court denied TNS’s motion and granted the motions filed by the staffing agencies; however, the California Appellate Court reversed the trial court’s decision in part and instructed the trial court to reconsider its ruling. In February 2017, the court denied a new motion for summary judgment filed by the staffing companies and has since stated that the staffing companies would be liable to TNS for any damages owed to the class members that the staffing companies employed. The final amount of liability, if any, payable in connection with this matter remains the subject of pending litigation and will ultimately depend on various factors, including the outcome of Quanta’s appeal of the trial court’s ruling on liability, the final determination with respect to any damages owed by Quanta, and the solvency of the staffing agencies. Based on review and analysis of the trial court’s rulings on liability, Quanta does not believe, at this time, that it is probable this matter will result in a material loss. However, if Quanta is unsuccessful in this litigation and the staffing agencies are unable to fund damages owed to class members, Quanta believes the range of reasonably possible loss to Quanta upon final resolution of this matter could be up to approximately $11.1 million, plus attorneys’ fees and expenses of the plaintiff class. Concentrations of Credit Risk Quanta is subject to concentrations of credit risk related primarily to its cash and cash equivalents and its net receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and contract assets net of advanced billings with the same customer. Substantially all of Quanta’s cash and cash equivalents are managed by what it believes to be high credit quality financial institutions. In accordance with Quanta’s investment policies, these institutions are authorized to invest cash and cash equivalents in a diversified portfolio of what Quanta believes to be high quality cash and cash equivalent investments, which consist primarily of interest-bearing demand deposits, money market investments, money market mutual funds and investment grade commercial paper with original maturities of three months or less. Although Quanta does not currently believe the principal amount of these cash and cash equivalents is subject to any material risk of loss, changes in economic conditions could impact the interest income Quanta receives from these investments. In addition, Quanta grants credit under normal payment terms, generally without collateral, to its customers, which include electric power and oil and gas companies, governmental entities, general contractors, and builders, owners and managers of commercial and industrial properties located primarily in the United States, Canada, Australia and Latin America. Consequently, Quanta is subject to potential credit risk related to changes in business and economic factors throughout these locations, which may be heightened as a result of uncertain economic and financial market conditions that have existed in recent years. However, Quanta generally has certain statutory lien rights with respect to services provided. Some of Quanta’s customers have experienced significant financial difficulties in the past, and customers may experience financial difficulties in the future. These difficulties expose Quanta to increased risk related to collectability of billed and unbilled receivables and contract assets for services Quanta has performed. At September 30, 2018 and December 31, 2017, no customer represented 10% or more of Quanta’s consolidated net receivable position. No customer represented 10% or more of Quanta’s consolidated revenues for the three and nine months ended September 30, 2018, and one customer within Quanta’s Oil and Gas Infrastructure Services segment accounted for approximately 10% of Quanta’s consolidated revenues for the three and nine months ended September 30, 2017. Insurance As discussed in Note 2, Quanta is insured for employer’s liability, workers’ compensation, auto liability, general liability and group health claims. As of September 30, 2018 and December 31, 2017, the gross amount accrued for insurance claims totaled $245.5 million and $254.7 million, with $186.9 million and $200.0 million considered to be long-term and included in “Insurance and other non-current liabilities.” Related insurance recoveries/receivables as of September 30, 2018 and December 31, 2017 were $36.9 million and $50.4 million, of which $0.3 million and $0.4 million were included in “Prepaid expenses and other current assets” and $36.6 million and $50.0 million were included in “Other assets, net.” Project Insurance Claim. While performing a horizontal directional drill and installing an underground gas pipeline, a subsidiary of Quanta experienced a partial collapse of a borehole. Quanta is working with its customer to mitigate the impact of the incident and develop a plan to complete the project. The customer agreed to obtain and has procured insurance coverage for the project, with the Quanta subsidiary as an additional insured. Quanta believes the incident is covered under such insurance and is working collaboratively with the customer to prepare and submit an insurance claim to the customer’s insurance carrier. To the extent such claim is not successful, Quanta could pursue contractual relief from the customer or seek recovery under its own insurance policies. As of September 30, 2018, Quanta had recorded an insurance receivable of $11.3 million, which represents management’s estimate of the amount of costs incurred through such date that are probable of recovery. Quanta anticipates recording additional insurance recovery in future periods as additional mitigation costs are incurred. The plan to mitigate the incident is not final, may change and will be subject to the inherent risks associated with underground pipeline installation, which could cause the estimated costs to mitigate the incident to increase materially. To the extent Quanta is unsuccessful in realizing insurance or contractual recoveries, additional charges would be required. See Revenue Recognition - Contract Estimates in Note 2 for additional information. Letters of Credit Certain of Quanta’s vendors require letters of credit to ensure reimbursement for amounts they are disbursing on Quanta’s behalf, such as to beneficiaries under its insurance programs. In addition, from time to time, certain customers require Quanta to post letters of credit to ensure payment of subcontractors and vendors and guarantee performance under contracts. Such letters of credit are generally issued by a bank or similar financial institution, typically pursuant to Quanta’s senior secured credit facility. Each letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit if the holder claims that Quanta has failed to perform specified actions. If this were to occur, Quanta would be required to reimburse the issuer of the letter of credit. Depending on the circumstances of such a reimbursement, Quanta may also be required to record a charge to earnings for the reimbursement. Quanta does not believe it is likely that any material claims will be made under a letter of credit in the foreseeable future. As of September 30, 2018, Quanta had $449.9 million in outstanding letters of credit and bank guarantees under its senior secured credit facility securing its casualty insurance program and various contractual commitments. These are irrevocable stand-by letters of credit with maturities generally expiring at various times throughout 2018 and 2019. Quanta expects to renew the majority of the letters of credit related to the casualty insurance program for subsequent one-year periods upon maturity. Performance Bonds and Parent Guarantees In certain circumstances, Quanta is required to provide performance bonds in connection with its contractual commitments. Quanta has indemnified its sureties for any expenses paid out under these performance bonds. These performance bonds expire at various times ranging from mechanical completion of the related projects to a period extending beyond contract completion in certain circumstances, and as such a determination of maximum potential amounts outstanding requires the use of certain estimates and assumptions. Such amounts can also fluctuate from period to period based upon the mix and level of Quanta’s bonded operating activity. As of September 30, 2018, the total amount of the outstanding performance bonds was estimated to be approximately $3.1 billion. Quanta’s estimated maximum exposure as it relates to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each of its commitments under the performance bonds generally extinguishes concurrently with the expiration of its related contractual obligation. The estimated cost to complete these bonded projects was approximately $791 million as of September 30, 2018. Additionally, from time to time, Quanta guarantees the obligations of its wholly owned subsidiaries, including obligations in connection with certain contracts with customers, lease obligations, joint venture arrangements and, in some states, contractors’ licenses. Quanta is not aware of any material obligations for performance or payment asserted against it under any of these guarantees. Employment Agreements Quanta has various employment agreements with certain executives and other employees, which provide for compensation, other benefits and, under certain circumstances, severance payments and post-termination equity-related benefits. Certain employment agreements also contain clauses that become effective upon a change in control of Quanta, and Quanta may be obligated to pay certain amounts to such employees upon the occurrence of any of the defined change in control events. 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. From time to time, Quanta is a party to grievance actions based on claims arising out of the collective bargaining agreements. The agreements require the operating units to pay specified wages, provide certain benefits to 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 any time and the need for union resources in connection with those projects. Therefore, Quanta is unable to accurately predict its union employee payroll and the amount of the resulting multiemployer pension plan contribution obligations for future periods. The Pension Protection Act of 2006 also added special funding and operational rules generally applicable to plan years beginning after 2007 for multiemployer plans that are classified as “endangered,” “seriously endangered” or “critical” status based on multiple factors (including, for example, the plan’s funded percentage, cash flow position and whether it is projected to experience a minimum funding deficiency). Plans in these classifications must adopt measures to improve their funded status through a funding improvement or rehabilitation plan, as applicable, which may require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to retiree benefits. Certain plans to which Quanta contributes or may contribute in the future are in “endangered,” “seriously endangered” or “critical” status. The amount of additional funds, if any, that Quanta may be obligated to contribute to these plans in the future cannot be reasonably estimated due to uncertainty of the future levels of work that require the specific use of union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans. Quanta may be subject to additional liabilities imposed by law as a result of its participation in multiemployer defined benefit pension plans. For example, the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, imposes certain liabilities upon an employer who is a contributor to a multiemployer pension plan if the employer withdraws from the plan or the plan is terminated or experiences a mass withdrawal. These liabilities include an allocable share of the unfunded vested benefits in the plan for all plan participants, not merely the benefits payable to a contributing employer’s own retirees. As a result, participating employers may bear a higher proportion of liability for unfunded vested benefits if other participating employers cease to contribute or withdraw, with the reallocation of liability being more acute in cases when a withdrawn employer is insolvent or otherwise fails to pay its withdrawal liability. Quanta is not aware of any material amounts of withdrawal liability that have been incurred or asserted and that remain outstanding as a result of a withdrawal by Quanta from a multiemployer defined benefit pension plan. Indemnities Quanta generally indemnifies its customers for the services it provides under its contracts, as well as other specified liabilities, which may subject Quanta to indemnity claims and liabilities and related litigation. Additionally, in connection with certain acquisitions and dispositions, Quanta has indemnified various parties against specified liabilities that those parties might incur in the future. The indemnities under acquisition or disposition agreements are usually contingent upon the other party incurring liabilities that reach specified thresholds. As of September 30, 2018, except as otherwise set forth above in Legal Proceedings, Quanta does not believe any material liabilities for claims exist against it in connection with any of these indemnity obligations. In the normal course of Quanta’s acquisition transactions, Quanta obtains rights to indemnification from the sellers or former owners of acquired businesses for certain risks, liabilities and obligations arising from their prior operations, such as performance, operational, safety, workforce or tax issues, some of which Quanta may not have discovered during due diligence. However, the indemnities may not cover all of Quanta’s exposure for such pre-acquisition matters, and the indemnitors may be unwilling or unable to pay the amounts owed to Quanta. Accordingly, Quanta may incur expenses for which it is not reimbursed. Quanta is currently in the process of negotiating certain pre-acquisition obligations associated with non-U.S. payroll taxes that may be due from a business acquired by Quanta in 2013. As of September 30, 2018, Quanta had recorded $11.4 million as its estimate of the pre-acquisition tax obligations and a corresponding indemnification asset, as management expects to recover from the indemnity counterparties any amounts that Quanta may be required to pay in connection with any such obligations.
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Segment Information |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Information | SEGMENT INFORMATION: 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 and are 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 projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, Quanta performs joint trenching projects to install distribution lines for electric power and natural gas customers. In addition, Quanta’s integrated operations and common administrative support for its operating units require that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs, such as facility costs, indirect operating expenses including depreciation, and general and administrative costs. Certain corporate costs are not allocated and include payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs and amortization related to intangible assets. Summarized financial information for Quanta’s reportable segments is presented in the following table (in thousands):
Separate measures of Quanta’s assets and cash flows by reportable segment, including capital expenditures, are not produced or utilized by management to evaluate segment performance. Quanta’s fixed assets, which are held at the operating unit level, include operating machinery, equipment and vehicles, as well as office equipment, buildings and leasehold improvements, and are used on an interchangeable basis across its reportable segments. As such, for reporting purposes, total depreciation expense is allocated each quarter among Quanta’s reportable segments based on the ratio of each reportable segment’s revenue contribution to consolidated revenues. Foreign Operations During the three months ended September 30, 2018 and 2017, Quanta derived $667.6 million and $653.1 million of its revenues from foreign operations. During the nine months ended September 30, 2018 and 2017, Quanta derived $1.84 billion and $1.83 billion of its revenues from foreign operations. Of Quanta’s foreign revenues, 78% and 80% were earned in Canada during the three months ended September 30, 2018 and 2017 and 75% and 81% were earned in Canada during the nine months ended September 30, 2018 and 2017. In addition, Quanta held property and equipment of $321.6 million and $330.4 million in foreign countries, primarily Canada, as of September 30, 2018 and December 31, 2017.
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Supplemental Cash Flow Information |
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| Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Information | SUPPLEMENTAL CASH FLOW INFORMATION: The net effects of changes in operating assets and liabilities, net of non-cash transactions, on cash flows from operating activities are as follows (in thousands):
A reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts shown in the statements of cash flows are as follows (in thousands).
Restricted cash includes any cash that is legally restricted as to withdrawal or usage. Additional supplemental cash flow information is as follows (in thousands):
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Subsequent Event |
9 Months Ended |
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Sep. 30, 2018 | |
| Subsequent Events [Abstract] | |
| Subsequent Event | SUBSEQUENT EVENT: Senior Secured Credit Facility Amendment On October 10, 2018, Quanta entered into an amendment to the amended and restated credit agreement for its senior secured credit facility, which, among other things, (i) increased the amount of revolving commitments thereunder by $175.0 million, resulting in an aggregate revolving credit facility of up to $1.99 billion, and (ii) provided for a new term loan facility with total term loan commitments of $600.0 million. After giving effect to the amendment, the aggregate amount of the credit facilities provided for under the credit agreement is $2.59 billion. In addition, subject to the conditions specified in the credit agreement, Quanta has the option to increase such amount, in the form of revolving loan or term loan commitments, by up to an additional $400.0 million, from time to time, upon receipt of additional commitments from new or existing lenders. Both the revolving credit facility and the term loan facility mature on October 31, 2022. The amendment also increased the amount of the revolving credit facility that may be used for swing line loans in Australian dollars from $30.0 million to $50.0 million and increased the threshold amount for cross-defaults to certain debt instruments and for certain other purposes from $100.0 million to $150.0 million. On October 10, 2018, Quanta borrowed the full amount of the term loan facility and used all of such proceeds to repay outstanding borrowings under the revolving credit facility. Pursuant to the amendment, amounts borrowed under the term loan facility will bear interest, at Quanta’s option, at a rate equal to either (i) the Eurocurrency Rate plus 1.125% to 1.875%, as determined based on Quanta’s Consolidated Leverage Ratio, or (ii) the Base Rate plus 0.125% to 1.000%, as determined based on Quanta’s Consolidated Leverage Ratio. Quanta is required to make quarterly amortization payments of $7.5 million on the last business day of each March, June, September and December, beginning in December 2018. The aggregate principal amount of all term loans outstanding on the maturity date must also be paid on such date; however, Quanta may voluntarily prepay these term loan borrowings from time to time, in whole or in part, without premium or penalty. For additional information on the credit agreement, see Debt Obligations - Senior Secured Credit Facility in Note 7.
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Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of Consolidation | Principles of ConsolidationThe condensed consolidated financial statements of Quanta include the accounts of Quanta Services, Inc. and its wholly owned subsidiaries, which are also referred to as its operating units. The condensed consolidated financial statements also include the accounts of certain of Quanta’s investments in joint ventures, which are either consolidated or proportionately consolidated, as discussed in the following summary of significant accounting policies. 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 U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (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 consolidated subsidiaries included in Quanta’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 28, 2018.
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| Reclassifications | ReclassificationsQuanta reclassified certain prior period amounts related to restricted cash and proceeds from the settlement of insurance claims related to property and equipment in the accompanying condensed consolidated statements of cash flows to conform to the current period presentation under recently adopted accounting updates. See Note 3 for further details regarding these updates. Certain reclassifications have also been made to Quanta’s condensed consolidated statements of operations for 2017 to conform to classifications for 2018. Additionally, the amounts previously reported as “Costs and estimated earnings in excess of billings on uncompleted contracts” and “Billings in excess of costs and estimated earnings on uncompleted contracts” on Quanta’s condensed consolidated balance sheets have been included in the newly titled “Contract assets” and “Contract liabilities” in accordance with the newly adopted revenue recognition guidance discussed below and in Note 3. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates and Assumptions | Use of Estimates and AssumptionsThe 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, acquisition-related contingent consideration liabilities, liabilities for insurance and other claims and guarantees, multiemployer pension plan withdrawal liabilities, contingent 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 EquivalentsQuanta had cash and cash equivalents of $113.5 million and $138.3 million as of September 30, 2018 and December 31, 2017. 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 September 30, 2018 and December 31, 2017, cash equivalents were $55.2 million and $7.1 million, and consisted primarily of money market investments and money market mutual funds and are discussed further in Fair Value Measurements below. As of September 30, 2018 and December 31, 2017, cash and cash equivalents held in domestic bank accounts were $79.3 million and $83.1 million, and cash and cash equivalents held in foreign bank accounts were $34.2 million and $55.2 million. As of September 30, 2018 and December 31, 2017, cash and cash equivalents held by joint ventures, which are either consolidated or proportionately consolidated, were $12.4 million and $16.7 million, of which $11.9 million and $10.0 million related to domestic joint ventures. Cash and cash equivalents held by the joint ventures are available to support joint venture operations, but Quanta cannot utilize those assets to support its other operations. Quanta generally has no right to the joint ventures’ cash and cash equivalents other than participating in distributions and in the event of dissolution. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Current and Long-Term Accounts and Notes Receivable and Allowance for Doubtful Accounts | Current and Long-Term Accounts Receivable, 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. 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 customers’ businesses or cash flows, which may be impacted by negative economic and market conditions, could affect Quanta’s ability to collect amounts due. As of September 30, 2018 and December 31, 2017, Quanta had allowances for doubtful accounts on current receivables of $6.7 million and $4.5 million. Should anticipated recoveries relating to receivables fail to materialize, Quanta could experience reduced cash flows and losses in excess of current allowances provided. Long-term accounts receivable are included within “Other assets, net” in the accompanying condensed consolidated balance sheets. Some contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts 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 September 30, 2018 and December 31, 2017 were $297.8 million and $300.5 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 September 30, 2018 and December 31, 2017 were $96.1 million and $41.9 million. Quanta recognizes unbilled receivables within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed under the terms of the contract until a later date, 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 revenue recognized for work performed under fixed-price contracts, as these amounts are recorded as “Contract assets.” At September 30, 2018 and December 31, 2017, the balances of unbilled receivables included in “Accounts receivable” were $460.3 million and $303.9 million.
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| Goodwill and Other Intangible Assets | Goodwill Quanta has recorded goodwill in connection with its historical acquisitions of businesses. Upon acquisition, these businesses were either combined into one of Quanta’s existing operating units or managed on a stand-alone basis as an individual operating unit. An annual assessment for impairment is performed for each operating unit that carries a balance of goodwill. Quanta’s operating units are 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 an operating unit at the point in time the divisional designation is made. Goodwill is required to be measured for impairment at the reporting unit level, which represents the operating segment level or one level below the operating segment level for which discrete financial information is available. Quanta has determined that its individual operating units represent its reporting units for the purpose of assessing goodwill impairments. An annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value. The income tax effect associated with an impairment of tax deductible goodwill is also considered in the measurement of the goodwill impairment. Quanta has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative 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. 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 the quantitative 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 annual goodwill impairment assessment is performed in the fourth quarter of its fiscal year, 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 a reporting unit. The quantitative impairment test involves comparing the fair value of each of Quanta’s reporting units with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding charge to “Asset impairment charges” in the consolidated statements of operations. Any goodwill impairment is limited to the total amount of goodwill allocated to that reporting unit. 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 because management believes this method results in the most accurate calculation of fair value. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions, including 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 quantitative impairment test may indicate a fair value that is substantially similar to the reporting unit’s carrying amount. 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 2017, a quantitative fair-value based goodwill impairment analysis indicated that the fair value of each of Quanta’s reporting units, with the exception of two reporting units in its Oil and Gas Infrastructure Services Division, was in excess of its carrying amount. Quanta recorded a $57.0 million non-cash charge in the fourth quarter of 2017 for the impairment of goodwill associated with a reporting unit that provides material handling services, which achieved lower operating margins than anticipated during 2017 and is expected to continue to face a highly competitive environment in its select markets, and a reporting unit that provides marine and offshore services, which has experienced prolonged periods of reduced revenues and operating margins and is expected to continue to experience lower levels of activity in the U.S. Gulf of Mexico and other offshore markets. Assuming a 10% decrease in the fair value of each of Quanta’s reporting units, one additional reporting unit within Quanta’s Oil and Gas Infrastructure Services Division would have had a fair value below its carrying amount. Circumstances such as market declines, unfavorable economic conditions, loss of a major customer or other factors could increase the risk of impairment of goodwill for this reporting unit in future periods. If an operating unit experiences prolonged periods of declining revenues, operating margins or both, it may be at risk of failing the quantitative goodwill impairment test. 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, including the reporting units referenced above, have continued to be negatively impacted by these factors. Goodwill and intangible assets associated with these operating units were $49.4 million and $12.7 million at September 30, 2018. Quanta monitors these conditions and others to determine if it is necessary to perform the quantitative 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 nine months ended September 30, 2018. Although Quanta is not aware of circumstances that would lead to additional goodwill impairments at this time, 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. Other Intangible Assets Quanta’s intangible assets include customer relationships, backlog, trade names, non-compete agreements, patented rights and developed technology and curriculum, which are all subject to amortization, as well as an engineering license, which is not 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 multi-period excess earnings method. This analysis discounts 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 following table presents the significant estimates used by management in determining the fair values of customer relationships associated with acquisitions in the nine months ended September 30, 2018 and year ended December 31, 2017:
Quanta values backlog for acquired businesses as of the acquisition date based upon the contractual nature of the backlog within each service line, discounted to present value. The values of trade names and curriculum are estimated using the relief-from-royalty method of the income approach, which is based on the assumption that in lieu of ownership, a company would be willing to pay a royalty for use of the trade name and curriculum. The value of a non-compete agreement is estimated based on the difference between the present value of the prospective cash flows with the agreement in place and the present value of the prospective cash flows without the agreement in place. The value of the engineering license is based on cash paid to acquire the asset. Quanta amortizes intangible assets subject to amortization based upon the estimated consumption of their economic benefits, or on a straight-line basis if the pattern of economic benefit cannot otherwise be reliably estimated. Intangible assets are reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For instance, a significant change in business climate or a loss of a significant customer, among other things, may trigger the need for interim impairment testing of intangible assets. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. Intangible asset impairments are included within “Asset impairment charges” in the consolidated statements of operations, when applicable. During the fourth quarter of 2017, Quanta recorded an impairment charge of $1.1 million related to a customer relationship intangible asset, which primarily resulted from a strategic decision to restructure a business within a reporting unit in the Oil and Gas Infrastructure Services Division.
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| 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 analyses, engineering, design, procurement, construction and project operation and maintenance. These projects include public-private partnerships and concessions, along with private infrastructure projects such as build, own, operate (and in some cases transfer) and build-to-suit arrangements. As part of this strategy, Quanta formed a partnership with select investors that provides up to $1.0 billion of capital, including approximately $80.0 million from Quanta, available to invest in certain of these infrastructure projects through August 2024. Wholly owned subsidiaries of Quanta serve as the general partner of this partnership and as a separately operated registered investment adviser that manages the invested capital. Quanta determines whether investments involve a variable interest entity (VIE) based on the characteristics of the subject entity. If the entity is determined to be a VIE, then management determines if Quanta is the primary beneficiary of the entity and whether or not consolidation of the VIE is required. The primary beneficiary consolidating the VIE must normally have both (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb significant losses of or the right to receive significant benefits from, the VIE. When Quanta is deemed to be the primary beneficiary, the VIE is consolidated and the other party’s equity interest in the VIE is accounted for as a non-controlling interest. In cases where Quanta determines that it has an undivided interest in the assets, liabilities, revenues and profits of an unincorporated VIE (e.g., a general partnership interest), such amounts are consolidated on a basis proportional to Quanta’s ownership interest in the unincorporated entity. Investments in entities of which Quanta is not the primary beneficiary, but over which Quanta has the ability to exercise significant influence, are accounted for using the equity method of accounting. Quanta’s share of net income or losses from unconsolidated equity investments is reported as equity in earnings (losses) of unconsolidated affiliates, which is included in “Other income (expense)” in the accompanying condensed consolidated statements of operations. Equity investments are reviewed for impairment by assessing whether any decline in the fair value of the investment below the carrying amount 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 equity in earnings (losses) of unconsolidated affiliates. Equity method investments are carried at original cost adjusted for Quanta’s proportionate share of the investees’ income, losses and distributions and are included in “Other assets, net” in Quanta’s accompanying condensed consolidated balance sheets. Quanta has a minority ownership interest in a limited partnership that was selected during 2014 to build, own and operate a new electric transmission line and two substations in Alberta, Canada and has accounted for this interest as an equity-method investment. The limited partnership contracted with a Quanta subsidiary to perform the engineering, procurement and construction (EPC) services for the project, and the Quanta subsidiary recognizes revenue and related cost of services as performance progresses on the project. However, due to Quanta’s ownership interest, a proportional amount of the EPC profit is deferred until the electric transmission line and related substations are constructed and ownership of the assets is deemed to be transferred to the third party customer, which is expected to occur in 2019. The profit deferral has been recorded as a decrease to the equity method investment and as a component of equity in earnings (losses) of unconsolidated affiliates, which is included in “Other income (expense)” in the accompanying condensed consolidated statements of operations. Because the profit deferral is greater than the amount invested, the net amount has been included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. See Notes 8 and 10 for additional disclosures related to investments. During the three months ended September 30, 2018, Quanta acquired a 30% equity interest in a water and gas pipeline infrastructure contractor located in Australia for $22.2 million. This investment includes an option to acquire the remaining equity of the company through 2020 and provides for certain additional earnings and distribution participation rights during a designated 25-month post-investment period, as well as preferential liquidation rights. Quanta’s equity interest has been recorded at cost and will be adjusted for impairment, if any, plus or minus observable changes in the value of the company’s equity.
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| Revenue Recognition | Revenue Recognition As discussed in Note 3, effective January 1, 2018, Quanta adopted new revenue recognition guidance using the modified retrospective transition method, applying the guidance to contracts with customers that were not substantially complete as of such date. Quanta’s financial results for reporting periods after January 1, 2018 are presented under the new guidance, while financial results for prior periods will continue to be reported in accordance with the prior guidance and Quanta’s historical accounting policy. The net cumulative adjustment due to adoption of the new guidance was a $1.8 million reduction to retained earnings as of January 1, 2018, which primarily related to certain contracts that are now accounted for as a single performance obligation but were previously accounted for separately for revenue recognition purposes. Quanta does not anticipate significant changes to the pattern of revenue recognition for contracts with customers and does not believe that the guidance surrounding the identification of contracts and performance obligations or the measurement of variable consideration will have a material impact on revenue recognition under its customary contractual arrangements. Contracts Quanta designs, installs, upgrades, repairs and maintains infrastructure for customers in the electric power, oil and gas and communications industries. These services may be provided pursuant to master service agreements (MSAs), repair and maintenance contracts and fixed price and non-fixed price installation contracts. These contracts are classified into three categories based on how transaction prices are determined and revenue is recognized: unit-based contracts, cost-plus contracts and fixed price contracts. Transaction prices for unit-based contracts are determined on a per unit basis, transaction prices for cost-plus contracts are determined by applying a profit margin to costs incurred on the contracts and transaction prices for fixed price contracts are determined on a lump-sum basis. All of Quanta’s revenues are recognized from contracts with its customers. In addition to the considerations described below, revenue is not recognized unless collectability under the contract is considered probable, the contract has commercial substance and the contract has been approved. Additionally, the contract must contain payment terms, as well as the rights and commitments of both parties. Performance Obligations A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Most of Quanta’s contracts are considered to have a single performance obligation whereby Quanta is required to integrate complex activities and equipment into a deliverable for the customer. For contracts with multiple performance obligations, Quanta allocates the transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The standalone selling price is estimated using the expected costs plus a margin approach for each performance obligation. At September 30, 2018, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was estimated to be approximately $5.29 billion, of which 78.1% was expected to be recognized in the subsequent twelve months. This amount represents management’s estimate of the consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work has not yet begun. For purposes of calculating remaining performance obligations, Quanta includes all estimated revenues attributable to consolidated joint ventures and VIEs, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized and revenues from change orders and claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations were potential orders under MSAs and non-fixed price contracts expected to be completed within one year. Recognition of Revenue Upon Satisfaction of Performance Obligations A transaction price is determined for each contract, and that amount is allocated to each performance obligation within the contract and recognized as revenue when, or as, the performance obligation is satisfied. Quanta generally recognizes revenue over time as it performs its obligations because there is a continuous transfer of control of the deliverable to the customer. Quanta believes that the following methods provide a faithful depiction of when performance obligations under its contracts with customers are satisfied. Under unit-based contracts with an insignificant amount of partially completed units, Quanta recognizes revenue as units are completed based on contractual pricing amounts. Under unit-based contracts with more than an insignificant amount of partially completed units and fixed price contracts, Quanta recognizes revenues as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Under cost-plus contracts, Quanta recognizes revenue on an input basis, as labor hours are incurred, materials are utilized and services are performed. Contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. The majority of the materials associated with Quanta’s work are owner-furnished, and therefore not included in contract revenues and costs. Additionally, Quanta may incur incremental costs to obtain certain contracts, such as selling and marketing costs, bid and proposal costs, sales commissions, and legal fees or initial set-up or mobilization costs, certain of which can be capitalized under the newly adopted revenue recognition guidance. Such costs were not material during the three and nine months ended September 30, 2018. Contract Estimates Actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen or changed circumstances not included in Quanta’s cost estimates or covered by its contracts. The estimating process is based on the professional knowledge and experience of Quanta’s engineers, project managers and financial professionals. Some of the factors that may lead to changes in estimates include concealed or unknown environmental conditions; changes in the cost of equipment, commodities, materials or labor; unanticipated costs or claims due to delays caused by customers or third parties; customer failure to provide required materials or equipment; errors in engineering, specifications or designs; project modifications or contract termination; weather conditions; changes in estimates related to the length of time to complete a performance obligation; and performance and quality issues requiring rework or replacement. These factors, along with other risks inherent in performing services under fixed price contracts, are routinely evaluated by management. Any changes in estimates could result in changes in profitability or losses associated with the related performance obligations. For example, estimated costs for a performance obligation may increase from the original estimate and contractual provisions may not allow for adequate compensation or reimbursement for such additional costs. Changes in estimated revenues, costs and profit are recorded in the period they are determined to be probable and can be reasonably estimated. Changes in cost estimates on certain contracts may result in the issuance of change orders and/or claims, which may be approved or unapproved by the customer. Quanta determines the probability that such costs will be recovered based on, among other things, contractual entitlement, past practices with the customer, specific discussions or preliminary negotiations with the customer or verbal approvals by the customer. Quanta recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reliably estimated. Most of Quanta’s change orders are for services that are not distinct from an existing contract and are accounted for as part of an existing contract on a cumulative catch-up basis. Quanta accounts for a change order as a separate contract if the additional goods or services are distinct from and increase the scope of the contract, and the price of the contract increases by an amount commensurate to Quanta’s standalone selling price for the additional goods or services. As of September 30, 2018 and December 31, 2017, Quanta had recognized revenues of $118.3 million and $144.0 million related to change orders and claims included as contract price adjustments and that were in the process of being negotiated in the normal course of business. These aggregate amounts, which were included in “Contract assets” in the accompanying condensed consolidated balance sheets, represent management’s estimates of additional contract revenues that had been earned and were probable of collection. The amount ultimately realized by Quanta cannot currently be determined but could be significantly higher or lower than the estimated amount. Variable consideration amounts, including performance incentives, early pay discounts and penalties, may also cause changes in contract estimates. The amount of variable consideration is estimated based on the most likely amount that is deemed probable of realization. Contract consideration is adjusted for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty related to the variable consideration is resolved. Changes in contract estimates are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the current estimate differs from the previous estimate. The impact of a change in estimate is measured as the difference between the revenue or gross profit recognized in the prior period as compared to the revenue or gross profit which would have been recognized had the revised estimate been used as the basis of recognition in the prior period. During the three and nine months ended September 30, 2018, revenues were favorably impacted by $47.2 million and $71.0 million as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2018 and December 31, 2017, respectively. Quanta’s operating results for the three months ended September 30, 2018 were favorably impacted by $30.7 million, or 7.2% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2018. Quanta’s operating results for the nine months ended September 30, 2018 were negatively impacted by $4.6 million, or 0.4% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2017. Certain projects were materially impacted by changes to total estimated contract revenues and/or costs during the three and nine months ended September 30, 2018. Quanta successfully executed through project procurement, winter schedule challenges and productivity risks on an electrical transmission project in Canada, resulting in reductions to the estimated total costs necessary to complete the project. These changes in estimates resulted in favorable impacts to gross profit related to work performed in prior periods of $47.1 million and $47.2 million for the three and nine months ended September 30, 2018. Quanta experienced engineering and production delays on an ongoing processing facility construction project in Texas, which resulted in additional estimated construction costs and liquidated damages payable to the customer. These changes in estimates resulted in unfavorable impacts to gross profit related to work performed in prior periods of $18.8 million and $20.6 million during the three and nine months ended September 30, 2018. At September 30, 2018, this project had a contract value of approximately $150 million, was approximately 82% complete and is expected to be completed in the first half of 2019. Quanta also experienced a partial collapse of an underground borehole for a natural gas pipeline project in the northeast United States resulting in additional estimated costs to complete the project. These changes in estimates resulted in unfavorable impacts to gross profit related to work performed in prior periods of $10.8 million and $7.6 million during the three and nine months ended September 30, 2018. See Insurance in Note 10 for additional disclosure related to an estimated insurance recovery associated with this project. Additionally, a natural gas pipeline construction project in the northeast United States experienced weather delays and project performance issues resulting in additional estimated construction costs. These changes in estimates resulted in unfavorable impacts to gross profit related to work performed in prior periods of $6.2 million and $16.4 million during the three and nine months ended September 30, 2018. At September 30, 2018, this project had a contract value of approximately $50 million and was approximately 98% complete. Quanta’s operating results for the three months ended September 30, 2017 were negatively impacted by $2.8 million, or 0.8% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to June 30, 2017. Quanta’s operating results for the nine months ended September 30, 2017 were favorably impacted by $24.4 million, or 2.7% of gross profit, as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2016. Revenues by Category The following tables present Quanta’s revenue disaggregated by geographic location and contract type for the three and nine months ended September 30, 2018 (in thousands):
Contract Assets and Liabilities With respect to Quanta’s contracts, interim payments are typically received as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. As a result, under fixed price contracts the timing of revenue recognition and contract billings results in contract assets and contract liabilities. Contract assets represent revenues recognized in excess of amounts billed for fixed price contracts and are current assets that are transferred to accounts receivable when billed or the billing rights become unconditional. Contract assets are not considered a significant financing component as the intent is to protect the customer in the event Quanta does not perform on its obligations under the contract. Conversely, contract liabilities represent billings in excess of revenues recognized for fixed price contracts. These arise under certain contracts that allow for upfront payments from the customer or contain contractual billing milestones, which result in billings that exceed the amount of revenues recognized for certain periods. Contract liabilities are current liabilities and are not considered a significant financing component, as they are used to meet working capital requirements that are generally higher in the early stages of a contract and protect Quanta from the other party failing to meet its obligations under the contract. Contract assets and liabilities are recorded on a performance obligation basis at the end of each reporting period. Contract assets and liabilities consisted of the following (in thousands):
The increase in contract assets was primarily due to an increase in revenues on various large diameter pipeline projects. The increase in contract liabilities was primarily due to an advanced billing position at September 30, 2018 related to a large diameter pipeline project that had no contract liabilities associated with it at December 31, 2017, partially offset by normal fluctuations in the mix of projects and billing terms. During the three and nine months ended September 30, 2018, Quanta recognized revenue of approximately $32 million and $375 million related to contract liabilities outstanding at December 31, 2017. Quanta recognizes unbilled receivables for non-fixed price contracts within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed until a later date, costs have been incurred but are yet to be billed or if amounts arise from routine lags in billing. Quanta also recognizes unearned revenues for non-fixed price contracts when cash is received prior to recognizing revenues for the related performance obligation. Unearned revenues, which are included in “Accounts payable and accrued expenses,” were $20.0 million and $16.0 million at September 30, 2018 and December 31, 2017. Impairment losses recognized on contract assets were not material for the three and nine months ended September 30, 2018. Practical Expedients and Exemptions Quanta utilizes certain practical expedients and exemptions associated with the new revenue recognition guidance. For example, Quanta elected the modified retrospective transition method, which allowed the guidance to be applied only to contracts that were not considered substantially complete as of January 1, 2018. Additionally, in cases where Quanta has a right to consideration from a customer in an amount that corresponds directly with the value of Quanta’s performance completed to date, Quanta recognizes revenue in the amount to which it has a right to invoice and does not disclose such performance as a remaining performance obligation. Also, contract consideration is not adjusted for the effects of a significant financing component if payment is expected to be collected less than one year from when the services are performed.
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| Income Taxes | Income Taxes Quanta follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded based on future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. Quanta regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs from these estimates, Quanta may not realize deferred tax assets to the extent estimated. Quanta records reserves for income taxes related to certain tax positions 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 these reserves, Quanta assumes that taxing authorities have full knowledge of the position and all relevant facts. Quanta continually reviews exposure to additional tax obligations, and as further information is known or events occur, changes in tax reserves may be recorded. To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and included in the provision for income taxes. As of September 30, 2018, the total amount of unrecognized tax benefits relating to uncertain tax positions was $30.9 million, a decrease from December 31, 2017 of $5.3 million. This decrease resulted primarily from the expiration of the statute of limitations for the 2014 tax year. Quanta and certain subsidiaries remain under examination by various U.S. state and 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 $7.7 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, consolidated statements of operations and consolidated statements of comprehensive income. For example, the Tax Cuts and Jobs Act of 2017 (the Tax Act), among other things, significantly revised the U.S. corporate tax regime and resulted in a reduction of Quanta’s future effective tax rate and a remeasurement of its deferred tax assets and liabilities. While Quanta has substantially completed its provisional analysis of the effects of the Tax Act and recorded a reasonable estimate of such effects, the net one-time benefits and calculation of income tax expense related to the Tax Act may differ, possibly materially, due to, among other things, further refinement of Quanta’s calculations, changes in interpretations and assumptions made, additional regulatory guidance, and actions and related accounting policy decisions resulting from the Tax Act. Quanta will complete its analysis of the Tax Act over the one-year measurement period ending December 22, 2018, and any adjustments during the measurement period will be included within “Net income” as an adjustment to “Provision for income taxes” on Quanta’s consolidated statement of operations in the reporting period when such adjustments are determined. Certain of the pending items and the potential changes to Quanta’s provisional analysis are described in further detail below. The Tax Act imposed a tax on global intangible low-taxed income (GILTI), and it is unclear if GILTI should be included in the period in which it is incurred or whether deferred tax assets and liabilities should be recognized for basis differences expected to reverse as GILTI in future years. Quanta continues to analyze the impacts of the GILTI provision; however, due to the complexity of the new rules, Quanta’s analysis is not yet complete. Accordingly, Quanta has not yet made an accounting policy election related to GILTI. The Tax Act also lowered the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries, limited and eliminated certain tax deductions and created new taxes on certain foreign-sourced earnings. Consequently, for the year ended December 31, 2017, Quanta recorded one-time net tax benefits of $70.1 million, including $85.3 million of tax benefits associated with the remeasurement of U.S. federal deferred tax assets and liabilities based on expected future rates (generally 21%), partially offset by an estimated $15.2 million transition tax on post-1986 earnings and profits of certain foreign subsidiaries. This net tax benefit was Quanta’s provisional estimate, utilizing the information that was available at the time. As permitted by and in accordance with the guidance issued by the SEC and codified by the Financial Accounting Standards Board (FASB), Quanta may adjust its provisional estimates in reporting periods throughout 2018 as it completes its analysis and as more information becomes available, and these adjustments may affect earnings. During the three months ended September 30, 2018, Quanta recorded $5.0 million of additional benefit related to the remeasurement of U.S. federal deferred tax assets and liabilities, as the estimate of such amount was revised in connection with the preparation and filing of Quanta’s 2017 income tax returns . While the remeasurement of U.S. deferred tax assets and liabilities is deemed to be complete at September 30, 2018, Quanta’s accounting for the transition tax has not been finalized. Although Quanta was able to reasonably estimate certain effects of the repatriation transition tax and recorded provisional adjustments based on those estimates, no additional measurement-period adjustments have been made during 2018 because Quanta’s analysis of deferred foreign income is not complete. Quanta expects to complete its accounting within the prescribed measurement period. For the year ended December 31, 2017, an additional one-time tax benefit of $26.7 million was recorded in connection with entity restructuring and recapitalization transactions completed by Quanta, which was partially offset by an $8.5 million decrease in the production activity-related tax benefit that resulted from acceleration of certain deductions into 2017. During the three months ended September 30, 2018, the estimated benefit associated with entity restructuring and recapitalization transactions was decreased by $1.8 million based on actual 2017 earnings and profit balances. |
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| Earnings Per Share | Earnings Per Share Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Exchangeable shares that were issued pursuant to certain of Quanta’s historical acquisitions (as further discussed in Note 8), which are exchangeable on a one-for-one basis with shares of Quanta common stock, have been included in the calculation of weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the portion of the periods that they were outstanding. Additionally, unvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the three and nine months ended September 30, 2018 included 2.6 million and 2.5 million weighted average participating securities. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock for the three and nine months ended September 30, 2017 included 2.3 million and 2.5 million weighted average participating securities. Diluted earnings per share attributable to common stock is computed using the weighted average number of shares of common stock outstanding during the period adjusted for all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalents would be antidilutive.
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| Insurance | 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 manages and maintains a portion of its casualty risk through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs. 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 $0.5 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.
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| Collective Bargaining Agreements | Collective Bargaining AgreementsSome 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 obligations 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, net of estimated forfeitures. The fair value of these awards is generally determined based on the number of shares or units granted and the closing price of Quanta’s common stock on the date of grant, with the exception of performance units with market-based metrics, the fair value of which is determined using a Monte Carlo simulation valuation methodology. An estimate of future forfeitures, based on historical data, is utilized to determine the period expense. Such estimates are subject to change and may impact the value that will ultimately be recognized as compensation expense. The resulting compensation expense for performance unit and time-based RSU awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period, and the resulting compensation expense for performance-based RSU awards is recognized using the graded vesting method over the requisite service period. The compensation expense related to outstanding performance units can also vary from period to period based on changes in the total number of shares of common stock that Quanta anticipates will be issued upon vesting of such performance units. Payments made by Quanta to satisfy employee tax withholding obligations associated with awards settled in common stock are classified as financing cash flows. Compensation expense associated with liability-based awards, such as RSUs that are expected to or may settle in cash, is recognized based on a remeasurement of the fair value of the award at the end of each reporting period. Upon settlement, the holders receive for each RSU an amount in cash equal to the fair market value 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.
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| Functional Currency and Translation of Financial Statements | Functional Currency and Translation of Financial StatementsThe 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, Australia and Latin America, is typically the currency of the country where the foreign operating unit is located and transacts the majority of its activities, including billings, financing, payroll and other expenditures. The treatment of foreign currency translation gains or losses is dependent upon management’s determination of the functional currency, and when preparing its consolidated financial statements, Quanta translates the financial statements of its foreign operating units from their functional currency into U.S. dollars. Statements of operations, comprehensive income and cash flows are translated at average monthly rates, while balance sheets are translated at month-end exchange rates. The translation of the balance sheet results in translation gains or losses, which are included as a separate component of equity under “Accumulated other comprehensive income (loss).” Gains and losses arising from transactions not denominated in functional currencies are included within “Other income (expense)” in the accompanying condensed consolidated statements of operations. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive Income | Comprehensive IncomeComponents 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 ReservesQuanta 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 For disclosure purposes, qualifying assets and liabilities are categorized into three broad levels based on the priority of the inputs used to determine their fair values. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Certain assumptions and other information as they relate to these qualifying assets and liabilities are described below. Contingent Consideration Liabilities. As of September 30, 2018 and December 31, 2017, financial instruments required to be measured at fair value on a recurring basis consisted primarily of Quanta’s liabilities related to contingent consideration associated with certain acquisitions, the payment of which is contingent upon the future performance of the acquired businesses and, if earned, would be payable to the former owners of the acquired businesses. The liabilities recorded represent the estimated fair values of future amounts payable to the former owners, and the fair values are estimated by management based on entity-specific assumptions that are evaluated on an ongoing basis. As of September 30, 2018 and December 31, 2017, the aggregate fair value of these outstanding and unearned contingent consideration liabilities totaled $74.3 million and $65.7 million, which was included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. The fair value of contingent consideration liabilities as of September 30, 2018 was primarily determined using a Monte Carlo simulation valuation methodology based on probability-weighted performance projections and other inputs, including a discount rate and an expected volatility factor for each acquisition. The expected volatility factors ranged from 23.0% to 30.0% based on historical asset volatility of selected guideline public companies. Depending on contingent consideration payment terms, the present value of the estimated payments are discounted based on a risk-free rate and/or Quanta’s cost of debt, ranging from 2.1% to 3.6%.The fair value determinations incorporate significant inputs not observable in the market. Accordingly, the level of inputs used for these fair value measurements is the lowest level (Level 3). Significant changes in any of these assumptions could result in a significantly higher or lower potential liability. Quanta expects a significant portion of these liabilities to be settled by late 2020 or early 2021. The majority of Quanta’s contingent consideration liabilities are subject to a maximum payment amount, which aggregated to $157.3 million as of September 30, 2018. One contingent consideration liability for which the fair value as of September 30, 2018 was $1.0 million is not subject to a maximum payout amount. Quanta’s aggregate contingent consideration liabilities can change due to additional business acquisitions, payments to settle outstanding liabilities, changes in the fair value of amounts owed based on actual and forecasted performance, and foreign currency translation gains or losses. During the three and nine months ended September 30, 2018, acquisitions increased Quanta’s aggregate contingent consideration liabilities by $2.8 million and $16.5 million as of the respective acquisition dates. During the three and nine months ended September 30, 2017, the acquisition of Stronghold increased Quanta’s aggregate contingent consideration liabilities by $51.1 million. During the three and nine months ended September 30, 2018, Quanta recognized net decreases in the fair value of contingent consideration liabilities of $1.4 million and $7.7 million. The change in fair value of contingent consideration liabilities has been reflected in operating income on Quanta’s condensed consolidated statements of operations. Goodwill and Other Intangible Assets. As discussed in the Goodwill and Other Intangible Assets sections within this Note 2 above, Quanta has recorded goodwill and identifiable intangible assets in connection with certain of its historical business acquisitions. Quanta utilizes the fair value premise as the primary basis for its impairment valuation procedures. The Goodwill and Other Intangible Assets sections provide information regarding valuation methods, including the income approach, market approach and cost approach, and assumptions used to determine fair values of these assets based on the appropriateness of each method in relation to the type of asset being valued. Quanta believes that these valuation methods appropriately represent the methods that would be used by other market participants in determining fair value, and periodically engages the services of an independent valuation firm when a new business is acquired to assist management with this valuation process, including assistance with the selection of appropriate valuation methodologies and the development of market-based valuation assumptions. The level of inputs used for these fair value measurements is the lowest level (Level 3). Investments and Financial Instruments. Quanta also uses fair value measurements in connection with the valuation of its investments in private company equity interests and financial 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 recoverable. 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. The level of inputs used for these fair value measurements is the lowest level (Level 3). Other. The carrying amounts of cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair value due to the short-term nature of these instruments. The carrying amount of variable rate debt also approximates fair value. All of Quanta’s cash equivalents were categorized as Level 1 assets at September 30, 2018 and December 31, 2017, as all values were based on unadjusted quoted prices for identical assets in an active market that Quanta has the ability to access. Additionally, during the nine months ended September 30, 2018, Quanta recorded a $3.3 million charge associated with the exchange of a construction barge for an industrial property, and during the nine months ended September 30, 2017, Quanta recorded a $1.9 million charge associated with the planned disposition of the same construction barge, which was not consummated.
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| Adoption of New Accounting Pronouncements and Accounting Standards Not Yet Adopted | Adoption of New Accounting Pronouncements In May 2014, the FASB issued an update that superseded most revenue recognition guidance, as well as certain cost recognition guidance. The update, together with other clarifying updates, 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. The update also requires additional 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, and information about contract balances and performance obligations. Quanta adopted the new revenue recognition guidance using the modified retrospective transition method effective January 1, 2018, applying the guidance to contracts that were not substantially complete as of such date. Quanta’s financial results for reporting periods after January 1, 2018 have been and will be presented under the new guidance, while financial results for prior periods will continue to be reported in accordance with the prior guidance and Quanta’s historical accounting policy. The net cumulative adjustment resulting from adoption was a $1.8 million reduction to retained earnings as of January 1, 2018, which primarily related to certain contracts that are now accounted for as a single performance obligation but were previously accounted for separately for revenue recognition purposes. Quanta has not experienced significant changes to the pattern of revenue recognition for its contracts, the identification of contracts and performance obligations or the measurement of variable consideration. For the three and nine months ended September 30, 2018, the impact related to the adoption of the new revenue recognition guidance on revenues, contract assets and contract liabilities was immaterial. Quanta has also expanded its discussion in Note 2 above to address the quantitative and qualitative disclosure requirements of the new revenue recognition standard. 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. This update requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus observable price changes in orderly transactions for an identical or a similar investment of the same company. Quanta adopted the new standard effective January 1, 2018. Quanta’s equity investments that are within the scope of this update do not have readily determinable fair values. Accordingly, Quanta continues to measure these investments at cost less any impairments and also considers changes resulting from any observable price changes as described above. The new standard is not expected to have a material impact on Quanta’s consolidated financial statements in the near-term based on the equity investments held at the time of adoption. In August 2016, the FASB issued an update intended to standardize the classification of certain transactions on the statements of cash flows. These transactions include contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies and distributions received from equity method investments. The new standard requires application using a retrospective transition method. Quanta adopted this guidance effective January 1, 2018, and the changes did not have a material impact on its consolidated financial statements. In October 2016, the FASB issued an update that requires 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 should be recognized at the time of the transfer. The new guidance does 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. Quanta adopted this guidance effective January 1, 2018 utilizing the modified retrospective method, and the changes did not have a material impact on its consolidated financial statements. 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 guidance requires net cash withdrawn from (deposited to) restricted cash to be removed from investing activities. Additionally, restricted cash balances for each period are included with “Cash and cash equivalents” in order to obtain beginning and ending balances for condensed consolidated statement of cash flow purposes, and any activity between “Cash and cash equivalents” and restricted cash is no longer reported on Quanta’s condensed consolidated statements of cash flows. Quanta adopted this guidance effective January 1, 2018 utilizing the retrospective transition method, and the changes did not have a material impact on its consolidated financial statements. See Note 12 for reconciliations of “Cash and cash equivalents” and restricted cash. In January 2017, the FASB issued an update intended to clarify whether transactions should be accounted for as acquisitions or disposals of assets or businesses. 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 requires, among other things, 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 removes the evaluation of whether a market participant could replace missing elements in order to consider the set of assets and activities a business, provides more stringent criteria for sets without outputs and narrows the definition of output. Quanta adopted this guidance effective January 1, 2018 utilizing the prospective transition method, and the changes did not materially impact its consolidated financial statements. In May 2017, the FASB issued an update providing guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. A modification should be accounted for unless the following characteristics of the award are unchanged: the fair value, the vesting conditions and the classification as an equity instrument or a liability instrument. Quanta adopted this guidance effective January 1, 2018 using the prospective transition method, and the changes did not materially impact its consolidated financial statements. In June 2018, the FASB issued an update that expands the scope of share-based payment accounting to include share-based payment transactions for acquiring goods and services from non-employees. Quanta adopted this guidance effective August 31, 2018, and the change did not materially impact Quanta’s consolidated financial statements. Accounting Standards Not Yet Adopted In February 2016, the FASB issued an update that requires the recognition of operating lease right-of-use assets and the corresponding lease liabilities on the balance sheet. The new standard is effective for interim and annual periods beginning after December 15, 2018. In July 2018, the FASB issued an update that provides entities a choice between the previously required modified retrospective transition method and another transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. While Quanta continues to evaluate the effect of this standard on its consolidated financial statements, it is anticipated that adoption will result in a significant amount of lease right-of-use assets and corresponding lease liabilities being recorded on its consolidated balance sheets. Quanta has established a cross-functional team to implement this standard and is in the process of evaluating arrangements that will be subject to the standard, is implementing software to meet the reporting and disclosure requirements of the standard and is assessing the impact of the standard on its processes and internal controls. The standard is not expected to have a material impact on Quanta’s compliance with the financial covenants under its senior secured credit facility. Quanta will adopt this guidance effective January 1, 2019 and will apply the transition method that allows the recognition of a cumulative-effect adjustment to retained earnings on such date. 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 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. Quanta is currently evaluating the potential impact of this authoritative guidance on its consolidated financial statements and will adopt this guidance effective January 1, 2020. In August 2017, the FASB issued an update that amends and simplifies existing guidance for presenting the economic effects of risk management activities in the financial statements. The update is effective for interim and annual periods beginning after December 15, 2018. The amended presentation and disclosure guidance is required only prospectively, but certain amendments, if applicable, could require a cumulative-effect adjustment. Quanta is evaluating the impact of this new standard on its consolidated financial statements and will adopt the new standard effective January 1, 2019; however, as of September 30, 2018, Quanta had no hedging relationships outstanding. In August 2018, the FASB issued an update that amends certain disclosure requirements related to fair value measurements. Certain disclosure requirements will be removed, such as the valuation processes for Level 3 fair value measurements, and other disclosure requirements will be modified or added, including a new requirement to disclose the range and weighted average (or a more reasonable and rational method to reflect the distribution) of significant unobservable inputs used to develop Level 3 fair value measurements. This update is effective for interim and annual periods beginning after December 15, 2019. Certain amendments, including the disclosure of the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements, should be applied prospectively, while other amendments should be applied retrospectively. Quanta is evaluating the impact of this new standard on its consolidated financial statements and will adopt the new standard effective January 1, 2020. Also in August 2018, the FASB issued an update that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Entities can choose to adopt the new guidance prospectively or retrospectively. This update is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. Quanta does not expect this update to materially impact its consolidated financial statements and will adopt the new standard by January 1, 2020.
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| Acquisitions | These allocations require significant use of estimates and are based on information that was available to management at the time these consolidated financial statements were prepared. Quanta uses a variety of information to estimate fair values, including quoted market prices, carrying amounts and valuation techniques such as discounted cash flows. When deemed appropriate, third-party appraisal firms are engaged to assist in fair value determination of fixed assets, intangible assets and certain other assets and liabilities (in thousands). | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 and are 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 projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, Quanta performs joint trenching projects to install distribution lines for electric power and natural gas customers. In addition, Quanta’s integrated operations and common administrative support for its operating units require that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs, such as facility costs, indirect operating expenses including depreciation, and general and administrative costs. Certain corporate costs are not allocated and include payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs and amortization related to intangible assets.
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Summary of Significant Accounting Policies (Tables) |
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Estimates Used by Management in Determining Fair Values of Intangible Assets | The following table presents the significant estimates used by management in determining the fair values of customer relationships associated with acquisitions in the nine months ended September 30, 2018 and year ended December 31, 2017:
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| Revenue Disaggregated by Geographic Location and Contract Type | The following tables present Quanta’s revenue disaggregated by geographic location and contract type for the three and nine months ended September 30, 2018 (in thousands):
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| Contract Assets and Liabilities | Contract assets and liabilities consisted of the following (in thousands):
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Acquisitions (Tables) |
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Aggregate Consideration Paid or Payable and Allocation Net Assets | The following table summarizes the aggregate consideration paid or payable as of September 30, 2018 for the 2018 acquisitions and 2017 acquisitions and presents the allocation of these amounts to net tangible and identifiable intangible assets based on their estimated fair values as of the respective acquisition dates, inclusive of any purchase price adjustments. These allocations require significant use of estimates and are based on information that was available to management at the time these consolidated financial statements were prepared. Quanta uses a variety of information to estimate fair values, including quoted market prices, carrying amounts and valuation techniques such as discounted cash flows. When deemed appropriate, third-party appraisal firms are engaged to assist in fair value determination of fixed assets, intangible assets and certain other assets and liabilities (in thousands).
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| Estimated Fair Values of Identifiable Intangible Assets and Related Weighted Average Amortization | The following table summarizes the estimated fair values of identifiable intangible assets for the 2018 acquisitions as of the acquisition dates and the related weighted average amortization periods by type (in thousands, except for weighted average amortization periods, which are in years).
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| Unaudited Supplemental Pro Forma Results of Operations | The following unaudited supplemental pro forma results of operations have been provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors (in thousands, except per share amounts):
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Goodwill and Other Intangible Assets (Tables) |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Changes in Goodwill | A summary of changes in Quanta’s goodwill is as follows (in thousands):
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| Other Intangible Assets | Quanta’s intangible assets and the remaining weighted average amortization periods related to Quanta’s intangible assets subject to amortization were as follows (in thousands except for weighted average amortization periods, which are in years):
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| Estimated Future Aggregate Amortization Expense of Intangible Assets | The estimated future aggregate amortization expense of intangible assets subject to amortization as of September 30, 2018 is set forth below (in thousands):
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Per Share Information (Tables) |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic and Diluted Earnings Per Share Attributable to Common Stock | The amounts used to compute basic and diluted earnings per share attributable to common stock for the three and nine months ended September 30, 2018 and 2017 are illustrated below (in thousands):
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Debt Obligations (Tables) |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term Debt Obligations | Quanta’s long-term debt obligations consisted of the following (in thousands):
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| Current Maturities of Long-Term Debt and Short-Term Debt | Quanta’s current maturities of long-term debt and short-term debt consisted of the following (in thousands):
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| Borrowings under Credit Facility and Applicable Interest Rates | Borrowings under the credit facility and the applicable interest rates during the three months ended September 30, 2018 and 2017 were as follows (dollars in thousands):
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Equity-Based Compensation (Tables) |
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Grant Date Fair Value for Awards of Performance Units Inputs | The grant date fair values for awards of performance units with market-based metrics, which were granted in the nine months ended September 30, 2018 and 2017, were determined using a Monte Carlo simulation valuation methodology using the following key inputs:
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Commitments and Contingencies (Tables) |
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Minimum Lease Payments | The following schedule shows the future minimum lease payments under these leases as of September 30, 2018 (in thousands):
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Segment Information (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summarized Financial Information | Summarized financial information for Quanta’s reportable segments is presented in the following table (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Effects of Changes in Operating Assets and Liabilities, Net, on Cash Flows from Operating Activities | The net effects of changes in operating assets and liabilities, net of non-cash transactions, on cash flows from operating activities are as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Cash, Cash Equivalents, and Restricted Cash and Additional Supplemental Cash Flow Information | A reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts shown in the statements of cash flows are as follows (in thousands).
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business and Organization (Detail) |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
Segment
| |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Number of reportable segments | 2 |
Summary of Significant Accounting Policies - Cash and Cash Equivalents (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|---|---|---|---|
| Cash and Cash Equivalents [Line Items] | ||||||
| Cash and cash equivalents | $ 113,524 | $ 120,357 | $ 138,285 | $ 91,532 | $ 99,565 | $ 112,183 |
| Cash equivalents | 55,200 | 7,100 | ||||
| Domestic Bank Accounts | ||||||
| Cash and Cash Equivalents [Line Items] | ||||||
| Cash and cash equivalents | 79,300 | 83,100 | ||||
| Foreign Bank Accounts | ||||||
| Cash and Cash Equivalents [Line Items] | ||||||
| Cash and cash equivalents | 34,200 | 55,200 | ||||
| Investments in Joint Ventures | ||||||
| Cash and Cash Equivalents [Line Items] | ||||||
| Cash and cash equivalents | 12,400 | 16,700 | ||||
| Domestic Joint Ventures | ||||||
| Cash and Cash Equivalents [Line Items] | ||||||
| Cash and cash equivalents | $ 11,900 | $ 10,000 |
Summary of Significant Accounting Policies - Current and Long-Term Accounts Receivable and Notes Receivable and Allowance for Doubtful Accounts (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Allowances for doubtful accounts on current receivable | $ 6,662 | $ 4,465 |
| Current retainage balances | 297,800 | 300,500 |
| Non-current retainage balances | 96,100 | 41,900 |
| Unbilled receivables | $ 460,300 | $ 303,900 |
Summary of Significant Accounting Policies - Goodwill (Detail) |
3 Months Ended | 9 Months Ended |
|---|---|---|
|
Dec. 31, 2017
USD ($)
Reporting_Unit
|
Sep. 30, 2018
USD ($)
division
|
|
| Goodwill And Intangible Assets [Line Items] | ||
| Number of internal divisions | division | 2 | |
| Number of reporting units impacted by impairment charges | Reporting_Unit | 2 | |
| Non-cash charge for impairment of goodwill | $ 57,000,000.0 | $ 0 |
| Decrease in fair value of reporting units considered for impairment calculation | 10.00% | |
| Goodwill | $ 1,868,600,000 | 1,912,139,000 |
| Intangible assets | $ 263,179,000 | 284,411,000 |
| Oil and Gas Infrastructure Services Division | ||
| Goodwill And Intangible Assets [Line Items] | ||
| Number of reporting units with fair values that approximated carrying values after sensitivity of a decrease in fair value | Reporting_Unit | 1 | |
| Goodwill | 49,400,000 | |
| Intangible assets | $ 12,700,000 |
Summary of Significant Accounting Policies - Significant Estimates Used by Management in Determining Fair Values of Customer Relationships Acquired (Detail) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
| Minimum | ||
| Indefinite-lived Intangible Assets [Line Items] | ||
| Discount rates | 20.00% | 17.00% |
| Customer attrition rates | 20.00% | 15.00% |
| Maximum | ||
| Indefinite-lived Intangible Assets [Line Items] | ||
| Discount rates | 27.00% | 25.00% |
| Customer attrition rates | 33.00% | 78.00% |
Summary of Significant Accounting Policies - Other Intangible Assets (Detail) $ in Millions |
3 Months Ended |
|---|---|
|
Dec. 31, 2017
USD ($)
| |
| Accounting Policies [Abstract] | |
| Impairment charges related to customer relationship intangible asset | $ 1.1 |
Summary of Significant Accounting Policies - Investments in Affiliates and Other Entities (Detail) $ in Millions |
3 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Water and Gas Pipeline Infrastructure Contractor | |
| Summary Of Significant Accounting Policies [Line Items] | |
| Equity interest acquired | 30.00% |
| Cash subscription price | $ 22.2 |
| Capital for Infrastructure Projects | |
| Summary Of Significant Accounting Policies [Line Items] | |
| Capital provided to investors | 80.0 |
| Infrastructure Investors Partnership | Capital for Infrastructure Projects | |
| Summary Of Significant Accounting Policies [Line Items] | |
| Capital provided to investors | $ 1,000.0 |
Summary of Significant Accounting Policies - Performance Obligation (Detail) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01 |
Sep. 30, 2018 |
|---|---|
| Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
| Percent of remaining performance obligation expected to be recognized | 78.10% |
| Recognition period for remaining performance obligation | 12 months |
Summary of Significant Accounting Policies - Revenue Disaggregated by Geographic Location and Contract Type (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | $ 2,985,281 | $ 2,609,307 | $ 8,059,205 | $ 6,987,851 |
| Unit-price contracts | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 1,082,858 | 2,714,441 | ||
| Fixed price contracts | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 1,239,666 | 3,497,746 | ||
| Cost-plus contracts | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 662,757 | 1,847,018 | ||
| United States | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 2,317,643 | 6,223,507 | ||
| Canada | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 522,618 | 1,376,149 | ||
| Australia | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 75,055 | 308,392 | ||
| Latin America and Other | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | $ 69,965 | $ 151,157 | ||
Summary of Significant Accounting Policies - Contract Assets and Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Contract assets | $ 680,006 | $ 497,292 |
| Contract liabilities | $ 452,491 | $ 433,387 |
Summary of Significant Accounting Policies - Earnings Per Share (Detail) - shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Accounting Policies [Abstract] | ||||
| Number of shares of common stock received for each exchangeable share (in shares) | 1 | |||
| Weighted average shares outstanding attributable to participating securities (in shares) | 2,600,000 | 2,300,000 | 2,500,000 | 2,500,000 |
Summary of Significant Accounting Policies - Insurance (Detail) |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Accounting Policies [Abstract] | |
| Employer's liability claims subject to deductible per occurrence | $ 1,000,000.0 |
| Worker's compensation claims per occurrence | 5,000,000.0 |
| Auto liability insurance claims deductible | 10,000,000.0 |
| General liability insurance claims deductible | 10,000,000 |
| Employee health care benefit plans subject to deductible per claimant | $ 500,000 |
Summary of Significant Accounting Policies - Stock-Based Compensation (Detail) |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
shares
| |
| Restricted Stock Units to be Settled in Cash | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Amount in cash received for each RSU is equal to the fair value of this number of Quanta common stock shares (in shares) | 1 |
New Accounting Pronouncements (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
|---|---|---|---|
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Retained earnings | $ 2,425,832 | $ 2,191,059 | |
| Accounting Standards Update 2014-09 | Adjustment Due to Adoption of New Guidance | |||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Retained earnings | $ (1,800) |
Acquisitions - Unaudited Supplemental Pro Forma Results of Operations (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Business Combinations [Abstract] | ||||
| Revenues | $ 3,004,888 | $ 2,655,029 | $ 8,126,257 | $ 7,335,868 |
| Gross profit | 433,432 | 369,629 | 1,086,411 | 1,019,842 |
| Selling, general and administrative expenses | 226,017 | 210,503 | 653,444 | 631,254 |
| Amortization of intangible assets | 12,182 | 12,133 | 36,803 | 37,252 |
| Net income | 127,593 | 93,185 | 246,773 | 214,717 |
| Net income attributable to common stock | $ 127,245 | $ 92,649 | $ 245,087 | $ 213,485 |
| Earnings per share attributable to common stock: | ||||
| Basic (in dollars per share) | $ 0.83 | $ 0.58 | $ 1.59 | $ 1.35 |
| Diluted (in dollars per share) | $ 0.83 | $ 0.58 | $ 1.58 | $ 1.34 |
Goodwill and Other Intangible Assets (Detail) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
division
|
Sep. 30, 2017
USD ($)
|
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Number of internal divisions | division | 2 | |||
| Amortization of intangible assets | $ | $ 10,623 | $ 8,979 | $ 31,535 | $ 22,035 |
Goodwill and Other Intangible Assets - Estimated Future Aggregate Amortization Expense of Intangible Assets (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Remainder of 2018 | $ 12,307 | |
| 2019 | 45,333 | |
| 2020 | 43,172 | |
| 2021 | 40,836 | |
| 2022 | 37,307 | |
| Thereafter | 102,456 | |
| Intangible Assets, Net | $ 281,411 | $ 263,179 |
Per Share Information - Basic and Diluted Earnings Per Share Attributable to Common Stock (Detail) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Amounts attributable to common stock: | ||||
| Net income attributable to common stock | $ 124,551 | $ 89,313 | $ 236,530 | $ 201,417 |
| Weighted average shares: | ||||
| Weighted average shares outstanding for basic earnings per share attributable to common stock (in shares) | 152,562 | 157,484 | 154,087 | 155,796 |
| Effect of dilutive unvested non-participating stock-based awards (in shares) | 1,125 | 1,136 | 1,111 | 997 |
| Weighted average shares outstanding for diluted earnings per share attributable to common stock (in shares) | 153,687 | 158,620 | 155,198 | 156,793 |
Per Share Information (Detail) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Earnings Per Share [Abstract] | ||||
| Weighted average shares outstanding attributable to participating securities (in shares) | 2.6 | 2.3 | 2.5 | 2.5 |
Debt Obligations - Long-term Debt Obligations (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Borrowings under senior secured credit facility | $ 952,517 | $ 668,427 |
| Other long-term debt, interest rate of 2.4% | 1,648 | 1,810 |
| Capital leases, interest rates ranging from 2.5% to 3.8% | 1,188 | 1,704 |
| Total long-term debt obligations | 955,353 | 671,941 |
| Less — Current maturities of long-term debt | 2,467 | 1,220 |
| Total long-term debt obligations, net of current maturities | $ 952,886 | $ 670,721 |
| Other Long Term Debt | ||
| Debt Instrument [Line Items] | ||
| Interest rate | 2.40% | 2.40% |
| Capital Leases | Minimum | ||
| Debt Instrument [Line Items] | ||
| Interest rate | 2.50% | 2.50% |
| Capital Leases | Maximum | ||
| Debt Instrument [Line Items] | ||
| Interest rate | 3.80% | 3.80% |
Debt Obligations - Current Maturities of Long-Term Debt and Short-Term Debt (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| Short-term debt | $ 20,344 | $ 0 |
| Current maturities of long-term debt | 2,467 | 1,220 |
| Current maturities of long-term debt and short-term debt | $ 22,811 | $ 1,220 |
Debt Obligations - Borrowings under Current and Prior Credit Facility and Applicable Interest Rates (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Debt Disclosure [Abstract] | ||||
| Maximum amount outstanding under the credit facility during the period | $ 1,003,581 | $ 917,895 | $ 1,053,598 | $ 917,895 |
| Average daily amount outstanding under the credit facility | $ 899,323 | $ 760,418 | $ 836,448 | $ 564,178 |
| Weighted-average interest rate | 3.70% | 2.66% | 3.57% | 2.60% |
Debt Obligations - Other Facilities (Details) - Letters of Credit and Bank Guarantees $ in Millions |
Sep. 30, 2018
USD ($)
|
|---|---|
| Line of Credit Facility [Line Items] | |
| Letters of credit and bank guarantees | $ 449.9 |
| Other Credit Facilities | |
| Line of Credit Facility [Line Items] | |
| Letters of credit and bank guarantees | $ 2.6 |
Equity - Non-controlling Interests (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
| Equity [Abstract] | |||||
| Net income attributable to non-controlling interests | $ 348 | $ 536 | $ 1,686 | $ 1,232 | |
| Carrying value of the investments held by Quanta in variable interest entities | 9,700 | 9,700 | $ 7,800 | ||
| Non-controlling interests | 1,416 | 1,416 | $ 4,058 | ||
| Distributions to non-controlling interests | 1,300 | $ 400 | 2,900 | $ 1,800 | |
| Decrease in notes receivable | $ 500 | $ 1,400 | |||
Equity-Based Compensation - Stock Incentive Plans (Detail) |
Sep. 30, 2018
shares
|
|---|---|
| 2011 Plan | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Aggregate number of shares of common stock that may be issued (in shares) | 13,300,000 |
Equity-Based Compensation - Grant Date Fair Value for Awards of Performance Units Inputs (Detail) - Performance Units - $ / shares |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Feb. 28, 2018 |
Mar. 22, 2017 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Share price (in dollars per share) | $ 34.44 | $ 36.31 | ||
| Expected volatility | 34.00% | 36.00% | ||
| Risk-free interest rate | 2.39% | 1.46% | ||
| Term in years | 2 years 10 months 2 days | 2 years 9 months 10 days | ||
Equity-Based Compensation - RSUs to be Settled in Cash (Detail) - Restricted Stock Units to be Settled in Cash - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Amount in cash received for each RSU is equal to the fair value of this number of Quanta common stock shares (in shares) | 1 | ||||
| Compensation expense related to RSUs to be settled in cash | $ 1.2 | $ 2.3 | $ 4.0 | $ 6.2 | |
| Payments to settle liabilities under compensation plan | 0.1 | $ 1.4 | 6.1 | $ 7.5 | |
| Accrued liabilities under compensation plan | $ 2.5 | $ 2.5 | $ 4.6 | ||
| Minimum | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Vesting period for RSUs to be settled in cash | 2 years | ||||
| Maximum | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Vesting period for RSUs to be settled in cash | 3 years | ||||
Commitments and Contingencies - Minimum Lease Payments (Detail) $ in Thousands |
Sep. 30, 2018
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| Remainder of 2018 | $ 36,728 |
| 2019 | 108,640 |
| 2020 | 73,024 |
| 2021 | 48,174 |
| 2022 | 28,395 |
| Thereafter | 47,479 |
| Total minimum lease payments | $ 342,440 |
Commitments and Contingencies - Leases (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Operating Leases [Line Items] | ||||
| Rent expense related to operating leases | $ 77.4 | $ 67.4 | $ 229.2 | $ 200.2 |
| Residual Value Guarantee | ||||
| Operating Leases [Line Items] | ||||
| Maximum guaranteed residual value | $ 668.2 | $ 668.2 | ||
Commitments and Contingencies - Contingent Consideration Liabilities (Detail) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Level 3 | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Fair value of contingent consideration liability | $ 74.3 | $ 65.7 |
Commitments and Contingencies - Committed Expenditures (Detail) - Vehicle Fleet Committed Capital $ in Millions |
Sep. 30, 2018
USD ($)
|
|---|---|
| Unrecorded Unconditional Purchase Obligation [Line Items] | |
| Estimated committed capital in current year | $ 30.2 |
| Estimated committed capital next year | $ 1.3 |
Commitments and Contingencies - Legal Proceedings (Detail) - Maximum $ in Millions |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Maurepas Project Dispute | |
| Loss Contingencies [Line Items] | |
| Reasonably possible amount of loss | $ 22.0 |
| Lorenzo Benton v Telecom Network Specialists Inc | |
| Loss Contingencies [Line Items] | |
| Reasonably possible amount of loss | 11.1 |
| Damages sought | $ 11.1 |
Commitments and Contingencies - Concentrations of Credit Risk (Detail) - Customer Concentration Risk - Customer |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
| Concentration Risk [Line Items] | |||
| Number of customers representing ten percent or more of net receivable position | 0 | 0 | |
| Number of customers representing ten percent or more of revenue | 0 | ||
| Oil and Gas Infrastructure Services Segment | |||
| Concentration Risk [Line Items] | |||
| Number of customers representing ten percent or more of revenue | 1 | ||
| Consolidated Revenues | Oil and Gas Infrastructure Services Segment | |||
| Concentration Risk [Line Items] | |||
| Concentration risk percentage | 10.00% | ||
Commitments and Contingencies - Insurance (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Commitment And Contingencies [Line Items] | ||
| Insurance and other non-current liabilities | $ 388,395 | $ 342,356 |
| Insurance Claims | ||
| Commitment And Contingencies [Line Items] | ||
| Gross amount accrued for insurance claims | 245,500 | 254,700 |
| Insurance and other non-current liabilities | 186,900 | 200,000 |
| Related insurance recoveries/receivables | 36,900 | 50,400 |
| Related insurance recoveries/receivables included in prepaid expenses and other current assets | 300 | 400 |
| Related insurance recoveries/receivables included in other assets net | 36,600 | $ 50,000 |
| Atlantic Bridge Project Insurance Claim | ||
| Commitment And Contingencies [Line Items] | ||
| Related insurance recoveries/receivables | $ 11,300 |
Commitments and Contingencies - Letters of Credit (Detail) $ in Millions |
Sep. 30, 2018
USD ($)
|
|---|---|
| Letters of Credit and Bank Guarantees | |
| Loss Contingencies [Line Items] | |
| Outstanding letters of credit and bank guarantees | $ 449.9 |
Commitments and Contingencies - Performance Bonds and Parent Guarantees (Detail) - Performance Bonds $ in Millions |
Sep. 30, 2018
USD ($)
|
|---|---|
| Guarantor Obligations [Line Items] | |
| Total amount of outstanding performance bonds | $ 3,100 |
| Estimate | |
| Guarantor Obligations [Line Items] | |
| Estimated cost to complete bonded projects | $ 791 |
Commitments and Contingencies - Indemnities (Detail) - Indemnification Agreement $ in Millions |
Sep. 30, 2018
USD ($)
|
|---|---|
| Loss Contingencies [Line Items] | |
| Pre-acquisition estimate of tax obligations | $ 11.4 |
| Pre-acquisition estimate of indemnification asset | $ 11.4 |
Segment Information (Detail) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
Segment
division
|
Sep. 30, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
| Segment Reporting Information [Line Items] | |||||
| Number of reportable segments | Segment | 2 | ||||
| Number of internal divisions | division | 2 | ||||
| Revenues | $ 2,985,281 | $ 2,609,307 | $ 8,059,205 | $ 6,987,851 | |
| Property and equipment | 1,350,894 | 1,350,894 | $ 1,288,602 | ||
| Canada | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenues | 522,618 | 1,376,149 | |||
| Foreign Operations | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenues | 667,600 | $ 653,100 | 1,840,000 | $ 1,830,000 | |
| Property and equipment | $ 321,600 | $ 321,600 | $ 330,400 | ||
| Foreign Operations | Canada | |||||
| Segment Reporting Information [Line Items] | |||||
| Percentage of foreign revenues | 78.00% | 80.00% | 75.00% | 81.00% | |
Segment Information - Summarized Financial Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Segment Reporting Information [Line Items] | ||||
| Revenues | $ 2,985,281 | $ 2,609,307 | $ 8,059,205 | $ 6,987,851 |
| Operating income (loss) | 192,561 | 140,428 | 390,821 | 325,293 |
| Depreciation | 51,543 | 48,426 | 150,296 | 135,769 |
| Corporate and Non-Allocated Costs | ||||
| Segment Reporting Information [Line Items] | ||||
| Operating income (loss) | (82,687) | (68,134) | (225,219) | (202,552) |
| Depreciation | 4,559 | 3,693 | 12,609 | 11,302 |
| Electric Power Infrastructure Services | Operating Segments | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenues | 1,617,736 | 1,504,752 | 4,756,416 | 4,024,983 |
| Operating income (loss) | 179,181 | 150,054 | 466,087 | 362,769 |
| Depreciation | 24,273 | 23,996 | 71,801 | 68,232 |
| Oil and Gas Infrastructure Services | Operating Segments | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenues | 1,367,545 | 1,104,555 | 3,302,789 | 2,962,868 |
| Operating income (loss) | 96,067 | 58,508 | 149,953 | 165,076 |
| Depreciation | $ 22,711 | $ 20,737 | $ 65,886 | $ 56,235 |
Supplemental Cash Flow Information - Net Effects of Changes in Operating Assets and Liabilities, Net, on Cash Flows from Operating Activities (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Supplemental Cash Flow Elements [Abstract] | ||||
| Accounts and notes receivable | $ (169,041) | $ (272,131) | $ (345,842) | $ (398,574) |
| Contract assets | (125,878) | 20,981 | (188,996) | (126,999) |
| Inventories | (8,436) | 13,525 | (13,841) | 8,727 |
| Prepaid expenses and other current assets | 12,991 | 10,495 | (45,002) | (23,142) |
| Accounts payable and accrued expenses and other non-current liabilities | 170,469 | 203,607 | 294,259 | 216,651 |
| Contract liabilities | (48,386) | 43,836 | 22,676 | 80,042 |
| Other, net | (2,291) | (6,621) | (8,270) | 12,813 |
| Net change in operating assets and liabilities, net of non-cash transactions | $ (170,572) | $ 13,692 | $ (285,016) | $ (230,482) |
Supplemental Cash Flow Information - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|---|---|---|---|
| Cash, Cash Equivalents and Restricted Cash [Line Items] | ||||||
| Cash and cash equivalents | $ 113,524 | $ 120,357 | $ 138,285 | $ 91,532 | $ 99,565 | $ 112,183 |
| Total cash, cash equivalents, and restricted cash reported in the statements of cash flows | 118,174 | 124,737 | 143,775 | 95,234 | 102,608 | 114,410 |
| Prepaid Expenses and Other Current Assets | ||||||
| Cash, Cash Equivalents and Restricted Cash [Line Items] | ||||||
| Restricted cash and cash equivalents | 3,275 | 2,926 | 5,106 | 3,286 | 2,627 | 1,709 |
| Other Assets | ||||||
| Cash, Cash Equivalents and Restricted Cash [Line Items] | ||||||
| Restricted cash and cash equivalents | $ 1,375 | $ 1,454 | $ 384 | $ 416 | $ 416 | $ 518 |
Supplemental Cash Flow Information - Additional Supplemental Cash Flow Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Supplemental Cash Flow Elements [Abstract] | ||||
| Interest paid | $ (9,279) | $ (5,808) | $ (24,011) | $ (13,314) |
| Income taxes paid | (38,445) | (3,616) | (91,000) | (105,112) |
| Income tax refunds | $ 1,207 | $ 5,058 | $ 3,570 | $ 7,727 |
Supplemental Cash Flow Information (Detail) - USD ($) $ in Millions |
9 Months Ended | |
|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Supplemental Cash Flow Elements [Abstract] | ||
| Marine industrial property acquired | $ 6.4 | |
| Notes receivable reduction | $ 7.1 | |
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