Quanta Services (PWR) 10-K risk factor changes: FY2018 vs FY2017

This Annual Report [removed: on Form 10-K] also includes statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 and should be read in conjunction with the section entitled [removed: Uncertainty] [added: *Uncertainty] of Forward-Looking Statements and [removed: Information] [added: Information*] included in Item 7.

[removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations.][added: Operations.*]

[removed: Our] [added: Our] operating results may vary significantly from quarter to [removed: quarter.][added: quarter.]

| • | project delays, reductions in scope or cancellations, including as a result of permitting, regulatory or environmental processes, project performance, customer capital constraints, claimed force majeure [removed: events or] [added: events,] protests or other political [removed: activity;] [added: activity, or legal challenges;] |

| • | adverse weather conditions [removed: or] [added: and significant weather] events; |

| • | fluctuations in regional, national or global economic, political and market [removed: conditions and] [added: conditions, including as a result of tariffs or changes in U.S. trade relationships with other countries, which could result in decreased] demand for our services; |

| • | disruptions in our customers’ strategic [removed: plans] [added: plans,] which could occur as a result [removed: of] [added: of, among other things,] emerging [removed: technologies;] [added: technologies, financial difficulties of our customers or changing environmental conditions;] |

| • | disputes with customers or delays relating to billing and payment [removed: terms] under our contracts and change orders, and our ability to successfully negotiate and obtain payment or reimbursement under our contracts and change orders; |

| • | liabilities and costs experienced in our operations that are not covered [removed: by] [added: by, or that are in excess of, our] third-party [removed: insurance;] [added: insurance, including significant liabilities that may arise from the inherently hazardous conditions of our operations (e.g., explosions, fires) and which could be exacerbated by the geographies in which we operate;] |

| • | payment risk associated with the financial condition of our customers, including those customers affected by the volatility of natural gas and oil [removed: prices;] [added: prices or that have filed for bankruptcy protection;] |

| • | estimates and assumptions in determining our financial [removed: results] [added: results, remaining performance obligations] and backlog, including the timing and significance of impairments of long-lived assets, equity or other investments, receivables, goodwill or other intangible assets. |

[removed: Negative] [added: Negative] economic and market conditions, including [removed: continued] low oil and natural gas prices, may adversely impact our customers’ future spending as well as payment for our services and, as a result, our operations and [removed: growth.][added: growth.]

Consolidation, competition, capital constraints or negative economic conditions in the electric power, [removed: oil and gas] [added: energy] or communications industries may also result in reduced spending by, or the loss of, one or more of our customers.

Our [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment is exposed to risks associated with the oil and gas industry.

Specifically, lower natural gas and oil prices can result in decreased spending by our customers in our [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment.

[removed: Any future decline] [added: Declines] in prices, or perceived risk thereof, may result in our customers reducing or delaying capital spending on larger pipeline projects, gas gathering and compressor systems and related infrastructure, resulting in less demand for our services.

If the profitability of our [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment were to decline, our overall financial position, results of operations and cash flows could also be adversely affected.

[removed: A] [added: A] variety of issues outside of our control could affect the timing of and our performance on projects, which may result in additional costs to us, reductions or delays in revenues or the payment of liquidated [removed: damages.][added: damages.]

Our business is dependent in part upon projects that can be cyclical in nature and are subject to risks of [removed: delay.][added: delay or cancellation.]

[removed: The bidding processes for these] projects can also be longer, often taking six to nine months, and regulatory and permitting delays on these projects tend to be more challenging and cause more timing uncertainty.

[removed: Our] [added: Our] business is labor intensive, and we may be unable to attract and retain qualified employees, or incur significant costs in the event we are unable to efficiently manage our [removed: workforce.][added: workforce.]

In addition, in our [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment, there is limited availability of experienced supervisors and foremen that can oversee larger diameter [removed: pipe] [added: pipeline] projects.

[removed: Our] [added: Our] failure to adequately recover on contract change orders or claims brought by us against customers related to payment terms and costs could materially and adversely affect our financial position, results of operations and cash [removed: flows.][added: flows.]

These types of claims occur due to, among other things, customer- or third party-caused delays or changes in project scope, which may result in additional [removed: cost,] [added: costs,] which may or may not be recovered until the claim is resolved.

[added: Under these circumstances, we generally negotiate with the customer for additional] compensation; however, we are subject to the risk that we may be unable to obtain, through negotiation, arbitration, litigation or otherwise, adequate amounts to compensate us for the additional work or expenses incurred.

A failure to obtain adequate and prompt compensation for these matters could require us to record a reduction to revenues and gross profit recognized [removed: in prior periods under the percentage-of-completion accounting method.]

[removed: Regulatory and environmental] [added: Regulatory] requirements affecting any of the industries we serve may [removed: lead to] [added: result in delays or cancellations of projects or] less demand for our [removed: services.][added: services.]

Because the vast majority of our revenue is derived from a few industries, the [removed: regulatory] [added: federal, state] and [removed: environmental requirements] [added: local regulations] affecting those [removed: industries] [added: industries, including, among other things, environmental, safety, and permitting requirements,] have a material effect on our business, and increased regulatory [removed: and environmental] requirements [removed: in those industries] could adversely affect our business, financial condition, results of operations and cash flows.

[removed: These] [added: Increased] regulatory [removed: factors] [added: requirements] have [removed: resulted in] [added: also] decreased demand for our services in the past, and [removed: they] may [removed: continue to] do so in the future, potentially impacting our business, financial condition, results of operations, cash flows and our ability to grow.

[removed: Our] [added: Our] failure to accurately estimate project costs or successfully execute a project could result in reduced profits or losses that could adversely affect our business, financial condition, results of operations and cash [removed: flows.][added: flows.]

We currently generate some of our revenues under fixed price contracts, including contracts for projects where we provide engineering, procurement and construction (EPC) [removed: services.][added: services, and we expect to continue generating varying amounts of revenues under these types of contracts on various projects, such as electric power transmission line and mainline pipeline projects.]

| • | failure to accurately estimate project [removed: costs;] [added: costs or accurately establish the scope of our services covered by the project contract;] |

| • | quality issues, including those requiring rework or [removed: replacement;] [added: replacement.] |

[removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting [removed: Policies] [added: Policies*] and [removed: in] [added: Note 2 of] the [removed: notes] [added: Notes] to [removed: our consolidated financial statements] [added: Consolidated Financial Statements] included in Item 8.

Contract losses are recognized in full when losses are determined to be probable and can be reasonably [removed: estimated, and contract profit estimates are adjusted based on an ongoing review of contract performance and profitability.][added: estimated.]

[removed: Our] [added: Our] revenues and profitability may be exposed to potential risk if a contract is terminated or canceled, our customers encounter financial difficulties or [added: file bankruptcy or] disputes arise with our [removed: customers.][added: customers.]

[removed: In addition,] [added: Additionally,] many of our customers for larger projects are project-specific entities that do not have significant assets other than their interests in the project and may [added: be more likely to] encounter financial difficulties relating to their businesses.

It may be difficult to collect amounts owed to us by [removed: these customers,] [added: customers experiencing financial difficulties or in bankruptcy,] and [removed: if we are unable] [added: accounts receivable from such customers may become uncollectible and ultimately have] to [removed: do so, it] [added: be written off, which] could have an adverse effect on our future financial condition, results of operations and cash flows.

[removed: Our] [added: Our] operating results could be negatively affected by weather conditions and the nature of our work [removed: environment.][added: environment.]

As [removed: a result,] [added: an example,] adverse weather conditions or events, such as extreme heat or cold, rainfall, snowfall, wind, an early thaw in Canada and the northern parts of the U.S., and hurricanes or other storms, may affect our productivity or may temporarily prevent us from performing services.

| • | the decision by our Board of Directors to pay a dividend and market expectations with respect to the payment and amount of any dividends; |

Furthermore, regulatory requirements for a project may change during the course of our work, which can result in the suspension of work as permits are reissued or updated.

The bidding processes for these

A significant customer could also file for bankruptcy protection or cease operations, which could result in reduced or discontinued business with us.

in prior periods under the percentage-of-completion accounting method.

In recent years, our customers have faced heightened regulatory requirements and increased regulatory enforcement, which have resulted in delays and reductions in scope and cancellations of projects.

Additionally, certain regulatory requirements applicable to our customers are also required of us when we contract with such customers, and our inability to meet those requirements could also result in decreased demand for our services.

Changes in estimates related to revenues and costs associated with our contracts with customers could result in a reduction or an elimination of previously reported revenues and reduction of profits or the recognition of losses.

For fixed price contracts and certain unit-based contracts, we recognize revenue as performance obligations are satisfied over time and earnings or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability, as discussed in further detail in Item 7.

Changes in contract estimates are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made, and such changes can result in the recognition of revenue and profit in a current period for performance obligations satisfied in prior periods or the reversal of previously recognized revenue and the recognition of a loss.

The impacts of a change in estimate are measured as the differences between the revenue and gross profit recognized in the prior period and the revenue and gross profit which would have been recognized had the revised estimate been used as the basis of recognition in the prior period.

Variable consideration amounts, including performance incentives, early pay discounts and penalties, may also cause changes in contract estimates.

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.

The timing for recognition of these variable consideration amounts is uncertain, and therefore could have a significant impact on our financial condition, results of operations and cash flows.

In addition, we recognize amounts associated with change orders and/or claims as revenue when it is probable that the contract price will be adjusted and the amount of any such adjustment can be reasonably estimated.

As a result, costs incurred related to change orders and/or claims may be recognized in periods prior to the recognition of the related revenue.

In certain circumstances, it is possible that such adjustments could be significant and could result in a reduction or an elimination of previously reported revenues and a reduction in profits or recognition of losses on the associated contract.

Slowing economic conditions in the industries we serve, economic downturns or bankruptcies could also impair the financial condition of one or more of our customers and hinder their ability to pay us on a timely basis.

Further, to the extent a customer files bankruptcy, certain payments made to us prior to the filing of the bankruptcy petition may be avoided and returned to the customer’s bankruptcy estate.

For example, on January 29, 2019, PG&E Corporation and Pacific Gas and Electric Company (collectively PG&E), filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as amended, which could negatively impact, and is expected to delay, the collection of receivables owed to Quanta as of the filing date.

See Item 7.

*Management’s Discussion and Analysis of Financial Condition and Results of Operations — Concentrations of Credit Risk* for additional information.

Extraordinary or force majeure events, such as natural or man-made disasters, or other factors beyond our control could negatively impact our and our customers’ ability to operate or increase our costs to operate.

Furthermore, certain of our customers operate energy-related infrastructure assets in locations and environments that increase the likelihood and/or severity of these operational hazards.

In particular, we perform a significant amount of services for customers that operate electrical power and natural gas infrastructure assets in California and other locations that have recently experienced, and have a higher risk of, wildfires, some of which have exposed operators to significant additional costs and expenses and potentially significant additional liabilities.

As a result of these and other hazards, our operations could expose us to or result in liabilities, and because our services in certain instances may be integral to the operation and performance of our customers’ infrastructure, such liabilities could arise even if our operations are not the cause of the harm.

Insurance coverage may not be available to us or may be insufficient to cover the cost of these liabilities.

We manage and maintain a portion of our casualty risk through our wholly-owned captive

For additional information on our current deductibles, see Item 7.

*Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations — Insurance*.

We also face

Any such breach could subject us to significant liabilities, cause damage to our reputation or customer relationships, or result in regulatory investigations or other actions by governmental authorities.

Additionally, cyber-attacks and other disruptions to our data security systems and processes may occur and could result from, for example, theft, storms or other natural phenomena, information technology solution failures, network disruptions, and phishing and similar cyber-frauds.

These could result in compromises of our payment systems, monetary losses, delays in the processing of transactions or the reporting of financial results, the unintentional disclosure or misappropriation of confidential or proprietary company information (including for the purpose of transacting in our stock), or the inadvertent release of customer, stockholder, vendor or employee data.

Network security and internal control measures have been implemented to address such attacks and disruptions.

However, there can be no assurance that such attacks or disruptions will not occur, and any such attack or disruption could go unnoticed for some period of time.

For example, new legislation and regulatory requirements, as well as contractual commitments, may affect how we must store, use, transfer and process the confidential information of our employees, customers, vendors and stockholders.

*Business*.

For additional information on our recent investments, see Item 7.

*Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Acquisitions, Investments and Divestitures*.

In particular, capital spending by exploration and production companies and midstream companies has generally declined in the last few years.

Under these circumstances, we generally negotiate with the customer for additional

Customers in the industries we serve also face heightened regulatory and environmental requirements and stringent permitting processes that impact their projects, which could result in delays, reductions and cancellations of some of their projects.

We expect to generate a greater amount of revenues under these types of contracts in the future as anticipated larger and more complex projects, such as electric power transmission lines and mainline pipeline projects, become a more significant aspect of our business.

Our use of percentage-of-completion accounting could result in a reduction or elimination of previously reported revenues and profits.

As discussed in Item 7.

Financial Statements and Supplementary Data, a significant portion of our revenues are recognized using the percentage-of-completion method of accounting, utilizing the cost-to-cost method.

This accounting method is generally accepted for fixed price contracts and is used because management considers expended costs to be the best available measure of progress on these contracts.

The percentage-of-completion accounting practice we use results in the recognition of contract revenues and earnings ratably over the contract term in proportion to our incurrence of contract costs.

The earnings or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability.

Further, a substantial portion of our contracts contain cost and performance incentives.

Penalties are recorded when known or finalized, which generally occurs during the latter stages of the contract.

In addition, we record cost recovery claims when we believe recovery is probable and the amounts can be reasonably estimated.

In certain circumstances, it is possible that such adjustments could be significant.

As a result, adverse weather conditions or events, such as extreme heat or cold, rainfall, snowfall, wind, an early thaw in Canada or the United States, and hurricanes or other storms, may affect our productivity or may temporarily prevent us from performing services.

Furthermore, funding for renewable energy

Our offshore operations are subject to additional risks, including blowouts, collisions, vessels sinking or capsizing and damage from severe weather conditions.

In addition, we have significant operations in California and other locations that have recently experienced and have a higher risk of wildfires.

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.

Because our projects are

We use technology in substantially all aspects of our business operations.

Cyber-attacks and physical security risks, such as storms or other natural phenomena, IT solution failures, network disruptions, theft and other breaches of data security, could also disrupt our operations by causing, among other things, delays in the processing of transactions or the reporting of financial results or the unintentional disclosure of company information (including confidential or proprietary information), and such cyber-attacks could go unnoticed for some period of time.

A significant theft, loss, misappropriation, or inadvertent release of customer, stockholder or employee data by cyber-attack or otherwise could also adversely impact our reputation and could result in significant costs, fines and litigation.

While management has taken steps to address these concerns by implementing network security and internal control measures, there can be no assurance that the above events will not occur, and such events could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Backlog is not a term recognized under US GAAP; however, it is a common measurement used in our industry.

Business.

Additionally, failure

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.

For additional information on the Central States Plan matters, please see Collective Bargaining Agreements in Note 15 of the Notes to Consolidated Financial Statements in Item 8.

Plans in these classifications must adopt measures to improve their funded status

In addition, our international operations include business and transactions for which we are paid in local currency.

Further, we require our partners, subcontractors, agents and others who work for us or on our behalf to comply with the FCPA and other anti-bribery laws.

If we are found to be liable for FCPA violations (either due to our own acts or inadvertence, or due to the acts or inadvertence of others), we could be subject to severe criminal or civil penalties or other sanctions, which could have a material adverse effect on our reputation, business, financial condition, results of operations, and cash flows.

accurately as planned.

These

There are also other legislative and regulatory proposals to address greenhouse gas emissions.

These proposals, if enacted, could result in potential new regulations, additional charges to fund energy efficiency activities, or other regulatory actions.

If the results of these reviews or proceedings are unfavorable to us,

to volatility in the market price of our common stock.

[removed: Financial] [added: *Financial] Statements and Supplementary [removed: Data.][added: Data.*]

Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in [removed: Uncertainty] [added: *Uncertainty] of Forward-Looking Statements and [removed: Information] [added: Information*] below and Item 1A.

[removed: Introduction][added: Introduction]

We are a leading provider of specialty contracting services, [removed: offering] [added: delivering comprehensive] infrastructure solutions [removed: primarily to] [added: for] the electric power, [removed: oil and gas] [added: energy] and communications industries in the United States, Canada, Australia, Latin America and select other international markets.

The services we provide include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries we serve, such as electric power transmission and distribution [removed: networks,] [added: networks;] substation [removed: facilities, renewable energy facilities, and] [added: facilities;] pipeline transmission and distribution systems and [removed: facilities.][added: facilities; refinery, petrochemical and industrial facilities; and telecommunications and cable multi-system operator networks.]

We report our results under two reportable segments: (1) Electric Power Infrastructure Services and (2) [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services.

Our consolidated revenues for the year ended December 31, [removed: 2017] [added: 2018] were [removed: $9.47] [added: $11.17] billion, of which [removed: 59%] [added: 57%] was attributable to the Electric Power Infrastructure Services segment and [removed: 41%] [added: 43%] was attributable to the [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment.

In addition, this segment [removed: designs, installs and maintains] [added: provides services that support the development of] renewable energy [removed: generation facilities, consisting of] [added: generation, including] solar, wind and certain types of natural gas generation facilities, and related switchyards and transmission infrastructure.

[removed: To a lesser extent, the] [added: This] segment also provides comprehensive communications infrastructure services to [removed: wireline, fiber] [added: wireline] and wireless [removed: carrier] [added: telecommunications companies, cable multi-system operators and other] customers within the communications industry; services in connection with the construction of electric power generation facilities; [added: and] the design, installation, maintenance and repair of commercial and industrial [removed: wiring; and the installation of traffic networks and cable and control systems for light rail lines.][added: wiring.]

The [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment provides comprehensive [removed: network] [added: infrastructure] solutions to customers involved in the development, transportation, storage and processing of natural gas, oil and other [removed: pipeline] products.

Services performed by the [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] 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 [added: the] fabrication of pipeline support systems and related structures and [removed: facilities.][added: facilities for natural gas utilities and midstream companies.]

To a lesser extent, this segment [added: serves the offshore and inland water energy markets and] designs, installs and maintains fueling [removed: systems, as well as] [added: systems and] water and sewer infrastructure.

[removed: Through a recent acquisition discussed below, we] [added: We have also] expanded our [removed: service offerings in this segment to include] [added: industrial services offerings, including] high-pressure and critical-path turnaround services to the downstream and midstream energy [removed: markets] [added: markets,] and enhanced our capabilities with respect to instrumentation and electrical services, piping, fabrication and storage tank services.

For internal management purposes, we are also organized into two internal [removed: divisions, namely,] [added: divisions:] the Electric Power Infrastructure Services Division and the [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services Division.

Our operating units may perform joint projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide [removed: services across] [added: service offerings to various] industries.

Our integrated operations and common administrative support [removed: at each of] [added: for] our operating units requires that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs, such as facility costs, indirect operating expenses [removed: including depreciation,] [added: (e.g., depreciation),] and general and administrative costs.

[removed: Corporate costs, such as] [added: Certain corporate costs are not allocated, including] payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition [removed: costs] [added: costs, non-cash stock-based compensation] and amortization related to intangible [removed: assets are not allocated.][added: assets.]

We also enter into strategic partnerships and investment arrangements with customers and infrastructure investors to provide fully integrated infrastructure services on certain projects, including planning and feasibility analysis, engineering, design, procurement, construction and [removed: operation and maintenance, as well as] project [removed: financing] [added: operation] and [removed: investment.][added: maintenance.]

These projects include public-private [removed: partnerships, private infrastructure projects] [added: partnerships] and concessions, along with [added: private infrastructure projects such as] build, own, operate [removed: and transfer] [added: (and in some cases transfer)] and [removed: build to suit] [added: build-to-suit] arrangements.

As part of this strategy, [removed: during the year ended December 31, 2017,] we formed a partnership with select [removed: infrastructure] investors that provides up to $1.0 billion of capital, including approximately $80.0 million from us, available to invest in certain of these infrastructure projects through August 2024.

[removed: Recent Investments, Acquisitions] [added: Recent Acquisitions, Investments] and [removed: Divestitures][added: Divestitures]

[removed: Acquisitions][added: Acquisitions]

[removed: In January] [added: During the year ended December 31,] 2018, we acquired an electrical infrastructure services business specializing in substation construction and relay [removed: services and] [added: services,] a postsecondary educational institution that provides pre-apprenticeship training and programs for experienced [removed: lineman, both] [added: linemen and two communications infrastructure services businesses, all] of which are located in the United States.

The aggregate consideration for these acquisitions was [removed: $47.9] [added: $106.8] million [added: paid or payable] in cash, subject to certain adjustments, and [removed: 379,817] [added: 679,668] shares of Quanta common stock, which had a fair value of approximately [removed: $13.6] [added: $22.9] million [removed: at] [added: as of] the [added: respective] acquisition dates.

Additionally, the acquisition [removed: of the postsecondary educational institution] includes the potential payment of up to [removed: approximately $15.0] [added: $100.0] million of contingent consideration, payable if the acquired business achieves certain [removed: financial and operational] [added: performance] objectives over a [removed: five-year] [added: three-year post-acquisition] period.

The results of the acquired businesses [removed: will] [added: have] generally [removed: be] [added: been] included in our Electric Power Infrastructure Services segment and [added: have been included in our] consolidated financial statements beginning on the [added: respective] acquisition dates.

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 [added: fair] value of $81.3 million [removed: at] [added: as of] the acquisition date.

The results of the acquired business have generally been included in our [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment and [added: have been included in our] consolidated financial statements since the acquisition date.

During the year ended December 31, 2017, we also acquired a communications infrastructure services [removed: contractor] [added: business] and an electrical and communications [removed: contractor,] [added: business,] both of which are located in the United States.

The aggregate consideration for these acquisitions consisted of [removed: $11.9] [added: $12.0] million paid or payable in cash, subject to certain adjustments, and 288,666 shares of Quanta common stock, [removed: with] [added: which had] a [added: fair] value of $8.3 million as of the [removed: respective] acquisition [removed: dates.][added: date of the applicable acquired business.]

The results of the acquired businesses have generally been included in our Electric Power Infrastructure Services segment and [added: have been included in our] consolidated financial statements since the [added: respective] acquisition dates.

The results of four of the acquired businesses [removed: are] [added: have been] generally included in our Electric Power Infrastructure Services [removed: segment.][added: segment and have been included in our consolidated financial statements since their respective acquisition dates.]

We also acquired a pipeline services contractor located in the United States, the results of which [removed: are] [added: have] generally [added: been] included in our [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services [removed: segment.][added: segment]

The aggregate consideration for these acquisitions consisted of $75.9 million paid or payable in cash, subject to certain adjustments, 70,840 shares of Quanta common [removed: stock valued at] [added: stock, which had a fair value of] $1.5 million as of the settlement date of the applicable [added: acquisition, and contingent consideration payments of up to $39.5 million, payable if certain of the acquired businesses achieve performance objectives over a four to five-year post-acquisition period.]

[removed: Seasonality;] [added: Seasonality;] Fluctuations of Results; Economic [removed: Conditions][added: Conditions]

For example, revenues in Canada are [removed: often] [added: typically] higher in the first quarter because projects are often accelerated in order to complete work [added: while the ground is frozen and] prior to the break up, or seasonal thaw, as productivity is adversely affected by wet ground conditions during the warmer spring and summer months.

to fluctuate materially from quarter to quarter include: the financial condition of our customers and their access to capital; margins of [removed: projects performed during any particular period; economic, political] [added: ongoing projects; economic] and [removed: market] [added: political] conditions on a regional, national or global [removed: scale;] [added: scale, including changes in U.S. trade relationships with other countries;] our customers’ capital spending, including on larger pipeline and electrical infrastructure projects; oil, natural gas and natural gas liquids prices; [added: liabilities and costs that are not covered by, or that are in excess of, third party insurance coverage;] the timing of and costs associated with acquisitions; changes in the fair value of acquisition-related contingent consideration liabilities; dispositions; equity in earnings (losses) of unconsolidated affiliates; impairments of goodwill, intangible assets, long-lived assets or investments; effective tax rates; and interest rates.

Please read [removed: Outlook] [added: *Outlook*] and [removed: Understanding Margins] [added: *Understanding Margins*] for additional discussion of trends and challenges that may affect our financial condition, results of operations and cash flows.

[removed: Understanding Margins][added: Understanding Margins]

*Risk Factors*.

As of December 31, 2018, we changed the name of our Oil and Gas Infrastructure Services segment to the Pipeline and Industrial Infrastructure Services segment.

There was no change to the composition of the segment, and the name change was made to better reflect the work performed within the segment and the diversity of its service offerings.

This segment also includes our postsecondary educational institution, which specializes in pre-apprenticeship training, apprenticeship training and specialized utility task training for electric workers, and has been recently expanded to include curriculum for the gas distribution and communications industries.

We operate primarily in the United States; however, we derived $2.60 billion, $2.48 billion and $1.59 billion of our revenues from foreign operations during the years ended December 31, 2018, 2017 and 2016, respectively.

Of our foreign revenues, 76%, 79% and 75% were earned in Canada during the years ended December 31, 2018, 2017 and 2016, respectively.

In addition, we held property and equipment of $304.0 million and $330.4 million in foreign countries, primarily Canada, as of December 31, 2018 and 2017.

*Financial Statements and Supplementary Data* for a further disaggregation of revenues by geographic location.

On January 24, 2019, we acquired an electric power specialty contracting business located in the United States.

The purchase price for this acquisition was approximately $47.0 million, which included the repayment of certain indebtedness of the acquired business.

The results of the acquired business will generally be included in our Electrical Power Infrastructure Services segment and consolidated financial statements beginning on the acquisition date.

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.

since the acquisition date.

Investments

During the year ended December 31, 2018, we 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 through 2020 to acquire the remaining equity of the company and provides for certain additional earnings and distribution participation rights during a designated 25-month post-investment period, as well as preferential liquidation rights.

This investment 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 are recognized as dividends are received and are reported in “Other expense, net” in the accompanying consolidated statements of operations.

We received and recognized $3.9 million of cash dividends from this investment during 2018.

Additionally, during the year ended December 31, 2018, we acquired a 49% equity interest in an electric power infrastructure services company together with certain related customer relationship and other intangible assets for $12.3 million in total.

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.

Through February 2019, we had contributed $15.1 million to this partnership in connection with certain investments and the payment of management fees.

For example, margins may be negatively impacted by unexpected difficulties that can arise in challenging operating conditions such as urban settings or mountainous and other difficult terrain.

Furthermore, fluctuations in the price of materials we are required to procure, including as a result of changes in U.S. trade relationships with other countries or other economic or political conditions, may impact our margins.

Larger projects

*Change in fair value of contingent consideration liabilities.* We anticipate fluctuations in operating income margins as a result of changes in the fair value of contingent consideration liabilities associated with prior acquisitions, which occur as we obtain additional information on the likelihood that the acquired businesses will achieve their post-acquisition performance objectives.

Contributing to the overall increase were an $889.2 million increase in revenues from our Pipeline and Industrial Infrastructure Services segment and an $815.7 million increase in revenues from our Electric Power Infrastructure Services segment.

The increase in Pipeline and Industrial Infrastructure Services segment revenues was primarily due to an increase in revenues from gas distribution and smaller diameter pipeline transmission services work and approximately $385 million of increased revenues from Stronghold during 2018, which was acquired in late July 2017.

The increase in Electric Power Infrastructure Services segment revenues was primarily the result of increased spending by our customers associated with transmission and distribution services and to a lesser extent an increase in customer spending associated with larger electric transmission projects, including progress on a large transmission project in Canada.

The increased gross profit was primarily due to the increased revenues described above, including the impact of continued favorable progress on a large transmission project in Canada.

Partially offsetting the increases were project losses associated with two projects within the Pipeline and Industrial Infrastructure Services segment and one project within the Electric Power Infrastructure Services segment.

Additionally, gross profit during 2017 was negatively impacted by work disruptions,

project suspensions or deferrals, and employee support costs due to Hurricanes Harvey and Irma.

See *Segment Results* below for additional information and discussion related to segment revenues and operating income (loss).

The increase was primarily due to a $56.7 million increase in expenses associated with acquired businesses, including incremental acquisition and integration costs of $6.7 million; and a $25.3 million increase in compensation expenses, largely associated with higher salaries due to increased personnel to support business growth, annual and incentive compensation increases and increased stock-based compensation expense related to improved forecasted achievement of multi-year performance metrics.

Also contributing to the increase were a $7.9 million increase in travel and entertainment expenses; a $6.8 million increase in bad debt expense; and $1.3 million of severance and restructuring costs incurred during 2018, which were associated with the closure of certain operations within the Pipeline and Industrial Infrastructure Services segment.

These increases were partially offset by a $12.5 million decrease in legal costs, partially due to certain legal costs incurred in 2017 that were related to a matter involving our prior disposition of certain communications operations, and a $6.0 million decrease in liabilities associated with deferred compensation plans.

During the fourth quarter of 2018, we recorded a $49.4 million asset impairment charge related to the winding down of certain oil-influenced operations and assets.

*Other expense, ne*t.

Other expense, net was $47.2 million for the year ended December 31, 2018, as compared to $5.0 million for the year ended December 31, 2017.

Risk Factors.

We also serve 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.

We enter into various types of contracts, including unit price, hourly rate, cost-plus (or time and materials basis), and fixed price (or lump sum basis), the final terms and prices of which are frequently negotiated with the customer.

Although the terms of our contracts vary considerably, most are made on either a unit price or fixed price basis in which we agree to a price per unit of work performed (unit price) or a fixed amount for the entire project (fixed price).

We complete a substantial majority of our fixed price projects, other than certain large transmission projects, within one year, while we frequently provide maintenance and repair work under open-ended unit price or cost-plus master service agreements that are renewable periodically.

We recognize revenues on our unit price and cost-plus contracts as units are completed or services are performed.

For our fixed price contracts, we record revenues as work on the contract progresses on a percentage-of-completion basis.

Under this method, revenues are recognized based on the percentage of total costs incurred to date in proportion to total estimated costs to complete the contract.

Fixed price contracts generally include retainage provisions under which a percentage of the contract price is withheld until the project is complete and has been accepted by our customer.

Additionally, the acquisition includes the potential payment of up to $100.0 million of contingent consideration, payable if the acquired business achieves certain financial targets over a three-year period.

acquisition, and contingent consideration payments of up to $39.5 million, payable if financial targets are achieved by certain of the acquired businesses.

The results of the acquired businesses have been included in our consolidated financial statements since the acquisition dates.

During 2015, we completed 11 acquisitions.

The results of eight of the acquired businesses are generally included in our Electric Power Infrastructure Services segment.

These businesses included a foundation services business located in the United States, an electrical contracting business located in the United States, an electrical engineering business located in Australia, a powerline construction business located in the United States, an engineering business located in Canada, an engineering, procurement and construction services business based in the United States, an underground construction contracting business located in Canada and a supplier and material procurement specialist for the power and utility industry in Canada.

The results of the remaining three acquired businesses are generally included in our Oil and Gas Infrastructure Services segment.

These businesses include a business that services above-ground storage tanks in the United States, an underground utility distribution contractor that provides services to gas and electric utilities in Canada, and a business that specializes in the engineering, procurement, construction, and commissioning of compression and surface facilities for the high pressure gas industry in Australia.

The aggregate consideration for these acquisitions consisted of $110.6 million paid or payable in cash, subject to certain adjustments, 461,037 shares of Quanta common stock valued at $10.1 million as of the settlement dates of the applicable acquisitions, and contingent consideration payments with an estimated fair value of $1.0 million as of the applicable acquisition date.

The results of the acquired businesses have been included in our consolidated financial statements since the acquisition dates.

Disposition

On April 29, 2015, we entered into a stock purchase agreement with Crown Castle International Corp. pursuant to which we agreed to sell our fiber optic licensing operations.

The purchase agreement contained customary representations and warranties, covenants and indemnities.

On August 4, 2015, we completed the sale for a purchase price of $1.00 billion in cash, resulting in after-tax net proceeds of $848.2 million.

In the third quarter of 2015, we recognized a net of tax gain of $171.0 million.

We have presented the results of operations, financial position, cash flows and disclosures of the fiber optic licensing operations as discontinued operations for all periods in our consolidated financial statements.

Seasonal and geographical.

For example, margins may be negatively impacted by operations in an urban setting as opposed to a less populated rural setting or over mountainous or other difficult terrain as opposed to open terrain.

Weather.

Revenue mix.

Service and maintenance versus installation.

Subcontract work.

Materials versus labor.

Size, scope and complexity of projects.

fixed costs.

Depreciation.

Insurance.

Project Variability and Performance.

Foreign currency risk.

We anticipate fluctuations in operating income margins as a result of changes in the fair value of contingent consideration liabilities.

Additionally, the results of operations for our fiber optic licensing operations, which were disposed of on August 4, 2015, have been reclassified from continuing operations to net income (loss) from discontinued operations for all periods presented.

[added: *Credit Risk.*] We are subject to concentrations of credit risk related to our cash and cash equivalents and [removed: our] net receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and [removed: costs and estimated earnings in excess of billings on uncompleted contracts] [added: contract assets] net of advanced billings with the same customer.

In accordance with our investment policies, these institutions are authorized to invest cash and cash equivalents in a diversified portfolio of what we believe to be high-quality investments, which primarily include interest-bearing demand deposits, money market investments and money market mutual [removed: funds with original maturities of three months or less.][added: funds.]

In addition, [removed: as] we grant credit under normal payment terms, generally without [removed: collateral, we] [added: collateral; and therefore,] are subject to potential credit risk related to our customers’ [removed: ability] [added: inability] to pay for services provided.

[removed: This] [added: Furthermore, the] risk [added: of nonpayment] may be heightened as a result of depressed economic and financial market conditions.

We [added: believe the concentration of credit risk related to billed and unbilled receivables and contract assets is limited because of the diversity of our customers, and we] perform ongoing credit risk assessments of our customers and financial institutions and in some cases [removed: we] obtain collateral or other security from our customers.

[added: *Interest Rate Risk.*] As of December 31, [removed: 2017,] [added: 2018,] we had no derivative financial instruments to manage interest rate risk.

As of December 31, [removed: 2017,] [added: 2018,] the fair value of our variable rate debt of [removed: $668.4 million] [added: $1.07 billion] approximated book value.

Our weighted average interest rate on our variable rate debt for the year ended December 31, [removed: 2017] [added: 2018] was [removed: 2.7%.][added: 3.6%.]

The annual effect on our pretax earnings of a hypothetical 50 basis point increase or decrease in variable interest rates would be approximately [removed: $3.3] [added: $5.4] million based on our December 31, [removed: 2017] [added: 2018] balance of variable rate debt.

[added: *Foreign Currency Risk.*] The U.S. dollar is the functional currency for the majority of our operations, which are primarily located within the United States.

During [removed: 2017,] [added: 2018,] revenues from our foreign operations accounted for [removed: 26.2%] [added: 23.2%] of our consolidated revenues.

Fluctuations in foreign exchange rates during the year ended December 31, [removed: 2016] [added: 2018] caused a decrease of approximately [removed: $41] [added: $18] million in foreign revenues [removed: compared to the year ended December 31, 2015.]

[added: To minimize the risk from changes in foreign] currency exchange rates, we may enter into foreign currency derivative contracts to hedge our foreign currency risk on a cash flow basis.

There were no outstanding foreign currency derivative contracts at December 31, [removed: 2017.][added: 2018.]

Based on the balance of cash and cash equivalents in foreign banks of [removed: $55.2] [added: $16.2] million as of December 31, [removed: 2017,] [added: 2018,] an assumed 5% adverse change to foreign exchange rates would result in a fair value decline of [removed: $2.8] [added: $0.7] million.

Fluctuations in fair value are recorded in “Accumulated other comprehensive income [removed: (loss)”,] [added: (loss),”] a separate component of stockholders’ equity.

For example, in January 2019 one of our customers, PG&E, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as amended.

See Item 7.

*Management's Discussion and Analysis of Financial Condition and Results of Operations — Concentration of Credit Risk* for additional information regarding our pre-petition receivables and this bankruptcy matter.

compared to the year ended December 31, 2017.

Credit Risk.

However, we believe the concentration of credit risk related to billed and unbilled receivables and costs and estimated earnings in excess of billings on uncompleted contracts is limited because of the diversity of our customers.

Interest Rate Risk.

Foreign Currency Risk.

To minimize the risk from changes in foreign

[removed: General][added: General]

Quanta Services, Inc. (Quanta) is a leading provider of specialty contracting services, [removed: offering] [added: delivering comprehensive] infrastructure solutions [removed: primarily to] [added: for] the electric power, [removed: oil and gas] [added: energy] and [removed: communication] [added: communications] industries in the United States, Canada, Australia, Latin America and select other international markets.

The services we provide include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries we serve, such as electric power transmission and distribution [removed: networks,] [added: networks;] substation [removed: facilities, renewable energy facilities,] [added: facilities;] pipeline transmission and distribution systems and [removed: facilities.][added: facilities; refinery, petrochemical and industrial facilities; and telecommunications and cable multi-system operator networks.]

We report our results under two reportable segments: (1) Electric Power Infrastructure Services and (2) [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services.

Our consolidated revenues for the year ended December 31, [removed: 2017] [added: 2018] were [removed: $9.47] [added: $11.17] billion, of which [removed: 59%] [added: 57%] was attributable to the Electric Power Infrastructure Services segment and [removed: 41%] [added: 43%] was attributable to the [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment.

We believe our reputation for responsiveness and performance, geographic reach, comprehensive service [removed: offering,] [added: offerings,] safety leadership and financial strength have resulted in strong relationships with numerous customers, which include many of the leading companies in the industries we [removed: serve.][added: serve, and have positioned us to continue to take advantage of other opportunities.]

| l | American Electric Power Company, Inc. | l | [removed: Nalcor Energy] [added: FirstEnergy Corp.] |

| l | ATCO Electric | l | [removed: NextEra Energy,] [added: Fortis] Inc. |

| l | CenterPoint Energy, Inc. | l | [removed: NiSource] [added: NextEra Energy,] Inc. |

| l | Exelon Corporation | l | [removed: TransCanada] [added: Valero Energy] Corporation |

We believe that our business strategies, along with our [removed: competitive] [added: safety culture] and financial [removed: strengths, are key elements in differentiating] [added: strength, differentiate] us from our competition and position us to capitalize on future capital spending by our customers.

[removed: Reportable Segments][added: Reportable Segments]

[removed: Electric] [added: Electric] Power Infrastructure Services [removed: Segment][added: Segment]

In addition, this segment [removed: designs, installs and maintains] [added: provides services that support the development of] renewable energy [removed: generation facilities, consisting of] [added: generation, including] solar, wind and certain types of natural gas generation facilities, and related switchyards and transmission infrastructure.

[removed: To a lesser extent, the] [added: This] segment also provides comprehensive communications infrastructure services to [removed: wireline, fiber] [added: wireline] and wireless [removed: carrier] [added: telecommunications companies, cable multi-system operators and other] customers within the communications industry; services in connection with the construction of electric power generation facilities; [added: and] the design, installation, maintenance and repair of commercial and industrial [removed: wiring; and the installation of traffic networks and cable and control systems for light rail lines.][added: wiring.]

[removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services [removed: Segment][added: Segment]

The [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services segment provides comprehensive [removed: network] [added: infrastructure] solutions to customers involved in the development, transportation, storage and processing of natural gas, oil and other [removed: pipeline] products.

Services performed by the [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] 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 [added: the] fabrication of pipeline support systems and related structures and [removed: facilities.][added: facilities for natural gas utilities and midstream companies.]

To a lesser extent, this segment [added: serves the offshore and inland water energy markets and] designs, installs and maintains fueling [removed: systems, as well as] [added: systems and] water and sewer infrastructure.

[removed: Through a recent acquisition, we expanded our service offerings in this segment to include] [added: We also provide] high-pressure and critical-path turnaround services to the downstream and midstream energy markets and [removed: enhanced our capabilities with respect to] instrumentation and electrical services, piping, fabrication and storage tank services.

[removed: Financial] [added: Financial] Information [removed: about] [added: and] Geographic [removed: Areas][added: Areas]

We operate primarily in the United States; however, we derived [removed: $2.48] [added: $2.60] billion, [removed: $1.59] [added: $2.48] billion and [removed: $1.54] [added: $1.59] billion of our revenues from foreign operations during the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] respectively.

Of our foreign revenues, [removed: 79%, 75%] [added: 76%, 79%] and [removed: 85%] [added: 75%] were earned in Canada during the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] respectively.

In addition, we held property and equipment of [removed: $330.4] [added: $304.0] million and [removed: $320.7] [added: $330.4] million in foreign countries, primarily Canada, as of December 31, [removed: 2017] [added: 2018] and [removed: 2016.][added: 2017.]

[removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations and Item 7A.][added: Operations*.]

[removed: Customers,] [added: Customers,] Strategic Alliances and Preferred Provider [removed: Relationships][added: Relationships]

Our customers include electric power, [removed: oil and gas] [added: energy] and communications companies, as well as commercial, industrial and governmental entities.

Our 10 largest customers accounted for [removed: 36%] [added: 37%] of our consolidated revenues during the year ended December 31, [removed: 2017.][added: 2018.]

Our largest customer accounted for [removed: 9%] [added: 7%] of our consolidated revenues for the year ended December 31, [removed: 2017.][added: 2018.]

Our corporate-level business development group supports these activities by promoting and marketing our services for existing and prospective large national accounts, as well as projects that [removed: would require] [added: are capable of utilizing] services from multiple operating units.

Furthermore, many of our strategic relationships with customers take the form of strategic alliance or long-term maintenance agreements, which typically extend for an initial term of approximately two to five years and may include renewal options to [removed: extend the initial term.]

[removed: Backlog][added: | | Backlog as of | | | | | | | | Backlog as of | | | | | | |]

[removed: Backlog] [added: We have also historically disclosed our backlog, and while backlog] is not a term recognized under [removed: United States] generally accepted accounting principles [removed: (US GAAP); however,] [added: in the United States (GAAP),] it is a common measurement used in our industry.

The following table presents our total backlog [added: (a non-GAAP measure)] by reportable segment as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] along with an estimate of the backlog amounts expected to be realized within 12 months of each balance sheet date (in thousands):

| | [removed: December] [added: December] 31, [removed: 2017] [added: 2018] | | | | | | | | [removed: December] [added: December] 31, [removed: 2016] [added: 2017] | | | | | | |

| | [removed: 12 Month] | [removed: | | | Total | | | | 12 Month] [added: 12 Month] | | | | [removed: Total] [added: Total] | | |

| Electric Power Infrastructure Services | $ | [removed: 4,032,379] [added: 4,561,115] | | | $ | [removed: 7,359,237] [added: 8,545,440] | | | $ | [removed: 3,369,373] [added: 4,032,379] | | | $ | [removed: 6,657,431] [added: 7,359,237] | |

Revenue estimates included in our [added: remaining performance obligations and] backlog can be subject to change as a result [removed: of] [added: of, among other things:] project [removed: accelerations,] [added: acceleration;] cancellations or delays due to various factors, including but not limited to commercial issues, regulatory requirements and adverse [removed: weather.][added: weather conditions; and final acceptance of change orders by our customers.]

Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and most of our contracts may be terminated, typically upon 30 to 90 [removed: days] [added: days’] notice, even if we are not in default under the contract.

We have a workforce of approximately 39,200 employees as of December 31, 2018 and serve a diverse customer base.

Our services are typically provided pursuant to master service agreements, repair and maintenance contracts and fixed price and non-fixed price installation contracts.

Quanta is organized as a corporation under the laws of the State of Delaware and was formed in 1997.

As of December 31, 2018, we changed the name of our Oil and Gas Infrastructure Services segment to the Pipeline and Industrial Infrastructure Services segment.

There was no change to the composition of the segment, and the name change was made to better reflect the work performed within the segment and the diversity of its service offerings.

We continue to evaluate potential strategic acquisitions and investments to broaden our customer base, expand our geographic area of operations, grow our portfolio of services and increase opportunities across our operations.

This segment also includes our postsecondary educational institution, which specializes in pre-apprenticeship training, apprenticeship training and specialized utility task training for electric workers, and has been recently expanded to include curriculum for the gas distribution and communications industries.

| l | Dominion Energy, Inc. | l | NiSource Inc. |

| l | Entergy Corporation | l | Sempra Energy |

| l | EQT Midstream | l | TransCanada Corporation |

| l | Eversource Energy | l | Xcel Energy Inc. |

We believe our ability to provide services that cover a broad spectrum of our customers’ requirements is a significant differentiator.

extend the initial term.

Remaining Performance Obligations and Backlog

A performance obligation is a promise in a contract with a customer to transfer a distinct good or service.

As of December 31, 2018, our remaining performance obligations were $4.68 billion, 66.2% of which was expected to be recognized in the subsequent twelve months.

Our remaining performance obligations represent management’s estimate of 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, we include all estimated revenues attributable to consolidated joint ventures and variable interest entities (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.

We also believe this non-GAAP measure enables us to more effectively forecast our future results and better identify future operating trends that may not otherwise be apparent.

Our remaining performance obligations, as described above, are a component of our backlog calculation, which also includes estimated orders under master service agreements (MSAs), including estimated renewals, and non-fixed price contracts expected to be completed within one year.

In addition, many of our MSAs are subject to renewal, and these potential renewals are considered in determining the estimated amount of backlog.

The following table reconciles total remaining performance obligations to our backlog (a non-GAAP measure) by reportable segment as of December 31, 2018, along with estimates of amounts expected to be realized within 12 months of December 31, 2018 (in thousands):

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| | | December 31, 2018 | | | | | | |

| Electric Power Infrastructure Services | | | | | | | | |

| Remaining performance obligations | | $ | 2,093,461 | | | $ | 3,045,553 | |

| Estimated orders under MSAs and short-term, non-fixed price contracts | | 2,467,654 | | | | 5,499,887 | | |

| Backlog | | 4,561,115 | | | | 8,545,440 | | |

| | | | | | | | | |

| Pipeline and Industrial Infrastructure Services | | | | | | | | |

| Remaining performance obligations | | 1,003,543 | | | | 1,635,918 | | |

| Estimated orders under MSAs and short-term, non-fixed price contracts | | 1,411,329 | | | | 2,161,275 | | |

| Backlog | | 2,414,872 | | | | 3,797,193 | | |

| | | | | | | | | |

| Total | | | | | | | | |

| Remaining performance obligations | | 3,097,004 | | | | 4,681,471 | | |

| Estimated orders under MSAs and short-term, non-fixed price contracts | | 3,878,983 | | | | 7,661,162 | | |

| Backlog | | $ | 6,975,987 | | | $ | 12,342,633 | |

We have established a presence throughout the United States, Canada, Australia and Latin America with a workforce of approximately 32,800 employees as of December 31, 2017, which enables us to quickly and reliably serve a diversified customer base.

Our ability to deploy services to customers throughout the United States, Canada, Australia and Latin America as a result of our broad geographic presence and significant scope and scale of services is particularly important to our customers who operate networks that span multiple states or regions.

We believe these same factors also position us to continue to take advantage of other international opportunities.

| l | Ameren Corporation | l | ITC Holdings Corp. |

| l | Entergy Corporation | l | San Diego Gas & Electric Company |

| l | Eversource Energy | l | Valero Energy Corporation |

| l | FirstEnergy Corp. | l | The Williams Companies, Inc. |

We were organized as a corporation in the state of Delaware in 1997, and since that time, we have grown organically and through strategic acquisitions.

This growth has allowed us to expand our geographic presence and scope of services and develop new capabilities to meet our customers’ evolving needs.

We also continue to evaluate potential acquisitions of companies with strong management teams and good reputations and believe our financial strength and experienced management are attractive to potential acquisition targets.

We also serve 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.

Financial Information Regarding Reportable Segments

For financial information about our reportable segments, refer to Note 16 of the Notes to Consolidated Financial Statements in Item 8.

Financial Statements and Supplementary Data, which note is incorporated herein by reference.

Our business, financial condition and results of operations in foreign countries may be adversely impacted by monetary and fiscal policies, currency fluctuations, regulatory requirements and other political, social and economic developments or instability.

Refer to Item 1A.

Risk Factors, Item 7.

Quantitative and Qualitative Disclosures about Market Risk for additional information and discussion regarding the potential impact of currency rate fluctuations.

Our backlog represents the amount of consolidated revenues that we expect to realize from future work under construction contracts, long-term maintenance contracts and master service agreements (MSAs).

These estimates include revenues from the remaining portion of firm orders not yet completed and on which work has not yet begun, as well as revenues from change orders, renewal options, and funded and unfunded portions of government contracts to the extent that they are reasonably expected to occur.

For purposes of calculating backlog, we include 100% of estimated revenues attributable to consolidated joint ventures and variable interest entities (VIEs).

| | Backlog as of | | | | | | | | Backlog as of | | | | | | |

| Oil and Gas Infrastructure Services | 2,413,817 | | | | 3,818,470 | | | | 2,483,963 | | | | 3,092,341 | | |

| Total | $ | 6,446,196 | | | $ | 11,177,707 | | | $ | 5,853,336 | | | $ | 9,749,772 | |

For example, during the year ended December 31, 2017, we reduced our 12-month backlog for the Oil and Gas Infrastructure Services segment by approximately $100 million as a result of a cancellation of a natural gas pipeline project, for which we received a termination fee.

In addition, many of our MSAs are subject to renewal options.

We expect to continue to report total backlog on a basis consistent with our current definition.

programs specifically designed for developing and improving the skills of their members who work in the pipeline construction industry.

We have also continued to invest in our internal education and training capabilities.

We expect these capabilities to support future demand for qualified labor in the industries we serve and provide a platform for the development of additional educational and training programs.

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

In addition, our Corporate Governance Guidelines, Code of Ethics and Business Conduct and the charters of each of our Audit Committee, Compensation Committee, Governance and Nominating Committee and Investment Committee are posted on our website under the heading Investors & Media/Governance.

We intend to disclose on our website any amendments or waivers to our Code of Ethics and Business Conduct that are required to be disclosed pursuant to Item 5.05 of Form 8-K.

Free copies of these items may be obtained from our website.

See [removed: Legal Proceedings and Collective Bargaining Agreements in] Note [removed: 15] [added: 14] of the Notes to Consolidated Financial Statements in Item 8.

[removed: Financial] [added: *Financial] Statements and Supplementary [removed: Data,] [added: Data,*] which are incorporated by reference in this Item 3, for additional information regarding litigation, claims and other legal proceedings.

[removed: UNITED] [added: UNITED] STATES SECURITIES AND [removed: EXCHANGE COMMISSION][added: EXCHANGE COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: Form 10-K][added: Form 10-K]

| þ | | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: | | | For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2017 |][added: 2018]

| ¨ | | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: Commission] [added: Commission] file number [removed: 001-13831][added: 001-13831]

[removed: Quanta] [added: Quanta] Services, [removed: Inc.][added: Inc.]

[removed: (Exact] [added: *(Exact] name of registrant as specified in its [removed: charter)][added: charter)*]

| [removed: Delaware] [added: Delaware] | | [removed: 74-2851603] [added: 74-2851603] |

| [removed: (State] [added: *(State] or other jurisdiction [removed: of incorporation] [added: of* *incorporation] or [removed: organization)] [added: organization)*] | | [removed: (I.R.S. Employer Identification No.)] [added: *(I.R.S. Employer* *Identification No.)*] |

[removed: 2800] [added: 2800] Post Oak Boulevard, Suite [removed: 2600][added: 2600]

[removed: Houston,] [added: Houston,] Texas [removed: 77056][added: 77056]

[removed: (Address] [added: *(Address] of principal executive offices, including zip [removed: code)][added: code)*]

[removed: (713) 629-7600][added: (713) 629-7600]

[removed: (Registrant’s] [added: *(Registrant’s] telephone number, including area [removed: code)][added: code)*]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | | [removed: Name] [added: Name] of Exchange on Which [removed: Registered] [added: Registered] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

[removed: Title] [added: Title] of Each [removed: Class][added: Class]

[removed: None][added: None]

Indicate by check mark whether the Registrant has submitted electronically [removed: and posted on its corporate web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit [removed: and post] such files).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [added: o]

| Large accelerated filer þ | | | | Accelerated filer o | [added: |]

| Non-accelerated filer o | | [removed: (Do not check if smaller reporting company)] | | Smaller reporting company o | [added: |]

| | | | | Emerging growth company o | [added: |]

As of June [removed: 30, 2017] [added: 29, 2018] (the last business day of the Registrant’s most recently completed second fiscal quarter), the aggregate market value of the Common Stock of the Registrant held by non-affiliates of the Registrant, based on the last sale price of the Common Stock reported by the New York Stock Exchange on such date, was $4.9 billion.

As of February 21, [removed: 2018,] [added: 2019,] the number of outstanding shares of Common Stock of the Registrant was [removed: 153,744,728.][added: 141,356,413.]

As of the same date, [removed: 449,929] [added: 36,183] exchangeable shares of a Canadian subsidiary of the Registrant [removed: associated with one share of Series G Preferred Stock of the Registrant] were [removed: outstanding and an additional 36,183 exchangeable shares of certain other Canadian subsidiaries of the Registrant were] outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Registrant’s Definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

[removed: QUANTA] [added: QUANTA] SERVICES, [removed: INC.][added: INC.]

[removed: ANNUAL] [added: ANNUAL] REPORT ON FORM [removed: 10-K][added: 10-K]

[removed: For] [added: For] the Year [removed: Ended December] [added: Ended December] 31, [removed: 2017][added: 2018]

[removed: INDEX][added: INDEX]

| | | [removed: Page] [added: Page] |

| | | [removed: Number] [added: Number] |

| [removed: PART I] [added: PART I] | | |

| ITEM 1. | [removed: [Business](#s8F7FA5AE00C051E1868BE9E43CA97EF8)] [added: [Business](#s8BA2A9160F9E50D8A05930BEB1AE667D)] | [removed: [2](#s8F7FA5AE00C051E1868BE9E43CA97EF8)] [added: [2](#s8BA2A9160F9E50D8A05930BEB1AE667D)] |

| ITEM 1A. | [Risk [removed: Factors](#s66A2B84793EB51C18F8F61E5DAF09FD0)] [added: Factors](#s3AF80055AA925944A77DF82844708688)] | [removed: [8](#s66A2B84793EB51C18F8F61E5DAF09FD0)] [added: [8](#s3AF80055AA925944A77DF82844708688)] |

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| | | |

10-K 1 pwr-123117x10k.htm 10-K

(Check one):

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

[removed: Facilities][added: Facilities]

We lease our corporate headquarters in Houston, Texas and own and lease other facilities throughout [removed: North America] [added: the United States, Canada] and [removed: in various] [added: other] foreign locations where we conduct business.

Our facilities are [removed: used] [added: utilized] for [added: operations in both of our reportable segments and include] offices, equipment yards, warehouses, [removed: storage] [added: storage, maintenance shops] and [removed: vehicle shops.][added: training and educational facilities.]

As of December 31, [removed: 2017,] [added: 2018,] we owned [removed: 55] [added: 60] of our facilities and leased the remainder.

[removed: Equipment][added: Equipment]

As of December 31, [removed: 2017,] [added: 2018,] the total size of the rolling-stock fleet was approximately [removed: 40,000] [added: 45,000] units.

[removed: PART II][added: PART II]

Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “PWR.” [removed: The following table sets forth the high and low closing prices of our common stock per quarter, as reported by the NYSE, for the two most recent fiscal years.]

On February 21, [removed: 2018,] [added: 2019,] there were [removed: 670] [added: 650] holders of record of our common [removed: stock, four] [added: stock and three] holders of record of exchangeable shares of Canadian subsidiaries of [removed: Quanta, and one holder of record of our Series G preferred stock.][added: Quanta.]

There is no established trading market for the exchangeable [removed: shares or the Series G preferred stock;] [added: shares;] however, the exchangeable shares may be exchanged at the option of the holder for Quanta common stock on a one\-for-one basis.

See Note [removed: 11] [added: 10] of the Notes to Consolidated Financial Statements in Item 8.

[removed: Financial] [added: *Financial] Statements and Supplementary [removed: Data] [added: Data*] for additional discussion of our equity securities.

[removed: Unregistered] [added: Unregistered] Sales of Securities During the Fourth Quarter [removed: of 2017][added: of 2018]

The shares of common stock issued in [removed: these acquisitions] [added: this transaction] were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as the shares were issued to the [removed: owners] [added: owner] of [removed: businesses] [added: business] acquired in [added: a] privately negotiated [removed: transactions] [added: transaction] not involving any public offering or solicitation.

[removed: Issuer] [added: Issuer] Purchases of Equity Securities During the Fourth Quarter [removed: of 2017][added: of 2018]

The following table contains information about our purchases of equity securities during the three months ended December 31, [removed: 2017.][added: 2018.]

| [removed: Period] [added: Period] | | [removed: Total] [added: Total] Number of Shares [removed: Purchased] [added: Purchased] | | | [removed: Average] [added: Average] Price Paid per [removed: Share] [added: Share] | | | [removed: Total] [added: | Total] Number of Shares Purchased as Part of Publicly Announced Plans or [removed: Programs] [added: Programs] | | | [removed: Maximum] [added: Maximum] Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or [removed: Programs(2)] [added: Programs(1)] | | |

| Tax Withholdings [removed: (1)] [added: (2)] | | [removed: 9,252] [added: —] | | | [removed: $37.42] [added: $] | [added: —] | | [added: |] — | | | | | |

| [removed: December 1 - 31, 2017] | | [removed: —] [added: December 31,] | | | [removed: —] | | | [removed: —] | | | | | | [added: | | | | | | | | | | |]

| [removed: (1)] [added: (2)] | | Includes shares purchased from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock unit [removed: awards] and performance unit awards or the settlement of previously vested [removed: but] [added: and] deferred restricted stock unit [added: and performance unit] awards. |

| [removed: (2)] [added: (1)] | | [added: Includes shares repurchased as of the trade date of such repurchases.] On May 25, 2017, we issued a press release announcing that our [removed: board] [added: Board] of [removed: directors] [added: Directors] approved a stock repurchase program that [removed: authorizes] [added: authorized] us to purchase, from time to time through June 30, 2020, up to $300.0 million of our outstanding common [removed: stock.] [added: 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 [removed: this program] [added: 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. [removed: This program does] [added: These programs do] not obligate us to acquire any specific amount of common stock and may be modified or terminated by our [removed: board] [added: Board] of [removed: directors] [added: Directors] at any time at its sole discretion and without notice. As of December 31, [removed: 2017,] [added: 2018,] we had repurchased [removed: 1.4] [added: 8.6] million shares of our common stock under [removed: this program] [added: the 2017 Repurchase Program] at a cost of [removed: $50.0] [added: $300.0 million and 6.7 million shares of our common stock under the 2018 Repurchase Program at a cost of $201.3] million. [removed: Accordingly, $250.0] [added: As a result, the 2017 Repurchase Program was completed and $298.7] million remained available under the [removed: program.] [added: 2018 Repurchase Program as of December 31, 2018.] |

[removed: Dividends][added: Dividends]

We did not declare any cash dividends on our common stock during the [removed: years] [added: year] ended December 31, [removed: 2017 or 2016, or in any previous periods.][added: 2017.]

In addition, as discussed in [removed: Liquidity] [added: *Liquidity] and Capital Resources [removed: -] [added: —] Debt Instruments — [added: Senior Secured] Credit [removed: Facility] [added: Facility*] in Item 7.

[removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations, our] [added: Operations*, the] credit agreement [added: for our senior secured credit facility] restricts the payment of cash dividends unless certain conditions are met.

[removed: Performance Graph][added: Performance Graph]

[removed: The] [added: *The] following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such [removed: filing.][added: filing.*]

The following graph compares, for the period from December 31, [removed: 2012] [added: 2013] to December 31, [removed: 2017,] [added: 2018,] the cumulative stockholder return on our common stock with the cumulative total return of the [removed: Standard & Poor’s] [added: S&P] 500 Index (the S&P [removed: 500 Index)] [added: 500), the S&P MidCap 400 Index (the S&P 400)] and [removed: a] [added: two] peer [removed: group] [added: groups] selected by our management that [removed: includes] [added: include] public companies within our industries.

The companies in the peer [removed: group] [added: groups] were selected to represent a broad group of publicly held corporations with operations similar to ours.

The [added: current] peer group (the [added: 2018] Peer Group) includes AECOM, [removed: Chicago Bridge & Iron Company N.V.,] EMCOR Group Inc., Fluor Corporation, Jacobs Engineering Group Inc., KBR, Inc., MasTec, Inc., [added: McDermott International, Inc.;] MYR Group Inc. and Primoris Services Corporation.

The graph below assumes an investment of $100 (with reinvestment of all dividends) in our common stock, the [added: 2018] Peer [removed: Group and] [added: Group,] the [added: 2017 Peer Group, the] S&P 500 [removed: Index] [added: and the S&P MidCap 400] on December 31, [removed: 2012] [added: 2013] and tracks their relative performance through December 31, [removed: 2017.][added: 2018.]

[removed: COMPARISON] [added: COMPARISON] OF 5 YEAR CUMULATIVE TOTAL [removed: RETURN][added: RETURN]

Among Quanta Services, Inc., the [added: 2018 Peer Group, the 2017 Peer Group, the] S&P [removed: 500 Index] [added: 500,] and the [removed: Peer Group][added: S&P MidCap 400]

[removed: ][added: ]

However, subsequent to December 31, 2018, we issued 449,929 shares of our common stock to the former owner of an acquired business in exchange, on a one-for-one basis, for exchangeable shares in a Canadian subsidiary of Quanta that were held by the former owner.

The former owner originally received the exchangeable shares as partial consideration for the sale of the acquired business.

In connection with the aforementioned acquisition, the former owner also received one share of Quanta Series G Preferred Stock, which provided the former owner voting rights in Quanta common stock equivalent to the number of outstanding exchangeable shares held by the former owner.

Upon completion of the exchange described above, no exchangeable shares associated with the preferred share remained outstanding.

Accordingly, the share of Quanta Series G preferred stock was redeemed, deemed retired and canceled and may not be reissued.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | |

| October 1 - 31, 2018 | | | | | | | | | | | | | | |

| Open Market Stock Repurchases (1) | | 2,706,951 | | | $ | 31.86 | | | 2,706,951 | | | $ | 446,088,029 | |

| Tax Withholdings (2) | | 10,098 | | | $ | 33.61 | | | — | | | | | |

| November 1 - 30, 2018 | | | | | | | | | | | | | | |

| Open Market Stock Repurchases (1) | | — | | | $ | — | | | — | | | $ | 446,088,029 | |

| Tax Withholdings (2) | | 6,868 | | | $ | 34.71 | | | — | | | | | |

| December 1 - 31, 2018 | | | | | | | | | | | | | | |

| Open Market Stock Repurchases (1) | | 4,945,214 | | | $ | 29.80 | | | 4,945,214 | | | $ | 298,709,474 | |

| Total | | 7,669,131 | | | | | | | 7,652,165 | | | $ | 298,709,474 | |

During the fourth quarter of 2018, we declared a cash dividend of $0.04 per share of our common stock, which was paid on January 16, 2019 to stockholders of record as of January 2, 2019.

The peer group used in the prior year (the 2017 Peer Group) was the same, except that McDermott International, Inc. replaced Chicago Bridge & Iron Company N.V. as a result of the combination of the two companies.

| | | 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | |

| Quanta Services, Inc. | | $ | 100.00 | | | $ | 89.96 | | | $ | 64.16 | | | $ | 110.42 | | | $ | 123.92 | | | $ | 95.50 | |

| 2018 Peer Group | | $ | 100.00 | | | $ | 74.06 | | | $ | 67.55 | | | $ | 89.16 | | | $ | 98.27 | | | $ | 73.20 | |

| 2017 Peer Group | | $ | 100.00 | | | $ | 76.57 | | | $ | 69.40 | | | $ | 89.62 | | | $ | 99.85 | | | $ | 76.52 | |

| S&P 500 | | $ | 100.00 | | | $ | 113.69 | | | $ | 115.26 | | | $ | 129.05 | | | $ | 157.22 | | | $ | 150.33 | |

| S&P MidCap 400 | | $ | 100.00 | | | $ | 109.77 | | | $ | 107.38 | | | $ | 129.65 | | | $ | 150.71 | | | $ | 134.01 | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| | | High | | | | Low | | |

| Year Ended December 31, 2017 | | | | | | | | |

| 4th Quarter | | $ | 39.50 | | | $ | 35.35 | |

| 3rd Quarter | | $ | 37.59 | | | $ | 32.67 | |

| 2nd Quarter | | $ | 36.48 | | | $ | 30.66 | |

| 1st Quarter | | $ | 38.47 | | | $ | 34.14 | |

| | | | | | | | | |

| Year Ended December 31, 2016 | | | | | | | | |

| 4th Quarter | | $ | 36.85 | | | $ | 27.29 | |

| 3rd Quarter | | $ | 28.14 | | | $ | 22.58 | |

| 2nd Quarter | | $ | 24.47 | | | $ | 21.60 | |

| 1st Quarter | | $ | 22.87 | | | $ | 16.77 | |

However, subsequent to the end of the fourth quarter of 2017, on January 19, 2018 and January 22, 2018, we completed acquisitions in which a portion of the consideration for each acquisition consisted of the unregistered issuance of shares of our common stock.

The aggregate consideration paid at closing in these acquisitions included 379,817 shares of our common stock valued at approximately $13.6 million as of the acquisition dates.

For additional information about these acquisitions, including additional consideration, see Note 19 of the Notes to Consolidated Financial Statements in Item 8.

Financial Statements and Supplementary Data.

| | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | |

| October 1 - 31, 2017 | | | | | | | | | | | | | |

| November 1 - 30, 2017 | | | | | | | | | | | | | |

| Open Market Stock Repurchases (2017 Repurchase Program) (2) | | 1,382,292 | | | $36.17 | | | 1,382,292 | | | $ | 250,000,000 | |

| Tax Withholdings (1) | | 1,692 | | | $36.16 | | | — | | | | | |

| Total | | 1,393,236 | | | | | | 1,382,292 | | | $ | 250,000,000 | |

We currently intend to retain our future earnings, if any, to finance the growth, development and expansion of our business.

Accordingly, we currently do not intend to declare or pay any cash dividends on our common stock in the immediate future.

| | | 12/12 | | | | 12/13 | | | | 12/14 | | | | 12/15 | | | | 12/16 | | | | 12/17 | | |

| Quanta Services, Inc. | | $ | 100.00 | | | $ | 115.65 | | | $ | 104.03 | | | $ | 74.20 | | | $ | 127.70 | | | $ | 143.31 | |

| Peer Group | | $ | 100.00 | | | $ | 140.12 | | | $ | 100.17 | | | $ | 91.17 | | | $ | 111.67 | | | $ | 118.25 | |

| S&P 500 | | $ | 100.00 | | | $ | 132.39 | | | $ | 150.51 | | | $ | 152.59 | | | $ | 170.84 | | | $ | 208.14 | |

See Note [removed: 5] [added: 4] of the Notes to Consolidated Financial Statements in Item 8.

[removed: Financial] [added: *Financial] Statements and Supplementary [removed: Data] [added: Data*] for information regarding certain acquisitions and the related impact on our results of operations as these acquisitions may affect the comparability of such results.

We have presented the results of operations, financial position and cash flows of such fiber optic licensing subsidiaries as discontinued operations for all applicable periods presented in this Annual [removed: Report on Form 10-K.][added: Report.]

[removed: Financial] [added: *Financial] Statements and Supplementary [removed: Data] [added: Data*] and [removed: Item] [added: *Item] 7.

Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations.][added: Operations.*]

| | | [removed: Year] [added: Year] Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | |

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | |

| | | [removed: (In] [added: (In] thousands, except per share [removed: information)] [added: information)] | | | | | | | | | | | | | | | | | | | |

| [removed: Consolidated] [added: Consolidated] Statements of Operations [removed: Data:] [added: Data:] | | | | | | | | | | | | | | | | | | | | | |

| Revenues | | $ | [removed: 9,466,478] [added: 11,171,423] | | | $ | [removed: 7,651,319] [added: 9,466,478] | | | $ | [removed: 7,572,436] [added: 7,651,319] | | | $ | [removed: 7,747,229] [added: 7,572,436] | | | $ | [removed: 6,411,577] [added: 7,747,229] | | |

| Cost of services (including depreciation) | | [removed: 8,224,618] [added: 9,691,459] | | | | [removed: 6,637,519] [added: 8,224,618] | | | | [removed: 6,648,771] [added: 6,637,519] | | | | [removed: 6,578,435] [added: 6,648,771] | | | | [removed: 5,424,644] [added: 6,578,435] | | | |

| Gross profit | | [removed: 1,241,860] [added: 1,479,964] | | | | [removed: 1,013,800] [added: 1,241,860] | | | | [removed: 923,665] [added: 1,013,800] | | | | [removed: 1,168,794] [added: 923,665] | | | | [removed: 986,933] [added: 1,168,794] | | | |

| Selling, general and administrative expenses | | [added: 857,574 | | | |] 777,920 | | | | 653,338 | | | | 592,863 | | | | 705,477 | | | (c) | [removed: 485,069 | | | |]

| Amortization of intangible assets | | [removed: 32,205] [added: 43,994] | | | | [removed: 31,685] [added: 32,205] | | | | [removed: 34,848] [added: 31,685] | | | | [removed: 34,257] [added: 34,848] | | | | [removed: 25,865] [added: 34,257] | | | |

| Asset impairment charges (a) | | [removed: 58,057] [added: 49,375] | | | | [removed: 7,964] [added: 58,057] | | | | [removed: 58,451] [added: 7,964] | | | | [removed: —] [added: 58,451] | | | | — | | | |

| Change in fair value of contingent consideration liabilities | | [removed: (5,171] [added: (11,248] | | ) | | [removed: —] [added: (5,171] | | [added: )] | | — | | | | — | | | | — | | | |

| Operating income | | [removed: 378,849] [added: 540,269] | | | | [removed: 320,813] [added: 378,849] | | | | [removed: 237,503] [added: 320,813] | | | | [removed: 429,060] [added: 237,503] | | | | [removed: 475,999] [added: 429,060] | | | |

| Interest expense | | [removed: (20,946] [added: (36,945] | | ) | | [removed: (14,887] [added: (20,946] | | ) | | [removed: (8,024] [added: (14,887] | | ) | | [removed: (4,765] [added: (8,024] | | ) | | [removed: (2,668] [added: (4,765] | | ) | |

| Interest income | | [removed: 832] [added: 1,555] | | | | [removed: 2,423] [added: 832] | | | | [removed: 1,493] [added: 2,423] | | | | [removed: 3,736] [added: 1,493] | | | | [removed: 3,378] [added: 3,736] | | | |

| Other [removed: income (expense),] [added: expense,] net | | [removed: (4,978] [added: (47,213] | | ) | | [removed: (663] [added: (4,978] | | ) | | [removed: (2,297] [added: (663] | | ) | | [removed: (1,432] [added: (2,297] | | ) | | [removed: 111,611] [added: (1,432] | | [added: )] | [removed: (d)] |

| Income from continuing operations before income taxes | | [removed: 353,757] [added: 457,666] | | | | [removed: 307,686] [added: 353,757] | | | | [removed: 228,675] [added: 307,686] | | | | [removed: 426,599] [added: 228,675] | | | | [removed: 588,320] [added: 426,599] | | | |

| Provision for income taxes (b) | | [removed: 35,532] [added: 161,659] | | | | [removed: 107,246] [added: 35,532] | | | | [removed: 97,472] [added: 107,246] | | | | [removed: 139,007] [added: 97,472] | | | | [removed: 196,875] [added: 139,007] | | | |

| Net income from continuing operations | | [removed: 318,225] [added: 296,007] | | | | [removed: 200,440] [added: 318,225] | | | | [removed: 131,203] [added: 200,440] | | | | [removed: 287,592] [added: 131,203] | | | | [removed: 391,445] [added: 287,592] | | | |

| Net income (loss) from discontinued operations | | — | | | | [removed: (342] [added: —] | | [removed: )] | | [removed: 190,621] [added: (342] | | [added: )] | | [removed: 27,490] [added: 190,621] | | | | [removed: 29,864] [added: 27,490] | | | |

| Net income | | [removed: 318,225] [added: 296,007] | | | | [removed: 200,098] [added: 318,225] | | | | [removed: 321,824] [added: 200,098] | | | | [removed: 315,082] [added: 321,824] | | | | [removed: 421,309] [added: 315,082] | | | |

| Less: Net income attributable to non-controlling interests | | [removed: 3,247] [added: 2,661] | | | | [removed: 1,715] [added: 3,247] | | | | [removed: 10,917] [added: 1,715] | | | | [removed: 18,368] [added: 10,917] | | | | [removed: 19,388] [added: 18,368] | | | |

| Net income attributable to common stock | | $ | [removed: 314,978] [added: 293,346] | | | $ | [removed: 198,383] [added: 314,978] | | | $ | [removed: 310,907] [added: 198,383] | | | $ | [removed: 296,714] [added: 310,907] | | | $ | [removed: 401,921] [added: 296,714] | | |

| Net income from continuing operations | | $ | [removed: 314,978] [added: 293,346] | | | $ | [removed: 198,725] [added: 314,978] | | | $ | [removed: 120,286] [added: 198,725] | | | $ | [removed: 269,224] [added: 120,286] | | | $ | [removed: 372,057] [added: 269,224] | | |

| Net income (loss) from discontinued operations | | — | | | | [removed: (342] [added: —] | | [removed: )] | | [removed: 190,621] [added: (342] | | [added: )] | | [removed: 27,490] [added: 190,621] | | | | [removed: 29,864] [added: 27,490] | | | |

| Net income attributable to common stock | | $ | [removed: 314,978] [added: 293,346] | | | $ | [removed: 198,383] [added: 314,978] | | | $ | [removed: 310,907] [added: 198,383] | | | $ | [removed: 296,714] [added: 310,907] | | | $ | [removed: 401,921] [added: 296,714] | | |

| Basic earnings per share attributable to common stock from continuing operations | | $ | [removed: 2.02] [added: 1.92] | | | $ | [removed: 1.26] [added: 2.02] | | | $ | [removed: 0.62] [added: 1.26] | | | $ | [removed: 1.22] [added: 0.62] | | | $ | [removed: 1.73] [added: 1.22] | | |

| Diluted earnings per share attributable to common stock from continuing operations | | $ | [removed: 2.00] [added: 1.90] | | | $ | [removed: 1.26] [added: 2.00] | | | $ | [removed: 0.62] [added: 1.26] | | | $ | [removed: 1.22] [added: 0.62] | | | $ | [removed: 1.73] [added: 1.22] | | |

| (a) | In [added: 2018,] 2017, 2016 and 2015, we recorded asset impairment charges of [added: $49.4 million ($36.5 million net of tax),] $58.1 million ($36.6 million net of tax), $8.0 million ($7.1 million net of tax) and $58.5 million ($44.6 million net of [removed: tax).] [added: tax).The charges recorded in 2018 related to the winding down of certain oil-influenced operations and assets.] The charges recorded in 2017 related to goodwill and intangible assets, including a $57.0 million goodwill impairment and a $1.1 million impairment of a customer relationship intangible asset. The goodwill impairment [removed: is] [added: was] associated with two reporting units within our [removed: Oil] [added: Pipeline] and [removed: Gas] [added: Industrial] Infrastructure Services Division. The charges recorded in 2016 primarily related to a pending disposition of certain international renewable energy services operations, which was completed in 2017. The charges recorded in 2015 related to goodwill, intangible assets and property and equipment, including a $39.8 million goodwill impairment and a $12.1 million impairment to customer relationship, trade name and non-compete agreement intangible assets. For [removed: a] [added: further] discussion of these [removed: charges,] [added: charges in 2018, 2017 and 2016,] refer to [removed: Results] [added: *Results] of Operations [removed: -] [added: —] Consolidated Results [removed: -] [added: —] Asset impairment [removed: charges] [added: charges*] included in Item 7. [removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations.] [added: Operations*.] |

| (b) | The [removed: low] effective tax [added: rates in 2018 and 2017 were impacted by the enactment of the Tax Cuts and Jobs Act of 2017 (Tax Act), which, among other things, lowered the U.S. federal corporate tax] rate [added: from 35% to 21% as of January 1, 2018. The lower effective tax rate] in 2017 was primarily due to $70.1 million of tax benefits related to the enactment of the Tax [removed: Cuts and Jobs Act (Tax Act) on December 22, 2017.] [added: Act.] For more information [removed: and the status of our provisional analysis of] [added: regarding] the Tax Act, refer to Note [removed: 10] [added: 9] of the Notes to Consolidated Financial Statements in Item 8. [removed: Financial] [added: *Financial] Statements and Supplementary [removed: Data.] [added: Data.* As a result of the tax reform regulations issued during 2018, the 2018 effective tax rate includes a $37.2 million provision to record a valuation allowance against tax benefits recognized during 2017 associated with the Tax Act and other entity restructuring and recapitalization efforts.] For more information on other items that impacted the effective tax rates in [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] refer to [removed: Results] [added: *Results] of Operations [removed: -] [added: —] Consolidated Results [removed: -] [added: —] Provision for income [removed: taxes] [added: taxes*] included in Item 7. [removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations.] [added: Operations*.] The effective tax [removed: rates] [added: rate] in [added: 2015 did not include a significant decrease in reserves for uncertain tax positions. The effective tax rate in] 2014 [removed: and 2013 were] [added: was] impacted by $8.1 million [removed: and $9.9 million] in tax benefits primarily due to decreases in reserves for uncertain tax positions [removed: resulting] [added: that resulted] from the expiration of federal and state statute of limitations periods. |

| | | [removed: December 31,] [added: December 31,] | | | | | | | | | | | | | | | | | | |

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| | | [removed: (In thousands)] [added: (In thousands)] | | | | | | | | | | | | | | | | | | |

| [removed: Balance] [added: Balance] Sheet [removed: Data:] [added: Data:] | | | | | | | | | | | | | | | | | | | | |

| Working capital | | $ | [removed: 1,377,840] [added: 1,519,977] | | | $ | [removed: 1,083,517] [added: 1,377,840] | | | $ | [removed: 1,073,775] [added: 1,083,517] | | | $ | [removed: 1,389,393] [added: 1,073,775] | | | $ | [removed: 1,226,012] [added: 1,389,393] | |

| Goodwill | | $ | [removed: 1,868,600] [added: 1,899,879] | | | $ | [removed: 1,603,169] [added: 1,868,600] | | | $ | [removed: 1,552,658] [added: 1,603,169] | | | $ | [removed: 1,596,695] [added: 1,552,658] | | | $ | [removed: 1,445,927] [added: 1,596,695] | |

| | |

| --- | --- |

| (d) | In 2013, we recorded a pre-tax gain of approximately $112.7 million from the sale of all of our equity ownership interest in Howard Midstream Energy Partners, LLC. |

[removed: INDEX] [added: INDEX] TO QUANTA SERVICES, INC.’S CONSOLIDATED FINANCIAL [removed: STATEMENTS][added: STATEMENTS]