Quanta Services (PWR) 10-K risk factor changes: FY2020 vs FY2019

Our business is subject to a variety of risks and uncertainties, including, but not limited to, the [added: material] risks and uncertainties described below.

This Annual Report 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 of] [added: *Cautionary Statement About] Forward-Looking Statements and [removed: Information* included in Item 7.][added: Information.*]

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

Risks Related to [removed: Our Industries and] Operating Our Business

[removed: | • |] [added: -] the timing and volume of work we perform and our performance with respect to ongoing [removed: projects; |][added: projects, including as a result of project delays, reductions in project scope, project terminations or cancellations, and agreement terminations and expirations;]

[removed: | • | project delays, reductions in project scope, project terminations or cancellations and] [added: -] increases in project [removed: costs, including as a] [added: costs that] result [removed: of,] [added: from,] among other things, natural [removed: disasters,] [added: disasters and emergencies,] adverse weather conditions or events, legal [removed: challenges or] [added: challenges,] permitting, regulatory or environmental [removed: processes; |][added: processes, or inaccurate project cost estimates;]

[removed: | • |] [added: -] variations in the size, scope, costs and margins of ongoing [removed: projects and] [added: projects, as well as] the mix of our customers, contracts and business; [removed: |]

[removed: | • |] [added: -] fluctuations in economic, political and market conditions on a regional, national or global [removed: basis; |][added: basis, including potential regulatory, legislative and policy changes resulting from the 2020 U.S. congressional and presidential elections;]

[removed: | • |] [added: -] pricing pressures as a result of competition; [removed: |]

[removed: | • |] [added: -] changes in the budgetary spending patterns or strategic plans of customers or [removed: federal, state, provincial and local governments; |][added: governmental entities;]

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

[removed: | • |] [added: - increased payment risk associated with customers experiencing financial difficulties (including bankruptcy) and an increase in] disputes with customers [removed: or delays] relating to billing and payment under [removed: our] contracts and change orders; [removed: |]

[removed: | • |] [added: - disputes with customers or delays and] payment risk [removed: associated with the financial condition of customers,] [added: relating to billing and payment under our contracts and change orders,] including customers affected by the volatility of [removed: natural gas and oil] [added: commodity] prices or [added: production or] that have filed for bankruptcy protection; [removed: |]

[removed: | • |] [added: -] the resolution of, or unexpected or increased costs associated with, pending or threatened legal proceedings, indemnity obligations, multiemployer pension plan obligations (e.g., withdrawal liability) or other [removed: claims asserted against us; |][added: claims;]

[removed: | • |] [added: -] restructuring, severance and other costs associated [removed: with] [added: with, among other things,] winding down certain operations and exiting markets, including our Latin American operations; [removed: |]

[removed: | • |] [added: -] estimates and assumptions in determining our financial 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: |]

[removed: | • |] [added: -] significant fluctuations in foreign currency rates; [removed: |]

[removed: | • |] [added: -] the recognition of tax impacts related to changes in tax laws or uncertain tax positions; and [removed: |]

[removed: | • |] [added: -] the timing and magnitude of costs we incur to support [added: our operations or] growth internally or through [removed: acquisitions or otherwise. |][added: acquisitions.]

Negative economic and market conditions, including low [removed: oil and natural gas] [added: commodity] production volumes and prices, can adversely impact our customers’ future spending as well as payment for our services.

A number of factors can adversely affect the industries we serve, including, among other things, [added: the COVID-19 pandemic,] financing conditions, potential bankruptcies and global and U.S. trade relationships and other geopolitical events.

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

These risks, which are not subject to our control, include the volatility of [removed: natural gas and oil] [added: commodity] prices and [removed: production,] [added: production volumes,] the development of and consumer demand for alternative energy sources, and legislative and regulatory actions, as well as public opinion, regarding the impact of fossil fuels on the climate and environment.

[removed: In addition,] [added: Furthermore,] the [removed: 2020 U.S. presidential and congressional elections may result in a] change in [removed: administration and] control of [removed: Congress with] the [removed: potential consequence of] [added: U.S. Congress and presidency in 2021 may result in] increased restrictions on oil and gas production activities, which could have a material adverse effect on the oil and gas [removed: industry.][added: industry as a whole.]

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

[removed: Additionally, a] [added: A] decline in prices, production or the development of resource plays can [added: also] negatively impact [added: demand for] certain [removed: portions of our Electric Power Infrastructure Services segment.][added: electric power infrastructure services performed in energy-reliant markets, including Canada and Australia.]

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

Many of our projects involve challenging engineering, permitting, procurement and construction phases that occur over extended time periods, sometimes several years, and we have encountered and may in the future encounter project [removed: delays] [added: delays, additional costs] or project performance issues as a result of, among other things:

[removed: | • |] [added: -] delays in the delivery or management of design or engineering information, equipment or materials; [removed: |]

[removed: | • |] [added: -] schedule changes; [removed: |]

[removed: | • |] [added: -] natural [removed: disasters,] [added: disasters or emergencies,] including [removed: wildfires, earthquakes] [added: wildfires] and [added: earthquakes, as well as] significant weather events (e.g., hurricanes, tropical storms, tornadoes, floods, droughts, blizzards and extreme [removed: temperatures); |][added: temperatures) and adverse or unseasonable weather conditions (e.g., prolonged rainfall or snowfall, early thaw in Canada and the northern United States);]

[removed: | • |] [added: -] our or a customer’s failure to timely obtain permits or rights of way or meet other permitting, regulatory or environmental requirements or conditions; [removed: |]

[removed: | • |] [added: -] difficult terrain and site conditions where delivery of materials and availability of labor are impacted or where there is exposure to harsh and hazardous conditions; [removed: |]

[removed: | • |] [added: -] protests, legal challenges or other political activity or opposition to a project; [removed: |]

[removed: | • |] [added: -] other factors such as terrorism, military action and public health crises [removed: (including the outbreak of] [added: (e.g.,] the [removed: recent coronavirus); |][added: COVID-19 pandemic);]

[removed: In addition, we contract with third-party suppliers and] [added: - delay or failure to perform by suppliers,] subcontractors [added: or other third parties, or our failure] to [removed: assist us with the completion] [added: coordinate performance] of [removed: contracts, and] [added: such parties, as] approximately 15% to 20% of our work is subcontracted to other service providers.

Delays and additional costs [added: associated with delays] may be substantial and not recoverable from third parties, and in some cases, we may be required to compensate the customer for such [removed: delays.][added: delays, including in circumstances where we have guaranteed project completion or performance by a scheduled date and incur liquidated damages if we do not meet such schedule.]

[removed: In extreme cases, project delay or] [added: Additionally,] performance difficulties can result in project cancellation by a customer [removed: or] [added: and] damage to our reputation or relationship with a customer, which can adversely affect our ability to secure new contracts.

[removed: Additional] [added: As a result, additional] costs or penalties, a reduction in our productivity or efficiency or a project termination in any given period can have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our revenues and profitability can be [removed: exposed to potential risk] [added: negatively impacted] if our customers encounter financial difficulties or file bankruptcy or disputes arise with our customers.

Summary Risk Factors

The following is a summary of some of the material risks and uncertainties that could materially adversely affect our business, financial condition and results of operations.

You should read this summary together with the more detailed description of each risk factor contained below.

- Our operating results may vary significantly from quarter to quarter.

*•*The COVID-19 pandemic and related economic repercussions have materially affected our and our customers’ businesses, and the duration and extent of the negative impact resulting from the pandemic remains uncertain.

- A variety of issues could affect the timing or profitability of our projects, and could result in, among other things, project termination or payment of liquidated damages.

- Our business is subject to operational hazards (e.g., wildfires, explosions) that can result in significant liabilities, and we may not be insured against all potential liabilities.

- Unavailability or cancellation of third-party insurance would increase our risk exposure and disrupt our operations, and our estimates of losses under our insurance programs could prove inaccurate.

- Our business is labor-intensive, and we may be unable to attract and retain qualified employees or we may incur significant costs if we are unable to efficiently manage our workforce.

- A loss of business from certain significant customers could have a material effect on our business.

- Our financial results are based on estimates and assumptions that may differ from actual results.

- We may fail to adequately recover on contract change orders or claims against customers.

- Changes in estimates related to revenues and costs under customer contracts could result in a reduction or elimination of revenues or profits or the recognition of losses.

- We may be unsuccessful in generating internal growth.

- Many of our contracts may be canceled or suspended on short notice or may not be renewed or replaced.

- The nature of our business exposes us to warranty, engineering and other related claims.

- We can incur liabilities or suffer negative financial or reputational impacts due to health and safety matters.

- Disruptions or failure to adequately protect our information technology systems could materially affect our business or result in harm to our reputation.

- A deterioration of our reputation or brands could have an adverse impact on our business.

- Our financial results and financial condition may be adversely affected as a result of asset impairments.

- Our inability to successfully execute our acquisition strategy may adversely impact our growth.

- Our decentralized management infrastructure could negatively impact our business.

- The loss of key personnel could disrupt our business.

- Our investments and joint ventures expose us to risks and may result in conflicts of interest.

- We extend credit to, and enter into other financing arrangements with customers, which subject us to credit and investment risk.

- Risks associated with operating in international markets could harm our business and prospects.

- Limitations on the availability of suppliers, subcontractors and equipment manufacturers could adversely affect our business.

- Increasing scrutiny and expectations with respect to corporate sustainability practices may impose additional costs on us or expose us to reputational or other risks.

Risks Related to Our Industries

- Negative economic and market developments, including low commodity production volumes and prices, can adversely impact our customers.

- Our revenues and profitability can be negatively impacted if customers encounter financial difficulties or disputes arise with our customers.

- Our business is highly competitive and competitive pressures could negatively impact our business.

- Regulatory requirements applicable to our business and potential changes related to those requirements may adversely affect our business.

- Our unionized workforce and related obligations may adversely affect our operations.

- We could be adversely affected by failure to comply with laws applicable to our foreign activities.

- Compliance with tax laws could adversely affect our financial results.

- Our failure to comply with environmental laws and regulations could result in significant liabilities and costs.

- Certain specific regulatory requirements are applicable to us and certain of our subsidiaries, which could materially impact our business.

- Governmental opportunities could subject us to increased regulation and costs and may pose additional risks relating to funding and compliance.

- Immigration laws, including inability to verify employment and restrictions on movement, could adversely impact our business.

| | |

| --- | --- |

| • | the termination or expiration of existing customer agreements; |

For example, the low price of oil has had an adverse impact on the Canadian economy, which has impacted demand for some of our electric power services in Canada.

| • | adverse weather conditions (e.g., prolonged rainfall or snowfall, early thaw in Canada and the northern United States, other unseasonable weather patterns); |

| • | changes in permitting and regulatory requirements during the course of our work; and |

| • | additional complexity, timing uncertainty or extended bidding, regulatory and permitting processes associated with the projects where we provide engineering, procurement and construction (EPC) services. |

A delay or failure to perform by suppliers or by subcontractors can result in delays in the overall progress of the project or cause us to incur additional costs.

Furthermore, in certain circumstances we guarantee project completion or performance by a scheduled date, and failure to meet the schedule or performance requirements can result in additional costs or penalties, including liquidated damages.

Such amounts could exceed expected project profit.

See Item 7.

*Management’s Discussion and Analysis of Financial Condition and Results of Operations - Concentrations of Credit Risk* for additional information on this matter.

We ultimately may be unable to collect amounts owed to us by customers experiencing financial difficulties or

Quanta’s operating units have received document hold requests and subpoenas in connection with these events.

We recently acquired The Hallen Construction Co., Inc. (Hallen), a company that specializes in underground gas and electric distribution and transmission services and operates in metropolitan areas throughout the northeastern United States, including New York City, New York.

*Financial Statements and Supplementary Data*, increases our potential exposure to certain of these hazards and accidents.

In connection with our casualty insurance programs, we are required to issue letters of credit to secure our obligations.

There can also be no assurance that any of our other existing third-party insurance coverages will be renewed at their current levels or at all or that any future coverage will be available at reasonable and competitive rates.

Additionally, we have incurred, and expect to continue to incur, significant education and training expenses in order to recruit and train employees.

Our failure to accurately estimate project costs or successfully execute a project could result in reduced profits or losses.

Under these contracts, we assume risks related to project estimates and execution, and project revenues, profitability and costs can vary, sometimes substantially, from our original projections due to a variety of factors, including:

| • | failure to coordinate performance of subcontractors, suppliers and other third parties or delays and failure to perform by such parties; |

| • | contract termination or suspension and our inability to obtain reimbursement for services performed, costs incurred or expected profit; |

| • | delays or productivity issues caused by adverse weather conditions, significant weather events or other natural disasters; |

| • | delays and additional costs associated with obtaining required permits or approvals; |

| • | changes in laws or regulations; |

| • | delays and additional costs attributable to legal challenges and protests and other political activity; and |

| • | quality issues, including those requiring rework or replacement. |

These factors and events can result in reputational harm or cause actual revenues and gross profits for a project to differ from what we originally estimated, resulting in reduced profitability or losses on projects.

through our contract terms for actions by our customers, subcontractors or other third parties.

Our ability to generate internal growth will be affected by, among other factors, our ability to:

| • | expand the range of services we offer to customers to address their evolving infrastructure needs; |

| • | attract new customers; |

| • | increase the number of projects performed for existing customers; |

| • | hire and retain qualified employees; |

| • | expand geographically; and |

| • | address regulatory, environmental and permitting requirements and economic or market conditions that affect us or our customers. |

Our financial condition, results of operations and cash flows can be negatively impacted if any of the following occur:

| • | our customers cancel or suspend contracts having significant value; |

| • | we fail to renew a significant number of our existing contracts; |

*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 of] [added: *Cautionary Statement About] Forward-Looking Statements and Information* [removed: below] [added: above] and Item 1A.

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

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

Our services are typically provided pursuant to master service agreements, repair and maintenance contracts and fixed price and non-fixed price [removed: installation] [added: new construction] contracts.

We report our results under two reportable segments: (1) Electric Power Infrastructure [removed: Services] [added: Solutions] and (2) [removed: Pipeline] [added: Underground Utility] and [removed: Industrial] Infrastructure [removed: Services,] [added: Solutions,] as further described in Item 1.

Included within the Electric Power Infrastructure [removed: Services] [added: Solutions] segment are the results related to our [removed: telecommunications] [added: communications] infrastructure services.

Key financial results for the year ended December 31, [removed: 2019] [added: 2020] included:

[removed: | • |] [added: -] Operating income increased [removed: 2.7%,] [added: 10.2%,] or [removed: $14.6] [added: $56.5] million, to [removed: $554.9] [added: $611.4] million as compared to [removed: $540.3] [added: $554.9] million for the year ended December 31, [removed: 2018; |][added: 2019;]

[removed: | • |] [added: -] Net income attributable to common stock increased [removed: 37.1%,] [added: 10.8%,] or [removed: $108.7] [added: $43.6] million, to [removed: $402.0] [added: $445.6] million as compared to [removed: $293.3] [added: $402.0] million for the year ended December 31, [removed: 2018; |][added: 2019;]

[removed: | • |] [added: -] Diluted earnings per share increased [removed: 43.7%,] [added: 12.5%,] or [removed: $0.83,] [added: $0.34,] to [removed: $2.73] [added: $3.07] as compared to [removed: $1.90] [added: $2.73] for the year ended December 31, [removed: 2018; |][added: 2019;]

[removed: | • |] [added: -] Net cash provided by operating activities increased [removed: 46.8%,] [added: 111.9%,] or [removed: $167.8] [added: $589.4] million, to [removed: $526.6 million] [added: $1.12 billion] as compared to [removed: $358.8] [added: $526.6] million for the year ended December 31, [removed: 2018; |][added: 2019;]

[removed: | • |] [added: -] Remaining performance obligations [removed: increased 13.3%,] [added: decreased 24.8%,] or [removed: $621.0 million,] [added: $1.32 billion,] to [removed: $5.30] [added: $3.99] billion as of December 31, [removed: 2019] [added: 2020] as compared to [removed: $4.68] [added: $5.30] billion as of December 31, [removed: 2018;] [added: 2019;] and [removed: |]

[removed: | • | Total backlog (a non-GAAP measure) increased 21.6%, or $2.66 billion, to $15.00 billion as] [added: For a reconciliation] of [removed: December 31, 2019 as compared] [added: EBITDA and adjusted EBITDA] to [removed: $12.34 billion as of December 31, 2018. For] [added: net income attributable to common stock, their most comparable GAAP measure, and] a reconciliation of backlog to remaining performance obligations, its most comparable GAAP measure, see [removed: *Remaining Performance Obligations and Backlog*] [added: *Non-GAAP Reconciliations*] below. [removed: |]

[removed: During 2019, our results were also impacted by the following significant events, the] [added: The] gross amounts related to which are recorded as equity in earnings of unconsolidated affiliates included in “Other income (expense), net” in our consolidated statements of [removed: operations:][added: operations.]

[removed: | • | Recognition] [added: During 2019, our results were also impacted by the recognition] of $60.3 million ($43.9 million net of tax) of previously deferred earnings as a result of the completion of [removed: the] [added: a] larger transmission project in Canada [removed: referenced above;] and [removed: |][added: the subsequent recognition of a $13.0 million gain ($20.7 million with favorable tax benefits) related to the sale of our interest in such project.]

During [removed: 2019,] [added: the year ended December 31, 2020,] revenues were positively impacted by approximately [removed: $305] [added: $405] million from acquired businesses.

[removed: We] [added: Despite the challenges presented by the COVID-19 pandemic, we] believe there are [added: long-term] growth opportunities across [removed: the industries we serve] [added: our industries,] and [added: we] continue to have a positive long-term outlook.

Although not without risks and challenges, including those discussed [removed: below and] in [removed: *Uncertainty of] [added: *Overview* and *Cautionary Statement About] Forward-Looking Statements and Information* [added: above] and [removed: included in] Item 1A.

*Risk [removed: Factors*,] [added: Factors* of this Annual Report,] we believe, with our full-service operations, broad geographic reach, financial position and technical expertise, we are well positioned to capitalize on opportunities and trends in our industries.

*Electric Power Infrastructure [removed: Services Segment*.][added: Solutions Segment*]

Utilities are accommodating a changing fuel generation mix that is moving toward more sustainable sources such as [added: renewables and] natural gas and [removed: renewables and] replacing aging infrastructure to support long-term economic growth.

A number of utilities [removed: are also implementing] [added: have and continue to implement] system upgrades or hardening programs in response to recurring severe weather events, such as hurricanes and [added: wildfires, and in particular there are significant system resiliency initiatives in California and other regions in the western U.S. underway that are designed to prevent and manage the impact of] wildfires.

[removed: However, while these] [added: These] resiliency initiatives [removed: also] provide [added: additional] opportunities for our [removed: services,] [added: services; however,] they also increase our potential exposure to significant liabilities attributable to those events.

[removed: We] [added: While the COVID-19 pandemic has resulted in an overall decline in electricity usage in the near term, primarily related to commercial and industrial users, we] expect demand for electricity in North America to grow over the long term and believe that certain segments of the North American electric power grid are not adequate to efficiently serve the power needs of the future.

As demand for power increases, we also expect an increase in new power generation facilities powered by [removed: certain traditional] [added: renewable] energy sources [removed: (e.g., natural gas)] [added: (e.g. solar] and [removed: renewable] [added: wind) and certain traditional] energy sources (e.g., [removed: solar and wind).][added: natural gas).]

In particular, communications providers in North America are in the early stages of developing new fifth generation wireless services (5G), which are intended to facilitate bandwidth-intensive services at high speeds for [added: consumers and a wide range of commercial applications.]

As a result of these industry trends, we believe there will be meaningful demand for our [added: engineering and construction] services in that market.

While we [removed: expect additional] [added: have incurred] costs [removed: in the near-term] related to exiting these operations, we anticipate this decision will result in improved profitability of our overall services offerings.

[removed: *Pipeline] [added: As discussed in *COVID-19 Pandemic - Response] and [removed: Industrial Infrastructure Services Segment.* We have] [added: Impact,* though we] experienced [removed: an increase] [added: short-term disruptions] in [added: 2020 due to the impact of the COVID-19 pandemic in certain metropolitan markets, we believe] demand for our gas utility distribution services [added: will increase] as a result of [removed: improved economic conditions, lower natural gas prices, regulatory requirements and] customer desire to upgrade and replace aging [removed: infrastructure.][added: infrastructure, lower natural gas prices, and increasing regulatory requirements.]

[removed: We provide] [added: The COVID-19 pandemic and challenging overall energy market conditions have resulted in an overall decline in global demand for refined products during 2020 and thus far in 2021, which has negatively impacted our] critical path [removed: solutions] [added: services] and related specialty services to refinery and chemical processing [removed: facilities,] [added: facilities that are] primarily along the Gulf Coast of the United States and in other select markets in North America.

Due to its abundant supply and current low price, we [removed: also] believe natural gas will remain a fuel of choice for both primary power generation and backup power generation for renewable-driven power plants in North America.

The favorable characteristics of natural gas also position [removed: the United States] [added: North America] as a leading competitor in the global LNG export market, which has the potential to continue to grow over the coming years as approved and proposed LNG export facilities are developed.

[removed: Although much of our pipeline and industrial infrastructure services are influenced by hydrocarbon production volume rather than shorter-term changes in commodity prices, the] [added: The] broader oil and gas industry is highly cyclical and subject to price volatility, [added: such as the current low commodity price environment,] which can impact demand for our services.

For example, certain of our end markets where the price of oil is influential, such as Australia, the Canadian Oil Sands and certain oil-driven U.S. shale formations, have been materially impacted [removed: and remain challenged, as] [added: by] the [removed: broader] [added: current challenged] energy [removed: market has not fully recovered from the significant decline in oil prices that occurred in 2014 and 2015.][added: market.]

[removed: Certain regulatory] [added: Regulatory] and environmental permitting processes continue to create uncertainty for projects and negatively impact customer [removed: spending.][added: spending, and delays have increased as the COVID-19 pandemic has impacted regulatory agency operations.]

[removed: In] [added: The regulatory environment creates both challenges and opportunities for our business, and in] recent [removed: years,] [added: years] electric power and [removed: pipeline] [added: underground utility] infrastructure [removed: services] margins have been impacted by regulatory and permitting [removed: delays,] [added: delays in certain periods,] particularly with respect to larger electric transmission and larger pipeline projects.

[removed: We] [added: However, we] believe that [added: there are also] several existing, pending or proposed legislative or regulatory actions [added: that] may alleviate certain [removed: of these] [added: regulatory and permitting] issues and positively impact long-term demand, particularly in connection with electric power infrastructure and renewable energy spending.

Our customers [removed: are seeking] [added: continue to seek] additional specialized labor resources to address an aging utility workforce and [added: longer-term] labor availability issues, increasing pressure to reduce costs and improve reliability, and increasing duration and complexity of their capital programs.

Our ability to capitalize on available opportunities is limited by our ability to employ, train and retain the necessary skilled personnel, and we are taking proactive steps to develop our workforce, including through [added: strategic relationships with universities, the military and unions and the expansion and development of our training facility and postsecondary educational institution.]

- Consolidated revenues decreased 7.5% to $11.20 billion as compared to $12.11 billion for the year ended December 31, 2019;

- EBITDA (a non-GAAP measure) increased 10%, or $85.8 million, to $922.7 million as compared to $836.9 million for the year ended December 31, 2019, and adjusted EBITDA (a non-GAAP measure) increased 11%, or $108.1 million, to $1.05 billion as compared to $941.8 million for the year ended December 31, 2019;

- Total backlog (a non-GAAP measure) increased 0.8%, or $127.5 million, to $15.13 billion as of December 31, 2020 as compared to $15.00 billion as of December 31, 2019.

During 2020, we were impacted by certain significant operational trends and events as compared to 2019 as described below.

- Revenues increased by 9.1% to $7.77 billion, as compared to $7.12 billion.

Overall, revenues increased as a result of continued favorable dynamics across our core utility market and increased demand for our electric power services, including a $220 million increase in emergency restoration services revenues and a $125 million increase in revenues from our North American communication operations.

We also recognized approximately $175 million of incremental revenues from acquired businesses and increased revenues from larger transmission projects in Canada.

- Operating income increased by 39.8% to $826.3 million, as compared to $591.2 million, and operating income as a percentage of revenues increased to 10.6% as compared to 8.3%.

Operating income increased primarily due to improved performance across the segment and increased emergency restoration services and Canadian revenues, both of which contributed to improved equipment utilization and fixed cost absorption as compared to the year ended December 31, 2019, which was negatively impacted by elevated levels of unabsorbed costs due to severe weather and other delays on certain larger transmission projects in Canada.

- Operating income was negatively impacted in both periods by our Latin American operations, which have been adversely impacted by the COVID-19 pandemic due to shelter-in-place restrictions and other work disruptions.

As a result of these factors, we accelerated various contract terminations and other activities in order to expedite cessation of operations in the region.

We substantially completed our exit of this market as of December 31, 2020.

During the year ended December 31, 2020, these operations generated an operating loss of $74.0 million.

During the year ended December 31, 2019, these operations generated an operating loss of $85.7 million, which included the recognition of a $79.2 million charge associated with a terminated telecommunications project in Peru, composed of a $48.8 million reversal of revenues and a $30.4 million increase in cost of services.

See *Business Environment* below for additional information and discussion related to the exit of our Latin American operations.

*Underground Utility and Infrastructure Solutions Segment*

- Revenues decreased by 31.3% to $3.43 billion, as compared to $4.99 billion.

- Revenues associated with larger pipeline projects decreased by approximately $830 million as a result of the industry entering the late-stage of the current construction cycle, as well as the next cycle of projects being delayed due to various factors, including among other things, permitting delays and worksite access limitations related to environmental regulations.

- The impact of the COVID-19 pandemic contributed to the decline in revenues and operating income.

Specifically, shelter-in-place and worksite access restrictions in major metropolitan areas caused short-term disruptions for our gas utility customers in the first half of 2020, and a lack of demand for refined products during 2020 resulted in project delays and deferrals that negatively impacted our high pressure and critical-path turn around services to the downstream and midstream energy markets.

- Revenues were favorably impacted by approximately $230 million of incremental revenues from acquired businesses.

- Operating income decreased by 48.8% to $170.1 million, as compared to $332.0 million, and operating income as a percentage of revenues decreased to 5.0%, as compared to 6.7%.

Operating income and operating income as a percentage of revenues decreased primarily due to the decrease in revenues and the adverse effects of the COVID-19 pandemic and the overall challenged energy market on our operations.

See *COVID-19 Pandemic – Response and Impact, Results of Operations* and *Liquidity and Capital Resources* below for additional information and discussion related to our consolidated and segment results.

Debt Issuance and Amendment and Extension of Senior Credit Facility

On September 22, 2020, we issued $1.00 billion aggregate principal amount of 2.900% Senior Notes due October 1, 2030 (the senior notes) and received proceeds of $986.7 million, net of the original issue discount, underwriting discounts and debt issuance costs.

We used the net proceeds, together with cash on hand, to voluntarily prepay $1.21 billion of term loans then-outstanding under our senior credit facility, which had a maturity date in October 2022.

Additionally, we entered into an amendment to the credit agreement for our senior credit facility (the credit agreement) that, among other things, increased the aggregate revolving commitments from $2.14 billion to $2.51 billion, extended the maturity date from October 31, 2022 to September 22, 2025, released the liens on the collateral securing our obligations thereunder, released the subsidiary guarantors from their guarantees of such obligations and removed the collateral reinstatement provision that would have applied in the event our corporate credit rating were to fall below an investment grade rating.

Recent Acquisitions

We continue to selectively evaluate acquisitions as part of our overall business strategy and acquired seven businesses in the year ended December 31, 2020.

These acquired businesses enhanced and expanded, among other things, our services related electric power distribution, transmission and substation maintenance; our directional boring and emergency restoration services capabilities; our engineering and design services for electric utilities, gas utilities and communications services companies; our aviation services for the utility industry; our capabilities with respect to underground conduit services and short- and long-haul fiber optic cable and utilities; our services to provide heavy, civil, industrial and energy related services and construction and maintenance of pipelines and metering stations; and our industrial services business.

Puerto Rico Joint Venture

Additionally, during the year ended December 31, 2020, a joint venture in which we own a 50% interest, LUMA Energy, LLC (LUMA), was selected for a 15-year operation and maintenance agreement to operate, maintain and modernize the approximately 18,000-mile electric transmission and distribution system in Puerto Rico.

The 15-year operation and maintenance period is scheduled to begin following a transition period that is expected to end in mid-2021.

During the transition period, LUMA will complete numerous steps necessary to transition operation and maintenance from the current operator and receives a fixed transition services fee, payable in monthly installments, and is reimbursed for costs and expenses.

During the operation and maintenance period, LUMA will continue to be reimbursed for costs and expenses and will receive a fixed annual management fee, with the opportunity to receive additional annual performance-based incentive fees.

LUMA will not assume ownership of any electric transmission and distribution system assets and will not be responsible for operation of the power generation assets.

LUMA is operationally integral to our operations, and therefore our share of LUMA’s net income or losses is reported within operating income and reflected within the Electric Power Infrastructure Solutions segment.

COVID-19 Pandemic *–* Response and Impact

During 2020 and the first part of 2021, the COVID-19 pandemic has significantly impacted global economies, resulting in workforce and travel restrictions, supply chain and production disruptions and reduced demand and spending across many sectors.

| | |

| --- | --- |

| • | Consolidated revenues increased 8.4% to $12.11 billion as compared to $11.17 billion for the year ended December 31, 2018, of which 59% was attributable to the Electric Power Infrastructure Services segment and 41% was attributable to the Pipeline and Industrial Infrastructure Services segment; |

During 2019, our Electric Power Infrastructure Services segment was impacted by the following significant operational trends and events:

| • | Increased customer spending on smaller electric transmission and distribution services projects, including increased revenues in the western United States associated with grid modernization and accelerated fire hardening programs, which are services we generally consider to be base business operations; |

| • | Decreased revenues on larger transmission projects primarily due to the completion of a larger transmission project in Canada in the first quarter of 2019 as compared to full construction on the project throughout 2018; |

| • | Delays on other larger transmission projects in Canada, which shifted expected revenues from 2019 to 2020 and beyond; and |

| • | Recognition of a $79.2 million charge related to the termination of a large telecommunications project in Peru. |

During 2019, our Pipeline and Industrial Infrastructure Services segment was impacted by the following significant operational trends and events:

| • | Increased customer spending on gas utility infrastructure replacement and modernization initiatives, pipeline integrity work, industrial services and other services that we generally consider to be base business operations; |

| • | Improved operating income margins across our transmission, distribution and industrial services operations resulting from improved execution and utilization; |

| • | Decreased revenues from larger pipeline projects as compared to 2018, the timing of which is highly variable due to potential permitting delays, worksite access limitations related to environmental regulations and seasonal weather patterns; and |

| • | Recognition of a $28.3 million project loss associated with engineering and production delays on a substantially complete processing facility project, which negatively impacted operating income and was partially offset by favorable change orders and insurance settlements on other projects during 2019. |

| • | Recognition of a $13.0 million gain ($20.7 million with favorable tax benefits) related to the sale of our interest in the same large electric transmission project in Canada. |

We also continue to selectively evaluate acquisitions as part of our overall business strategy and acquired seven businesses in 2019, including The Hallen Construction Co., Inc. (Hallen), a business that specializes in above-ground and underground gas distribution and transmission services in the northeastern United States.

In particular, current system resiliency initiatives in California and other regions in the western U.S. are designed to prevent and manage the impact of wildfires.

consumers and a wide range of commercial applications.

While we continue to perform certain electric power and communications services in Latin America, we have completed a strategic review of those operations, and due to circumstances experienced in connection with the termination of the large telecommunications project in Peru during 2019 and political volatility in other areas of the region, have concluded to pursue an orderly exit of our Latin American operations.

Trends and estimates for process facility utilization rates and overall refining capacity show North America as the largest downstream maintenance market in the world over the next several years, and we believe processing facilities located along the U.S. Gulf Coast region should have certain strategic advantages due to their proximity to affordable hydrocarbon resources.

While our high-pressure and critical-path turnaround services can be negatively impacted in the short term by severe weather events, such as hurricanes, tropical storms and floods, we expect these favorable industry dynamics to provide near-term and longer-term opportunities for these services, as well as our capabilities with respect to instrumentation, high-voltage and other electrical services, piping, fabrication and storage, and other industrial services.

Additionally, a number of larger pipeline projects from the North American shale formations and Canadian oil sands to power plants, refineries, liquefied natural gas (LNG) export facilities and other demand centers are in various stages of development.

While there is risk the projects will not move forward or be delayed, we believe many of our customers remain committed to them given the cost and time required to move from conception to construction.

The larger pipeline market is cyclical and the contribution of these projects to our revenues has declined over the last few years.

We currently expect a further reduction in revenues from larger pipeline projects in 2020; however, we are pursuing various opportunities that, if successful, could cause our current expectations to increase.

The regulatory environment creates both challenges and opportunities for our business.

strategic relationships with universities, the military and unions and the expansion and development of our training facility and postsecondary educational institution.

Our volume of business may be adversely affected by declines or delays in new projects due to cyclicality, which may vary by geographic region.

For example, installation work is often performed on a fixed price basis, while maintenance work is often performed under pre-established or negotiated prices or cost-plus pricing arrangements.

Margins for installation work varies by project but can be higher than maintenance work due to higher risk.

We have historically derived approximately 30% to 35% of our annual revenues from maintenance work, but a higher portion of maintenance work in any given period may affect our gross margins for that period.

Additionally, the areas in which we operate during a given period can impact margins.

Some areas offer the opportunity for higher margins due to their more difficult geographic characteristics, such as urban settings or mountainous and other difficult terrain.

However, margins may also be negatively impacted by unexpected difficulties that can arise due to those same characteristics, as well as unexpected site conditions.

transitioning between a larger number of smaller projects versus continuous production on fewer larger projects.

Also, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.

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

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

| | | 2019 | | | | | | | 2018 | | | | | | | $ | | | | % | |

| Revenues | | $ | 12,112,153 | | | 100.0 | % | | $ | 11,171,423 | | | 100.0 | % | | $ | 940,730 | | | 8.4 | % |

| Cost of services (including depreciation) | | 10,511,901 | | | | 86.8 | | | 9,691,459 | | | | 86.8 | | | 820,442 | | | | 8.5 | % |

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

Furthermore, the risk of nonpayment may be heightened as a result of depressed economic and financial market [removed: conditions.][added: conditions, including in connection with the ongoing COVID-19 pandemic and the significant decline in commodity prices and volatility in commodity production volumes.]

*Interest Rate Risk.* As of December 31, [removed: 2019,] [added: 2020,] we had no derivative financial instruments to manage interest rate risk.

As such, we were exposed to earnings and fair value risk due to changes in interest rates with respect to our [removed: long-term obligations.][added: variable rate debt, which is comprised of borrowings under the credit agreement for our senior credit facility.]

[removed: Our] [added: As of December 31, 2020, the fair value of our variable rate debt of $148.5 million approximated book value, and our] weighted average interest rate on our variable rate debt for the year ended December 31, [removed: 2019] [added: 2020] was [removed: 3.8%.][added: 2.1%.]

The annual effect on our pretax earnings of a hypothetical 50 basis point increase or decrease in variable interest rates would be approximately [removed: $6.7] [added: $0.7] million based on our December 31, [removed: 2019] [added: 2020] balance of variable rate debt.

During [removed: 2019,] [added: 2020,] revenues from our foreign operations accounted for [removed: 15.9%] [added: 14.1%] of our consolidated revenues.

Fluctuations in foreign exchange rates during the year ended December 31, [removed: 2018] [added: 2020] caused a decrease of approximately [removed: $18] [added: $17] million in foreign revenues compared to the year ended December 31, [removed: 2017.][added: 2019.]

There were no outstanding foreign currency derivative contracts at December 31, [removed: 2019.][added: 2020.]

Based on the balance of cash and cash equivalents in foreign banks of [removed: $34.0] [added: $28.5] million as of December 31, [removed: 2019,] [added: 2020,] an assumed 5% adverse change to foreign exchange rates would result in a [added: fair value] decline [removed: in cash] of [removed: $1.5] [added: $0.9] million.

For example a customer within our Underground Utility and Infrastructure Solutions segment encountered financial difficulties during 2020 that resulted in nonpayment of certain receivables owed, and as a result of which we decided to foreclose our liens on the pipeline asset in order to recover the outstanding amounts.

See *Concentrations of Credit Risk* in Note 14 of the Notes to Consolidated Financial Statements in Item 8.

*Financial Statements and Supplementary Data* for additional information.

For example, in January 2019 one of our largest 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.

As of December 31, 2019, the fair value of our variable rate debt of $1.35 billion approximated book value.

Quanta Services, Inc. [removed: (Quanta)] [added: (together with its subsidiaries, “Quanta,” “we,” “us” or “our”)] is a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric [removed: power, energy] and [removed: communications] [added: gas utility, communications, pipeline and energy] industries in the United States, Canada, Australia and select other international markets.

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

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

Our services are typically provided pursuant to master service agreements, repair and maintenance contracts and fixed price and non-fixed price [removed: installation] [added: construction] contracts.

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

We believe that our business strategies, along with our safety culture and financial [removed: strength,] [added: resources,] differentiate us from our competition and position us to [removed: capitalize on] [added: benefit from] future capital spending by our customers.

We also have an experienced management team, both at the executive level and within our [added: subsidiaries, which we refer to as] operating [removed: units, and various proprietary technologies that enhance our service offerings.][added: units.]

Our strategies of expanding our portfolio of service offerings for existing and potential customers, increasing [added: and enhancing] our [removed: geographic,] [added: presence in core geographic markets,] technological and training capabilities, promoting best practices and cross-selling services to our existing [removed: customers, as well as continuing to maintain our financial strength,] [added: customers] place us in the position to capitalize on opportunities and trends in the industries we serve and expand our operations to select new markets.

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

[removed: Electric] [added: *Electric] Power Infrastructure [removed: Services Segment][added: Solutions*.]

[removed: The] [added: Our] Electric Power Infrastructure [removed: Services] [added: Solutions] segment [removed: provides] [added: provides, among other things,] comprehensive network solutions to customers in the electric [removed: power industry.][added: power, communications and other industries.]

[removed: This segment also provides emergency restoration services, including the repair of infrastructure damaged by inclement weather,] [added: -] the energized installation, maintenance and upgrade of electric power infrastructure utilizing unique bare hand and hot stick methods and our proprietary robotic arm [removed: techniques, and the installation of “smart grid” technologies on electric power networks.][added: techniques;]

[removed: In addition, this segment provides services that support the development] [added: - engineering and construction] of [added: substations, switchyards and transmission infrastructure to interconnect] renewable energy generation, including solar, wind, hydro power and backup natural gas generation [removed: facilities, and related switchyards and transmission infrastructure.][added: facilities;]

[removed: This segment also provides] [added: -] comprehensive [removed: communications infrastructure] [added: design and construction] services to wireline and wireless [removed: telecommunications] [added: communications] companies, cable multi-system operators and other customers within the communications industry (including services in connection with 5G wireless deployment); [removed: services in connection with the construction of electric power generation facilities; and the design, installation, maintenance and repair of commercial and industrial wiring.]

This segment also includes [removed: the] [added: a] majority of [added: the financial results of] our [added: training facility and our] postsecondary educational institution, which specializes in pre-apprenticeship training, apprenticeship training and [removed: specialized] utility task training for electric workers, as well as training for the [removed: pipeline and industrial] [added: gas utility] and communications industries.

[removed: The Pipeline] [added: *Underground Utility] and [removed: Industrial] Infrastructure [removed: Services] [added: Solutions.* Our Underground Utility and Infrastructure Solutions] segment provides comprehensive infrastructure solutions to customers involved in the development, transportation, distribution, storage and processing of natural gas, oil and other products.

Services performed by the [removed: Pipeline] [added: Underground Utility] and [removed: Industrial] Infrastructure [removed: Services] [added: Solutions] segment generally [removed: include the design, installation, upgrade, repair][added: include:]

[removed: We also provide] [added: - catalyst replacement services,] high-pressure and critical-path turnaround [removed: services to the downstream and midstream energy markets and] [added: services,] instrumentation and electrical services, piping, fabrication and storage tank [removed: services.][added: services to the midstream and downstream industrial energy complex;]

To a lesser extent, this segment [removed: serves the offshore energy market and] [added: also] designs, installs and maintains fueling systems and water and sewer [removed: infrastructure.][added: infrastructure, fabricates pipeline support systems and related structures and facilities for the pipeline industry and provides services to the offshore energy market.]

We operate primarily in the United States; however, we derived [removed: $1.92 billion, $2.60 billion] [added: approximately 14.1%, 15.9%] and [removed: $2.48 billion] [added: 23.2%] of our revenues from foreign [removed: operations] [added: operations, primarily in Canada and Australia,] during the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017.][added: 2018.]

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

For the year ended December 31, [removed: 2019,] [added: 2020,] our [added: largest customer accounted for 5% of our consolidated revenues and our] ten largest customers accounted for [removed: 34%] [added: 32%] of our consolidated revenues.

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

| l | [added: | |] ATCO Electric | [added: | |] l | [added: | |] Fortis Inc. | [added: | |]

| l | [added: | |] Berkshire Hathaway, Inc. | [added: | |] l | [added: | |] National Grid plc | [added: | |]

| l | [added: | |] CenterPoint Energy, Inc. | [added: | |] l | [removed: NextEra Energy, Inc.] | [added: | NextBridge Infrastructure, LP | | |]

| l | [added: | |] Dominion Energy, Inc. | [added: | |] l | [removed: PG&E Corporation] | [added: | NiSource Inc. | | |]

| l | [added: | |] Duke Energy Corporation | [added: | |] l | [removed: Puget Sound Energy, Inc.] | [added: | PG&E Corporation | | |]

| l | [added: | |] Enbridge Inc. | [added: | |] l | [added: | |] Sempra Energy | [added: | |]

| l | [added: | |] Entergy Corporation | [added: | |] l | [added: | | The] Southern [removed: California Edison] Company | [added: | |]

| l | [added: | |] Enterprise Products Partners L.P. | [added: | |] l | [removed: The Southern Company] | [added: | TC Energy Corporation | | |]

| l | [added: | |] Eversource Energy | [added: | |] l | [added: | |] Valero Energy Corporation | [added: | |]

| l | [added: | |] Exelon Corporation | [added: | |] l | [added: | |] Verizon Communications Inc. | [added: | |]

Although we have [removed: a centralized] [added: an integrated] marketing and business development strategy, management at each of our operating units is responsible for developing and maintaining successful long-term relationships with customers.

We believe our ability to provide services that cover a broad spectrum of our customers’ [added: needs and] requirements is a significant differentiator.

We are a preferred service provider for many of our customers, which [added: generally] means we have met minimum standards for a specific category of service, maintained a high level of performance and agreed to certain payment terms and negotiated rates.

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

| | | [removed: December 31, 2019] | | | | [added: 2020] | | | | [removed: December 31, 2018] | | [added: 2019] | | | | | [added: | 2018 | | |]

[removed: |] [added: Services performed by the] Electric Power Infrastructure [removed: Services | | | | | | | | | | | | | | | | |][added: Solutions segment generally include:]

We compete with other contractors in [removed: most of] the geographic markets in which we operate, and several of our competitors are large companies that have significant financial, technical and marketing resources.

Overview

We operate a fleet of owned and leased trucks and trailers, support vehicles and specialty construction equipment, as well as various proprietary technologies that enhance our service offerings.

We have a large and diverse customer base, including many of the leading companies in the utility, industrial, communications and energy markets.

The performance of our business generally depends on our ability to obtain contracts with customers and to effectively deliver the services provided under those contracts.

Services

*•*the design, engineering, new construction, upgrade and repair and maintenance of electric power transmission and distribution infrastructure and substation facilities to support, among other things, utility customers’ efforts to ensure the safety and reliability of the power grid and integrate renewable generation and the growing trend towards the electrification of transportation and other industries;

- emergency restoration services, including the repair of infrastructure damaged by, among other things, inclement weather and wildfires;

- the installation of “smart grid” technologies on electric power networks;

- engineering and construction of micro-grids, battery storage and solar generation facilities;

- the design, installation, maintenance and repair of commercial and industrial wiring; and

*•*aviation services primarily for the utility industry, including the transportation of line workers, the setting of poles, and the stringing of wires.

For additional information on this institution, see *Human Capital Resources - Employee Recruiting, Development and Training*.

- the design, engineering, new construction, upgrade and repair and maintenance of natural gas systems for gas utility customers;

- pipeline protection, integrity testing, rehabilitation and replacement;

- engineering and construction services for pipeline systems, storage systems and compressor and pump stations; and

- trenching, directional boring and mechanized welding services related to the above services and in connection with our electric power infrastructure services.

Recent Acquisitions

During the year ended December 31, 2020, we acquired seven businesses that we believe support our strategic goals and enhance our ability to innovate and expand our services offerings to serve our customers.

These acquisitions involved aggregate consideration of approximately $351.7 million paid or payable in cash, subject to certain adjustments, 1,334,469 shares of Quanta common stock, which had a fair value of $57.1 million as of the respective acquisition dates, and certain contingent consideration obligations.

For additional information on our investments and acquisitions, see Notes 2, 4 and 14 of the Notes to Consolidated Financial Statements in Item 8.

*Financial Statements and Supplementary Data*.

Puerto Rico Joint Venture

During the first half of 2020, a joint venture in which we own a 50% interest, LUMA Energy, LLC (LUMA), was selected for a 15-year operation and maintenance agreement to operate, maintain and modernize the approximately 18,000-mile electric transmission and distribution system in Puerto Rico.

The operation and maintenance period is scheduled to begin following a transition period, which is expected to end in mid-2021 and during which we receive a fixed transition services fee.

During the operation and maintenance period, LUMA will receive a fixed annual management fee, with the opportunity to receive additional annual performance-based incentive fees.

Customer Relationships

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

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

| l | | | Comcast Corporation | | | l | | | NextEra Energy, Inc. | | |

| l | | | Edison International | | | l | | | Puget Sound Energy, Inc. | | |

We have estimated revenues by customer type as a percentage of total revenues below.

Such estimates are based on management judgment and assumptions and are provided to show perceived trends in our customer types and should be considered directional in nature.

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

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

| Utility | | | | | | 72 | | % | | | | 64 | | % | | | | 60 | | % |

| Communications | | | | | | 4 | | % | | | | 3 | | % | | | | 2 | | % |

| Industrial | | | | | | 13 | | % | | | | 15 | | % | | | | 14 | | % |

| Energy Delivery | | | | | | 6 | | % | | | | 14 | | % | | | | 17 | | % |

| Other | | | | | | 5 | | % | | | | 4 | | % | | | | 7 | | % |

| Total revenues | | | | | | 100 | | % | | | | 100 | | % | | | | 100 | | % |

General

We have a workforce of approximately 40,300 employees as of December 31, 2019 and serve a diverse customer base.

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

Our consolidated revenues for the year ended December 31, 2019 were $12.11 billion, of which 59% was attributable to the Electric Power Infrastructure Services segment and 41% was attributable to the Pipeline and Industrial Infrastructure Services segment.

Reportable Segments

The following is an overview of the types of services provided by each of our reportable segments.

Services performed by the Electric Power Infrastructure Services segment generally include the design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities along with other engineering and technical services.

Pipeline and Industrial Infrastructure Services Segment

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 the fabrication of pipeline support systems and related structures and facilities for natural gas utilities and midstream companies.

Financial Information and Geographic Areas

Of our foreign revenues, 75%, 76% and 79% were earned in Canada during the years ended December 31, 2019, 2018 and 2017.

In addition, we held property and equipment of $314.1 million and $304.0 million in foreign countries, primarily Canada, as of December 31, 2019 and 2018.

Customers, Strategic Alliances and Preferred Provider Relationships

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

| l | EQT Midstream | l | TC Energy Corporation |

Remaining Performance Obligations and Backlog

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

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, which includes 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 they will be earned and are probable of collection.

We have also historically disclosed our backlog, a measure commonly used in our industry but not recognized under generally accepted accounting principles in the United States (GAAP).

We believe this measure enables management to more effectively forecast our future capital needs and results and better identify future operating trends that may not otherwise be apparent.

We believe this measure is also useful for investors in forecasting our future results and comparing us to our competitors.

Our remaining performance obligations are a component of backlog, 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.

Our methodology for determining backlog may not be comparable to the methodologies used by other companies.

Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and most of our contracts can be terminated, on short notice even if we are not in default.

We determine the estimated backlog for these MSAs using recurring historical trends, factoring in seasonal demand and projected customer needs based upon ongoing communications.

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

As a result, estimates for remaining performance obligations and backlog are subject to change based on, among other things, project accelerations; project cancellations or delays, including but not limited to those caused by commercial issues, regulatory requirements, natural disasters and adverse weather conditions; and final acceptance of change orders by customers.

These factors can cause revenues to be realized in periods and at levels that are different than originally projected.

As of December 31, 2019 and 2018, MSAs accounted for 53% and 53% of our estimated 12-month backlog and 61% and 60% of total backlog.

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

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

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

| | | 12 Month | | | | Total | | | | 12 Month | | | | Total | | |

| Remaining performance obligations | | $ | 2,483,109 | | | $ | 3,957,710 | | | $ | 2,093,461 | | | $ | 3,045,553 | |

| Estimated orders under MSAs and short-term, non-fixed price contracts | | 2,873,446 | | | | 5,864,527 | | | | 2,467,654 | | | | 5,499,887 | | |

| Backlog | | 5,356,555 | | | | 9,822,237 | | | | 4,561,115 | | | | 8,545,440 | | |

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

| Remaining performance obligations | | 670,707 | | | | 1,344,741 | | | | 1,003,543 | | | | 1,635,918 | | |

These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, negligence or gross negligence and/or property [removed: damages,] [added: damage, environmental liabilities,] wage and hour claims and other employment-related damages, punitive damages, [added: consequential damages,] civil penalties or other losses, or injunctive or declaratory relief.

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

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

| (Mark One) | | | [added: | | | | | |]

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

For the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2019][added: 2020]

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

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

[removed: ][added: ]

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

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

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

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

| Title of each class | | [added: | | | |] Trading Symbol(s) | | [added: | | | |] Name of each exchange on which registered | [added: | |]

| Common Stock, $0.00001 par value | | [added: | | | |] PWR | | [added: | | | |] New York Stock Exchange | [added: | |]

| Large accelerated filer | [added: | |] ☑ | [added: | |] Accelerated filer | [added: | |] ☐ | [added: | |] Non-accelerated filer | [added: | |] ☐ | [added: | |] Smaller reporting company | [added: | |] ☐ | [added: | |] Emerging growth company | [added: | |] ☐ | [added: | |]

As of June [removed: 28, 2019] [added: 30, 2020] (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 [removed: $5.4] [added: $5.3] billion.

As of February [removed: 25, 2020,] [added: 23, 2021,] the number of outstanding shares of Common Stock of the Registrant was [removed: 142,508,874.][added: 138,365,007.]

Portions of the Registrant’s Definitive Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

For the Year [removed: Ended December] [added: Ended December] 31, [removed: 2019][added: 2020]

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

| ITEM 1. | [removed: [Business](#s0F50BD59C44059BD8667B368792A7478)] | [removed: [2](#s0F50BD59C44059BD8667B368792A7478)] | [added: [Business](#icb403b30e28147cb9c46cb1062acf9c5_13) | | | [3](#icb403b30e28147cb9c46cb1062acf9c5_13) | | |]

| ITEM 1A. | [added: | |] [Risk [removed: Factors](#sDE80F5B7F85C5225AA77FF18A7E48EF7)] [added: Factors](#icb403b30e28147cb9c46cb1062acf9c5_16)] | [removed: [8](#sDE80F5B7F85C5225AA77FF18A7E48EF7)] | [added: | [11](#icb403b30e28147cb9c46cb1062acf9c5_16) | | |]

| ITEM 1B. | [added: | |] [Unresolved Staff [removed: Comments](#s25A58A732D75553EA0E57183FE32785A)] [added: Comments](#icb403b30e28147cb9c46cb1062acf9c5_19)] | [removed: [26](#s25A58A732D75553EA0E57183FE32785A)] | [added: | [32](#icb403b30e28147cb9c46cb1062acf9c5_19) | | |]

| ITEM 2. | [removed: [Properties](#s86882C0C65EF5D0990604297D83ED700)] | [removed: [26](#s86882C0C65EF5D0990604297D83ED700)] | [added: [Properties](#icb403b30e28147cb9c46cb1062acf9c5_22) | | | [32](#icb403b30e28147cb9c46cb1062acf9c5_22) | | |]

| ITEM 3. | [added: | |] [Legal [removed: Proceedings](#s31CE3F6591D85334B3589224DE100559)] [added: Proceedings](#icb403b30e28147cb9c46cb1062acf9c5_25)] | [removed: [26](#s31CE3F6591D85334B3589224DE100559)] | [added: | [32](#icb403b30e28147cb9c46cb1062acf9c5_25) | | |]

| ITEM 4. | [added: | |] [Mine Safety [removed: Disclosure](#s8DB6D01BB9C950F3A9CD4B87B9E487EA)s] [added: Disclosure](#icb403b30e28147cb9c46cb1062acf9c5_28)s] | [removed: [26](#s8DB6D01BB9C950F3A9CD4B87B9E487EA)] | [added: | [32](#icb403b30e28147cb9c46cb1062acf9c5_28) | | |]

| PART II | | | [added: | | | | | |]

| ITEM 5. | [added: | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s53B675F9E02A5B8C9760B904F6027DD3)] [added: Securities](#icb403b30e28147cb9c46cb1062acf9c5_34)] | [removed: [27](#s53B675F9E02A5B8C9760B904F6027DD3)] | [added: | [33](#icb403b30e28147cb9c46cb1062acf9c5_34) | | |]

| ITEM 6. | [added: | |] [Selected Financial [removed: Data](#s33E6D420D7FA583B8346DC2928653054)] [added: Data](#icb403b30e28147cb9c46cb1062acf9c5_2119)] | [removed: [30](#s33E6D420D7FA583B8346DC2928653054)] | [added: | [35](#icb403b30e28147cb9c46cb1062acf9c5_2119) | | |]

| ITEM 7. | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sBBA132B90534541A88EE1977D7F52C62)] [added: Operations](#icb403b30e28147cb9c46cb1062acf9c5_40)] | [removed: [32](#sBBA132B90534541A88EE1977D7F52C62)] | [added: | [36](#icb403b30e28147cb9c46cb1062acf9c5_40) | | |]

| ITEM 7A. | [added: | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sDD4C7C7679DF5E28A7EFB0749969A154)] [added: Risk](#icb403b30e28147cb9c46cb1062acf9c5_79)] | [removed: [54](#sDD4C7C7679DF5E28A7EFB0749969A154)] | [added: | [58](#icb403b30e28147cb9c46cb1062acf9c5_79) | | |]

| ITEM 8. | [added: | |] [Financial Statements and Supplementary [removed: Data](#sC45118E8F9E45293B98B8AE202FC9935)] [added: Data](#icb403b30e28147cb9c46cb1062acf9c5_82)] | [removed: [55](#sC45118E8F9E45293B98B8AE202FC9935)] | [added: | [60](#icb403b30e28147cb9c46cb1062acf9c5_82) | | |]

| ITEM 9. | [added: | |] [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s58395D5A223D535AB3A0FE4A0824B541)] [added: Disclosure](#icb403b30e28147cb9c46cb1062acf9c5_193)] | [removed: [112](#s58395D5A223D535AB3A0FE4A0824B541)] | [added: | [118](#icb403b30e28147cb9c46cb1062acf9c5_193) | | |]

| ITEM 9A. | [added: | |] [Controls and [removed: Procedures](#s488A28E4C7775A0E905C5D058543A859)] [added: Procedures](#icb403b30e28147cb9c46cb1062acf9c5_196)] | [removed: [112](#s488A28E4C7775A0E905C5D058543A859)] | [added: | [118](#icb403b30e28147cb9c46cb1062acf9c5_196) | | |]

| ITEM 9B. | [added: | |] [Other [removed: Information](#sAFDF4DBDE75A5CF5A2FA953146BF3CF3)] [added: Information](#icb403b30e28147cb9c46cb1062acf9c5_199)] | [removed: [113](#sAFDF4DBDE75A5CF5A2FA953146BF3CF3)] | [added: | [119](#icb403b30e28147cb9c46cb1062acf9c5_199) | | |]

| PART III | | | [added: | | | | | |]

| ITEM 10. | [added: | |] [Directors, Executive Officers and Corporate [removed: Governance](#s7A8825A70927517D8B272758AD4C6F12)] [added: Governance](#icb403b30e28147cb9c46cb1062acf9c5_205)] | [removed: [114](#s7A8825A70927517D8B272758AD4C6F12)] | [added: | [120](#icb403b30e28147cb9c46cb1062acf9c5_205) | | |]

| ITEM 11. | [added: | |] [Executive [removed: Compensation](#s92A0D6851935554582E81CDDD4E71DD9)] [added: Compensation](#icb403b30e28147cb9c46cb1062acf9c5_208)] | [removed: [114](#s92A0D6851935554582E81CDDD4E71DD9)] | [added: | [120](#icb403b30e28147cb9c46cb1062acf9c5_208) | | |]

| ITEM 12. | [added: | |] [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sA299586F834258A199B54C3D9643D8B7)] [added: Matters](#icb403b30e28147cb9c46cb1062acf9c5_211)] | [removed: [114](#sA299586F834258A199B54C3D9643D8B7)] | [added: | [120](#icb403b30e28147cb9c46cb1062acf9c5_211) | | |]

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Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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| [SIGNATURES](#icb403b30e28147cb9c46cb1062acf9c5_232) | | | | | | [127](#icb403b30e28147cb9c46cb1062acf9c5_232) | | |

Cautionary Statement About Forward-Looking Statements and Information

This Annual Report on Form 10-K (Annual Report) includes forward-looking statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995.

You can identify these statements by the fact that they do not relate strictly to historical or current facts.

They use words such as “anticipate,” “estimate,” “project,” “forecast,” “may,” “will,” “should,” “could,” “expect,” “believe,” “plan,” “intend” and other words of similar meaning.

In particular, these include, but are not limited to, statements relating to the following:

- Projected revenues, net income, earnings per share, margins, cash flows, liquidity, weighted average shares outstanding, capital expenditures, tax rates and other projections of operating or financial results;

- Expectations regarding our business or financial outlook;

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

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

- Expectations regarding our plans and strategies, including plans, effects and other matters relating to the COVID-19 pandemic and our exit from our Latin American operations;

- The business plans or financial condition of our customers, including with respect to or as a result of the COVID-19 pandemic;

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

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

- Beliefs and assumptions about the collectability of receivables;

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

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

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

- The impact of existing or potential legislation or regulation;

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

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

- The expected realization of remaining performance obligations or backlog;

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| [SIGNATURES](#s3FBEC0AA6E1E544F978AFD1CE127BDB2) | | [121](#s3FBEC0AA6E1E544F978AFD1CE127BDB2) |

We lease [added: office space for] our corporate headquarters in Houston, Texas and own and lease other facilities throughout the United States, [removed: Canada] [added: Canada, Australia] and [added: certain] other foreign [removed: locations] [added: countries] where we conduct business.

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

As of December 31, [removed: 2019,] [added: 2020,] we owned [removed: 62] [added: 67] of our facilities and leased the remainder.

We operate a fleet of owned and leased trucks and trailers, support vehicles and specialty construction equipment, such as [added: bucket trucks, digger derricks,] backhoes, excavators, trenchers, generators, boring machines, cranes, robotic arms, wire pullers, tensioners and helicopters.

As of December 31, [removed: 2019,] [added: 2020,] the total size of the [removed: rolling-stock] [added: rolling stock] fleet was approximately [removed: 49,700] [added: 51,000] units.

We believe that our equipment is generally well maintained and [added: is suitable and] adequate for our present operations.

We believe that our existing facilities are suitable and adequate for our current needs; however, we continue to evaluate real estate strategies to support our recent growth.

We believe that our existing facilities are sufficient for our current needs.

Our owned equipment and the leasehold interests in our leased equipment are encumbered by a security interest granted under our credit agreement.

Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “PWR.” [added: On February 23, 2021, there were approximately 559 holders of record of our common stock.]

[removed: See] [added: For additional information about this acquisition, see] Note [removed: 11] [added: 4] of the Notes to Consolidated Financial Statements in Item 8.

Unregistered Sales of Securities During the Fourth Quarter [removed: of 2019][added: of 2020]

[added: *Financial Statements and Supplementary Data.*] The shares of common stock issued in [removed: these transactions] [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 owners of the business acquired in a privately negotiated transaction not involving any public offering or solicitation.

Issuer Purchases of Equity Securities During the Fourth Quarter [removed: of 2019][added: of 2020]

The following table contains information about our purchases of equity securities during the three months ended December 31, [removed: 2019.][added: 2020.]

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

| Open Market Stock Repurchases (1) | | [added: | | | |] — | | | [added: | | |] $ | — | | | [added: | |] — | | | [added: | | |] $ | [removed: 286,756,122] [added: 586,756,136] | |

| [removed: December 1 - 31, 2019] | | | | | | [added: December 31,] | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | |]

| Tax Withholdings (2) | | [removed: 5] | | | [added: | 5,865 | | | | | |] $ | [removed: 37.07] [added: 53.56] | | | [added: | |] — | | | | | | [added: | | |]

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

We have declared a quarterly dividend during each quarter beginning in the fourth quarter of [removed: 2018.][added: 2018, and we currently expect that comparable cash dividends will continue to be paid for the foreseeable future.]

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

The following graph compares, for the period from December 31, [removed: 2014] [added: 2015] to December 31, [removed: 2019,] [added: 2020,] the cumulative stockholder return on our common stock with the cumulative total return of the S&P 500 Index (the S&P 500), the S&P MidCap 400 Index (the S&P [added: Mid-Cap] 400) and [removed: two] [added: a] peer [removed: groups] [added: group] selected by our management that [removed: include] [added: includes] public companies within our industries.

The companies in the peer [removed: groups] [added: group] were selected to represent a broad group of publicly held corporations with operations similar to [removed: ours.][added: ours, and includes AECOM, Dycom Industries, Inc., EMCOR Group Inc., Fluor Corporation, Jacobs Engineering Group Inc., KBR, Inc., MasTec, 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 S&P 500, the S&P MidCap [removed: 400, the 2018 Peer Group] [added: 400] and the [removed: 2019 Peer Group] [added: peer group] on December 31, [removed: 2014] [added: 2015] and tracks their relative performance through December 31, [removed: 2019.][added: 2020.]

The returns of each company in the [removed: Peer Group are] [added: peer group is] weighted based on the market capitalization of that company at the beginning of the measurement period.

Among Quanta Services, Inc., the S&P 500, the S&P MidCap [removed: 400, the 2018 Peer Group] [added: 400] and the [removed: 2019] Peer Group

[removed: ][added: ]

| [added: December 1 - 31, 2020] | | [removed: December 31,] | | | | | | | | | | | | | | | | | | | | | | | [added: | |]

| | | [removed: 2014] | | | | 2015 | | | | [added: | |] 2016 | | | | [added: | |] 2017 | | | | [added: | |] 2018 | | | | [added: | |] 2019 | | | [added: | | | 2020 | | |]

This number does not include stockholders for whom shares of our common stock are held in “nominee” or “street name.” See Note 11 of the Notes to Consolidated Financial Statements in Item 8.

On December 17, 2020, we completed an acquisition in which a portion of the consideration consisted of the unregistered issuance of shares of our common stock.

The aggregate consideration paid at closing in the acquisition included 129,883 shares of our common stock, valued at $7.4 million as of the acquisition date.

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| October 1 - 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| November 1 - 30, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Open Market Stock Repurchases (1) | | | | | | 297,232 | | | | | | $ | 68.13 | | | | | 297,232 | | | | | | $ | 566,506,467 | |

| Tax Withholdings (2) | | | | | | 9,380 | | | | | | $ | 69.37 | | | | | — | | | | | | | | |

| Open Market Stock Repurchases (1) | | | | | | 422,179 | | | | | | $ | 70.35 | | | | | 422,179 | | | | | | $ | 536,807,425 | |

| Tax Withholdings (2) | | | | | | 2,432 | | | | | | $ | 66.70 | | | | | — | | | | | | | | |

| Total | | | | | | 737,088 | | | | | | | | | | | | 719,411 | | | | | | $ | 536,807,425 | |

(1)Includes shares repurchased as of the trade date of such repurchases.

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.

Additionally, on August 6, 2020, 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, 2023, up to an additional $500.0 million of our outstanding common stock.

Repurchases under these programs can be made in open market and privately negotiated transactions, at our discretion, based on market and business conditions, applicable contractual and legal requirements and other factors.

These programs do not obligate us to acquire any specific amount of common stock and may be modified or terminated by our Board of Directors at any time at its sole discretion and without notice.

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| Quanta Services, Inc. | | | | | | $ | 100.00 | | | | | $ | 172.10 | | | | | $ | 193.14 | | | | | $ | 148.84 | | | | | $ | 202.18 | | | | | $ | 359.36 | |

| S&P 500 | | | | | | $ | 100.00 | | | | | $ | 111.96 | | | | | $ | 136.40 | | | | | $ | 130.42 | | | | | $ | 171.49 | | | | | $ | 203.04 | |

| S&P MidCap 400 | | | | | | $ | 100.00 | | | | | $ | 120.74 | | | | | $ | 140.35 | | | | | $ | 124.80 | | | | | $ | 157.49 | | | | | $ | 179.00 | |

| Peer Group | | | | | | $ | 100.00 | | | | | $ | 127.93 | | | | | $ | 145.15 | | | | | $ | 107.66 | | | | | $ | 148.80 | | | | | $ | 170.91 | |

ITEM 6.Selected Financial Data

On February 25, 2020, there were approximately 590 holders of record of our common stock.

None.

Subsequent to December 31, 2019, we issued 36,183 shares of our common stock to the former owners 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 owners.

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

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| October 1 - 31, 2019 | | | | | | | | | | | | | | |

| Tax Withholdings (2) | | 5,185 | | | $ | 36.50 | | | — | | | | | |

| November 1 - 30, 2019 | | | | | | | | | | | | | | |

| Tax Withholdings (2) | | 12,905 | | | $ | 42.25 | | | — | | | | | |

| Total | | 18,095 | | | | | | | — | | | $ | 286,756,122 | |

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| (1) | Includes shares repurchased as of the trade date of such repurchases. 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. Repurchases under this program 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. This program does not obligate us to acquire any specific amount of common stock and may be modified or terminated by our Board of Directors at any time at its sole discretion and without notice. |

The current peer group (the 2019 Peer Group) includes AECOM, Dycom Industries, Inc., EMCOR Group Inc., Fluor Corporation, Jacobs Engineering Group Inc., KBR, Inc., MasTec, Inc., MYR Group Inc. and Primoris Services Corporation.

The peer group used in the previous year (the 2018 Peer Group) included each of the foregoing companies, as well as McDermott International, Inc., but did not include Dycom Industries, Inc. We determined that McDermott International, Inc. should be excluded due to dissimilarities with respect to its financial condition and end markets and that Dycom Industries, Inc. should be added due to its similarities with respect to market capitalization, lines of business and end markets.

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

| Quanta Services, Inc. | | $ | 100.00 | | | $ | 71.33 | | | $ | 122.75 | | | $ | 137.76 | | | $ | 106.16 | | | $ | 144.21 | |

| S&P 500 | | $ | 100.00 | | | $ | 101.38 | | | $ | 113.51 | | | $ | 138.29 | | | $ | 132.23 | | | $ | 173.86 | |

| S&P MidCap 400 | | $ | 100.00 | | | $ | 97.82 | | | $ | 118.11 | | | $ | 137.30 | | | $ | 122.08 | | | $ | 154.07 | |

| 2018 Peer Group | | $ | 100.00 | | | $ | 91.21 | | | $ | 120.39 | | | $ | 132.69 | | | $ | 98.83 | | | $ | 134.34 | |

| 2019 Peer Group | | $ | 100.00 | | | $ | 94.95 | | | $ | 121.47 | | | $ | 137.81 | | | $ | 102.22 | | | $ | 141.28 | |

The following historical selected financial data has been derived from our consolidated financial statements.

See Note 4 of the Notes to Consolidated Financial Statements in Item 8.

*Financial Statements and Supplementary 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.

Additionally, on August 4, 2015, we sold our fiber optic licensing operations.

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 Report.

The historical selected financial data should be read in conjunction with our consolidated financial statements and related notes thereto included in Item 8.

*Financial Statements and Supplementary Data* and Item 7.

*Management’s Discussion and Analysis of Financial Condition and Results of Operations* (in thousands, except share information)*.*

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

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

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

| | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| Consolidated Statements of Operations Data: | | | | | | | | | | | | | | | | | | | | |

| Revenues | | $ | 12,112,153 | | | $ | 11,171,423 | | | $ | 9,466,478 | | | $ | 7,651,319 | | | $ | 7,572,436 | |

| Cost of services (including depreciation) | | 10,511,901 | | | | 9,691,459 | | | | 8,224,618 | | | | 6,637,519 | | | | 6,648,771 | | |

| Gross profit | | 1,600,252 | | | | 1,479,964 | | | | 1,241,860 | | | | 1,013,800 | | | | 923,665 | | |

| Selling, general and administrative expenses | | 955,991 | | | | 857,574 | | | | 777,920 | | | | 653,338 | | | | 592,863 | | |

| Amortization of intangible assets | | 62,091 | | | | 43,994 | | | | 32,205 | | | | 31,685 | | | | 34,848 | | |

| Asset impairment charges (a) | | 13,892 | | | | 49,375 | | | | 58,057 | | | | 7,964 | | | | 58,451 | | |

| Change in fair value of contingent consideration liabilities | | 13,404 | | | | (11,248 | | ) | | (5,171 | | ) | | — | | | | — | | |

| Operating income | | 554,874 | | | | 540,269 | | | | 378,849 | | | | 320,813 | | | | 237,503 | | |

| Interest expense | | (66,890 | | ) | | (36,945 | | ) | | (20,946 | | ) | | (14,887 | | ) | | (8,024 | | ) |

| Interest income | | 927 | | | | 1,555 | | | | 832 | | | | 2,423 | | | | 1,493 | | |

| Other income (expense), net (b) | | 83,376 | | | | (47,213 | | ) | | (4,978 | | ) | | (663 | | ) | | (2,297 | | ) |

| Income from continuing operations before income taxes | | 572,287 | | | | 457,666 | | | | 353,757 | | | | 307,686 | | | | 228,675 | | |

| Provision for income taxes (c) | | 165,472 | | | | 161,659 | | | | 35,532 | | | | 107,246 | | | | 97,472 | | |

| Net income from continuing operations | | 406,815 | | | | 296,007 | | | | 318,225 | | | | 200,440 | | | | 131,203 | | |

| Net income (loss) from discontinued operations | | — | | | | — | | | | — | | | | (342 | | ) | | 190,621 | | |

| Net income | | 406,815 | | | | 296,007 | | | | 318,225 | | | | 200,098 | | | | 321,824 | | |

| Less: Net income attributable to non-controlling interests | | 4,771 | | | | 2,661 | | | | 3,247 | | | | 1,715 | | | | 10,917 | | |

| Net income attributable to common stock | | $ | 402,044 | | | $ | 293,346 | | | $ | 314,978 | | | $ | 198,383 | | | $ | 310,907 | |

| Amounts attributable to common stock: | | | | | | | | | | | | | | | | | | | | |

| Net income from continuing operations | | $ | 402,044 | | | $ | 293,346 | | | $ | 314,978 | | | $ | 198,725 | | | $ | 120,286 | |

| Basic earnings per share attributable to common stock from continuing operations | | $ | 2.76 | | | $ | 1.92 | | | $ | 2.02 | | | $ | 1.26 | | | $ | 0.62 | |

| Diluted earnings per share attributable to common stock from continuing operations | | $ | 2.73 | | | $ | 1.90 | | | $ | 2.00 | | | $ | 1.26 | | | $ | 0.62 | |

| Cash dividends declared per share | | $ | 0.17 | | | $ | 0.04 | | | $ | — | | | $ | — | | | $ | — | |

_______________________________________

| | |

| --- | --- |

| (a) | In 2019, 2018, 2017, 2016 and 2015, we recorded asset impairment charges of $13.9 million ($10.5 million net of tax), $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 tax). The charges recorded in 2019 related to the winding down and exit of certain oil-influenced operations and assets, the replacement of an internally-developed software application and the planned sale of certain foreign operations and assets. The charges recorded in 2018 primarily 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 was associated with two reporting units within our Pipeline and 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 |

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| [Report of Independent Registered Public Accounting [removed: Firm](#s229016DADF625CC792B6552F3926C620)] [added: Firm](#icb403b30e28147cb9c46cb1062acf9c5_88)] | [removed: [57](#s229016DADF625CC792B6552F3926C620)] | [added: | [62](#icb403b30e28147cb9c46cb1062acf9c5_88) | | |]

| [Consolidated Balance [removed: Sheets](#sABB6BFF903B8585286CDC46BE850FB61)] [added: Sheets](#icb403b30e28147cb9c46cb1062acf9c5_91)] | [removed: [60](#sABB6BFF903B8585286CDC46BE850FB61)] | [added: | [65](#icb403b30e28147cb9c46cb1062acf9c5_91) | | |]

| [Consolidated Statements of [removed: Operations](#s4631C894AC375BBD94F76D18ABB1CC62)] [added: Operations](#icb403b30e28147cb9c46cb1062acf9c5_97)] | [removed: [61](#s4631C894AC375BBD94F76D18ABB1CC62)] | [added: | [66](#icb403b30e28147cb9c46cb1062acf9c5_97) | | |]

| [Consolidated Statements of Comprehensive [removed: Income](#s17958C110484542896BC88935A22AC43)] [added: Income](#icb403b30e28147cb9c46cb1062acf9c5_100)] | [removed: [62](#s17958C110484542896BC88935A22AC43)] | [added: | [67](#icb403b30e28147cb9c46cb1062acf9c5_100) | | |]

| [Consolidated Statements of Cash [removed: Flows](#s9896091AED62563D936754DE43F6B31B)] [added: Flows](#icb403b30e28147cb9c46cb1062acf9c5_106)] | [removed: [63](#s9896091AED62563D936754DE43F6B31B)] | [added: | [68](#icb403b30e28147cb9c46cb1062acf9c5_106) | | |]

| [Consolidated Statements of [removed: Equity](#sE7F41BC701ED5E1F8087B955DF1EDCCC)] [added: Equity](#icb403b30e28147cb9c46cb1062acf9c5_109)] | [removed: [64](#sE7F41BC701ED5E1F8087B955DF1EDCCC)] | [added: | [69](#icb403b30e28147cb9c46cb1062acf9c5_109) | | |]

[removed: | [Notes to Consolidated Financial Statements](#sEFBFE8396DE753069ED5FB555C19286B) | [65](#sEFBFE8396DE753069ED5FB555C19286B) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)]

Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, [removed: 2019] [added: 2020] to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

The effectiveness of Quanta Services, Inc.’s internal control over financial reporting as of December 31, [removed: 2019] [added: 2020] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears herein.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, [removed: 2019] [added: 2020] excluded the seven businesses we acquired in [removed: 2019.][added: 2020.]

These acquisitions comprised approximately [removed: 2.1%] [added: 2.9%] and [removed: 1.8%] [added: 1.2%] of our consolidated assets and revenues as of and for the year ended December 31, [removed: 2019.][added: 2020.]

We have audited the accompanying consolidated balance sheets of Quanta Services, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2019] [added: 2020,] and [removed: 2018,] [added: 2019] and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in [removed: *Internal] [added: Internal] Control - Integrated [removed: Framework*] [added: Framework] (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019] [added: 2020] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in [removed: *Internal] [added: Internal] Control - Integrated [removed: Framework*] [added: Framework] (2013) issued by the COSO.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded seven acquired businesses from its assessment of internal control over financial reporting as of December 31, [removed: 2019] [added: 2020] because they were acquired by the Company in purchase business combinations during [removed: 2019.][added: 2020.]

These acquired businesses, each of which is wholly-owned, comprised, in the aggregate, total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting of approximately [removed: 2.1%] [added: 2.9%] and [removed: 1.8%] [added: 1.2%] of consolidated total assets and consolidated total revenues, respectively, as of and for the year ended December 31, [removed: 2019.][added: 2020.]

[added: A company’s internal control over financial reporting includes those policies and procedures that (i) pertain] to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

During the year ended December 31, [removed: 2019,] [added: 2020,] approximately [removed: 50%] [added: 47.9%] of the Company’s [removed: revenue] [added: revenues] recognized were associated with this revenue recognition method.

[removed: As described by management, actual] [added: Actual] revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen or changed circumstances not included in [removed: Quanta’s] [added: management’s] cost estimates or covered by its contracts.

The estimating process is based on the professional knowledge and experience of [removed: Quanta’s] [added: management’s] project estimators, project managers and finance professionals.

Some of the factors that may lead to [added: negative] changes in estimates include concealed or unknown site conditions; changes [added: to or disputes with customers regarding the scope of services; changes] in [added: estimates related to] the [added: length of time to complete a performance obligation; changes or delays with respect to permitting and regulatory requirements; changes in the] cost of equipment, commodities, materials or labor; unanticipated costs or claims due to delays [removed: caused] [added: or failure to perform] by customers or third parties; customer failure to provide required materials or equipment; errors in engineering, specifications or designs; project [removed: modifications or contract termination;] [added: modifications;] adverse weather [removed: conditions and] [added: conditions,] natural [removed: disasters; changes in estimates related to] [added: disasters, and other emergencies (including] the [removed: length of time to complete] [added: ongoing pandemic as] a [removed: performance obligation;] [added: result of the novel coronavirus disease (COVID-19) that began in 2019);] and performance and quality issues [added: causing delay (including payment of liquidated damages) or] requiring rework or replacement.

The principal considerations for our determination that performing procedures relating to revenue recognition for contracts recognized over time is a critical audit matter are [removed: that there was] [added: (i) the] significant judgment by management when [removed: estimating] [added: determining] the total contract [removed: costs.][added: costs and (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s estimate of the total costs of the contracts recognized over time.]

These procedures included testing the effectiveness of controls relating to the revenue recognition process [removed: including controls over] [added: and] the determination of total estimated contract cost for contracts recognized over time.

These procedures also included, among others, (i) [removed: evaluating and] testing management’s process for determining the total estimated contract cost [removed: for a sample of contracts,] which included evaluating the contracts and other documents that support those estimates, and testing of underlying contract costs; (ii) evaluating management’s ability to reasonably estimate total contract costs by performing a comparison of the actual total estimated contract cost as compared with prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the total estimated contract [removed: cost] [added: cost;] and (iii) evaluating management’s methodologies and the consistency of management’s methodologies over the life of the contract.

The principal considerations for our determination that performing procedures relating to the [removed: acquisition] [added: goodwill impairment assessment] of [removed: Hallen] [added: the three reporting units] is a critical audit matter are (i) [removed: there was a high degree of auditor judgment and subjectivity in applying procedures relating to] the [removed: fair value measurement of the customer relationship intangible assets acquired due to the] significant judgment by management when [removed: estimating] [added: determining] the fair value [added: estimates] of the [removed: customer relationship intangible assets,] [added: reporting units;] (ii) [removed: significant audit] [added: the high degree of auditor judgment, subjectivity and] effort [removed: was required] in [added: performing procedures and] evaluating [removed: the] [added: management’s] significant assumptions related to [removed: the fair value of the customer relationship intangible assets, such as the future revenues, the discount rates] [added: projected revenues] and [removed: customer attrition rate,] [added: margins,] and [added: weighted average costs of capital; and] (iii) the audit effort involved the use of professionals with specialized skill and [removed: knowledge.][added: knowledge.]

These procedures [removed: also] included, among [removed: others,] [added: others] (i) [removed: reading the purchase agreement, (ii)] testing management’s process for [removed: estimating] [added: determining] the fair value [removed: of the customer relationship intangible assets, (iii)] [added: estimates for three reporting units; (ii)] evaluating the appropriateness of the [removed: valuation method and] [added: discounted cash flow method; (iii) testing] the [removed: reasonableness] [added: completeness and accuracy] of [removed: significant assumptions, including] the [removed: future revenues,] [added: underlying data used in] the [removed: discount rates] [added: fair value estimates;] and [added: (iv) evaluating] the [removed: customer attrition rate for] [added: reasonableness of] the [removed: customer relationship intangible assets,] [added: significant assumptions used by management related to projected revenues] and [removed: (iv) testing the completeness, accuracy,] [added: margins,] and [removed: relevance] [added: weighted average costs] of [removed: underlying data used in the estimate.][added: capital.]

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

| | | [added: | | | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | |

| [removed: ASSETS] [added: ASSETS] | | | | | | | | | [added: | | | | | |]

| Current Assets: | | | | | | | | | [added: | | | | | |]

| Cash and cash equivalents | | [added: | | | |] $ | [removed: 164,798] [added: 184,620] | | | [added: | |] $ | [removed: 78,687] [added: 164,798] | |

| Accounts receivable, net of allowances of [removed: $9,398] [added: $16,546] and [removed: $5,839] [added: $9,398] | | [removed: 2,747,911] | | | | [removed: 2,354,737] [added: 2,716,083] | | | [added: | | | 2,747,911 | | |]

| Contract assets | | [added: | | | | $ | 453,832 | | | | | $ |] 601,268 | | | | [removed: 576,891] | [added: $] | [added: 576,891] | [added: |]

| Inventories | | [removed: 55,719] | | | | [removed: 107,732] [added: 50,472] | | | [added: | | | 55,719 | | |]

| Prepaid expenses and other current assets | | [removed: 261,290] | | | | [removed: 208,057] [added: 183,382] | | | [added: | | | 261,290 | | |]

| Total current assets | | [removed: 3,830,986] | | | | [removed: 3,326,104] [added: 3,588,389] | | | [added: | | | 3,830,986 | | |]

| Property and equipment, net of accumulated depreciation of [removed: $1,250,197] [added: $1,372,132] and [removed: $1,092,440] [added: $1,250,197] | | [removed: 1,386,654] | | | | [removed: 1,276,032] [added: 1,560,656] | | | [added: | | | 1,386,654 | | |]

| [Notes to Consolidated Financial Statements](#icb403b30e28147cb9c46cb1062acf9c5_112) | | | [70](#icb403b30e28147cb9c46cb1062acf9c5_112) | | |

*Goodwill Impairment Assessment – Three Reporting Units within the Underground Utility and Infrastructure Solutions Division*

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $2.1 billion as of December 31, 2020, and the amount of the goodwill associated with the three reporting units was $99.8 million.

Goodwill is tested for impairment annually in the fourth quarter of the fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired.

The assessment can be performed by first completing a qualitative

assessment on none, some or all reporting units.

If management believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required.

The quantitative test involves comparing the fair value of each reporting unit with its carrying amount, including goodwill.

Management determines the fair value of its reporting units using the income approach (discounted cash flow method).

Inherent assumptions and estimates used in developing future cash flows include projected revenues and margins, and weighted average costs of capital.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of three reporting units.

Evaluating management’s assumptions related to projected revenues and margins involved evaluating whether the assumptions were reasonable considering (i) current and past performance of the reporting units; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow method and (ii) the reasonableness of the significant assumption related to the weighted average costs of capital.

February 26, 2021

*[Index](#icb403b30e28147cb9c46cb1062acf9c5_7)*

*[Index](#icb403b30e28147cb9c46cb1062acf9c5_7)*

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| Equity in earnings of integral unconsolidated affiliates | | | | | | 11,303 | | | | | | — | | | | | | — | | |

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*[Index](#icb403b30e28147cb9c46cb1062acf9c5_7)*

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*[Index](#icb403b30e28147cb9c46cb1062acf9c5_7)*

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

| Net income | | | | | | $ | 451,959 | | | | | $ | 406,815 | | | | | $ | 296,007 | |

| Amortization of intangible assets | | | | | | 76,704 | | | | | | 62,091 | | | | | | 43,994 | | |

| Asset impairment charges | | | | | | 8,282 | | | | | | 13,892 | | | | | | 49,375 | | |

| Impairment of cost method investment | | | | | | 9,311 | | | | | | — | | | | | | — | | |

| Change in fair value of contingent consideration liabilities | | | | | | 719 | | | | | | 13,404 | | | | | | (11,248) | | |

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

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

| Proceeds from disposition of businesses | | | | | | 18,785 | | | | | | — | | | | | | — | | |

| Proceeds from notes offering | | | | | | 990,130 | | | | | | — | | | | | | — | | |

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

| Payments for contingent consideration liabilities | | | | | | (61,483) | | | | | | — | | | | | | — | | |

*[Index](#icb403b30e28147cb9c46cb1062acf9c5_7)*

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

| | |

| --- | --- |

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain

This in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating audit evidence relating to management’s estimate of the total costs of the contracts recognized over time.

*Acquisition of The Hallen Construction Co. - Fair Value of the Customer Relationships*

As described in Notes 2 and 4 to the consolidated financial statements, the Company completed the acquisition of The Hallen Construction Co. (“Hallen”) on August 30, 2019, which resulted in $175 million of intangible assets recorded, principally the customer relationships.

The fair value of customer relationships is estimated as of the date a business is acquired based on the

value-in-use concept utilizing the income approach, specifically the multi-period excess earnings method.

This method discounts to present value the projected cash flows attributable to the customer relationships, with consideration given to customer contract renewals and estimated customer attrition rates.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationship intangible assets and controls over development of significant assumptions, including future revenues, the discount rates and the customer attrition rate.

Evaluating the reasonableness of the future revenues and customer attrition rate assumptions involved considering the past performance of the acquired business, as well as economic forecasts.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation method and significant assumptions, including the discount rates and customer attrition rate.

February 28, 2020

[*Index*](#sFD9F9DF73CDA51AE935A93546D82BF11)

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| Exercise of stock options | | — | | | | — | | | | 25 | | |

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| Balance at December 31, 2016 | 144,710,773 | | | $ | 1 | | | 6,515,453 | | | $ | — | | | 1 | | | $ | — | | | 1 | | | $ | — | | | $ | 1,749,306 | | | $ | 1,876,081 | | | $ | (271,673 | ) | | $ | (14,288 | ) | | $ | 3,339,427 | | | $ | 3,275 | | | $ | 3,342,702 | |

| Acquisitions | 2,982,346 | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | 89,604 | | | | — | | | | — | | | | — | | | | 89,604 | | | | — | | | | 89,604 | | |

| Stock-based compensation activity | 1,000,935 | | | 1 | | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | 50,421 | | | | — | | | | — | | | | (21,163 | | ) | | 29,259 | | | | — | | | | 29,259 | | |

| Stock options exercised | 1,223 | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | 25 | | | | — | | | | — | | | | — | | | | 25 | | | | — | | | | 25 | | |

| Common stock repurchases | (1,382,292 | ) | | — | | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | (50,000 | | ) | | (50,000 | | ) | | — | | | | (50,000 | | ) |

| Net income | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | | 314,978 | | | | — | | | | — | | | | 314,978 | | | | 3,247 | | | | 318,225 | | |

| Dividends declared | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | | (5,838 | | ) | | — | | | | — | | | | (5,838 | | ) | | — | | | | (5,838 | | ) |

| Buyout of a non-controlling interest | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,387 | | ) | | (1,387 | | ) |

| Retirement of preferred stock | — | | | — | | | | — | | | — | | | | — | | | — | | | | (1 | ) | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |

Pipeline and Industrial Infrastructure Services Segment

Services performed by the Pipeline and Industrial Infrastructure Services segment generally include the design, installation, upgrade, 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 the fabrication of pipeline support systems and related structures and facilities for natural gas utilities and midstream companies.

On July 20, 2017, Quanta acquired Stronghold, Ltd. and Stronghold Specialty, Ltd. (collectively Stronghold), a specialized services business located in the United States that provides high-pressure and critical-path solutions to the downstream and midstream energy markets.

*Contracts.* Quanta designs, installs, upgrades, repairs and maintains infrastructure for customers in the electric power, energy and communications industries.

These amounts represent management’s estimate of the consolidated revenues that are expected to be

However,

As of December 31, 2019, this project had a contract value of approximately $400 million and was approximately 73% complete.

The increase in contract assets from December 31, 2018 to December 31, 2019 was partially due to billing process changes for certain customers that impacted Quanta’s ability to timely invoice and collect for services performed.

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Based on this evaluation, these officers have concluded that, as of December 31, [removed: 2019,] [added: 2020,] our disclosure controls and procedures were effective to provide reasonable assurance of achieving their objectives.

*Financial Statements and Supplementary Data* [added: of this Annual Report] under the heading *Report of Management* and is incorporated herein by reference.

*Financial Statements and Supplementary Data* [added: of this Annual Report] under the heading *Report of Independent Registered Public Accounting Firm* and is incorporated herein by reference.

There has been no change in our internal control over financial reporting that occurred during the quarter ended December 31, [removed: 2019] [added: 2020] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control [removed: system’s objectives will be met.]

system’s objectives will be met.

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The information required by this Item 10 is incorporated by reference to [removed: our] [added: the] definitive proxy [removed: statement,] [added: statement related to our 2021 Annual Meeting of Stockholders,] which is to be filed with the SEC pursuant to the Exchange Act within 120 days following the end of our [removed: 2019] [added: 2020] fiscal year.

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The information required by this Item 11 is incorporated by reference to [removed: our] [added: the] definitive proxy [removed: statement,] [added: statement related to our 2021 Annual Meeting of Stockholders,] which is to be filed with the SEC pursuant to the Exchange Act within 120 days following the end of our [removed: 2019] [added: 2020] fiscal year.

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The information required by this Item 12 is incorporated by reference to [removed: our] [added: the] definitive proxy [removed: statement,] [added: statement related to our 2021 Annual Meeting of Stockholders,] which is to be filed with the SEC pursuant to the Exchange Act within 120 days following the end of our [removed: 2019] [added: 2020] fiscal year.

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The information required by this Item 13 is incorporated by reference to [removed: our] [added: the] definitive proxy [removed: statement,] [added: statement related to our 2021 Annual Meeting of Stockholders,] which is to be filed with the SEC pursuant to the Exchange Act within 120 days following the end of our [removed: 2019] [added: 2020] fiscal year.

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The information required by this Item 14 is incorporated by reference to [removed: our] [added: the] definitive proxy [removed: statement,] [added: statement related to our 2021 Annual Meeting of Stockholders,] which is to be filed with the SEC pursuant to the Exchange Act within 120 days following the end of our [removed: 2019] [added: 2020] fiscal year.

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| Exhibit | | | | | [added: | | | | | | |]

| No. | | | | [added: | |] Description | [added: | | | | |]

| [removed: 2.1] [added: 10.15*] | | [added: |] — | | [removed: [Securities Purchase Agreement,] [added: | [Employment Agreement] dated [added: September 12, 2017, effective] as of [removed: July 20,] [added: January 1,] 2017, by and [removed: among Quanta Services, Inc., certain subsidiaries of] [added: between] Quanta Services, [removed: Inc., as purchasers, and the General Partners and Limited Partners of Stronghold, Ltd.] [added: Inc.] and [removed: Stronghold Specialty, Ltd.] [added: Paul C. Gregory] (previously filed as Exhibit [removed: 2.1] [added: 10.1] to the Company’s Form 10-Q for the quarter ended September 30, 2017 filed November 9, 2017 and incorporated herein by [removed: reference)](http://www.sec.gov/Archives/edgar/data/1050915/000105091517000057/pwr9-30x2017ex21.htm)] [added: reference)](http://www.sec.gov/Archives/edgar/data/1050915/000105091517000057/pwr9-30x2017ex101.htm)] | [added: | | | | |]