Item 1. Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)

						September 30, 2021						December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents						$	1,696,210					$	184,620
Accounts receivable, net of allowances of $39,709 and $16,546						3,002,172						2,716,083
Contract assets						760,279						453,832
Inventories						61,959						50,472
Prepaid expenses and other current assets						183,514						183,382
Total current assets						5,704,134						3,588,389
Property and equipment, net of accumulated depreciation of $1,481,416 and $1,372,132						1,601,500						1,560,656
Operating lease right-of-use assets						232,282						256,845
Other assets, net						602,838						435,713
Other intangible assets, net of accumulated amortization of $582,126 and $517,574						388,999						435,655
Goodwill						2,145,963						2,121,014
Total assets						$	10,675,716					$	8,398,272
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt and short-term debt						$	23,748					$	14,764
Current portion of operating lease liabilities						78,869						85,134
Accounts payable and accrued expenses						1,760,789						1,509,794
Contract liabilities						501,142						528,864
Total current liabilities						2,364,548						2,138,556
Long-term debt, net of current maturities						2,930,905						1,174,294
Operating lease liabilities, net of current portion						161,320						178,822
Deferred income taxes						184,827						166,407
Insurance and other non-current liabilities						400,284						391,221
Total liabilities						6,041,884						4,049,300
Commitments and Contingencies
Equity:
Common stock, $0.00001 par value, 600,000,000 shares authorized, 165,007,258 and 162,710,792 shares issued, and 139,111,888 and 138,300,191 shares outstanding						2						2
Additional paid-in capital						2,232,319						2,170,026
Retained earnings						3,620,409						3,264,967
Accumulated other comprehensive loss						(242,986)						(232,997)
Treasury stock, 25,895,370 and 24,410,601 common shares						(979,034)						(857,817)
Total stockholders’ equity						4,630,710						4,344,181
Non-controlling interests						3,122						4,791
Total equity						4,633,832						4,348,972
Total liabilities and equity						$	10,675,716					$	8,398,272

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Revenues						$	3,353,278					$	3,020,161					$	9,056,675					$	8,290,487
Cost of services (including depreciation)						2,818,602						2,512,647						7,701,398						7,095,513
Gross profit						534,676						507,514						1,355,277						1,194,974
Equity in earnings of integral unconsolidated affiliates						10,232						5,120						22,865						6,165
Selling, general and administrative expenses						(274,846)						(250,654)						(788,308)						(709,299)
Amortization of intangible assets						(22,772)						(19,687)						(65,418)						(55,374)
Asset impairment charges						—						—						(2,319)						—
Change in fair value of contingent consideration liabilities						787						(78)						1,360						(598)
Operating income						248,077						242,215						523,457						435,868
Interest expense						(17,259)						(11,049)						(42,843)						(33,709)
Interest income						72						80						3,098						1,114
Other income (expense), net						6,089						2,931						18,232						(3,649)
Income before income taxes						236,979						234,177						501,944						399,624
Provision for income taxes						61,581						70,477						116,256						119,626
Net income						175,398						163,700						385,688						279,998
Less: Net income attributable to non-controlling interests						1,033						787						4,529						4,453
Net income attributable to common stock						$	174,365					$	162,913					$	381,159					$	275,545
Earnings per share attributable to common stock:
Basic						$	1.25					$	1.16					$	2.72					$	1.95
Diluted						$	1.21					$	1.13					$	2.64					$	1.90
Shares used in computing earnings per share:
Weighted average basic shares outstanding						140,008						140,542						140,134						141,610
Weighted average diluted shares outstanding						144,304						144,363						144,448						144,985

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Net income						$	175,398					$	163,700					$	385,688					$	279,998
Other comprehensive income (loss), net of tax provision:
Foreign currency translation adjustment, net of tax of $0, $0, $0 and $0						(26,429)						15,707						(10,009)						(32,524)
Other, net of tax of $1, $0, $4 and $0						6						—						20						—
Other comprehensive income (loss)						(26,423)						15,707						(9,989)						(32,524)
Comprehensive income						148,975						179,407						375,699						247,474
Less: Comprehensive income attributable to non-controlling interests						1,033						787						4,529						4,453
Total comprehensive income attributable to common stock						$	147,942					$	178,620					$	371,170					$	243,021

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Cash Flows from Operating Activities:
Net income						$	175,398					$	163,700					$	385,688					$	279,998
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation						61,616						56,244						186,480						165,180
Amortization of intangible assets						22,772						19,687						65,418						55,374
Asset impairment charges						—						—						2,319						—
Impairment of cost method investment						—						—						—						9,311
Change in fair value of contingent consideration liabilities						(787)						78						(1,360)						598
Equity in (earnings) losses of unconsolidated affiliates						(10,758)						(5,260)						(24,734)						2,207
Amortization of deferred financing costs						3,919						3,070						5,609						4,247
Gain on sale of property and equipment						(1,077)						(2,246)						(10,931)						(4,218)
Provision for credit losses						249						1,566						24,169						2,910
Deferred income tax provision (benefit)						(2,502)						(17,443)						14,245						(19,226)
Non-cash stock-based compensation						21,642						21,431						64,252						58,323
Foreign currency gain						(4,901)						(1,505)						(6,531)						(4,942)
Payments for contingent consideration liabilities						—						—						—						(590)
Changes in operating assets and liabilities, net of non-cash transactions						(247,695)						(124,463)						(372,187)						290,715
Net cash provided by operating activities						17,876						114,859						332,437						839,887
Cash Flows from Investing Activities:
Capital expenditures						(74,612)						(50,780)						(232,996)						(167,037)
Proceeds from sale of property and equipment						16,431						5,844						35,101						18,460
Proceeds from insurance settlements related to property and equipment						255						73						535						271
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired						(33,261)						(187,655)						(101,373)						(212,092)
Proceeds from disposition of businesses						—						203						—						11,064
Investments in unconsolidated affiliates and other						(5,154)						(778)						(119,478)						(9,538)
Cash received from investments in unconsolidated affiliates and other entities						5						2,538						3,022						2,570
Cash paid for intangible assets						(200)						—						(524)						—
Net cash used in investing activities						(96,536)						(230,555)						(415,713)						(356,302)
Cash Flows from Financing Activities:
Borrowings under credit facility						1,240,766						478,762						3,124,845						2,453,941
Payments under credit facility						(1,142,350)						(1,648,614)						(2,857,190)						(3,602,660)
Proceeds from notes offering						1,487,450						990,130						1,487,450						990,130
Payments of other long-term debt						(916)						(652)						(2,530)						(1,635)
Net repayments of short-term debt, net of borrowings						13,619						(1,761)						9,372						(6,180)
Deferred financing costs						(5,056)						(7,794)						(5,056)						(7,794)
Payments for contingent consideration liabilities						—						—						(263)						(10,399)
Distributions to non-controlling interests						(1,107)						(744)						(6,357)						(4,669)
Payments related to tax withholding for stock-based compensation						(2,638)						(830)						(63,131)						(24,403)
Payment of dividends						(8,414)						(7,001)						(25,627)						(21,545)
Repurchase of common stock						(17,764)						—						(66,687)						(200,000)
Net cash provided by (used in) financing activities						1,563,590						(198,504)						1,594,826						(435,214)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash						(549)						449						738						986
Net increase in cash, cash equivalents and restricted cash						1,484,381						(313,751)						1,512,288						49,357
Cash, cash equivalents and restricted cash, beginning of period						214,715						532,853						186,808						169,745
Cash, cash equivalents and restricted cash, end of period						$	1,699,096					$	219,102					$	1,699,096					$	219,102

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)

																											Accumulated
															Additional												Other												Total						Non-
			Common Stock												Paid-In						Retained						Comprehensive						Treasury						Stockholders’						Controlling						Total
			Shares						Amount						Capital						Earnings						Income (Loss)						Stock						Equity						Interests						Equity
Balance, December 31, 2020			138,300,191						$	2					$	2,170,026					$	3,264,967					$	(232,997)					$	(857,817)					$	4,344,181					$	4,791					$	4,348,972
Other comprehensive income			—						—						—						—						8,539						—						8,539						—						8,539
Stock-based compensation activity			1,368,739						—						13,702						—						—						(55,101)						(41,399)						—						(41,399)
Common stock repurchases			(222,081)						—						—						—						—						(17,710)						(17,710)						—						(17,710)
Dividends declared ($0.06 per share)			—						—						—						(8,429)						—						—						(8,429)						—						(8,429)
Distributions to non-controlling interests			—						—						—						—						—						—						—						(1,129)						(1,129)
Net income			—						—						—						89,761						—						—						89,761						1,558						91,319
Balance, March 31, 2021			139,446,849						2						2,183,728						3,346,299						(224,458)						(930,628)						4,374,943						5,220						4,380,163
Other comprehensive income			—						—						—						—						7,895						—						7,895						—						7,895
Stock-based compensation activity			64,600						—						25,177						—						—						(216)						24,961						—						24,961
Common stock repurchases			(313,725)						—						—						—						—						(29,450)						(29,450)						—						(29,450)
Dividends declared ($0.06 per share)			—						—						—						(8,650)						—						—						(8,650)						—						(8,650)
Distributions to non-controlling interests			—						—						—						—						—						—						—						(4,121)						(4,121)
Other			—						—						—						—						—						—						—						25						25
Net income			—						—						—						117,033						—						—						117,033						1,938						118,971
Balance, June 30, 2021			139,197,724						2						2,208,905						3,454,682						(216,563)						(960,294)						4,486,732						3,062						4,489,794
Other comprehensive loss			—						—						—						—						(26,423)						—						(26,423)						—						(26,423)
Acquisitions			32,822						—						2,479						—						—						—						2,479						—						2,479
Stock-based compensation activity			66,100						—						20,935						—						—						(1,912)						19,023						—						19,023
Common stock repurchases			(184,758)						—						—						—						—						(16,828)						(16,828)						—						(16,828)
Dividends declared ($0.06 per share)			—						—						—						(8,638)						—						—						(8,638)						—						(8,638)
Distributions to non-controlling interests			—						—						—						—						—						—						—						(1,107)						(1,107)
Other			—						—						—						—						—						—						—						134						134
Net income			—						—						—						174,365						—						—						174,365						1,033						175,398
Balance, September 30, 2021			139,111,888						$	2					$	2,232,319					$	3,620,409					$	(242,986)					$	(979,034)					$	4,630,710					$	3,122					$	4,633,832

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)

																																							Accumulated
															Exchangeable												Additional												Other												Total						Non-
			Common Stock												Shares												Paid-In						Retained						Comprehensive						Treasury						Stockholders’						Controlling						Total
			Shares						Amount						Shares						Amount						Capital						Earnings						Income (Loss)						Stock						Equity						Interests						Equity
Balance, December 31, 2019			142,324,318						$	2					36,183						$	—					$	2,024,610					$	2,854,271					$	(241,818)					$	(586,773)					$	4,050,292					$	3,539					$	4,053,831
Credit loss cumulative effect adjustment			—						—						—						—						—						(3,841)						—						—						(3,841)												(3,841)
Other comprehensive loss			—						—						—						—						—						—						(82,968)						—						(82,968)						—						(82,968)
Acquisitions			121,089						—						—						—						4,329						—						—						—						4,329												4,329
Stock-based compensation activity			1,124,530						—						—						—						11,444						—						—						(19,750)						(8,306)						—						(8,306)
Exchange of exchangeable shares			36,183						—						(36,183)						—						—						—						—						—						—						—						—
Common stock repurchases			(5,960,134)						—						—						—						—						—												(200,000)						(200,000)						—						(200,000)
Dividends declared ($0.05 per share)			—						—						—						—						—						(7,184)						—						—						(7,184)						—						(7,184)
Distributions to non-controlling interests			—						—						—						—						—						—						—						—						—						(1,963)						(1,963)
Other			—						—						—						—						—						(516)						—						—						(516)						293						(223)
Net income			—						—						—						—						—						38,686						—						—						38,686						2,817						41,503
Balance, March 31, 2020			137,645,986						2						—						—						2,040,383						2,881,416						(324,786)						(806,523)						3,790,492						4,686						3,795,178
Other comprehensive income			—						—						—						—						—						—						34,737						—						34,737						—						34,737
Stock-based compensation activity			65,826						—						—						—						22,717						—						—						(281)						22,436						—						22,436
Dividends declared ($0.05 per share)			—						—						—						—						—						(7,182)						—						—						(7,182)						—						(7,182)
Distributions to non-controlling interests			—						—						—						—						—						—						—						—						—						(1,962)						(1,962)
Net income			—						—						—						—						—						73,946						—						—						73,946						849						74,795
Balance, June 30, 2020			137,711,812						$	2					—						$	—					$	2,063,100					$	2,948,180					$	(290,049)					$	(806,804)					$	3,914,429					$	3,573					$	3,918,002
Other comprehensive income			—						—						—						—						—						—						15,707						—						15,707						—						15,707
Acquisitions			1,087,774						—						—						—						45,532						—						—						—						45,532						—						45,532
Stock-based compensation activity			43,760						—						—						—						21,425						—						—						(812)						20,613						—						20,613
Dividends declared ($0.05 per share)			—						—						—						—						—						(7,244)						—						—						(7,244)						—						(7,244)
Distributions to non-controlling interests			—						—						—						—						—						—						—						—						—						(744)						(744)
Net income			—						—						—						—						—						162,913						—						—						162,913						787						163,700
Balance, September 30, 2020			138,843,346						$	2					—						$	—					$	2,130,057					$	3,103,849					$	(274,342)					$	(807,616)					$	4,151,950					$	3,616					$	4,155,566

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BUSINESS AND ORGANIZATION:

Quanta Services, Inc. (together with its subsidiaries, Quanta) is a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric and gas utility, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. Quanta reports its results under two reportable segments: (1) Electric Power Infrastructure Solutions and (2) Underground Utility and Infrastructure Solutions.

On October 13, 2021, Quanta completed the acquisition of Blattner Holding Company and its operating subsidiaries (collectively, Blattner). Blattner is a large utility-scale renewable energy infrastructure solutions provider that is located and primarily operates in North America. For additional information regarding this acquisition, see Note 4. Blattner provides comprehensive solutions to customers in the renewable energy industry, which generally include front-end engineering, procurement, project management and construction services for wind, solar and energy storage projects. Blattner’s results will be included in Quanta’s consolidated financial statements beginning on the acquisition date.

Electric Power Infrastructure Solutions Segment

The Electric Power Infrastructure Solutions segment provides comprehensive network solutions to customers in the electric power and other industries. Services performed by the Electric Power Infrastructure Solutions segment generally include the design, new construction, upgrade and repair and maintenance of electric power transmission and distribution infrastructure and substation facilities, along with other engineering and technical services. This includes solutions that support the implementation of upgrades by utilities to modernize and harden the electric power grid in order to ensure its safety and enhance reliability. In addition, this segment provides engineering and construction services for switchyards and transmission infrastructure needed to interconnect renewable energy generation, including solar, wind, hydro power and backup natural gas generation facilities. This segment also provides emergency restoration services, including the repair of infrastructure damaged by fire and inclement weather; the energized installation, maintenance and upgrade of electric power infrastructure utilizing unique bare hand and hot stick methods and Quanta’s proprietary robotic arm techniques; and the installation of “smart grid” technologies on electric power networks. Engineering and construction services related to, among other things, electric vehicle charging infrastructure, micro-grids and battery storage are also performed in this segment. This segment also provides comprehensive design and construction solutions to wireline and wireless communications companies, cable multi-system operators and other customers within the communications industry, including services in connection with 5G wireless deployment; and the design, installation, maintenance and repair of commercial and industrial wiring. This segment also provides aviation services in support of the services described above and includes the majority of the financial results of Quanta’s postsecondary educational institution, which specializes in pre-apprenticeship training, apprenticeship training and specialized utility task training for electric workers, as well as training for the gas distribution and communications industries.

Underground Utility and Infrastructure Solutions Segment

The Underground Utility and Infrastructure Solutions segment provides comprehensive infrastructure solutions, including design, engineering, new construction, upgrade and repair and maintenance services, to customers involved in the transportation, distribution, storage and processing of natural gas, oil and other products. Services include the upgrade, new construction and repair and maintenance of natural gas systems for gas utility customers, as well as pipeline protection, integrity testing, rehabilitation and replacement. Quanta also provides catalyst replacement services, high-pressure and critical-path turnaround services, instrumentation and electrical services, piping, fabrication and storage tank services to the midstream and downstream industrial energy markets. This segment also provides engineering and construction services for pipeline systems, storage systems and compressor and pump stations and the fabrication of pipeline support systems and related structures and facilities, as well as trenching, directional boring and mechanized welding services related to the services described above and in connection with our electric power infrastructure services. To a lesser extent, this segment includes construction services for the offshore energy market and services in connection with the design, installation and maintenance of fueling systems and water and sewer infrastructure.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The condensed consolidated financial statements of Quanta include the accounts of Quanta Services, Inc. and its wholly-owned subsidiaries, which are also referred to as its operating units. The condensed consolidated financial statements also include the accounts of certain of Quanta’s investments in joint ventures, which are either consolidated or proportionately consolidated. Investments in affiliated entities in which Quanta does not have a controlling financial interest, but over which Quanta has significant influence, usually because Quanta holds a voting interest of between 20% and 50% in the affiliated entity, are accounted for using the equity method. Unless the context requires otherwise, references to Quanta include Quanta Services, Inc. and its consolidated subsidiaries.

Interim Condensed Consolidated Financial Information

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP), have been condensed or omitted pursuant to those rules and regulations. Quanta believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations, comprehensive income and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations and comprehensive income for the interim periods are not necessarily indicative of the results for the entire fiscal year. The results of Quanta have historically been subject to significant seasonal fluctuations.

Quanta recommends that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto of Quanta and its consolidated subsidiaries, which contain additional information about Quanta’s policies and are included in Quanta’s 2020 Annual Report.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses recognized during the periods presented. Quanta reviews all significant estimates affecting its consolidated financial statements on a recurring basis and records the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on Quanta’s beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. Estimates are primarily used in Quanta’s assessment of revenue recognition for construction contracts, including contractual change orders and claims; allowance for credit losses; valuation of inventory; useful lives of assets; fair value assumptions in analyzing goodwill, other intangibles and long-lived asset impairments; equity and other investments; purchase price allocations; acquisition-related contingent consideration liabilities; multiemployer pension plan withdrawal liabilities; contingent liabilities associated with, among other things, legal proceedings and claims, parent guarantees and indemnity obligations; estimated insurance claim recoveries; stock-based compensation; operating results of reportable segments; provision for income taxes; and uncertain tax positions.

Revenue Recognition

Quanta’s services may be provided pursuant to master service agreements (MSAs), repair and maintenance contracts and fixed price and non-fixed price construction contracts. These contracts are classified into three categories based on the methods by which transaction prices are determined and revenue is recognized: unit-price contracts, cost-plus contracts and fixed price contracts. Transaction prices for unit-price contracts are determined on a per unit basis, transaction prices for cost-plus contracts are determined by applying a profit margin to costs incurred on the contracts and transaction prices for fixed price contracts are determined on a lump-sum basis.

Performance Obligations

At September 30, 2021 and December 31, 2020, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was approximately $4.37 billion and $3.99 billion, of which 78.7% and 71.2% were expected to be recognized in the subsequent twelve months. These amounts represent management’s estimates of the consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work had not yet begun as of such dates. For purposes of calculating remaining performance

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obligations, Quanta includes all estimated revenues attributable to consolidated joint ventures and variable interest entities, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized and revenues from change orders and claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations are potential orders under MSAs and non-fixed price contracts expected to be completed within one year.

Contract Estimates

Actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen or changed circumstances not included in Quanta’s cost estimates or covered by its contracts. Some of the factors that can result in positive changes in estimates on projects include successful execution through project risks, reduction of estimated project costs or increases of estimated revenues. Some of the factors that can result in negative changes in estimates include concealed or unknown site conditions; changes to or disputes with customers regarding the scope of services; changes in estimates related to the length of time to complete a performance obligation; changes or delays with respect to permitting and regulatory requirements; changes in the cost or availability of equipment, commodities, materials or skilled labor; unanticipated costs or claims due to delays or failure to perform by customers or third parties; customer failure to provide required materials or equipment; errors in engineering, specifications or designs; project modifications; adverse weather conditions, natural disasters, and other emergencies (including the ongoing COVID-19 pandemic); and performance and quality issues causing delay (including payment of liquidated damages) or requiring rework or replacement. Any changes in estimates may result in changes to profitability or losses associated with the related performance obligations.

Changes in estimated revenues, costs and profit are recognized on a cumulative catch-up basis and recorded in the period they are determined to be probable and can be reasonably estimated. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations that were satisfied or partially satisfied in prior periods or the reversal of previously recognized revenue if the currently estimated revenue is less than the previous estimate. The impact of a change in contract estimate is measured as the difference between the revenue or gross profit recognized in the prior period as compared to the revenue or gross profit which would have been recognized had the revised estimate been used as the basis of recognition in the prior period. Changes in estimates can also result in contract losses, which are recognized in full when they are determined to be probable and can be reasonably estimated.

Operating results for the three months ended September 30, 2021 were favorably impacted by $41.9 million, or 7.8%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at June 30, 2021. Operating results for the nine months ended September 30, 2021 were favorably impacted by $127.4 million, or 9.4%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at December 31, 2020. The overall favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion.

Operating results for the three months ended September 30, 2020 were favorably impacted by $48.7 million, or 9.6%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at June 30, 2020. Operating results for the nine months ended September 30, 2020 were impacted by less than 5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at December 31, 2019.

Certain projects were materially impacted by changes to estimated contract revenues and/or project costs during the three and nine months ended September 30, 2020. Revenues and gross profit were favorably impacted as a result of successful execution through project risks and close-out activities on certain large pipeline projects in the United States, as well as a project scope reduction on a large pipeline project in the United States that allowed Quanta to recognize a portion of previously deferred milestone payments and reduce certain contingencies on the project. The favorable impact related to these projects was partially offset by increased costs on two large pipeline projects in Canada that experienced severe weather conditions during the three and nine months ended September 30, 2020, both of which were complete as of September 30, 2021. With respect to all of these large pipeline projects, the aggregate net favorable impact on gross profit related to work performed in prior periods was $32.9 million and $15.1 million during the three and nine months ended September 30, 2020.

Additionally, during the three and nine months ended September 30, 2020, Quanta was pursuing the orderly exit of its Latin American operations, which was substantially complete as of December 31, 2020. These operations were adversely impacted by the COVID-19 pandemic due to shelter-in-place restrictions and other work disruptions, and as a result Quanta accelerated various contract terminations and other activities in order to expedite cessation of operations in the region. These factors resulted in changes in estimates on several projects and negatively impacted gross profit related to work performed in prior periods by $12.1 million and $28.6 million in the aggregate during the three and nine months ended September 30, 2020.

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Changes in cost estimates on certain contracts may also result in the issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. As of September 30, 2021 and December 31, 2020, Quanta had recognized revenues of $254.1 million and $141.2 million related to change orders and claims included as contract price adjustments that were in the process of being negotiated in the normal course of business. The largest component of the revenues recognized is associated with change orders and claims arising from delays on two electric transmission projects in Canada. The most significant delays on these projects occurred in the first and third quarters of 2021 and were related to the COVID-19 pandemic that negatively impacted productivity. Additionally, during the third quarter of 2021, both of the projects were negatively impacted by unrelated wildfires, and one was also impacted by acceleration of the project timeline, all of which resulted in change orders. Quanta believes that the contracts for these projects entitle it to recover certain amounts associated with these delays. The aggregate amounts related to change orders and claims, which are included in “Contract assets” in the accompanying condensed consolidated balance sheets, represent management’s estimates of additional contract revenues that have been earned and are probable of collection. However, Quanta’s estimates could change, and the amount ultimately realized could be significantly higher or lower than the estimated amount.

Revenues by Category

The following tables present Quanta’s revenue disaggregated by geographic location, as determined by the job location, and contract type (in thousands):

						Three Months Ended September 30,																								Nine Months Ended September 30,
						2021												2020												2021												2020
By primary geographic location:
United States						$	2,892,446					86.2		%				$	2,629,606					87.1		%				$	7,669,360					84.7		%				$	7,105,568					85.7		%
Canada						382,072						11.4		%				320,576						10.6		%				1,123,077						12.4		%				917,621						11.1		%
Australia						52,804						1.6		%				49,537						1.6		%				170,719						1.9		%				156,664						1.9		%
Others						25,956						0.8		%				20,442						0.7		%				93,519						1.0		%				110,634						1.3		%
Total revenues						$	3,353,278					100.0		%				$	3,020,161					100.0		%				$	9,056,675					100.0		%				$	8,290,487					100.0		%

						Three Months Ended September 30,																								Nine Months Ended September 30,
						2021												2020												2021												2020
By contract type:
Unit-price contracts						$	1,399,358					41.8		%				$	1,141,102					37.7		%				$	3,593,644					39.7		%				$	3,034,169					36.6		%
Cost-plus contracts						825,622						24.6		%				702,392						23.3		%				2,247,879						24.8		%				1,958,404						23.6		%
Fixed price contracts						1,128,298						33.6		%				1,176,667						39.0		%				3,215,152						35.5		%				3,297,914						39.8		%
Total revenues						$	3,353,278					100.0		%				$	3,020,161					100.0		%				$	9,056,675					100.0		%				$	8,290,487					100.0		%

Under fixed price contracts, as well as unit-price contracts with more than an insignificant amount of partially completed units, revenue is recognized as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately 42.5% and 47.9% of Quanta’s revenues recognized during the three months ended September 30, 2021 and 2020 were associated with this revenue recognition method, and 43.4% and 48.4% of Quanta’s revenues recognized during the nine months ended September 30, 2021 and 2020 were associated with this revenue recognition method.

Contract Assets and Liabilities

Contract assets and liabilities, recorded as current assets and liabilities, respectively, consisted of the following (in thousands):

						September 30, 2021						December 31, 2020
Contract assets						$	760,279					$	453,832
Contract liabilities						$	501,142					$	528,864

Contract assets and liabilities fluctuate period to period based on various factors, including, among others, changes in the number and size of projects in progress at period end and variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings, deferred billings and unapproved change orders and contract claims recognized in

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revenues. The increase in contract assets from December 31, 2020 to September 30, 2021 was primarily due to increased working capital requirements related to progress on two large electric transmission projects in Canada and the timing of billings for such projects. Both of the projects were negatively impacted by delays related to the COVID-19 pandemic and unrelated wildfires, and one project was also impacted by acceleration of the project timeline, all of which resulted in change orders and an increase in contract assets.

Revenues were positively impacted by $151.7 million during the nine months ended September 30, 2021 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2020. During the nine months ended September 30, 2021, Quanta recognized revenue of approximately $381.9 million related to contract liabilities outstanding at December 31, 2020.

Current and Long-Term Accounts Receivable and Allowance for Credit Losses

Quanta’s historical loss ratio and its determination of risk pools, which are used to calculate expected credit losses, may be adjusted for changes in customer credit concentrations within its portfolio of financial assets, customers’ ability to pay, and other considerations, such as economic and market changes, changes to the regulatory or technological environments affecting customers and the consistency between current and forecasted economic conditions and historical economic conditions used to derive historical loss ratios. At the end of each quarter, management reassesses these and other relevant factors, including any potential effects from the currently challenged energy market and the ongoing COVID-19 pandemic.

Quanta considers accounts receivable delinquent after 30 days but does not generally consider such amounts delinquent in its credit loss analysis unless the accounts receivable are at least 90 days past due. In addition to monitoring delinquent accounts, management monitors the credit quality of its receivables by, among other things, obtaining credit ratings of significant customers, assessing economic and market conditions and evaluating material changes to a customer’s business, cash flows and financial condition. Should anticipated recoveries relating to receivables fail to materialize, including anticipated recoveries relating to bankruptcies or other workout situations, Quanta could experience reduced cash flows and losses in excess of current allowances provided.

For example, in July 2021 Limetree Bay Refining, LLC (Limetree Refining), a customer within Quanta’s Underground Utility and Infrastructure Solutions segment, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as amended, after experiencing operational and financial difficulties and shutting down operations at its refinery. As of September 30, 2021, Quanta had $31.3 million of billed and unbilled receivables for services performed and other costs. Quanta also had $0.7 million of billed and unbilled receivables outstanding from Limetree Bay Terminals, LLC (Limetree Terminals), an affiliate of Limetree Refining that has not filed for bankruptcy. During the three months ended June 30, 2021, Quanta recorded a provision for credit loss of $23.6 million with respect to these receivables based on the current estimated amount of expected loss. However, given the uncertainties associated with the bankruptcy proceeding and the financial condition of the customers, the amount of receivables ultimately collected and the ultimate amount of credit loss recognized depends on a number of factors that are subject to change, including, among other things, the potential sale of the refinery assets by Limetree Refining, negotiations with respect to payment of the amounts owed by Limetree Terminals and the result of any preferential payment actions brought in the bankruptcy proceeding. As such, an additional allowance for credit loss may be recorded in the future, including with respect to the remaining $8.4 million of receivables owed by the customers. See Concentrations of Credit Risk in Note 10 for further discussion of the credit quality of certain other outstanding receivables due from customers that have experienced financial difficulties.

Activity in Quanta’s allowance for credit losses consisted of the following (in thousands):

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Balance at beginning of period						$	39,713					$	14,948					$	16,546					$	9,398
Cumulative effect of adoption of new credit loss standard						—						—						—						5,067
Provision for credit losses						249						1,566						24,169						2,910
Direct write-offs charged against the allowance						(253)						(110)						(1,006)						(971)
Balance at end of period						$	39,709					$	16,404					$	39,709					$	16,404

Certain contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts are generally due upon completion of the contract and acceptance of the project by the customer. Based on Quanta’s

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experience in recent years, the majority of these retainage balances are expected to be collected within approximately twelve months of September 30, 2021. Retainage balances with expected settlement dates within twelve months of September 30, 2021 and December 31, 2020 were $295.9 million and $306.3 million, which are included in “Accounts receivable.” Retainage balances with expected settlement dates beyond twelve months of September 30, 2021 and December 31, 2020 were each $88.2 million and are included in “Other assets, net.”

Quanta recognizes unbilled receivables for non-fixed price contracts within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed under the terms of the contract until a later date or when amounts arise from routine lags in billing (for example, work completed during one month but not billed until the next month). These balances do not include revenues recognized for work performed under fixed-price contracts, as these amounts are recorded as “Contract assets.” At September 30, 2021 and December 31, 2020, unbilled receivables included in “Accounts receivable” were $827.3 million and $472.3 million. The increase in unbilled receivables was primarily due to the ramp up of work, certain delays in billing related to a large customer and a significant amount of emergency restoration services revenues performed in the latter part of the third quarter that remained unbilled at the end of the quarter. Quanta also recognizes unearned revenues for non-fixed price contracts when cash is received prior to recognizing revenues for the related performance obligation. Unearned revenues, which are included in “Accounts payable and accrued expenses,” were $39.5 million and $53.6 million at September 30, 2021 and December 31, 2020.

Cash and Cash Equivalents

Amounts related to Quanta’s cash and cash equivalents based on geographic location of the bank accounts were as follows (in thousands):

						September 30, 2021						December 31, 2020
Cash and cash equivalents held in domestic bank accounts						$	1,664,990					$	156,122
Cash and cash equivalents held in foreign bank accounts						31,220						28,498
Total cash and cash equivalents						$	1,696,210					$	184,620

At September 30, 2021 and December 31, 2020, cash equivalents were $1.63 billion and $98.0 million and consisted primarily of money market investments and money market mutual funds and are discussed further in the Fair Value Measurements section within this Note 2. The proceeds received from Quanta’s issuance of senior notes on September 23, 2021 represented a significant portion of the cash and cash equivalents balance at September 30, 2021, and such proceeds were utilized to fund the acquisition of Blattner on October 13, 2021, as described further in Notes 4 and 6.

Cash and cash equivalents held by joint ventures, which are either consolidated or proportionately consolidated, are available to support joint venture operations, but Quanta cannot utilize those assets to support its other operations. Quanta generally has no right to cash and cash equivalents held by a joint venture other than participating in distributions, to the extent made, and in the event of dissolution. Cash and cash equivalents held by Quanta’s wholly-owned captive insurance company are generally not available for use in support of its other operations. Amounts related to cash and cash equivalents held by joint ventures and the captive insurance company, which are included in Quanta’s total cash and cash equivalents balances, were as follows (in thousands):

						September 30, 2021						December 31, 2020
Cash and cash equivalents held by domestic joint ventures						$	13,377					$	7,714
Cash and cash equivalents held by foreign joint ventures						4,568						3,973
Total cash and cash equivalents held by joint ventures						17,945						11,687
Cash and cash equivalents held by captive insurance company						132,916						85,014
Cash and cash equivalents not held by joint ventures or captive insurance company						1,545,349						87,919
Total cash and cash equivalents						$	1,696,210					$	184,620

Goodwill and Other Intangible Assets

Goodwill, net of accumulated impairment losses, represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses and is stated at cost. Quanta has determined that its individual operating units represent its reporting units for the purpose of assessing goodwill impairment. Goodwill is not amortized but is tested for impairment annually in the fourth quarter of the fiscal year, or more frequently if events or circumstances arise which indicate

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that goodwill may be impaired. Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic conditions; declining financial performance; deterioration in the operational environment; an expectation of selling or disposing of a portion of a reporting unit; a significant change in market, management, business strategy or business climate; a loss of a significant customer; increased competition; a sustained decrease in share price; or a decrease in Quanta’s market capitalization below book value. Quanta did not identify any triggering events in the first three quarters of 2021 and did not recognize any goodwill impairments for the three and nine months ended September 30, 2021.

Quanta’s intangible assets include customer relationships; backlog; trade names; non-compete agreements; patented rights, developed technology, and process certifications; and curriculum, all of which are subject to amortization, as well as an engineering license, which is not subject to amortization. As a result of the broader challenges in the energy market, the effect of which continues to be exacerbated by the COVID-19 pandemic, Quanta assessed the expected negative impact related to its intangible assets, particularly intangible assets associated with reporting units within the Underground Utility and Infrastructure Solutions Division. Quanta concluded that such impact is not likely to result in intangible asset impairments, and therefore no intangible asset impairments were recognized during the three and nine months ended September 30, 2021.

In connection with its annual goodwill assessment in 2020, Quanta also considered the sensitivity of its fair value estimates to changes in certain valuation assumptions, including with respect to reporting units within Quanta’s Underground Utility and Infrastructure Solutions Division that have recently been negatively impacted by energy market challenges. The potential future impact of these challenges is uncertain and depends on numerous factors and could continue or increase in future periods. In particular, two Canadian pipeline-related businesses and a United States material handling services business were identified in the annual goodwill assessment to have an increased risk of goodwill impairment in the near and medium term due to the currently challenged energy market. After taking into account a 10% decrease in fair value, these reporting units would have had fair values below their carrying amounts as of December 31, 2020. The aggregate goodwill and intangible asset balances for these three businesses totaled $100.1 million and $16.0 million as of September 30, 2021. In addition, a specialized industrial services business located in the United States experienced lower demand for certain services during the year ended December 31, 2020, which has continued in 2021, as customers reduced and deferred regularly scheduled maintenance due to lack of demand for refined products, particularly certain transportation-related fuels, as a result of the COVID-19 pandemic. After taking into account a 10% decrease in fair value, the reporting unit would have had a fair value in excess of its carrying amount as of December 31, 2020; however, uncertainty as to the timing and extent of recovery of demand for refined products has increased the risk of goodwill impairment for this reporting unit. The goodwill and intangible asset balances for this reporting unit were $313.4 million and $51.9 million as of September 30, 2021. Quanta will continue to monitor the goodwill associated with these reporting units, and should they suffer additional declines in actual or forecasted financial results, the risk of goodwill impairment would increase.

Investments in Affiliates and Other Entities

Investments in entities of which Quanta is not the primary beneficiary, but over which Quanta has the ability to exercise significant influence, are accounted for using the equity method of accounting. Equity method investments are carried at original cost adjusted for Quanta’s proportionate share of the investees’ income, losses and distributions. The carrying values for Quanta’s unconsolidated equity method investments were $73.8 million and $44.9 million at September 30, 2021 and December 31, 2020 and are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. Quanta’s share of net income or losses of these investments is included within operating income in the accompanying condensed consolidated statements of operations when the investee is operationally integral to the operations of Quanta and is reported as “Equity in earnings (losses) of integral unconsolidated affiliates.” Quanta’s share of net income or losses of unconsolidated equity method investments that are not operationally integral to the operations of Quanta are included in “Other income (expense), net” below operating income in the accompanying condensed consolidated statements of operations. As of September 30, 2021, Quanta had receivables of $13.3 million and payables of $3.2 million from its integral unconsolidated affiliates.

During the nine months ended September 30, 2020, Quanta recognized impairment losses of $8.7 million related to a non-integral equity method investment, which were primarily due to the decline in commodity prices and production volumes during 2020. These impairment losses are included in “Other income (expense), net” in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2020.

In October 2021, Quanta acquired a 44% interest in an entity that provides right-of-way solutions, including site preparation and clearing, materials delivery and installation and management of permitting requirements and traffic control for approximately $18 million, subject to certain adjustments. This investment will be accounted for as an integral affiliate using the equity method of accounting.

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Investments in entities of which Quanta is not the primary beneficiary, and over which Quanta does not have the ability to exercise significant influence are accounted for using the cost method of accounting. Additionally, certain investments provide for significant influence over the investee, but also include preferential liquidation rights, which precludes accounting for the investments under the equity method. These cost method investments are required to be measured at fair value, with changes in fair value recognized in net income unless the investments do not have readily determinable fair values, in which case the investments are measured at cost minus impairment (if any), plus or minus observable price changes in orderly transactions for an identical or similar investment in the same company. Earnings on investments accounted for using the cost method of accounting are recognized as dividends are declared. These earnings and any impairments of cost method investments are reported in “Other income (expense), net” in the accompanying condensed consolidated statements of operations.

The carrying values for investments accounted for using the cost method of accounting were $130.2 million and $39.5 million at September 30, 2021 and December 31, 2020, and these amounts are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2021, Quanta acquired a minority interest in a broadband technology provider for $90.0 million. This investment includes preferential liquidation rights and is accounted for using the cost method of accounting. There have been no changes in the carrying value of the investment through September 30, 2021.

During the three months ended March 31, 2021, Quanta also purchased, through its wholly-owned captive insurance company, certain real property, including associated buildings and facilities, that is expected to be developed for its future corporate headquarters. A portion of this property is currently leased to third-party lessees and is expected to continue to be leased to third-party lessees in the future. As a result, an investment in real estate of $23.5 million was recognized at cost for the third-party leased portion of the property during the three months ended March 31, 2021, and the carrying amount of $23.4 million is included in “Other assets, net” in the accompanying condensed consolidated balance sheet at September 30, 2021.

During the three months ended June 30, 2020, Quanta recognized a $9.3 million impairment to an investment in a water and gas infrastructure contractor, which also represents the cumulative amount of impairment on investments accounted for using the cost method of accounting. Quanta did not exercise its option to acquire the remaining interest in this business at an agreed price based on a multiple of the company’s earnings during a designated performance period.

See Note 10 for additional information related to investments.

Puerto Rico Joint Venture

During the three months ended June 30, 2020, a joint venture in which Quanta owns 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. In June 2021, LUMA completed the steps necessary to transition operation and maintenance of the system from the owner to LUMA and entered into an interim services agreement. Once the owner emerges from its Title III debt restructuring process, the 15-year operation and maintenance period is scheduled to begin. During the interim services period, LUMA receives a fixed annual management fee, payable in monthly installments, and is reimbursed for costs and expenses. During the 15-year operation and maintenance period, LUMA will continue to be reimbursed for costs and expenses and receive a fixed annual management fee, but will also have the opportunity to receive additional annual performance-based incentive fees. LUMA has not assumed and will not assume ownership of any electric transmission and distribution system assets or be responsible for operation of the power generation assets. Quanta’s ownership interest and participation in LUMA is accounted for as an equity method investment due to Quanta’s equal ownership and management of LUMA with its joint venture partner. LUMA is operationally integral to the operations of Quanta, and therefore Quanta’s share of LUMA’s net income or losses is reported within operating income in “Equity in earnings (losses) of integral unconsolidated affiliates.” Included within the equity method investments described above are Quanta’s equity interest in LUMA of $34.5 million and $10.9 million at September 30, 2021 and December 31, 2020.

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Accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following (in thousands):

						September 30, 2021						December 31, 2020
Accounts payable, trade						$	956,873					$	798,023
Accrued compensation and related expenses						497,451						378,002
Other accrued expenses						306,465						333,769
Accounts payable and accrued expenses						$	1,760,789					$	1,509,794

Income Taxes

Quanta regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs from these estimates, Quanta may not realize deferred tax assets to the extent estimated.

As of September 30, 2021, the total amount of unrecognized tax benefits relating to uncertain tax positions was $40.6 million, an increase of $7.4 million from December 31, 2020. The increase resulted primarily from a $5.0 million increase in reserves for uncertain tax positions expected to be taken in 2021 and a $2.4 million increase related to prior year positions. Quanta’s consolidated federal income tax return for tax year 2019 is currently under examination by the Internal Revenue Services (IRS), and Quanta’s consolidated federal income tax returns for tax years 2017, 2018, and 2020 remain open to examination by the IRS, as these statute of limitations periods have not yet expired. Additionally, various state and foreign tax returns filed by Quanta and certain subsidiaries for multiple periods remain under examination by various U.S. state and foreign tax authorities. Quanta believes it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to $13.3 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods.

Fair Value Measurements

For disclosure purposes, qualifying assets and liabilities are categorized into three broad levels based on the priority of the inputs used to determine their fair values. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Certain assumptions and other information as they relate to these qualifying assets and liabilities are described below.

Goodwill and Other Intangible Assets

Quanta has recorded goodwill and identifiable intangible assets in connection with certain of its historical business acquisitions. Quanta utilizes the fair value premise as the primary basis for its impairment valuation procedures. The Goodwill and Other Intangible Assets sections in Note 2 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2020 Annual Report provide information regarding valuation methods, including the income approach, market approach and cost approach, and assumptions used to determine the fair value of these assets based on the appropriateness of each method in relation to the type of asset being valued. Quanta believes that the valuation methods it employs appropriately represent the methods that would be used by other market participants in determining fair value, and periodically engages the services of an independent valuation firm when a new business is acquired to assist management with the valuation process, including assistance with the selection of appropriate valuation methodologies and the development of market-based valuation assumptions. The level of inputs used for these fair value measurements is the lowest level (Level 3).

Investments

Equity investments with readily determinable fair values are measured at fair value, with changes in fair value recognized in net income. In cases where those readily determinable values are quoted market prices, the level of input used for these fair value measurements is the highest level (Level 1). Equity investments without readily determinable fair values are measured on a nonrecurring basis. These types of fair market value assessments are similar to other nonrecurring fair value measures used by Quanta, which include the use of significant judgments and available relevant market data. Such market data may include observations of the valuation of comparable companies, risk-adjusted discount rates and an evaluation of the expected

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performance of the underlying portfolio asset, including historical and projected levels of profitability or cash flows. In addition, a variety of additional factors may be reviewed by management, including, but not limited to, contemporaneous financing and sales transactions with third parties, changes in market outlook and the third-party financing environment. The level of inputs used for these fair value measurements is the lowest level (Level 3).

Quanta has investments accounted for using the equity and cost methods of accounting. Quanta utilizes the fair value premise as the basis for its impairment valuation and recognizes impairment if there are sufficient indicators that the fair value of the investment is less than its carrying value.

Financial Instruments

The carrying amounts of cash equivalents, accounts receivable, contract assets, accounts payable, accrued expenses and contract liabilities approximate fair value due to the short-term nature of these instruments. All of Quanta’s cash equivalents were categorized as Level 1 assets at September 30, 2021 and December 31, 2020, as all values were based on unadjusted quoted prices for identical assets in an active market that Quanta has the ability to access.

Long-term Debt

The carrying amount of variable rate debt, which includes borrowings under Quanta’s senior credit facility, approximates fair value. Quanta’s fixed rate debt primarily includes its senior notes. The fair value of Quanta’s senior notes, which are described further in Note 6, was $2.52 billion at September 30, 2021, compared to a carrying value of $2.47 billion net of unamortized bond discount, underwriting discounts and deferred financing costs of $28.3 million. The fair value of the senior notes is based on the quoted market prices for the same issue, and the senior notes are categorized as Level 1 liabilities. See Note 6 for additional information regarding Quanta’s senior credit facility and senior notes.

3. NEW ACCOUNTING PRONOUNCEMENTS:

Adoption of New Accounting Pronouncements

In December 2019, the FASB issued an update that, among other things, amends the guidance related to accounting for tax law changes when an entity has a year-to-date loss in an interim period and provides guidance on how to evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. This update is effective for interim and annual periods beginning after December 15, 2020, with certain amendments applied prospectively and other amendments applied on a modified retrospective basis. Quanta adopted this update effective January 1, 2021, and it did not have a material impact on Quanta’s condensed consolidated financial statements at the date of adoption.

In January 2020, the FASB issued an update that clarified the applicable guidance for measurement of the fair value of equity and cost method investments when there is a change in the level of ownership or degree of influence. Quanta adopted this update effective January 1, 2021 and will prospectively apply this update.

4. ACQUISITIONS:

On October 13, 2021, Quanta completed the acquisition of Blattner, a large utility-scale renewable energy infrastructure solutions provider in North America. The consideration for this transaction consisted of approximately $2.29 billion paid in cash on the date of acquisition and 3.3 million shares of Quanta common stock, which had a fair value of $345.4 million as of the date of the acquisition. The final amount of consideration for this acquisition remains subject to certain post-closing adjustments, including with respect to net working capital. Additionally, pursuant to the terms of the agreement and plan of merger, the former owners of Blattner are eligible for the potential payment of up to $300 million of contingent consideration, payable to the extent the acquired business achieves certain financial performance objectives over a three-year period beginning in January 2022. Blattner’s results will be included in Quanta’s consolidated financial statements beginning on the acquisition date. Quanta is in the process of performing procedures to determine the fair value of assets acquired and liabilities assumed related to the acquisition of Blattner, including the fair value assessment of contingent consideration, and will include the preliminary purchase price allocation in its Annual Report on Form 10-K for the year ended December 31, 2021. See Note 6 for additional information regarding the financing of this acquisition.

In addition, in October 2021, Quanta acquired a business located in the United States that provides electric power construction and related services. The aggregate consideration for this acquisition included approximately $50.0 million paid or

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payable in cash, subject to certain adjustments, and the issuance of 42,748 shares of common stock, which had a fair value of approximately $4.0 million at the acquisition date.

During the nine months ended September 30, 2021, Quanta acquired a communications services business located in the United States that performs data center connection services; a business located in the United States that designs, develops and holds a certification for the manufacture of personal protective breathing equipment and related monitoring devices primarily used in the refining and petrochemical industries, including in connection with catalyst services; a business located in Canada that provides front-end land services for infrastructure development projects in Canada and the United States; and a business located in the United States that primarily provides horizontal directional drilling services. The aggregate consideration for these acquisitions was $59.2 million paid or payable in cash (subject to certain adjustments) and 32,822 shares of Quanta common stock, which had a fair value of $2.5 million as of the applicable acquisition date.

During the year ended December 31, 2020, Quanta acquired a contractor located in the United States that provides electric power distribution, transmission and substation maintenance and construction, directional boring and emergency restoration services; a professional engineering business located in the United States that provides infrastructure engineering and design services to electric utilities, gas utilities and communications services companies, as well as permitting and utility locating services; a business located in the United States that provides aviation services primarily for the utility industry; an electric power infrastructure business located in the United States that primarily provides underground conduit services; a business located in the United States that specializes in the deployment of short- and long-haul fiber optic cable and utilities; an industrial services business located in Canada that performs catalyst handling services, including changeover and shutdown maintenance, for customers in the refining and chemical industries; and a business located in the United States that provides heavy, civil, industrial and energy related services and specializes in the construction and maintenance of pipelines and metering stations. The aggregate consideration for these acquisitions was $359.6 million paid or payable in cash (subject to certain adjustments) and 1,334,469 shares of Quanta common stock, which had a fair value of $57.1 million as of the respective acquisition dates. Additionally, one of the acquisitions includes the potential payment of up to approximately $6.9 million of contingent consideration, payable if the acquired business achieves certain performance objectives over a five-year post-acquisition period. Based on the estimated fair value of the contingent consideration, Quanta recorded a $2.3 million liability as of the acquisition date.

The results of the businesses acquired as of or prior to September 30, 2021 have been included in Quanta’s consolidated financial statements beginning on the respective acquisition dates, with the results of the manufacturing business, the industrial services business and the business specializing in construction and maintenance of pipelines and metering stations generally included in the Underground Utility and Infrastructure Solutions segment and the results of the remaining businesses generally included in the Electric Power Infrastructure Solutions segment.

The following table summarizes the aggregate consideration paid or payable as of September 30, 2021 for the acquisitions completed in the nine months ended September 30, 2021 and the year ended December 31, 2020 and presents the allocation of these amounts to net tangible and identifiable intangible assets based on their estimated fair values as of the respective acquisition dates, inclusive of any purchase price adjustments. These allocations require significant use of estimates and are based on information that was available to management at the time these condensed consolidated financial statements were prepared. Quanta uses a variety of information to estimate fair values, including quoted market prices, carrying amounts and valuation techniques such as discounted cash flows. When deemed appropriate, third-party appraisal firms are engaged to assist in fair value determination of fixed assets, intangible assets and certain other assets and liabilities.

Quanta is finalizing its fair value assessments for the acquired assets and assumed liabilities related to businesses acquired subsequent to September 30, 2020, and further adjustments to the purchase price allocations may occur. As of September 30, 2021, the estimated fair values of the net assets acquired were preliminary, with possible updates primarily related to tax estimates and inventory. Consideration amounts are also subject to the finalization of closing working capital adjustments. The aggregate consideration paid or payable for businesses acquired between September 30, 2020 and September 30, 2021 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of $136.4 million to net tangible assets, $37.6 million to identifiable intangible assets and $35.3 million to goodwill. The following table summarizes the fair value of

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total consideration transferred or estimated to be transferred and the fair value of assets acquired and liabilities assumed as of September 30, 2021 for acquisitions completed in the year-to-date periods shown below (in thousands).

						September 30, 2021						December 31, 2020
Consideration:
Cash paid or payable						$	59,226					$	359,624
Value of Quanta common stock issued						2,479						57,119
Contingent consideration						—						2,250
Fair value of total consideration transferred or estimated to be transferred						$	61,705					$	418,993
Accounts receivable						$	10,678					$	74,492
Contract assets						2,048						8,919
Other current assets						7,189						53,302
Property and equipment						5,651						143,276
Other assets						216						14
Identifiable intangible assets						18,506						96,827
Contract liabilities						(16)						(3,750)
Other current liabilities						(10,371)						(35,112)
Deferred tax liabilities, net						(2,093)						(3,185)
Total identifiable net assets						31,808						334,783
Goodwill						29,897						84,210
Fair value of net assets acquired						$	61,705					$	418,993

Goodwill represents the amount by which the purchase price for an acquired business exceeds the net fair value of the assets acquired and liabilities assumed. The acquisitions completed in the nine months ended September 30, 2021 and the year ended December 31, 2020 strategically expanded Quanta’s domestic and international underground utility and infrastructure solutions and domestic electric power infrastructure solutions, which Quanta believes contributes to the recognition of goodwill. Approximately $13.3 million and $72.6 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in the nine months ended September 30, 2021 and the year ended December 31, 2020.

Quanta’s intangible assets include customer relationships; backlog; trade names; non-compete agreements; patented rights, developed technology, and process certifications; and curriculum, all of which are subject to amortization, as well as an engineering license, which is not subject to amortization. The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in the nine months ended September 30, 2021 as of the acquisition

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date and the related weighted average amortization periods by asset type (in thousands, except for weighted average amortization periods, which are in years).

						Estimated Fair Value						Weighted Average Amortization Period in Years
Customer relationships						$	3,063					5.6
Backlog						3,811						1.3
Trade names						1,110						14.4
Non-compete agreements						1,494						5.0
Patented rights, developed technology, and process certifications						9,028						3.5
Total intangible assets subject to amortization						$	18,506					4.2

The significant estimates used by management in determining the fair value of customer relationship intangible assets include future revenues, discount rates and customer attrition rates. The following table includes the discount rates and customer attrition rates used to determine the fair value of customer relationship intangible assets for businesses acquired during the nine months ended September 30, 2021 and the year ended December 31, 2020 as of the respective acquisition dates:

						2021												2020
						Range						Weighted Average						Range						Weighted Average
Discount rates						22% to 25%						22%						19% to 25%						20%
Customer attrition rates						20% to 30%						23%						10% to 43%						13%

The following unaudited supplemental pro forma results of operations for Quanta, which incorporate the acquisitions completed in the three and nine months ended September 30, 2021 and 2020, have been provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors (in thousands, except per share amounts).

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Revenues						$	3,357,877					$	3,069,921					$	9,090,656					$	8,519,226
Gross profit						$	535,935					$	520,866					$	1,367,256					$	1,254,826
Selling, general and administrative expenses						$	(275,363)					$	(256,608)					$	(794,249)					$	(740,564)
Amortization of intangible assets						$	(22,836)					$	(22,843)					$	(68,167)					$	(69,742)
Net income						$	175,865					$	166,326					$	387,713					$	287,171
Net income attributable to common stock						$	174,832					$	165,539					$	383,184					$	282,718
Earnings per share attributable to common stock:
Basic						$	1.25					$	1.17					$	2.73					$	1.98
Diluted						$	1.21					$	1.14					$	2.65					$	1.94

The pro forma combined results of operations for the three and nine months ended September 30, 2021 and 2020 were prepared by adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2021 as if they occurred January 1, 2020. The pro forma combined results of operations for the three and nine months ended September 30, 2020 were prepared by also adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2020 as if they occurred January 1, 2019. These pro forma combined historical results were adjusted for the following: a reduction of interest expense as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest expense as a result of the cash consideration paid; an increase in amortization expense due to the incremental intangible assets recorded; elimination of inter-company sales; changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies; an increase in the

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number of outstanding shares of Quanta common stock; and reclassifications to conform the acquired businesses’ presentation to Quanta’s accounting policies. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs or any cost savings or other synergies that resulted or may result from the acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.

Revenues of $13.4 million and a loss before income taxes of $0.3 million, which included $2.0 million of acquisition-related costs, related to the acquisitions completed in 2021 are included in Quanta’s condensed consolidated results of operations for the three months ended September 30, 2021. Revenues of $14.6 million and a loss before income taxes of $0.2 million, which included $2.4 million of acquisition-related costs, related to the acquisitions completed in 2021 are included in Quanta’s condensed consolidated results of operations for the nine months ended September 30, 2021. Revenues of $55.2 million and income before income taxes of $1.0 million, which included $10.6 million acquisition-related costs, related to the acquisitions completed in 2020 are included in Quanta’s condensed consolidated results of operations for the three months ended September 30, 2020. Revenues of $63.0 million and income before income taxes of $1.0 million, which included $11.4 million of acquisition-related costs, related to the acquisitions completed in 2020 are included in Quanta’s condensed consolidated results of operations for the nine months ended September 30, 2020.

5. PER SHARE INFORMATION:

The amounts used to compute basic and diluted earnings per share attributable to common stock consisted of the following (in thousands):

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Amounts attributable to common stock:
Net income attributable to common stock						$	174,365					$	162,913					$	381,159					$	275,545
Weighted average shares outstanding:
Weighted average shares outstanding for basic earnings per share attributable to common stock						140,008						140,542						140,134						141,610
Effect of dilutive unvested non-participating stock-based awards						4,296						3,821						4,314						3,375
Weighted average shares outstanding for diluted earnings per share attributable to common stock						144,304						144,363						144,448						144,985

Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Unvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock included 0.5 million and 1.4 million weighted average participating securities for the three months ended September 30, 2021 and 2020 and 0.7 million and 1.7 million weighted average participating securities for the nine months ended September 30, 2021 and 2020.

For purposes of calculating diluted earnings per share attributable to common stock, there were no adjustments required to derive Quanta’s net income attributable to common stock. Diluted earnings per share attributable to common stock is computed using the weighted average number of shares of common stock outstanding during the period adjusted for all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalents would be antidilutive.

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6. DEBT OBLIGATIONS:

Quanta’s long-term debt obligations consisted of the following (in thousands):

						September 30, 2021						December 31, 2020
0.950% Senior Notes due October 2024						$	500,000					$	—
2.900% Senior Notes due October 2030						1,000,000						1,000,000
2.350% Senior Notes due January 2032						500,000						—
3.050% Senior Notes due October 2041						500,000						—
Borrowings under senior credit facility						415,851						148,508
Other long-term debt						51,366						46,981
Finance leases						2,253						2,228
Unamortized discount and deferred financing costs related to senior notes						(28,289)						(12,892)
Total long-term debt obligations						2,941,181						1,184,825
Less — Current maturities of long-term debt						10,276						10,531
Total long-term debt obligations, net of current maturities						$	2,930,905					$	1,174,294

Quanta’s current maturities of long-term debt and short-term debt consisted of the following (in thousands):

						September 30, 2021						December 31, 2020
Short-term debt						$	13,472					$	4,233
Current maturities of long-term debt						10,276						10,531
Current maturities of long-term debt and short-term debt						$	23,748					$	14,764

Senior Notes

On September 23, 2021, Quanta issued $1.50 billion aggregate principal amount of senior notes consisting of: $500.0 million aggregate principal amount of 0.950% senior notes due October 2024 (the 2024 notes); $500.0 million aggregate principal amount of 2.350% senior notes due January 2032 (the 2032 notes); and $500.0 million aggregate principal amount of 3.050% senior notes due October 2041 (the 2041 notes). The cumulative proceeds received from the public offering of the 2024 notes, the 2032 notes and the 2041 notes were $1.48 billion, net of the original issue discount, underwriting discounts and deferred financing costs, which were used, along with drawings under Quanta’s senior credit facility, as amended, to acquire Blattner. Additionally, on September 22, 2020, Quanta issued $1.00 billion aggregate principal amount of 2.900% senior notes due October 2030 (the 2030 notes, and together with the 2024 notes, the 2032 notes and the 2041 notes, collectively the Senior Notes) and received proceeds of $986.7 million from the offering, net of the original issue discount, underwriting discounts and deferred financing costs.

Interest on the Senior Notes is payable semi-annually in arrears as set forth below (dollars in thousands).

Title of the Notes						Interest Amount						Payment Dates						Commencement Date
0.950% Senior Notes due October 2024						$	2,375					April 1 and October 1						April 1, 2022
2.900% Senior Notes due October 2030						$	14,500					April 1 and October 1						April 1, 2021
2.350% Senior Notes due January 2032						$	5,875					January 15 and July 15						July 15, 2022
3.050% Senior Notes due October 2041						$	7,625					April 1 and October 1						April 1, 2022

In each case as further specified by the terms of the Senior Notes and the indenture and supplemental indentures governing the Senior Notes (collectively, the indenture), Quanta may redeem all or a portion of (i) the 2024 notes at any time prior to October 1, 2022 at a price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest, and at any time on or after October 1, 2022 at a price equal to 100% of the principal amount plus accrued and unpaid interest; (ii) the 2030 notes at any time prior to July 1, 2030 at a price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest, and at any time on or after July 1, 2030 at a price equal to 100% of the principal amount plus accrued and unpaid interest; (iii) the 2032 notes at any time prior to October 15, 2031 at a price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest, and at any time on or after October 15, 2031

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at a price equal to 100% of the principal amount plus accrued and unpaid interest; and (iv) the 2041 notes at any time prior to April 1, 2041 at a price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest, and at any time on or after April 1, 2041 at a price equal to 100% of the principal amount plus accrued and unpaid interest.

Upon the occurrence of a Change of Control Triggering Event (as defined in the indenture), unless Quanta has exercised its right to redeem the applicable series of Senior Notes in full by giving irrevocable notice to the trustee, each holder of such Senior Notes will have the right to require Quanta to purchase all or a portion of such holder’s Senior Notes of such series at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest.

The indenture contains covenants that, among other things, limit Quanta’s ability to incur liens securing certain indebtedness, to engage in certain sale and leaseback transactions with respect to certain properties and to sell all or substantially all of Quanta’s assets or merge or consolidate with or into other companies. The indenture also contains customary events of default.

Senior Credit Facility

October 2021 Amendment

On October 8, 2021, Quanta entered into an amendment to the credit agreement for its senior credit facility (the Amended Credit Agreement) that, among other things, (i) provided for a new $750.0 million term loan facility for the purpose of financing, in whole or in part, the acquisition of Blattner pursuant to the agreement and plan of merger, refinancing certain existing indebtedness of Blattner and paying certain related costs and expenses, (ii) increased the aggregate revolving commitments from $2.51 billion to $2.64 billion and (iii) extended the maturity date for revolving commitments under the senior credit facility from September 22, 2025 to October 8, 2026, which is also the maturity date for the new term loan facility. The amendment also increased the threshold amount for cross-defaults to certain debt instruments and for certain other purposes from $150.0 million to $300.0 million. After giving effect to the amendment, the aggregate amount of the credit facilities provided for under the Amended Credit Agreement is $3.39 billion.

On October 13, 2021, Quanta borrowed the full amount of the $750.0 million term loan facility and used such amount, together with the net proceeds from the September 2021 offering of the 2024 notes, the 2032 notes and the 2041 notes and approximately $50.9 million of revolving loans borrowed under the senior credit facility, to pay the cash consideration for the acquisition of Blattner, as further described in Note 4.

Quanta is required to make quarterly principal payments on the first business day of each January, April, July and October, beginning in January 2023, on outstanding borrowings under the new term loan facility in an amount equal to $4.7 million per quarter in 2023 and 2024, $9.4 million per quarter in 2025 and $18.8 million per quarter in 2026. The aggregate remaining principal amount outstanding for the new term loan facility must be paid on the maturity date of the senior credit facility. Quanta may voluntarily prepay the term loan borrowings from time to time, in whole or in part, without premium or penalty.

Amounts borrowed under the new term loan facility bear interest, at Quanta’s option, at a rate equal to either (a) the LIBOR Rate (as defined in the Amended Credit Agreement) plus 1.000% to 1.625%, or (b) the Base Rate (as defined below) plus 0.000% to 0.625%, each as determined based on either Quanta’s Consolidated Leverage Ratio (as described below) or Quanta’s Debt Rating (as defined in the Amended Credit Agreement), whichever is more favorable to Quanta. The Consolidated Leverage Ratio is the ratio of Quanta’s total funded debt to Consolidated EBITDA (as defined in the Amended Credit Agreement). For purposes of calculating the Consolidated Leverage Ratio, total funded debt is reduced by available cash and Cash Equivalents (as defined in the Amended Credit Agreement) in excess of $25.0 million. The Base Rate equals the highest of (i) the Federal Funds Rate (as defined in the Amended Credit Agreement) plus 0.5%, (ii) Bank of America’s prime rate and (iii) the LIBOR Rate plus 1.00%.

Beginning October 8, 2021, amounts borrowed in U.S. dollars under the revolving credit facility bear interest, at Quanta’s option, at a rate equal to either (a) the LIBOR Rate plus 1.125% to 1.750%, or (b) the Base Rate plus 0.125% to 0.750%, each as determined based on either Quanta’s Consolidated Leverage Ratio or its Debt Rating, whichever is more favorable to Quanta. Revolving loans borrowed in any currency other than U.S. dollars bear interest at a rate equal to the Alternative Currency Daily Rate or the Alternative Currency Term Rate (each as defined in the Amended Credit Agreement), as applicable, plus 1.125% to 1.750%, as determined based on either Quanta’s Consolidated Leverage Ratio or Quanta’s Debt Rating, whichever is more favorable to Quanta. Additionally, standby or commercial letters of credit issued under the Amended Credit Agreement are subject to a letter of credit fee of 1.125% to 1.750%; Performance Letters of Credit (as defined in the Amended Credit Agreement) issued under the Amended Credit Agreement in support of certain contractual obligations are subject to a letter of credit fee of 0.675% to 1.125%; and Quanta is subject to a commitment fee of 0.100% to 0.275% on any unused

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availability under the revolving credit facility, in each case as determined based on either the Quanta’s Consolidated Leverage Ratio or its Debt Rating, whichever is more favorable to Quanta.

The Amended Credit Agreement contains certain covenants, including, as of the end of any fiscal quarter of Quanta, (i) a maximum Consolidated Leverage Ratio (as defined in the Amended Credit Agreement) of 3.5 to 1.0 (except that in connection with certain permitted acquisitions in excess of $200.0 million, including Quanta’s acquisition of Blattner, such ratio is 4.0 to 1.0 for the fiscal quarter in which the acquisition is completed and the four subsequent fiscal quarters) and (ii) a minimum Consolidated Interest Coverage Ratio (as defined in the Amended Credit Agreement) of 3.0 to 1.0.

As of and for the three and nine months ended September 30, 2021

As of September 30, 2021, Quanta had $415.9 million of outstanding revolving loans under its senior credit facility. Of the total outstanding borrowings, $239.7 million were denominated in Canadian dollars, $142.2 million were denominated in U.S. dollars and $34.0 million were denominated in Australian dollars. As of September 30, 2021, Quanta also had $333.9 million of letters of credit issued under the senior credit facility, of which $92.8 million were denominated in currencies other than the U.S. dollar, primarily Canadian dollars. As of September 30, 2021, subject to the applicable sublimits and other terms and conditions, the remaining $1.76 billion of available commitments under the senior credit facility was available for loans or issuing new letters of credit in U.S. dollars and certain alternative currencies.

Borrowings under the senior credit facility and the applicable interest rates were as follows (dollars in thousands):

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Maximum amount outstanding						$	517,883					$	1,462,069					$	576,993					$	2,023,326
Average daily amount outstanding						$	416,089					$	1,255,171					$	360,609					$	1,395,207
Weighted-average interest rate						2.13		%				1.57		%				2.05		%				2.13		%

As of September 30, 2021, Quanta was in compliance with all of the financial covenants under its senior credit facility.

Bridge Facility Commitment

On September 1, 2021, in connection with the signing of the merger agreement for the acquisition of Blattner, Quanta entered into a commitment letter, pursuant to which certain lenders committed to provide a 364-day senior unsecured bridge facility in an aggregate principal amount of up to $2.18 billion to finance the cash consideration estimated to be due at closing of the acquisition of Blattner and to pay fees and expenses incurred in connection therewith. On September 23, 2021, in accordance with the terms of the commitment letter, the aggregate commitments under the commitment letter were reduced to approximately $696.1 million concurrently with Quanta’s issuance of the 2024 notes, the 2032 notes and the 2041 notes. Additionally, concurrent with the amendment to Quanta’s senior credit facility, the remaining aggregate commitments under the commitment letter were reduced to zero and the commitment was terminated.

During the three months ended September 30, 2021, Quanta paid $4.4 million of fees to the lenders related to the bridge facility commitment, $3.1 million of which was amortized to interest expense in the three months ended September 30, 2021 and $1.3 million of which was recorded as deferred financing costs as of September 30, 2021 and will be amortized to interest expense in the three months ending December 31, 2021.

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7. LEASES:

Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):

									Three Months Ended												Nine Months Ended
									September 30,												September 30,
Lease cost			Classification						2021						2020						2021						2020
Finance lease cost:
Amortization of lease assets			Depreciation (1)						$	231					$	53					$	705					$	515
Interest on lease liabilities			Interest expense						18						16						68						50
Operating lease cost			Cost of services and Selling, general and administrative expenses						25,323						29,577						80,046						89,289
Short-term and variable lease cost (2)			Cost of services and Selling, general and administrative expenses						176,605						160,365						494,846						478,683
Total lease cost									$	202,177					$	190,011					$	575,665					$	568,537

(1) Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.

(2) Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant and primarily relates to real estate leases and consists of common area maintenance charges, real estate taxes, insurance and other variable costs.

Quanta has entered into arrangements with certain related parties to lease certain real property and facilities. Typically, the parties are employees of Quanta who are also the former owners of businesses acquired by Quanta, and the real properties and facilities continue to be utilized by Quanta subsequent to the acquisitions. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to 10 years, subject to renewal options. Related party lease expense was $2.4 million and $4.5 million for the three months ended September 30, 2021 and 2020 and $10.4 million and $13.2 million for the nine months ended September 30, 2021 and 2020.

Future minimum lease payments for operating and finance leases were as follows (in thousands):

						As of September 30, 2021
						Operating Leases						Finance Leases						Total
Remainder of 2021						$	23,964					$	296					$	24,260
2022						80,516						872						81,388
2023						58,265						666						58,931
2024						36,341						409						36,750
2025						24,449						126						24,575
Thereafter						36,996						—						36,996
Total future minimum operating and finance lease payments						$	260,531					$	2,369					$	262,900
Less imputed interest						(20,342)						(116)						(20,458)
Total lease liabilities						$	240,189					$	2,253					$	242,442

Future minimum lease payments for short-term leases, which are not recorded in the condensed consolidated balance sheets due to Quanta’s accounting policy election, were $18.7 million as of September 30, 2021. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future rental amounts.

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The weighted average remaining lease terms and discount rates were as follows:

						As of September 30, 2021
Weighted average remaining lease term (in years):
Operating leases						4.16
Finance leases						2.90
Weighted average discount rate:
Operating leases						3.9		%
Finance leases						3.7		%

Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of September 30, 2021, the maximum guaranteed residual value of this equipment was $886.9 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.

As of September 30, 2021, Quanta had additional operating lease obligations of $6.4 million for leases that had not yet commenced but that are expected to commence in 2021 and have lease terms of one to seven years.

8. EQUITY:

Stock repurchases

Quanta repurchased the following shares of common stock in the open market under the stock repurchase programs (in thousands):

Quarter ended:						Shares						Amount
September 30, 2021						185						$	16,828
June 30, 2021						314						$	29,450
March 31, 2021						222						$	17,710
December 31, 2020						720						$	49,949
September 30, 2020						—						$	—
June 30, 2020						—						$	—
March 31, 2020						5,960						$	200,000

As of September 30, 2021, Quanta is authorized to repurchase up to an additional $472.8 million in shares of common stock through June 30, 2023 under its existing stock repurchase program. Quanta’s policy is to record a stock repurchase as of the trade date; however, the payment of cash related to the repurchase is made on the settlement date of the trade. During the three months ended September 30, 2021 and 2020, cash payments related to stock repurchases were $17.8 million and none, and during the nine months ended September 30, 2021 and 2020, cash payments related to stock repurchases were $66.7 million and $200.0 million.

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Dividends

Quanta declared the following cash dividends and cash dividend equivalents during 2020 and the first nine months of 2021 (in thousands, except per share amounts):

Declaration						Record						Payment						Dividend						Dividends
Date						Date						Date						Per Share						Declared
August 27, 2021						October 1, 2021						October 15, 2021						$	0.06					$	8,638
May 27, 2021						July 1, 2021						July 15, 2021						$	0.06					$	8,650
March 25, 2021						April 6, 2021						April 15, 2021						$	0.06					$	8,429
December 11, 2020						January 4, 2021						January 15, 2021						$	0.06					$	8,933
August 26, 2020						October 1, 2020						October 15, 2020						$	0.05					$	7,244
May 28, 2020						July 1, 2020						July 15, 2020						$	0.05					$	7,182
March 26, 2020						April 6, 2020						April 15, 2020						$	0.05					$	7,184

9. STOCK-BASED COMPENSATION:

Quanta has stock-based compensation awards outstanding under two equity incentive plans, the Quanta Services, Inc. 2011 Omnibus Equity Incentive Plan and the Quanta Services, Inc. 2019 Omnibus Equity Incentive Plan. For descriptions and further information regarding these plans, refer to Note 12 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2020 Annual Report.

RSUs to be Settled in Common Stock

A summary of the activity for RSUs to be settled in common stock for the nine months ended September 30, 2021 and 2020 is set forth below (shares in thousands):

			2021												2020
			RSUs						Weighted Average Grant Date Fair Value (Per share)						RSUs						Weighted Average Grant Date Fair Value (Per share)
Unvested at January 1			3,869						$37.57						3,265						$35.34
Granted			945						$82.75						2,008						$39.65
Vested			(1,442)						$36.92						(1,228)						$35.68
Forfeited			(119)						$47.23						(114)						$36.26
Unvested at period ended September 30			3,253						$50.71						3,931						$37.41

The grant date fair value for RSUs to be settled in common stock is based on the closing price of Quanta’s common stock on the date of grant. The approximate fair values of RSUs settled in common stock during the nine months ended September 30, 2021 and 2020 were $121.7 million and $48.8 million.

During the nine months ended September 30, 2021 and 2020, Quanta recognized $48.8 million and $41.0 million of non-cash stock-based compensation expense related to RSUs to be settled in common stock. Such expense is recorded in “Selling, general and administrative expenses.” As of September 30, 2021, there was $101.0 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 2.21 years.

In October 2021, subsequent to Quanta’s acquisition of Blattner, Quanta granted 0.7 million RSUs to be settled in common stock, which had a fair market value of $72.3 million at the date of grant, to certain employees of Blattner that are continuing as employees after the acquisition. These awards are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which occurs in annual installments over periods ranging from five to ten years following the date of grant.

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PSUs to be Settled in Common Stock

A summary of the activity for PSUs to be settled in common stock for the nine months ended September 30, 2021 and 2020 is set forth below (shares in thousands):

			2021												2020
			PSUs						Weighted Average Grant Date Fair Value (Per share)						PSUs						Weighted Average Grant Date Fair Value (Per share)
Unvested at January 1			1,047						$37.65						848						$33.20
Granted			174						$90.44						436						$34.59
Vested			(268)						$38.28						(238)						$17.48
Forfeited			(11)						$36.90						—						N/A
Unvested at September 30			942						$47.27						1,046						$37.35

The grant date fair value for PSUs is determined as follows: (i) for the portion of the awards based on company financial and operational performance metrics, by utilizing the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the awards based on total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. The Monte Carlo simulation valuation methodology applied the following key inputs:

						2021						2020
Valuation date price based on March 25, 2021 and March 26, 2020 closing stock prices of Quanta common stock						$83.48						$31.49
Expected volatility						36		%				34		%
Risk-free interest rate						0.26		%				0.35		%
Term in years						2.77						2.76

During the nine months ended September 30, 2021 and 2020, Quanta recognized $15.4 million and $17.4 million in compensation expense associated with PSUs. Such expense is recorded in “Selling, general and administrative expenses.” During both the nine months ended September 30, 2021 and 2020, 0.5 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs.

RSUs to be Settled in Cash

Compensation expense related to RSUs to be settled in cash was $13.7 million and $5.3 million for the nine months ended September 30, 2021 and 2020. Such expense is recorded in “Selling, general and administrative expenses.” RSUs that are anticipated to be settled in cash are not included in the calculation of weighted average shares outstanding for earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid $13.2 million and $4.3 million to settle liabilities related to cash-settled RSUs in the nine months ended September 30, 2021 and 2020. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $7.4 million and $8.7 million at September 30, 2021 and December 31, 2020.

10. COMMITMENTS AND CONTINGENCIES:

Investments in Affiliates and Other Entities

As described in Note 2, Quanta holds investments in various entities, including joint venture entities that provide infrastructure-related services under specific customer contracts and partially owned entities that own, operate and/or maintain certain infrastructure assets. As of September 30, 2021, Quanta had committed to contribute $13.6 million to certain new investments in joint venture entities. The timing of such contributions is not certain, but they are expected to occur in the next twelve months.

If losses are incurred by entities in which Quanta holds an interest, they are generally shared ratably based on the percentage ownership of the participants in the structures. However, in Quanta’s joint venture structures that provide infrastructure-related services, each participant is typically jointly and severally liable for all of the obligations of the joint venture entity pursuant to the contract with the customer, and therefore Quanta can be liable for full performance of the contract with the customer. Additionally, in circumstances where Quanta’s participation in a joint venture qualifies as a general

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partnership, Quanta can be liable for all obligations of the joint venture, including obligations owed to the customer or any other person or entity. Quanta is not aware of circumstances that would lead to future claims against it for material amounts in connection with these liabilities. Additionally, typically each joint venture participant agrees to indemnify the other participant for any liabilities incurred in excess of what the other participant is obligated to bear under the respective joint venture agreement or in accordance with the scope of work subcontracted to each participant. It is possible, however, that Quanta could be required to pay or perform obligations in excess of its share if another participant is unable or refuses to pay or perform its share of the obligations. Quanta is not aware of circumstances that would lead to future claims against it for material amounts that would not be indemnified. However, to the extent any such claims arise, they could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.

Committed Expenditures

Quanta has capital commitments for the expansion of its equipment fleet in order to accommodate manufacturer lead times on certain types of vehicles. As of September 30, 2021, Quanta had $58.5 million of production orders with expected delivery dates in the fourth quarter of 2021 and $106.9 million of production orders with expected delivery dates in 2022, $68.4 million of which is anticipated to occur in the first half of 2022. Although Quanta has committed to purchase these vehicles at the time of their delivery, Quanta anticipates that the majority of these orders will be assigned to third party leasing companies and made available under certain master equipment lease agreements, thereby releasing Quanta from its equipment purchase commitments.

Legal Proceedings

Quanta is from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, property damage, breach of contract, negligence or gross negligence, environmental liabilities, wage and hour and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, Quanta records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, Quanta discloses matters for which management believes a material loss is at least reasonably possible. Except as otherwise stated below, none of these proceedings are expected to have a material adverse effect on Quanta’s consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.

Peru Project Dispute

In 2015, Redes Andinas de Comunicaciones S.R.L. (Redes), a majority-owned subsidiary of Quanta, entered into two separate contracts with an agency of the Peruvian Ministry of Transportation and Communications (MTC), currently Programa Nacional de Telecomunicaciones (PRONATEL), as successor to Fondo de Inversion en Telecomunicaciones (FITEL), pursuant to which Redes would design, construct and operate certain telecommunication networks in rural regions of Peru. The aggregate consideration provided for in the contracts was approximately $248 million, consisting of approximately $151 million to be paid during the construction period and approximately $97 million to be paid during a 10-year post-construction operation and maintenance period. At the beginning of the project, FITEL made advance payments totaling approximately $87 million to Redes, which were secured by two on-demand advance payment bonds posted by Redes to guarantee proper use of the payments in the execution of the project. Redes also provided two on-demand performance bonds in the aggregate amount of $25 million to secure performance of its obligations under the contracts.

During the construction phase, the project experienced numerous challenges and delays, primarily related to issues which Quanta believes were outside of the control of and not attributable to Redes, including, among others, weather-related issues, local opposition to the project, permitting delays, the inability to acquire clear title to certain required parcels of land and other delays which Quanta believes were attributable to FITEL/PRONATEL. In response to various of these challenges and delays, Redes requested and received multiple extensions to certain contractual deadlines and relief from related liquidated damages. However, in April 2019, PRONATEL provided notice to Redes claiming that Redes was in default under the contracts due to the delays and that PRONATEL would terminate the contracts if the alleged defaults were not cured. Redes responded by claiming that it was not in default, as the delays were due to events not attributable to Redes, and therefore PRONATEL was not entitled to terminate the contracts. PRONATEL subsequently terminated the contracts for alleged cause prior to completion of Redes’ scope of work, exercised the on-demand performance bonds and advance payment bonds against Redes, and indicated its intention to claim damages, including a verbal allegation of approximately $45 million of liquidated damages

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under the contracts. In August 2020, Redes received a formal claim from PRONATEL for liquidated damages in the amount of approximately $38 million, which represents the U.S. dollar equivalent of the amount asserted based on the September 30, 2021 exchange rate.

In May 2019, Redes filed for arbitration before the Court of International Arbitration of the International Chamber of Commerce (ICC) against PRONATEL and the MTC. In the arbitration, Redes claims that PRONATEL: breached and wrongfully terminated the contracts; wrongfully executed the advance payment bonds and the performance bonds; and is not entitled to the alleged amount of liquidated damages. In addition, Redes is seeking compensation for all damages arising from PRONATEL’s actions, including but not limited to (i) repayment of the amounts collected by PRONATEL under the advance payment bonds and the performance bonds; (ii) payment of amounts owed for work completed by Redes under the contracts; (iii) lost income in connection with Redes’ future operation and maintenance of the networks; and (iv) other related costs and damages to Redes as a result of the breach and improper termination of the contracts (including construction costs caused by the delays and costs related to the transfer of the networks). The amount claimed by Redes in this arbitration is approximately $190 million. In May 2021, PRONATEL and the MTC filed their counter memorial and counterclaims in the ICC arbitration, requesting: (i) that Redes’ claims for breach of contract be rejected; (ii) a declaration that the execution of the advance payment bonds and the performance bonds was valid, and that the funds may be applied towards any debt owed by Redes; (iii) a declaration that the liquidated damages asserted by PRONATEL apply; (iv) that Redes’ claim for payment of amounts owed for work completed as a result of contractual reconciliation of balances be rejected and that any reconciliation of balances approved by the arbitration panel exclude the funds from the performance bonds; (v) that Redes’ claims for damages be rejected; (vi) a declaration that the contract terminations by PRONATEL were valid; and (vii) that Redes reimburse all funds it received from PRONATEL. In addition, PRONATEL alleges that Redes did not satisfy the contractual requirements for the transfer of the networks, which Redes disputes. In July 2021, Redes filed its statement of defense in reply to the counter memorial and counterclaims of PRONATEL and the MTC, in which it disputes all claims made by PRONATEL and the MTC and maintains the positions on its claims against PRONATEL and the MTC in the arbitration. In August 2021, PRONATEL and the MTC filed a rejoinder statement with their position on the merits and damages, which did not present any new claims, and in October 2021, Redes filed a rejoinder with respect to the counterclaims of PRONATEL and the MTC. The arbitration hearing on the merits is presently scheduled to take place in November 2021.

As of the date of the contract terminations, Redes had incurred costs of approximately $157 million related to the design and construction of the project and had received approximately $100 million of payments (inclusive of the approximately $87 million advance payments). Furthermore, upon completion of the transfer of the networks (as completed at the time of the contract terminations) to PRONATEL, which was required upon termination of the contracts and was completed in 2020, PRONATEL and the MTC are able to possess the networks, for which PRONATEL has paid approximately $100 million while also collecting approximately $112 million of bond proceeds. Quanta believes that PRONATEL’s actions represent an abuse of power and unfair and inequitable treatment and that PRONATEL and the MTC have been unjustly enriched. Specifically, under the terms of the contracts, the advance payment bonds were to be exercised only if it is determined that Redes did not use the advance payments for their intended purpose, in which case Redes would be obligated to return the portion of the advance payments not properly used. In connection with PRONATEL exercising the bonds, Redes was not afforded the opportunity to provide evidence of its proper use of the advance payments for project expenditures. Redes has incurred substantially more than the advance payment amounts in the execution of the project, and Quanta believes Redes has used the advance payment amounts for their intended purpose.

Quanta believes Redes is entitled to all amounts described in its claims above and intends to vigorously pursue those claims in the pending ICC arbitration proceeding. However, as a result of the contract terminations and the inherent uncertainty involved in arbitration proceedings and recovery of amounts owed, there can be no assurance that Redes will prevail on those claims or in defense of liquidated damages claims or any other claims asserted by PRONATEL. As a result, during the three months ended June 30, 2019, Quanta recorded a charge to earnings of $79.2 million, which included a reduction of previously recognized earnings on the project, a reserve against a portion of the project costs incurred through the project termination date, an accrual for a portion of the alleged liquidated damages, and the estimated costs to complete the project turnover and close out the project. The reduction of previously recognized earnings on the project included $14.5 million related to the correction of prior period errors associated with the determination of total estimated project costs and the resulting revenue recognized. Quanta assessed the materiality of the prior period errors and determined that the errors were immaterial individually and in the aggregate to its previously issued financial statements.

As of September 30, 2021, after taking into account the above charge, Quanta had a contract receivable of approximately $120 million related to the project, which includes the approximately $87 million PRONATEL collected through exercise of the advance payment bonds. The contract receivable from PRONATEL is included in “Other assets, net” in the accompanying condensed consolidated balance sheet as of September 30, 2021.

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Quanta also reserves the right to seek full compensation for the loss of its investment under applicable legal regimes, including investment treaties and customary international law, as well as to seek resolution through direct discussions with PRONATEL or the MTC. In connection with these rights, in May 2020 Quanta’s Dutch subsidiary delivered to the Peruvian government an official notice of dispute arising from the termination of the contracts and related acts by PRONATEL (which are attributable to Peru) under the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Peru (Investment Treaty). The Investment Treaty protects Quanta’s subsidiary’s indirect ownership stake in Redes and the project, and provides for rights and remedies distinct from the ICC arbitration. In December 2020, Quanta’s Dutch subsidiary filed a request for the institution of an arbitration proceeding against Peru with the International Centre for Settlement of Investment Disputes (ICSID) related to Peru’s breach of the Investment Treaty, which was registered by ICSID in January 2021. In the ICSID arbitration, Quanta’s Dutch subsidiary claims, without limitation, that Peru: (i) treated the subsidiary’s investment in Redes and the project unfairly and inequitably; and (ii) effectively expropriated the subsidiary’s investment in Redes and the project. In addition, Quanta’s Dutch subsidiary is seeking full compensation for all damages arising from Peru’s actions, including but not limited to (i) the fair market value of the investment and/or lost profits; (ii) attorneys’ fees and arbitration costs; (iii) other related costs and damages and (iv) pre- and post-award interest.

If Quanta is not successful in the pending arbitration proceedings, including the ICC arbitration scheduled for November 2021, this matter could result in an additional significant loss that could have a material adverse effect on Quanta’s consolidated results of operations and cash flows. However, based on the information currently available and the status of the pending arbitration proceedings, Quanta is not able to determine a range of reasonably possible additional loss, if any, with respect to this matter.

Maurepas Project Dispute

During the third quarter of 2017, Maurepas Pipeline, LLC (Maurepas) notified QPS Engineering, LLC (QPS), a subsidiary of Quanta, of its claim for liquidated damages allegedly arising from delay in mechanical completion of a project in Louisiana. Quanta disputes the claim and believes that QPS is not responsible for liquidated damages under the contract terms, and in June 2019 QPS filed suit against SemGroup Corporation (now Energy Transfer LP), the parent company of Maurepas, under the parent guarantee issued to secure payment from Maurepas on the project. QPS is seeking to recover $22 million that it believes has been wrongfully withheld, which represents the maximum liability for liquidated damages pursuant to the contract terms. In July and August 2018, QPS also received notice from Maurepas claiming certain warranty defects on the project. In July 2019, Maurepas filed suit against QPS and Quanta, pursuant to a parent guarantee, for damages related to the alleged warranty defects and for a declaratory judgment related to the liquidated damages claim, subsequently claiming approximately $59 million in damages related to a portion of the alleged warranty defects. The lawsuits relating to these claims have been consolidated and are pending in the Tulsa County District Court in Oklahoma. Quanta is continuing to evaluate the claimed warranty defects and, if they exist, the appropriate remedy. At this time, Quanta disputes the extent of the alleged defects or has not been able to substantiate them.

As of September 30, 2021, Quanta had recorded an accrual with respect to this matter based on its current estimated amount of probable loss. Based on the information currently available, including documentation received in the discovery process, Quanta estimates the range of additional reasonably possible loss in connection with this matter is between no additional loss and the amount claimed by Maurepas with respect to the alleged warranty defects and liquidated damages, less the accrued amount. Upon final resolution of this matter, any liquidated damages or warranty defect damages in excess of Quanta’s current loss accrual would be recorded as additional costs on the project.

Lorenzo Benton v. Telecom Network Specialists, Inc., et al.

In June 2006, plaintiff Lorenzo Benton filed a class action complaint in the Superior Court of California, County of Los Angeles, alleging various wage and hour violations against Telecom Network Specialists (TNS), a former subsidiary of Quanta. Quanta retained liability associated with this matter pursuant to the terms of Quanta’s sale of TNS in December 2012. Benton represents a class of workers that includes all persons who worked on certain TNS projects, including individuals that TNS retained through numerous staffing agencies. The plaintiff class in this matter is seeking damages for unpaid wages, penalties associated with the failure to provide meal and rest periods and overtime wages, interest and attorneys’ fees. In January 2017, the trial court granted a summary judgment motion filed by the plaintiff class and found that TNS was a joint employer of the class members and that it failed to provide adequate meal and rest breaks and failed to pay overtime wages. During 2019 and 2020, the parties filed additional summary judgment and other motions and a bench trial on liability and damages was held. Liability and damages have been determined by the trial court, with the amount of liability for TNS, including interest through the date of the trial court’s orders, determined to be approximately $9.5 million. Quanta believes the court’s decisions on liability and damages are not supported by controlling law and continues to contest its liability and the damage calculation

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asserted by the plaintiff class in this matter. The amount determined by the trial court includes damages and interest, but does not include attorneys’ fees or costs. In July 2021, the plaintiff class filed a motion for approval of approximately $37.0 million in attorneys’ fees, and in October 2021, Quanta filed a response to the motion opposing approval of substantially all of the claimed attorneys’ fees.

Additionally, in November 2007, TNS filed cross complaints for indemnity and breach of contract against the staffing agencies, which employed many of the individuals in question. In December 2012, the trial court heard cross-motions for summary judgment filed by TNS and the staffing agencies pertaining to TNS’s demand for indemnity. The court denied TNS’s motion and granted the motions filed by the staffing agencies; however, the California Appellate Court reversed the trial court’s decision in part and instructed the trial court to reconsider its ruling. In February 2017, the court denied a new motion for summary judgment filed by the staffing companies and has since stated that the staffing companies would be liable to TNS for any damages owed to the class members that the staffing companies employed. However, Quanta currently believes that, due to solvency issues, any contribution from the staffing companies may not be substantial.

The final amount of liability, if any, payable in connection with this matter remains the subject of pending litigation and will ultimately depend on various factors, including the outcome of Quanta’s appeal of the trial court’s rulings on liability and damages, a final determination with respect to any attorneys’ fees or additional costs or damages owed by Quanta, and the solvency of the staffing agencies. Based on review and analysis of the trial court’s rulings on liability, Quanta does not believe, at this time, that it is probable this matter will result in a material loss. However, if Quanta is unsuccessful in this litigation and the staffing agencies are unable to fund damages owed to class members, Quanta believes the range of reasonably possible loss to Quanta upon final resolution of this matter could be up to approximately $9.5 million, plus the final amount of any attorneys’ fees and expenses awarded to the plaintiff class.

Hallen Acquisition Assumed Liability

In August 2019, in connection with the acquisition of The Hallen Construction Co., Inc. (Hallen), Quanta assumed certain contingent liabilities associated with a March 2014 natural gas-fed explosion and fire in the Manhattan borough of New York City, New York. The incident resulted in, among other things, loss of life, personal injury and the destruction of two buildings and other property damage. After investigation, the National Transportation Safety Board determined that the probable cause of the incident was the failure of certain natural gas infrastructure installed by Consolidated Edison, Inc. (Con Ed) and the failure of certain sewer infrastructure maintained by the City of New York. Pursuant to a contract with Con Ed, Hallen had performed certain work related to such natural gas infrastructure and agreed to indemnify Con Ed for certain claims, liabilities and costs associated with its work. Numerous lawsuits are pending in New York state courts related to the incident, which generally name Con Ed, the City of New York and Hallen as defendants. These lawsuits are at various preliminary stages and generally seek unspecified damages and, in some cases, punitive damages, for wrongful death, personal injury, property damage and business interruption.

As of September 30, 2021, Quanta had not recorded an accrual related to this matter. Hallen’s liabilities associated with this matter are expected to be covered under applicable insurance policies or contractual remedies negotiated by Quanta with the former owners of Hallen. If a loss becomes probable and estimable with respect to this matter, Quanta expects to accrue its estimated liability and a receivable in the same amount. However, the ultimate amount of liability in connection with this matter remains subject to uncertainties associated with pending litigation, including, among other things, the apportionment of liability among the defendants and other responsible parties and the likelihood and amount of potential damages claims. As a result, this matter could result in a loss that is in excess of, or not covered by, such insurance or contractual remedies, which could have a material adverse effect on Quanta’s consolidated financial condition, results of operations and cash flows.

Concentrations of Credit Risk

Quanta is subject to concentrations of credit risk related primarily to its cash and cash equivalents and its net receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and contract assets net of advanced billings with the same customer. Substantially all of Quanta’s cash and cash equivalents are managed by what it believes to be high credit quality financial institutions. In accordance with Quanta’s investment policies, these institutions are authorized to invest cash and cash equivalents in a diversified portfolio of what Quanta believes to be high quality cash and cash equivalent investments, which consist primarily of interest-bearing demand deposits, money market investments and money market mutual funds. Although Quanta does not currently believe the principal amount of these cash and cash equivalents is subject to any material risk of loss, changes in economic conditions could impact the interest income Quanta receives from these investments. In addition, Quanta grants credit under normal payment terms, generally without collateral, to its customers, which include electric power, communications and energy companies, governmental entities, general contractors, and builders, owners and managers of commercial and industrial properties located primarily in the United States, Canada and

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Australia. While Quanta generally has certain statutory lien rights with respect to services provided, Quanta is subject to potential credit risk related to business, economic and financial market conditions that affect these customers and locations, which has been heightened as a result of the unfavorable and uncertain economic and financial market conditions resulting from the ongoing COVID-19 pandemic and the currently challenged energy market. Some of Quanta’s customers have experienced significant financial difficulties (including bankruptcy), and customers may experience financial difficulties in the future. These difficulties expose Quanta to increased risk related to collectability of billed and unbilled receivables and contract assets for services Quanta has performed.

For example, a customer within Quanta’s Underground Utility and Infrastructure Solutions segment encountered financial difficulties during 2020 that resulted in nonpayment of $27.5 million of receivables, plus accrued interest. As a result of the nonpayment, Quanta decided to foreclose the liens on the pipeline asset in order to recover the outstanding amount. During the three months ended September 30, 2021, Quanta entered into a settlement with the customer resulting in the sale of the pipeline asset to a third party and pursuant to which Quanta received $10.0 million of the amount owed and the right to receive payment of the remainder of the receivables in quarterly installments from the third party based on the cash flows generated by the pipeline and certain related assets. As a result, the remaining receivable balance of $17.5 million was reclassified to long-term receivables at September 30, 2021. Quanta also retained a security interest in the pipeline asset to secure payment of the remaining amount owed and believes that the value of the pipeline asset is in excess of such amount. However, the ultimate outcome with respect to the amount owed remains uncertain and is based on a number of assumptions that are potentially subject to change, including the future financial performance of the third party and the cash flows generated by the pipeline asset, as well as the future value of the pipeline asset. As a result, the amount ultimately collected could be materially less than the amount owed.

Additionally, in July 2021 Limetree Refining, a customer within Quanta’s Underground Utility and Infrastructure Solutions segment, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, as amended, after experiencing operational and financial difficulties and shutting down operations at its refinery. See Note 2 for further information related to this customer.

At September 30, 2021, the net receivable position of one customer within Quanta’s Electric Power Infrastructure Solutions segment, when combined with the net receivable position of a joint venture in which such customer owns a 50% interest, represented 12% of Quanta’s consolidated net receivable position. At December 31, 2020, no customer represented 10% or more of Quanta’s consolidated net receivable position. No customer represented 10% or more of Quanta’s consolidated revenues for the three and nine months ended September 30, 2021 or 2020.

Insurance

Quanta is insured for, among other things, employer’s liability, workers’ compensation, auto liability, aviation and general liability claims. Quanta manages and maintains a portion of its casualty risk through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs. Deductibles for the employer’s liability and workers’ compensation programs are $5.0 million per occurrence, and deductibles for the auto liability and general liability programs are $15.0 million per occurrence. Quanta also has employee health care benefit plans for most employees not subject to collective bargaining agreements, of which the primary plan is subject to a deductible of $0.8 million per claimant per year.

As of September 30, 2021 and December 31, 2020, the gross amount accrued for employer’s liability, workers’ compensation, auto liability, general liability, and group health claims totaled $316.8 million and $319.5 million, with $232.8 million and $238.0 million considered to be long-term and included in “Insurance and other non-current liabilities.” Related insurance recoveries/receivables as of September 30, 2021 and December 31, 2020 were $26.1 million and $35.6 million, of which $0.4 million and $0.4 million are included in “Prepaid expenses and other current assets” and $25.7 million and $35.2 million are included in “Other assets, net.”

Quanta renews its insurance policies on an annual basis, and therefore deductibles and levels of insurance coverage may change in future periods. In addition, insurers may cancel Quanta’s coverage or determine to exclude certain items from coverage, including wildfires, or Quanta may elect not to obtain certain types or incremental levels of insurance based on the potential benefits considered relative to the cost of such insurance, or coverage may not be available at reasonable and competitive rates. In any such event, Quanta’s overall risk exposure would increase, which could negatively affect its results of operations, financial condition and cash flows. For example, due to the increased occurrence and future risk of wildfires in California and other areas in the western United States, Australia and other locations, insurers have reduced coverage availability and increased the cost of insurance coverage for such events in recent years. As a result, Quanta’s level of insurance coverage for wildfire events has decreased, including in connection with recent annual insurance renewals, and the current level

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of coverage may not be sufficient to cover potential losses in connection with these events. Additionally, Quanta’s third-party insurers could decide to further reduce, exclude or increase the cost of coverage for wildfires or other events in connection with insurance renewals in the future.

Letters of Credit

Certain of Quanta’s vendors require letters of credit to ensure reimbursement for amounts they are disbursing on Quanta’s behalf, such as to beneficiaries under its insurance programs. In addition, from time to time, certain customers require Quanta to post letters of credit to ensure payment of subcontractors and vendors and guarantee performance under contracts. Such letters of credit are generally issued by a bank or similar financial institution, typically pursuant to Quanta’s senior credit facility. Each letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit if the holder claims that Quanta has failed to perform specified actions. If this were to occur, Quanta would be required to reimburse the issuer of the letter of credit. Depending on the circumstances of such a reimbursement, Quanta may also be required to record a charge to earnings for the reimbursement.

As of September 30, 2021, Quanta had $333.9 million in outstanding letters of credit under its senior credit facility securing its casualty insurance program and various other contractual commitments. These are irrevocable stand-by letters of credit with maturities generally expiring at various times throughout 2021 and 2022. Quanta expects to renew the majority of the letters of credit related to the casualty insurance program for subsequent one-year periods upon their maturity. Quanta is not aware of any claims currently asserted or threatened under any of these letters of credit that are material, individually or in the aggregate. However, to the extent payment is required for any such claims, the amount paid could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.

Bonds and Parent Guarantees

Many customers, particularly in connection with new construction, require Quanta to post performance and payment bonds. These bonds provide a guarantee that Quanta will perform under the terms of a contract and pay its subcontractors and vendors. In certain circumstances, the customer may demand that the surety make payments or provide services under the bond, and Quanta must reimburse the surety for any expenses or outlays it incurs. Quanta may also be required to post letters of credit in favor of the sureties, which would reduce the borrowing availability under its senior credit facility. Quanta has not been required to make any material reimbursements to its sureties for bond-related costs except in connection with the exercise of approximately $112 million advance payment and performance bonds in 2019 related to the terminated telecommunications project in Peru, as set forth in Legal Proceedings - Peru Project Dispute above. However, to the extent further reimbursements are required, the amounts could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows. As of September 30, 2021, Quanta is not aware of any outstanding material obligations for payments related to bond obligations.

Performance bonds expire at various times ranging from mechanical completion of a project to a period extending beyond contract completion in certain circumstances, and therefore a determination of maximum potential amounts outstanding requires certain estimates and assumptions. Such amounts can also fluctuate from period to period based upon the mix and level of Quanta’s bonded operating activity. As of September 30, 2021, the total amount of the outstanding performance bonds was estimated to be approximately $3.8 billion. Quanta’s estimated maximum exposure related to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a performance bond generally extinguishes concurrently with the expiration of its related contractual obligation. The estimated cost to complete these bonded projects was approximately $1.1 billion as of September 30, 2021.

Additionally, from time to time, Quanta guarantees certain obligations and liabilities of its subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, joint venture arrangements and contractor licenses. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. For example, with respect to customer contracts, a guarantee may cover a variety of obligations and liabilities arising during the ordinary course of the subsidiary’s business or operations, including, among other things, warranty and breach of contract claims, third party and environmental liabilities arising from the subsidiary’s work and for which it is responsible, liquidated damages, or indemnity claims. Quanta is not aware of any claims under any guarantees that are material, except as set forth in Legal Proceedings – Maurepas Project Dispute above. To the extent a subsidiary incurs a material obligation or liability and Quanta has guaranteed the performance or payment of such obligation or liability, the recovery by a customer or other counterparty or a third party will not be limited to the assets of the subsidiary. As a result, responsibility under the guarantee could exceed the amount recoverable from the subsidiary alone and could materially and adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.

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Collective Bargaining Agreements and Multiemployer Pension Plans

Certain of Quanta’s operating units are parties to collective bargaining agreements with unions that represent certain of their employees. The collective bargaining agreements expire at various times and have typically been renegotiated and renewed on terms similar to those in the expiring agreements. From time to time, Quanta is a party to grievance and arbitration actions based on claims arising out of the collective bargaining agreements. The agreements require the operating units to pay specified wages, provide certain benefits to union employees and contribute certain amounts to multiemployer pension plans and employee benefit trusts. Quanta’s multiemployer pension plan contribution rates generally are made to the plans on a “pay-as-you-go” basis based on its union employee payrolls. The location and number of union employees that Quanta employs at any given time and the plans in which they may participate vary depending on Quanta’s need for union resources in connection with its ongoing projects. Therefore, Quanta is unable to accurately predict its union employee payroll and the resulting multiemployer pension plan contribution obligations for future periods.

The Pension Protection Act of 2006 may require Quanta to make additional contributions to its multiemployer pension plans if they become underfunded, and these additional contributions will be determined based on Quanta’s union employee payrolls. Certain plans to which Quanta contributes or may contribute in the future may adopt measures to improve their funded status through a funding improvement or rehabilitation plan, as applicable, which may require additional contributions from employers (e.g., a surcharge on benefit contributions) and/or modifications to retiree benefits. The amount, if any, that Quanta may be obligated to contribute to these plans cannot be reasonably estimated due to uncertainty regarding the amount of future work involving covered union employees, future contribution levels and possible surcharges on plan contributions.

Quanta may be subject to additional liabilities imposed by law as a result of its participation in multiemployer defined benefit pension plans. These liabilities may include an allocable share of the unfunded vested benefits in the plan for all plan participants, not only the benefits payable to a contributing employer’s own retirees. As a result, participating employers may bear a higher proportion of liability for unfunded vested benefits if other participating employers cease to contribute or withdraw, with the reallocation of liability being more acute in cases when a withdrawn employer is insolvent or otherwise fails to pay its withdrawal liability. Quanta is not aware of any material withdrawal liabilities that have been incurred or asserted and that remain outstanding as a result of a withdrawal by Quanta from a multiemployer defined benefit pension plan. However, Quanta’s future contribution obligations and potential withdrawal liability exposure could vary based on the investment and actuarial performance of the multiemployer pension plans to which it contributes and other factors, which could be negatively impacted as a result of the unfavorable and uncertain economic and financial market conditions resulting from the ongoing COVID-19 pandemic and related issues. Quanta has been subject to significant withdrawal liabilities in the past, including in connection with its withdrawal from the Central States, Southeast and Southwest Areas Pension Plan. To the extent Quanta is subject to material withdrawal liabilities in the future, such liability could adversely affect its business, financial condition, results of operations and cash flows.

Deferred Compensation Plans

Quanta made matching contributions to the eligible participants’ accounts under deferred compensation plans of $0.2 million during each the three months ended September 30, 2021 and 2020. Quanta made matching contributions to the eligible participants’ accounts under the deferred compensation plans of $1.0 million during each the nine months ended September 30, 2021 and 2020. Quanta made no discretionary contributions during the nine months ended September 30, 2021 and 2020. At September 30, 2021 and December 31, 2020, obligations under these plans, including amounts contributed by Quanta, were $69.1 million and $58.2 million, the majority of which were included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. Quanta maintains investments to contribute to future obligations related to these deferred compensation plans. At September 30, 2021 and December 31, 2020, these investments were primarily comprised of company-owned life insurance policies, had fair market values of $68.4 million and $56.5 million and were included in “Other assets, net” in the accompanying condensed consolidated balance sheets.

During the three months ended September 30, 2021 and 2020, the fair market value of assets associated with our deferred compensation plan decreased $0.2 million and increased $2.8 million. During the nine months ended September 30, 2021 and 2020, the fair market value of assets associated with our deferred compensation plan increased $5.3 million and $1.9 million. These changes in fair market value of the assets are recorded in “Other income (expense), net” and were largely offset by corresponding changes in the fair market value of the liabilities associated with our deferred compensation plan, which are recorded in “Selling, general and administrative expenses.” During the three months ended September 30, 2021 and 2020, the fair market value of deferred compensation liabilities did not change and increased $3.3 million. During the nine months ended September 30, 2021 and 2020, the fair market value of deferred compensation liabilities increased $6.0 million and $1.9 million.

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Indemnities

Quanta generally indemnifies its customers for the services it provides under its contracts and other specified liabilities, which may subject Quanta to indemnity claims and liabilities and related litigation. Additionally, in connection with certain acquisitions and dispositions, Quanta has indemnified various parties against specified liabilities that those parties might incur in the future. The indemnities under acquisition or disposition agreements are usually contingent upon the other party incurring liabilities that reach specified thresholds. Quanta is not aware of any indemnity claims in connection with its indemnity obligations that are material. However, to the extent indemnification is required, the amount could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.

In the normal course of Quanta’s acquisition transactions, Quanta obtains rights to indemnification from the sellers or former owners of acquired businesses for certain risks, liabilities and obligations arising from their operations prior to the date of acquisition, such as performance, operational, safety, workforce or tax issues, some of which Quanta may not have discovered during due diligence. However, the indemnities may not cover all of Quanta’s exposure for such pre-acquisition matters, or the indemnitors may be unwilling or unable to pay amounts owed to Quanta. Accordingly, Quanta may incur expenses for which it is not reimbursed, and such amounts could be material and could have a material adverse effect on Quanta’s business or consolidated financial condition, results of operations and cash flows. For example, Quanta has obtained certain indemnification rights from the former owners of Hallen with respect to contingent liabilities that were assumed in connection with the acquisition, as set forth in Legal Proceedings — Hallen Acquisition Assumed Liability above.

Residual Value Guarantees

Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of September 30, 2021, the maximum guaranteed residual value of this equipment was $886.9 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.

Deferral of Employer Payroll Taxes

During 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which provided for various tax relief and tax incentive measures. These measures did not have a material impact on Quanta’s results of operations. However, pursuant to the CARES Act, Quanta deferred the payment of $108.9 million of employer payroll taxes during the year ended December 31, 2020, 50% of which are due to be paid by December 31, 2021 and the remainder is due by December 31, 2022.

11. SEGMENT INFORMATION:

Quanta currently presents its operations under two reportable segments: (1) Electric Power Infrastructure Solutions and (2) Underground Utility and Infrastructure Solutions. This structure is generally based on the broad end-user markets for Quanta’s services. See Note 1 for additional information regarding Quanta’s reportable segments.

Quanta’s segment results are derived from the types of services provided across its operating units in each of its end user markets. Quanta’s entrepreneurial business model allows multiple operating units to serve the same or similar customers and to provide a range of services across end user markets. Quanta’s operating units are organized into one of two internal divisions: the Electric Power Infrastructure Solutions Division and the Underground Utility and Infrastructure Solutions Division. These internal divisions are closely aligned with the reportable segments, and operating units are assigned to divisions based on the predominant type of work performed.

Reportable segment information, including revenues and operating income by type of work, is gathered from each operating unit for the purpose of evaluating segment performance in support of Quanta’s market strategies. Classification of operating unit revenues by type of work for segment reporting purposes can require judgment on the part of management. Quanta’s operating units may perform joint projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, Quanta performs joint trenching projects to install distribution lines for electric power and natural gas customers.

In addition, Quanta’s integrated operations and common administrative support for its operating units require that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs (e.g., facility costs), indirect operating expenses (e.g., depreciation), and general and administrative costs. Certain corporate costs are not allocated

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and include payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs and amortization related to intangible assets.

Summarized financial information for Quanta’s reportable segments is presented in the following table (in thousands):

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Revenues:
Electric Power Infrastructure Solutions						$	2,328,468					$	2,107,621					$	6,536,363					$	5,667,566
Underground Utility and Infrastructure Solutions						1,024,810						912,540						2,520,312						2,622,921
Consolidated revenues						$	3,353,278					$	3,020,161					$	9,056,675					$	8,290,487
Operating income (loss):
Electric Power Infrastructure Solutions (1)(2)						$	288,283					$	268,376					$	724,217					$	581,030
Underground Utility and Infrastructure Solutions						68,167						76,220						100,917						128,747
Corporate and Non-Allocated Costs						(108,373)						(102,381)						(301,677)						(273,909)
Consolidated operating income						$	248,077					$	242,215					$	523,457					$	435,868
Depreciation:
Electric Power Infrastructure Solutions						$	37,196					$	30,637					$	110,925					$	88,337
Underground Utility and Infrastructure Solutions						20,958						21,313						63,183						64,280
Corporate and Non-Allocated Costs						3,462						4,294						12,372						12,563
Consolidated depreciation						$	61,616					$	56,244					$	186,480					$	165,180

(1) As of December 31, 2020, Quanta had substantially completed the exit of its operations in Latin America. For the three and nine months ended September 30, 2020, operating income for the Electric Power Infrastructure Solutions segment included $15.4 million and $46.9 million of operating losses related to Latin American operations.

(2) Operating income for the Electric Power Infrastructure Solutions segment includes equity in earnings of integral unconsolidated affiliates that are operationally integral to the operations of Quanta, which primarily consists of equity in earnings related to Quanta’s equity interest in LUMA.

Separate measures of Quanta’s assets and cash flows by reportable segment, including capital expenditures, are not produced or utilized by management to evaluate segment performance. Quanta’s fixed assets, which are held at the operating unit level, include operating machinery, equipment and vehicles, office equipment, buildings and leasehold improvements, and certain units are used on an interchangeable basis across its reportable segments. As such, for reporting purposes, total depreciation expense is allocated each quarter among Quanta’s reportable segments based on the ratio of each reportable segment’s revenue contribution to consolidated revenues.

Foreign Operations

During the three months ended September 30, 2021 and 2020, Quanta derived $460.8 million and $390.6 million of its revenues from foreign operations. During the nine months ended September 30, 2021 and 2020, Quanta derived $1.39 billion and $1.18 billion of its revenues from foreign operations. Of Quanta’s foreign revenues, 83% and 82% were earned in Canada during the three months ended September 30, 2021 and 2020 and 81% and 77% were earned in Canada during the nine months ended September 30, 2021 and 2020. In addition, Quanta held property and equipment of $317.6 million and $336.4 million in foreign countries, primarily Canada, as of September 30, 2021 and December 31, 2020.

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12. SUPPLEMENTAL CASH FLOW INFORMATION:

The net effects of changes in operating assets and liabilities, net of non-cash transactions, on cash flows from operating activities are as follows (in thousands):

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Accounts and notes receivable						$	(411,890)					$	(322,579)					$	(299,857)					$	37,541
Contract assets						(96,423)						21,950						(308,849)						121,999
Inventories						5						8,655						(6,139)						6,787
Prepaid expenses and other current assets						37,406						19,655						(4,943)						70,133
Accounts payable and accrued expenses and other non-current liabilities						230,631						235,633						289,833						147,888
Contract liabilities						(1,397)						(79,964)						(27,027)						(73,567)
Other, net						(6,027)						(7,813)						(15,205)						(20,066)
Net change in operating assets and liabilities, net of non-cash transactions						$	(247,695)					$	(124,463)					$	(372,187)					$	290,715

Reconciliations of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts shown in the statements of cash flows are as follows (in thousands):

						September 30,
						2021						2020
Cash and cash equivalents						$	1,696,210					$	216,935
Restricted cash included in “Prepaid expenses and other current assets”						2,108						1,252
Restricted cash included in “Other assets, net”						778						915
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows						$	1,699,096					$	219,102

						June 30,
						2021						2020
Cash and cash equivalents						$	212,473					$	530,670
Restricted cash included in “Prepaid expenses and other current assets”						1,460						1,266
Restricted cash included in “Other assets, net”						782						917
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows						$	214,715					$	532,853

						December 31,
						2020						2019
Cash and cash equivalents						$	184,620					$	164,798
Restricted cash included in “Prepaid expenses and other current assets”						1,275						4,026
Restricted cash included in “Other assets, net”						913						921
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows						$	186,808					$	169,745

Restricted cash includes any cash that is legally restricted as to withdrawal or usage.

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Supplemental cash flow information related to leases and rental purchase options is as follows (in thousands):

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	(25,331)					$	(29,333)					$	(79,730)					$	(88,570)
Operating cash flows from finance leases						$	(18)					$	(16)					$	(68)					$	(50)
Financing cash flows from finance leases						$	(168)					$	(102)					$	(688)					$	(525)
Lease assets obtained in exchange for lease liabilities:
Operating leases						$	17,081					$	16,619					$	41,686					$	56,970
Finance leases						$	112					$	275					$	398					$	1,158
Rental purchase option assets obtained in exchange for rental purchase option liabilities						$	1,129					$	3,306					$	7,009					$	13,229

Additional supplemental cash flow information is as follows (in thousands):

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
						2021						2020						2021						2020
Cash (paid) received during the period for —
Interest paid						$	(2,260)					$	(8,443)					$	(26,883)					$	(30,704)
Income taxes paid						$	(35,740)					$	(86,077)					$	(103,225)					$	(149,690)
Income tax refunds						$	2,419					$	1,087					$	9,211					$	5,545

During the nine months ended September 30, 2020, in connection with the disposition of a small business, Quanta recorded a note receivable in exchange for the transfer of $8.5 million of inventory.

13. SUBSEQUENT EVENTS:

On October 13, 2021, Quanta completed the acquisition of Blattner, a large utility-scale renewable energy infrastructure solutions provider located in North America. The consideration for this transaction, which remains subject to certain post-closing adjustments, consisted of approximately $2.29 billion paid in cash on the date of acquisition and 3.3 million shares of Quanta common stock, which had a fair value of $345.4 million as of the date of the acquisition. See Note 1 and Note 4 for additional information on Blattner and Quanta’s acquisition of Blattner. Additionally, on October 8, 2021, Quanta amended its senior credit facility to, among other things, provide for a new $750.0 million term loan facility, increase the aggregate revolving commitments from $2.51 billion to $2.64 billion and extend the maturity date for the revolving commitments from September 2025 to October 2026. Quanta used proceeds from the new term loan, together with the net proceeds from its offering of senior notes in September 2021 and revolving loans borrowed under the senior credit facility, to finance the cash portion of the consideration paid in connection with the acquisition of Blattner. See Note 6 for additional information regarding the amendment to Quanta’s senior credit facility.

In October 2021, Quanta also acquired (i) a 44% interest in an entity that will be accounted for as an integral affiliate using the equity method of accounting and (ii) a business located in the United States that provides electric power construction and related services. See Note 2 and Note 4 for additional information on this investment and acquisition.