Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the financial condition and results of operations of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and with our 2020 Annual Report, which was filed with the SEC on March 1, 2021 and is available on the SEC’s website at www.sec.gov and on our website at www.quantaservices.com. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in Cautionary Statement About Forward-Looking Statements and Information above, in Item 1A. Risk Factors of Part II of this Quarterly Report and in Item 1A. Risk Factors of Part I of our 2020 Annual Report.

Overview

We are a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric and gas utility, renewable energy, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. The performance of our business generally depends on our ability to obtain contracts with customers and to effectively deliver the services provided under those contracts. The services we provide include the design, engineering, new construction, upgrade and repair and maintenance of infrastructure within each of the industries we serve, such as electric power transmission and distribution networks; substation facilities; wind and solar energy generation and battery storage facilities; communications and cable multi-system operator networks; gas utility systems; and pipeline transmission systems and facilities. Our customers include many of the leading companies in the industries we serve, and we endeavor to develop and maintain strategic alliances and preferred service provider status with our customers. Our services are typically provided pursuant to master service agreements, repair and maintenance contracts and fixed price and non-fixed price new construction contracts.

We report our results under two reportable segments: (1) Electric Power Infrastructure Solutions and (2) Underground Utility and Infrastructure Solutions. This structure is generally focused on broad end-user markets for our services. Included within the Electric Power Infrastructure Solutions segment are the results related to our communications infrastructure services.

Current Quarter Financial Results and Significant Operational Trends and Events

Key financial results for the three months ended September 30, 2021 included:

Consolidated revenues increased 11.0%, or $333.1 million, to $3.35 billion as compared to consolidated revenues of $3.02 billion for the three months ended September 30, 2020;
Operating income increased 2.4%, or $5.9 million, to $248.1 million as compared to $242.2 million for the three months ended September 30, 2020;
Net income attributable to common stock increased 7.0%, or $11.5 million, to $174.4 million as compared to $162.9 million for the three months ended September 30, 2020;
Diluted earnings per share increased 7.1%, or $0.08, to $1.21 as compared to $1.13 for the three months ended September 30, 2020;
EBITDA (a non-GAAP financial measure) increased 5.8%, or $18.8 million, to $340.3 million, as compared to $321.6 million for the three months ended September 30, 2020, and adjusted EBITDA (a non-GAAP financial measure) increased 3.8%, or $13.6 million, to $366.9 million, as compared to $353.3 million for the three months ended September 30, 2020;
Net cash provided by operating activities decreased by $97.0 million to $17.9 million, as compared to net cash provided by operating activities of $114.9 million for the three months ended September 30, 2020;
Remaining performance obligations increased 9.6%, or $382.9 million, to $4.37 billion as of September 30, 2021 as compared to $3.99 billion as of December 31, 2020; and
Total backlog (a non-GAAP financial measure) increased 12.5%, or $1.89 billion, to $17.02 billion as of September 30, 2021, as compared to $15.13 billion as of December 31, 2020.

For a reconciliation of EBITDA and adjusted EBITDA to net income attributable to common stock, the most comparable GAAP financial measure, and a reconciliation of backlog to remaining performance obligations, the most comparable GAAP financial measure, see Non-GAAP Financial Measures below.

As described below, during the three months ended September 30, 2021, our results reflected certain significant operational trends and events as compared to the three months ended September 30, 2020.

Electric Power Infrastructure Solutions Segment

Revenues increased by 10.5% to $2.33 billion, as compared to $2.11 billion.
Operating income increased by 7.4% to $288.3 million, as compared to $268.4 million, and operating income as a percentage of revenues decreased to 12.4%, as compared to 12.7%.
Revenues increased primarily due to continued favorable dynamics across our core utility market and increased demand for our electric power services, as well as approximately $55 million of revenues from acquired businesses, $27 million in incremental emergency restoration services revenues and a $15 million positive impact related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate.
Operating income increased primarily due to increased revenues and operating income as a percentage of revenues decreased due to normal project variability and higher general and administrative expenses during the three months ended September 30, 2021 as compared to lower than normal levels for the three months ended September 30, 2020.

Underground Utility and Infrastructure Solutions Segment

Revenues increased by 12.3% to $1.02 billion, as compared to $912.5 million.
Operating income decreased by 10.6% to $68.2 million, as compared to $76.2 million, and operating income as a percentage of revenues decreased to 6.7%, as compared to 8.4%.
Revenues increased primarily due to increased revenues from gas distribution and industrial services and a $10 million increase in revenues attributable to acquired businesses.
Operating income and operating income as a percentage of revenues decreased in the three months ended September 30, 2021 primarily due to adjustments on certain large pipeline projects that favorably impacted the three months ended September 30, 2020, which were associated with the recognition of previously deferred milestone payments and reduced contingencies due to a reduction in the scope of work on a project that is now complete, as well as the completion of certain other projects earlier than anticipated.

See Business Environment, Results of Operations and Liquidity and Capital Resources below for additional information and discussion related to consolidated and segment results.

Recent Significant Acquisition

On October 13, 2021, we completed the acquisition of Blattner, a large utility-scale renewable energy infrastructure solutions provider that is located in and primarily operates in North America. 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 Blattner owners 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 targets over a three-year period beginning in January 2022. Blattner’s results will be included in our consolidated financial statements beginning on the acquisition date. We are 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 our Annual Report on Form 10-K for the year ended December 31, 2021.

Business Environment

We believe there are long-term growth opportunities across our industries, and we continue to have a positive long-term outlook. Although not without risks and challenges, including those discussed in Cautionary Statement About Forward-Looking Statements and Information, Item 1A. Risk Factors of Part II of this Quarterly Report and Item 1A. Risk Factors of Part I of our 2020 Annual Report, we believe, with our full-service operations, broad geographic reach, financial position and technical expertise, we are well positioned to capitalize on opportunities and trends in our industries.

Electric Power Infrastructure Solutions. Utilities are investing significant capital in their electric power delivery systems, particularly transmission, substation and distribution infrastructure, through multi-year, multi-billion dollar grid modernization and reliability programs, which have provided, and are expected to continue to provide, demand for our services. As the overall

electrification trends in North America support a transition toward a carbon-neutral economy, utilities are accommodating a changing fuel generation mix that is moving toward more sustainable sources such as renewables (e.g., wind, solar and battery storage) and natural gas and replacing aging infrastructure to support long-term economic growth. We believe this trend will generate significant demand in the near- and longer-term for our services, including the development and construction of generation facilities powered by renewable energy sources (e.g., wind and solar) and certain traditional energy sources (e.g., natural gas), the development and construction of related infrastructure (e.g., battery storage), and the modernization of existing assets. While the demand for certain renewable energy services is expected to fluctuate in the short term due to, among other things, supply chain and other logistical difficulties that could delay projects, production tax credits and sourcing restrictions on materials necessary for certain projects (e.g., solar panels), we believe our recent acquisition of Blattner, together with the renewable energy and related services performed by our other operating companies, positions us to capitalize on the longer term growth trends with respect to the development of wind, solar and storage capacity infrastructure.

Furthermore, while the COVID-19 pandemic resulted in a short-term overall decline in electricity usage in 2020, primarily related to commercial and industrial users, demand has recovered and continues to increase in 2021, and we expect demand for electricity in North America to grow over the long term and believe that certain segments of the North American electric power grid are not adequate to efficiently serve the power needs of the future. To the extent that electrification trends increase, including through electric vehicle (EV) adoption, demand for electricity could be greater than currently anticipated. To accommodate this growth, we expect continued demand for new or expanded transmission and substation infrastructure to reliably transport power and interconnect new generation facilities and the modification and reengineering of existing infrastructure as existing coal and nuclear generation facilities are retired or shut down.

In order to reliably and efficiently deliver power, and in response to federal reliability standards, utilities are also integrating smart grid technologies into distribution systems in order to improve grid management and create efficiencies, and in preparation for emerging technologies such as EVs. A number of utilities have and continue to implement system upgrades or hardening programs in response to recurring severe weather events, such as hurricanes and wildfires, and, in particular, there are significant system resiliency initiatives in California and other regions in the western U.S. underway that are designed to prevent and manage the impact of wildfires. These resiliency initiatives provide additional opportunities for our services; however, they also increase our potential exposure to significant liabilities attributable to those events. Utilities are also executing significant initiatives to underground critical infrastructure, including additional underground transmission and distribution initiatives by utilities in California, underground electric transmission projects in the northeast, underground distribution circuits along the coastlines and underground transmission lines for offshore wind generation projects.

With respect to our communications service offerings, consumer and commercial demand for communication and data-intensive, high-bandwidth wireline and wireless services and applications is driving significant investment in infrastructure and the deployment of new technologies. In particular, communications providers in North America are in the early stages of developing new fifth generation wireless services (5G), which are intended to facilitate bandwidth-intensive services at high speeds for consumers and commercial applications. Additionally, the Federal Communications Commission has enacted the Rural Digital Opportunity Fund for the purpose of deploying billions of dollars in federal funds for high speed fixed broadband service to underserved rural homes and small businesses. As a result of these industry trends, we believe there will be meaningful demand for our engineering and construction services. We also reoriented our communications service offerings to strategically focus on the North American market, substantially completing the exit of our Latin American communications operations during 2020, which we anticipate will result in improved profitability within our communications services operations.

Underground Utility and Infrastructure Solutions. For several years we have focused on increasing our underground utility and infrastructure solutions related to specialty services and industries that we believe are driven by regulated utility spending, regulation, replacement and rehabilitation of aging infrastructure and safety and environmental initiatives, which we believe provide a greater level of business sustainability and predictability. These service offerings include gas utility services, pipeline integrity services and downstream industrial services. We believe focusing on these services helps to offset the seasonality and cyclicality of our larger pipeline project business, and although our strategic focus on larger pipeline projects has decreased, we continue to pursue project opportunities to the extent they satisfy our margin and risk profiles and support the needs of our customers. Though we experienced short-term disruptions in 2020 and to a lesser extent to date in 2021 due to the COVID-19 pandemic, we believe demand for our gas utility distribution services will increase as a result of customer desire to upgrade and replace aging infrastructure and increasing regulatory requirements. In particular, natural gas utilities have implemented multi-decade modernization programs to replace aging cast iron, bare steel, gas and plastic system infrastructure with modern materials for safety, reliability and environmental purposes.

We believe there are also growth opportunities for our pipeline integrity, rehabilitation and replacement services, as regulatory measures have increased the frequency and stringency of pipeline integrity testing requirements that require our customers to test, inspect, repair, maintain and replace pipeline infrastructure to ensure that it operates in a safe, reliable and environmentally conscious manner. Further, permitting challenges associated with construction of new pipelines can make

existing pipeline infrastructure more valuable, motivating owners to extend the useful life of existing pipeline assets through integrity initiatives.

Broader challenges in the energy market, which have been compounded by the COVID-19 pandemic, have materially impacted, and are expected to continue to materially impact, our Underground Utility and Infrastructure Solutions segment. In particular, demand for our midstream and industrial services operations has declined as customers reduced and deferred regularly scheduled maintenance and capital projects due to lack of demand for refined products. Our services to downstream industrial energy customers, which are primarily located along the Gulf Coast of the United States and in other select markets in North America, have been negatively impacted by the challenging overall energy market conditions that resulted in an overall decline in global demand for refined products during 2020 and 2021. While demand for our critical path catalyst services has remained solid, in the second half of 2020 customers began reducing onsite activity for our other services and have deferred maintenance and certain turnaround projects to late 2021 and 2022. Despite the current market conditions, we believe there are significant long-term opportunities for these services, including our high-pressure and critical-path turnaround services, as well as our capabilities with respect to instrumentation and electrical services, piping, fabrication and storage tanks services, and other industrial services, and that processing facilities located along the U.S. Gulf Coast region should have certain long-term strategic advantages due to their proximity to affordable hydrocarbon resources. However, these processing facilities can also be negatively impacted for short-term periods due to severe weather events, such as hurricanes, tropical storms and floods.

Furthermore, the broader oil and gas industry is highly cyclical and subject to price and production volume volatility, which can impact demand for our services. For example, certain of our end markets where the price of oil is influential, such as Australia, the Canadian Oil Sands and certain oil-driven U.S. shale formations, have been materially impacted by challenged energy market conditions. We have also entered the late-stage of the current construction cycle of larger pipeline projects, while the anticipated next cycle of larger projects could be impacted by various factors, including, among other things, permitting delays and worksite access limitations related to environmental regulations. As a result of these dynamics, our revenues related to larger pipeline projects have declined significantly over the last few years. This dynamic is supportive of our increased focus on specialty services and industries that are driven by regulated utility spending, regulation, replacement and rehabilitation of aging infrastructure and safety and environmental initiatives, which we believe provide a greater level of business sustainability and predictability.

Lastly, we believe there are also longer-term opportunities that may arise in this segment. For example, we believe natural gas, due to its expected abundant supply and attractive price over the long-term, will remain a fuel of choice for both primary power generation and backup power generation for renewable power plants in North America, which we believe could position North America as a leading competitor in the global LNG export market. In certain areas, the existing pipeline system infrastructure is insufficient to support any future LNG export facilities, which could provide additional opportunities for our business. We also believe that customers in this segment may implement strategies to reduce carbon emissions produced from their operations, which could provide incremental opportunities for our services, including developing infrastructure for blending hydrogen into natural gas flow to customers, further investment in renewable energy generation opportunities and carbon capture projects that could include building or repurposing pipeline infrastructure. While certain customers are in various stages of evaluating these types of strategies, we expect that any meaningful opportunities would only arise in the longer term.

COVID-19 Pandemic and Related Economic Impact. The effects of the COVID-19 pandemic continue to significantly impact global economies due to, among other things, workforce and travel restrictions and supply chain, production and other logistical disruptions. While we have continued to operate substantially all of our activities as a provider of essential services, during the course of the pandemic our operations and financial results have been adversely impacted by reduced customer spending and demand for certain of our services (including as described above), as well as governmental responses to the COVID-19 pandemic, including shut-down orders and limitations on work site practices implemented by governments, which have negatively impacted (i) our Canadian operations and financial results during 2020 and to date in 2021; (ii) our Australian operations and financial results during 2020 and to date in 2021; (iii) our operations in certain major U.S. metropolitan markets that were meaningfully impacted by the pandemic during the first and second quarters of 2020; and (iv) our Latin American operations during 2020.

Additionally, vaccination and testing requirements related to COVID-19 could impact our business in the future. In September 2021, the Occupational Safety and Health Administration was directed to implement an emergency temporary standard requiring employers with 100 or more employees to ensure their workforce is fully vaccinated or to require unvaccinated workers to produce a negative COVID-19 test result on at least a weekly basis. This standard has been issued and is expected to be published on November 5, 2021 and fully applicable by January 2022. The standard will apply to us and the costs related to mandatory testing could represent a substantial expense to us. Additionally, in September 2021, President Biden issued an executive order that requires federal contractors and subcontractors to mandate their employees be fully vaccinated against COVID-19 by January 2022. Some of our operating companies, as well as many of our customers, are considered federal contractors, or are performing work under contracts covered by the executive order. As such, employees of those

operating companies may need to be fully vaccinated to perform related work. In addition, many of our customers have established, or we believe are in the process of establishing, vaccination requirements that would apply to our employees performing work on their premises, or in proximity of their employees. The implementation of these vaccination and testing requirements could have a material adverse effect on our business, financial condition, results of operations or cash flows in the event that, among other things, a significant portion of our workforce does not choose to become vaccinated, the costs related to mandatory testing for unvaccinated employees are significant, the time away from work for testing is disruptive to our operations, or our unvaccinated employees are unable to perform work for customers that require vaccination.

We also continue to monitor supply chain and other logistical challenges with respect to certain materials and equipment necessary for the performance of our business, including, among other things, availability and costs related to steel, materials for renewable energy projects, new vehicles for our fleet (both on-road and specialty vehicles) and vehicle parts (e.g., tires). For example, we believe some participants in the renewable energy market are experiencing supply chain challenges, resulting in delays and shortages of materials necessary for the construction of renewable projects in the near term. While we believe many of our renewable energy customers are generally better equipped to manage near-term supply chain disruptions than smaller competitors, these challenges could impact our ability to perform renewable services during this period. Additionally, based on, among other things, the significant worldwide shortage of semiconductors, vehicle manufacturers are experiencing production delays with respect to vehicles we utilize in our operations. While we believe we have taken steps to secure delivery of such vehicles in the near term and do not anticipate any significant disruptions with respect to our fleet, to the extent the production issues become worse than expected or become longer-term in nature, our operations could be negatively impacted.

The broader and longer-term implications of the COVID-19 pandemic on our results of operations and overall financial performance and position remain highly uncertain and variable, and we expect continued operational challenges in the remainder of 2021 and into 2022 for portions of our operations. The future impact that the pandemic, or any resulting market disruption and volatility, will have on our business, cash flows, liquidity, financial condition and results of operations will depend on future developments, including, among others, the duration and severity of the pandemic; the actions taken by governmental authorities, customers, suppliers and other third parties in response to the pandemic and the consequences of those actions; our workforce availability; and the timing and extent to which normal economic and operating conditions resume and continue.

Regulatory Challenges and Opportunities. The regulatory environment creates both challenges and opportunities for our business, and in recent years electric power infrastructure solutions and underground utility and infrastructure solutions margins have been impacted by regulatory and permitting delays in certain periods, particularly with respect to larger electric transmission and larger pipeline projects. Regulatory and environmental permitting processes continue to create uncertainty for projects and negatively impact customer spending, and delays have increased as the COVID-19 pandemic has impacted regulatory agency operations. For example, recent changes to the U.S. Army Corps of Engineers Clean Water Act Section 404 Nationwide Permit 12 and related executive orders have impacted certain projects and resulted in increased costs and project interruptions and delays as customers are increasingly forced to seek additional or revised individual permits from the U.S. Army Corps of Engineers.

However, we believe that there are also several existing, pending or proposed legislative or regulatory actions that may alleviate certain regulatory and permitting issues and positively impact long-term demand, particularly in connection with electric power infrastructure and renewable energy spending. For example, regulatory changes affecting siting and right-of-way processes could potentially accelerate construction for transmission projects, and state and federal reliability standards are creating incentives for system investment and maintenance. Additionally, as described above, we consider renewable energy, including solar and wind generation facilities, to be an ongoing opportunity; however, policy and economic incentives designed to support and encourage such projects can create variability of project timing.

Labor Resource Availability and Cost. We continue to address the longer-term need for additional labor resources in our markets, as our customers continue to seek additional specialized labor resources to address an aging utility workforce and longer-term labor availability issues, increasing pressure to reduce costs and improve reliability, and increasing duration and complexity of their capital programs. We believe these trends will continue, possibly to such a degree that demand for labor resources will outpace supply. Furthermore, the increased demand for our services based on the dynamics described above can create shortages of qualified labor in our markets. Our ability to capitalize on available opportunities is limited by our ability to employ, train and retain the necessary skilled personnel, and therefore we are taking proactive steps to develop our workforce, including through strategic relationships with universities, the military and unions and the expansion and development of our training facility and postsecondary educational institution. Although we believe these initiatives will help address workforce needs, meeting our customers’ demand for labor resources could remain challenging.

Additionally, we continue to monitor our labor markets and expect labor costs to increase based on increased demand for our services and, to a lesser extent, the recent escalated inflationary environment in the United States. Our labor costs are passed through in certain of our contracts, and the portion of our workforce that is represented by labor unions typically operate under

multi-year collective bargaining agreements, which provide some visibility into future labor costs. While we do not currently believe this environment will present a material risk to our profitability and would expect to be able to adjust contract pricing with certain customers to the extent wages and other labor costs increase, whether due to renegotiation of collective bargaining agreements or market conditions, meaningful increases in our labor costs could have a material adverse effect on our business, financial condition, results of operations or cash flows to the extent we cannot do so.

Acquisitions and Investments. We believe potential acquisition and investment opportunities exist in our industries and adjacent industries, primarily due to the highly fragmented and evolving nature of those industries and inability of many companies to expand due to capital or liquidity constraints. We continue to evaluate opportunities that are expected to, among other things, broaden our customer base, expand our geographic area of operations and grow and diversify our portfolio of services.

Significant Factors Impacting Results

Our revenues, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Cautionary Statement About Forward-Looking Statements and Information above, Item 1A. Risk Factors of Part II of this Quarterly Report and Item 1A. Risk Factors of Part I of our 2020 Annual Report, and those factors have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain of those factors is provided below.

Seasonality. Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. In addition, infrastructure projects often do not begin in a meaningful way until our customers finalize their capital budgets, which typically occurs during the first quarter. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact productivity. Third quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. Generally, revenues during the fourth quarter are lower than the third quarter but higher than the second quarter, as many projects are completed and customers often seek to spend their capital budgets before year end. However, the holiday season and inclement weather can sometimes cause delays during the fourth quarter, reducing revenues and increasing costs. These seasonal impacts are typical for our U.S. operations, but seasonality for our international operations may differ. For example, revenues in Canada are typically higher in the first quarter because projects are often accelerated in order to complete work while the ground is frozen and prior to the break up, or seasonal thaw, as productivity is adversely affected by wet ground conditions during warmer months. Additionally, the COVID-19 pandemic affected typical seasonality during 2020, and our typical seasonality could also be impacted during the remainder of 2021 due to continued uncertainty regarding the future impact of the pandemic.

Weather, natural disasters and emergencies. The results of our business in a given period can be impacted by adverse weather conditions, severe weather events, natural disasters or other emergencies, which include, among other things, heavy or prolonged snowfall or rainfall, hurricanes, tropical storms, tornadoes, floods, blizzards, extreme temperatures, wildfires, post-wildfire floods and debris flows, pandemics (including the ongoing COVID-19 pandemic) and earthquakes. These conditions and events can negatively impact our financial results due to, among other things, the termination, deferral or delay of projects, reduced productivity and exposure to significant liabilities. See Overview – Business Environment above for further discussion regarding the impact of the COVID-19 pandemic. However, in some cases, severe weather events can increase our emergency restoration services, which typically yield higher margins due in part to higher equipment utilization and absorption of fixed costs.

Demand for services. We perform the majority of our services under existing contracts, including master service agreements (MSAs) and similar agreements pursuant to which our customers are not committed to specific volumes of our services. Therefore our volume of business can be positively or negatively affected by fluctuations in the amount of work our customers assign us in a given period, which may vary by geographic region. For example, to the extent our customers accelerate grid modernization or hardening programs or face deadlines to meet regulatory requirements for rehabilitation, reliability or efficiency, our volume of work could increase under existing agreements. Also, as described above in Overview – Business Environment, we have experienced reductions in demand for certain services as a result of the COVID-19 pandemic, as well as the currently challenged energy market. Examples of other items that may cause demand for our services to fluctuate materially from quarter to quarter include: the financial condition of our customers, their capital spending and their access to capital; economic and political conditions on a regional, national or global scale, including interest rates, governmental regulations affecting the sourcing of materials and equipment, and other changes in U.S. and global trade relationships; and project deferrals and cancellations.

Revenue mix and impact on margins. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Our larger or more complex

projects typically include, among others, electric transmission projects with higher voltage capacities; pipeline projects with larger-diameter throughput capacities; large-scale renewable generation projects, which we expect to increase subsequent to our acquisition of Blattner; and projects with increased engineering, design or construction complexities, more difficult terrain or geographical requirements, or longer distance requirements. These projects typically yield opportunities for higher margins than our recurring services under MSAs described above, as we assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. However, larger projects are subject to additional risk of regulatory delay and cyclicality. For example, our revenues with respect to larger electric transmission and pipeline projects have declined significantly in recent years, and a significant number of larger projects have been delayed or cancelled during that same period. Project schedules also fluctuate, particularly in connection with larger, more complex or longer-term projects, which can affect the amount of work performed in a given period. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a greater number of smaller projects versus continuous production on fewer larger projects. As a result, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.

Project variability and performance. Margins for a single project may fluctuate period to period due to changes in the volume or type of work performed, the pricing structure under the project contract or job productivity. Additionally, our productivity and performance on a project can vary period to period based on a number of factors, including unexpected project difficulties or site conditions (including in connection with difficult geographic characteristics); project location, including locations with challenging operating conditions; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; protests, other political activity or legal challenges related to a project; and the performance of third parties. Moreover, we currently generate a significant portion of our revenues under fixed price contracts, and fixed price contracts are more common in connection with our larger and more complex projects that typically involve greater performance risk. Furthermore, subsequent to our acquisition of Blattner, we expect the portion of our revenues generated under fixed price contracts to increase significantly. Under these contracts, we assume risks related to project estimates and execution, and project revenues can vary, sometimes substantially, from our original projections due to a variety of factors, including the additional complexity, timing uncertainty or extended bidding, regulatory and permitting processes associated with these projects. These variations can result in a reduction in expected profit or the incurrence of losses on a project or the issuance of change orders or assertion of contract claims against customers. See Revenue Recognition - Contract Estimates in Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for further information regarding changes in estimated contract revenues and/or project costs, including any significant project gains or losses in connection with fixed price contracts that have impacted our results, and determinations with respect to the recognition of change orders and claims as contract price adjustments.

Subcontract work and provision of materials. Work that is subcontracted to other service providers generally yields lower margins, and therefore an increase in subcontract work in a given period can decrease margins. In recent years, we have subcontracted approximately 15% to 20% of our work to other service providers. Our customers are usually responsible for supplying the materials for their projects. However, under some contracts, including contracts for projects where we provide engineering, procurement and construction (EPC) services, we agree to procure all or part of the required materials. Margins may be lower on projects where we furnish a significant amount of materials, as our markup on materials is generally lower than our markup on labor costs, and in a given period an increase in the percentage of work with greater materials procurement requirements may decrease our overall margins. Furthermore, fluctuations in the price or availability of materials and equipment we or our customers procure may impact our margins or cause delays on projects, including as a result of inflation; supply chain and other logistical challenges resulting from the COVID-19 pandemic or otherwise; governmental regulations affecting the sourcing of materials and equipment and other changes in U.S. or global trade relationships; or other economic or political conditions.

Foreign currency risk. Our financial performance is reported on a U.S. dollar-denominated basis but is partially subject to fluctuations in foreign currency exchange rates. Fluctuations in exchange rates relative to the U.S. dollar, primarily Canadian dollars and Australian dollars, can materially impact our results of operations and impact comparability between periods.

Results of Operations

The results of acquired businesses have been included in the following results of operations beginning on their respective acquisition dates. The following table sets forth selected statements of operations data, such data as a percentage of revenues for the periods indicated, as well as the dollar and percentage change from the prior period (dollars in thousands):

Consolidated Results

Three months ended September 30, 2021 compared to the three months ended September 30, 2020


	Three Months Ended September 30,								Change
	2021				2020				$		%
Revenues	$	3,353,278	100.0	%	$	3,020,161	100.0	%	$	333,117	11.0	%
Cost of services (including depreciation)	2,818,602		84.1		2,512,647		83.2		305,955		12.2	%
Gross profit	534,676		15.9		507,514		16.8		27,162		5.4	%
Equity in earnings of integral unconsolidated affiliates	10,232		0.3		5,120		0.2		5,112		99.8	%
Selling, general and administrative expenses	(274,846)		(8.2)		(250,654)		(8.3)		(24,192)		9.7	%
Amortization of intangible assets	(22,772)		(0.6)		(19,687)		(0.7)		(3,085)		15.7	%

Change in fair value of contingent consideration liabilities	787		—		(78)		—		865		*
Operating income	248,077		7.4		242,215		8.0		5,862		2.4	%
Interest expense	(17,259)		(0.5)		(11,049)		(0.4)		(6,210)		56.2	%
Interest income	72		—		80		—		(8)		(10.0)	%
Other income (expense), net	6,089		0.2		2,931		0.2		3,158		107.7	%
Income before income taxes	236,979		7.1		234,177		7.8		2,802		1.2	%
Provision for income taxes	61,581		1.9		70,477		2.4		(8,896)		(12.6)	%


Net income	175,398		5.2		163,700		5.4		11,698		7.1	%
Less: Net income attributable to non-controlling interests	1,033		—		787		—		246		31.3	%
Net income attributable to common stock	$	174,365	5.2	%	$	162,913	5.4	%	$	11,452	7.0	%

The percentage change is not meaningful.

Revenues. Revenues increased primarily due to a $220.8 million increase in revenues from our Electric Power Infrastructure Solutions segment as a result of strong demand for our electric power services and a $112.3 million increase in revenues from our Underground Utility and Infrastructure Solutions segment as a result of increased demand for gas distribution and industrial services. See Segment Results below for additional information and discussion related to segment revenues.

Gross profit. Gross profit increased due to the increase in revenues and improved utilization and fixed cost absorption in both our Electric Power Infrastructure Solutions segment and Underground Utility and Infrastructure Solutions segment. See Segment Results below for additional information and discussion related to segment operating income (loss).

Equity in earnings of integral unconsolidated affiliates. The amount for the three months ended September 30, 2021 primarily relates to our portion of amounts earned by LUMA Energy, LLC (LUMA).

Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of revenues decreased to 8.2% for the three months ended September 30, 2021, as compared to 8.3% for the three months ended September 30, 2020. The increase in selling, general and administrative expenses was partially attributable to a $15.2 million increase in compensation expense, which was primarily due to increased personnel to support business growth and increased incentive compensation expense as a result of higher levels of operating performance, and a $5.0 million increase in travel and related expenses, which were below historical levels in 2020 as a result of the COVID-19 pandemic. These increased expenses were partially offset by a $3.3 million decrease in expense related to deferred compensation liabilities. The changes in fair market value of deferred compensation liabilities were offset by corresponding changes in the fair market value of assets associated with the deferred compensation plan, and these corresponding changes are included in other income (expense), net.

Amortization of intangible assets. The increase was primarily due to amortization of intangible assets associated with recently acquired businesses, partially offset by reduced amortization expense from older acquired intangible assets, as certain of those assets became fully amortized.

Change in fair value of contingent consideration liabilities. Contingent consideration liabilities are payable in the event certain performance objectives are achieved by an acquired business during designated post-acquisition periods. The change in fair value associated with these liabilities was primarily due to changes in performance in post-acquisition measurement periods by certain acquired businesses and the effect of present value accretion on fair value calculations. Further changes in fair value are expected to be recorded periodically until the contingent consideration liabilities are settled.

Interest expense. Interest expense increased for the three months ended September 30, 2021 primarily due to higher levels of debt and a higher weighted average interest rate as compared to the three months ended September 30, 2020.

Other income (expense), net. The net other income for the three months ended September 30, 2021 included $4.9 million related to foreign currency exchange gains, as compared to $1.5 million related to foreign currency exchange gains for the three months ended September 30, 2020. Also included in other income (expense), net for the three months ended September 30, 2021 was $0.2 million of expense associated with our deferred compensation plan, as compared to $2.8 million of income during the three months ended September 30, 2020. The amounts associated with the deferred compensation plan 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, as discussed above.

Provision for income taxes. The effective tax rates for the three months ended September 30, 2021 and 2020 were 26.0% and 30.1%. The lower rate for the three months ended September 30, 2021 was primarily due to changes in the mix of earnings among various taxing jurisdictions.

Other comprehensive income (loss). Other comprehensive income (loss) results from translation of the balance sheets of our foreign operating units, which are primarily located in Canada and Australia and have functional currencies other than the U.S. dollar, and therefore are affected by the strengthening or weakening of the U.S. dollar against such currencies. The loss in the three months ended September 30, 2021 was primarily impacted by the strengthening of the U.S. dollar against the Canadian and Australian dollars as of September 30, 2021 when compared to June 30, 2021. The gain in the three months ended September 30, 2020 was primarily impacted by the weakening of the U.S. dollar against the Canadian and Australian dollars as of September 30, 2020 when compared to June 30, 2020.

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

The following table sets forth selected statements of operations data, such data as a percentage of revenues for the periods indicated, as well as the dollar and percentage change from the prior period (dollars in thousands):


	Nine Months Ended September 30,		Change
		2021	2020				$		%
Revenues			$	9,056,675	100.0	%	$	8,290,487	100.0	%	$	766,188	9.2	%
Cost of services (including depreciation)			7,701,398		85.0		7,095,513		85.6		605,885		8.5	%
Gross profit			1,355,277		15.0		1,194,974		14.4		160,303		13.4	%
Equity in earnings of integral unconsolidated affiliates			22,865		0.3		6,165		0.1		16,700		270.9	%
Selling, general and administrative expenses			(788,308)		(8.7)		(709,299)		(8.6)		(79,009)		11.1	%
Amortization of intangible assets			(65,418)		(0.8)		(55,374)		(0.6)		(10,044)		18.1	%
Asset impairment charges			(2,319)		—		—		—		(2,319)		*
Change in fair value of contingent consideration liabilities			1,360		—		(598)		—		1,958		*
Operating income			523,457		5.8		435,868		5.3		87,589		20.1	%
Interest expense			(42,843)		(0.5)		(33,709)		(0.4)		(9,134)		27.1	%
Interest income			3,098		—		1,114		—		1,984		178.1	%
Other income (expense), net			18,232		0.2		(3,649)		(0.1)		21,881		*
Income before income taxes			501,944		5.5		399,624		4.8		102,320		25.6	%
Provision for income taxes			116,256		1.2		119,626		1.4		(3,370)		(2.8)	%


Net income			385,688		4.3		279,998		3.4		105,690		37.7	%
Less: Net income attributable to non-controlling interests			4,529		0.1		4,453		0.1		76		1.7	%
Net income attributable to common stock			$	381,159	4.2	%	$	275,545	3.3	%	$	105,614	38.3	%

The percentage change is not meaningful.

Revenues. The increase in revenues was primarily due to increased revenues of $868.8 million from our Electric Power Infrastructure Solutions segment due to strong demand for our electric power services, partially offset by decreased revenues of $102.6 million from our Underground Utility and Infrastructure Solutions segment, primarily due to a reduction in services related to large pipeline transmission projects and the challenged energy market conditions, which have been exacerbated by the COVID-19 pandemic. This reduction in services in our Underground Utility and Infrastructure Solutions segment was partially offset by an increase in demand for gas distribution and industrial services during the nine months ended September 30, 2021. See Segment Results below for additional information and discussion related to segment revenues.

Gross profit. Gross profit increased due to an increase in revenues and improved utilization and fixed cost absorption from our Electric Power Infrastructure Solutions segment, partially offset by reduced revenues and decreased utilization and fixed cost absorption from our Underground Utility and Infrastructure Solutions segment. See Segment Results below for additional information and discussion related to segment operating income (loss).

Equity in earnings of integral unconsolidated affiliates. The amount for the nine months ended September 30, 2021 primarily relates to our portion of amounts earned by LUMA.

Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of revenues increased to 8.7% for the nine months ended September 30, 2021 from 8.6% for the nine months ended September 30, 2020. The increase in selling, general and administrative expenses was attributable to a $26.7 million increase in compensation expense, largely associated with increased incentive and non-cash stock compensation expense as a result of higher levels of operating performance and an increase in salaries and benefits due to increased personnel to support business growth; a $21.9 million increase in expenses associated with acquired businesses; and a $21.3 million increase in provision for credit loss, primarily related to the recognition of the provision for credit loss related to a receivable from a customer that declared bankruptcy in July 2021 and its affiliate, which is described further in Concentrations of Credit Risk within Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report. Also contributing to the increase were a $4.8 million increase in travel and related expenses, which were below historical levels in 2020 as a result of the COVID-19 pandemic, and a $4.1 million increase in expense related to deferred compensation liabilities. The fair market value changes in deferred compensation liabilities were offset by changes in the fair value of assets associated

with the deferred compensation plan, which are included in other income (expense), net below. Partially offsetting these increases were $6.5 million of incremental gains on sales of property and equipment.

Amortization of intangible assets. The increase was primarily due to amortization of intangible assets associated with recently acquired businesses, partially offset by reduced amortization expense associated with older acquired intangible assets, as certain of these assets became fully amortized.

Asset impairment charges. During the nine months ended September 30, 2021, we recognized a $2.3 million asset impairment charge related to certain equipment that was not utilized in our core operations and was subsequently sold in October 2021.

Interest expense. Interest expense increased primarily due to higher levels of outstanding debt and a higher weighted average interest rate during the nine months ended September 30, 2021 compared to 2020.

Interest income. Interest income increased primarily due to interest received related to a settlement with a customer.

Other income (expense), net. The net other income for the nine months ended September 30, 2021 included $6.5 million related to foreign currency exchange gains, as compared to $4.9 million of foreign currency exchange gains for the nine months ended September 30, 2020. Also favorably impacting other income was $5.3 million of income associated with our deferred compensation plan, as compared to $1.9 million of income in 2020. This income related to the deferred compensation plan was 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, as discussed above. Also favorably impacting the nine months ended September 30, 2021 were a $2.5 million benefit payment from a company-owned life insurance policy held in connection with our deferred compensation plan and $1.9 million of equity in earnings of non-integral unconsolidated affiliates. The net other expense for the nine months ended September 30, 2020 also included a $9.3 million impairment associated with an investment in a water and gas pipeline infrastructure contractor located in Australia that is accounted for using the cost method of accounting and $8.7 million of impairments associated with two non-integral equity investments that were negatively impacted by the decline in demand for refined petroleum products, which were partially offset by an $8.9 million legal settlement received.

Provision for income taxes. The effective tax rates for the nine months ended September 30, 2021 and 2020 were 23.2% and 29.9%. The lower rate for the nine months ended September 30, 2021 was primarily due to the recognition of an $19.7 million tax benefit that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair market value, as compared to the recognition of $2.6 million associated with this tax benefit for the nine months ended September 30, 2020, which was due to a smaller difference between the vest date fair market value and grant date fair market value of vested equity incentive awards.

Other comprehensive income (loss). Other comprehensive income (loss) results from translation of the balance sheets of our foreign operating units, which are primarily located in Canada and Australia and have functional currencies other than the U.S. dollar, and therefore are affected by the strengthening or weakening of the U.S. dollar against such currencies. The loss in the nine months ended September 30, 2021 was impacted primarily by the strengthening of the U.S. dollar against the Australian dollar as of September 30, 2021 when compared to December 31, 2020. The loss in the nine months ended September 30, 2020 was impacted by the strengthening of the U.S. dollar against both the Canadian and Australian dollars as of September 30, 2020 when compared to December 31, 2019.

Segment Results

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. Classification of our operating unit revenues by type of work for segment reporting purposes can at times require judgment on the part of management. Our 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, we perform joint trenching projects to install distribution lines for electric power and natural gas customers. Our integrated operations and common administrative support for 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, including payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs, non-cash

stock-based compensation, amortization related to intangible assets, asset impairment related to goodwill and intangible assets and change in fair value of contingent consideration liabilities.

Three months ended September 30, 2021 compared to the three months ended September 30, 2020

The following table sets forth segment revenues, segment operating income (loss) and operating margins for the periods indicated, as well as the dollar and percentage change from the prior period. Operating margins are calculated by dividing operating income by revenues. Management utilizes operating margins as a measure of profitability, which can be helpful for monitoring how effectively we are performing under our contracts. Management also believes operating margins are a useful metric for investors to utilize in evaluating our performance. The following table shows dollars in thousands.


	Three Months Ended September 30,								Change
	2021				2020				$		%
Revenues:


Electric Power Infrastructure Solutions	$	2,328,468	69.4	%	$	2,107,621	69.8	%	$	220,847	10.5	%
Underground Utility and Infrastructure Solutions	1,024,810		30.6		912,540		30.2		112,270		12.3	%
Consolidated revenues	$	3,353,278	100.0	%	$	3,020,161	100.0	%	$	333,117	11.0	%
Operating income (loss):


Electric Power Infrastructure Solutions before equity in earnings of integral unconsolidated affiliates	$	278,051	11.9	%	$	263,257	12.5	%	$	14,794	5.6	%
Equity in earnings of integral unconsolidated affiliates	10,232		N/A		5,119		N/A		5,113		99.9	%
Electric Power Infrastructure Solutions	288,283		12.4	%	268,376		12.7	%	$	19,907	7.4	%
Underground Utility and Infrastructure Solutions	68,167		6.7	%	76,220		8.4	%	(8,053)		(10.6)	%
Corporate and Non-Allocated Costs	(108,373)		N/A		(102,381)		N/A		(5,992)		5.9	%
Consolidated operating income	$	248,077	7.4	%	$	242,215	8.0	%	$	5,862	2.4	%

Electric Power Infrastructure Solutions Segment Results

The increase in revenues for the three months ended September 30, 2021 was primarily due to continued favorable dynamics across our core utility market and increased demand for our electric power services, as well as a $55 million increase in revenues attributable to acquired businesses. Additionally, revenues for the three months ended September 30, 2021 were positively impacted by $27 million in incremental emergency restoration services revenues and $15 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate.

The increase in operating income was primarily attributable to increased revenues. The decrease in operating margin was primarily attributable to normal project variability and higher general and administrative expenses during the three months ended September 30, 2021 as compared to lower than normal levels of general and administrative expenses for the three months ended September 30, 2020. Favorably impacting operating income and operating margin during the three months ended September 30, 2021 was the incremental impact of our equity interest in LUMA.

In addition, in early 2020, we decided to pursue an exit of our operations in Latin America and substantially completed such exit as of December 31, 2020. For the three months ended September 30, 2020, Electric Power Infrastructure Solutions operating income included $15.4 million of operating losses related to Latin American operations, which negatively impacted operating margin by 80 basis points.

Underground Utility and Infrastructure Solutions Segment Results

The increase in revenues for the three months ended September 30, 2021 was primarily due to increased demand for gas distribution and industrial services. Revenues were also favorably impacted by a $10 million increase in revenues attributable to acquired businesses and $6 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate. The increase in revenues attributable to these items was partially offset by disruptions along the U.S. Gulf Coast attributable to Hurricane Ida and broader challenges in the energy market that negatively impacted our industrial services operations, as well as governmental restrictions and protocols associated with the COVID-19 pandemic that negatively impacted our operations in non-U.S. markets.

The decrease in operating income and operating margin was primarily due to more favorable adjustments on certain large pipeline projects during the three months ended September 30, 2020, which were associated with the recognition of previously

deferred milestone payments and reduced contingencies due to a reduction in the scope of work on a project that is now complete, as well as the completion of certain other projects earlier than anticipated. Additionally, as referenced above, operating income for both the three months ended September 30, 2021 and 2020 were adversely impacted by the COVID-19 pandemic and the overall challenged energy market, with the greater negative impact occurring in the three months ended September 30, 2020 due to lower revenues from industrial services that negatively impacted our margins and ability to cover fixed and overhead costs.

Corporate and Non-Allocated Costs

The increase in corporate and non-allocated costs during the three months ended September 30, 2021 was primarily due to a $6.7 million increase in incentive compensation as a result of higher levels of operating performance relative to incentive compensation targets, a $3.1 million increase in intangible asset amortization, a $1.9 million increase in salaries and benefits due to increased personnel to support business growth and a $1.6 million increase in travel and related expenses, which were below historical levels in 2020 as a result of the COVID-19 pandemic. Partially offsetting these increases were a $4.2 million decrease in acquisition and integration costs and a $3.3 million decrease in expense related to deferred compensation liabilities. The changes in fair market value of deferred compensation liabilities were offset by corresponding changes in the fair market value of assets associated with the deferred compensation plan, which are recorded in other income (expense), net.

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020


	Nine Months Ended September 30,				Change
		2021	2020				$		%
Revenues:


Electric Power Infrastructure Solutions			$	6,536,363	72.2	%	$	5,667,566	68.4	%	$	868,797	15.3	%
Underground Utility and Infrastructure Solutions			2,520,312		27.8		2,622,921		31.6		(102,609)		(3.9)	%
Consolidated revenues			$	9,056,675	100.0	%	$	8,290,487	100.0	%	$	766,188	9.2	%
Operating income (loss):


Electric Power Infrastructure Solutions before equity in earnings of integral unconsolidated affiliates			$	701,352	10.7	%	$	574,865	10.1	%	$	126,487	22.0	%
Equity in earnings of integral unconsolidated affiliates			22,865		N/A		6,165		N/A		16,700		270.9	%
Electric Power Infrastructure Solutions			724,217		11.1	%	581,030		10.3	%	143,187		24.6	%
Underground Utility and Infrastructure Solutions			100,917		4.0	%	128,747		4.9	%	(27,830)		(21.6)	%
Corporate and Non-Allocated Costs			(301,677)		N/A		(273,909)		N/A		(27,768)		10.1	%
Consolidated operating income			$	523,457	5.8	%	$	435,868	5.3	%	$	87,589	20.1	%

Electric Power Infrastructure Solutions Segment Results

The increase in revenues for the nine months ended September 30, 2021 was primarily due to continued favorable dynamics across our core utility market and increased demand for our electric power services, as well as a $195 million increase in revenues attributable to acquired businesses. Additionally, revenues for the nine months ended September 30, 2021 were positively impacted by $80 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate, and a $53 million increase in emergency restoration services revenues.

The increase in operating income and operating margin was primarily attributable to improved performance across the segment, including increased revenues from large transmission projects and emergency restoration services revenues, both of which contributed to improved equipment utilization and fixed cost absorption. Also favorably impacting operating income and operating income as a percentage of revenues during the nine months ended September 30, 2021 was the incremental impact of our equity interest in LUMA. Partially offsetting the positive impact of these items were losses resulting from poor subcontractor performance, challenging site conditions and weather and seasonal impacts on certain communications projects during the first quarter of 2021.

In addition, in early 2020, we decided to pursue an exit of our operations in Latin America and substantially completed such exit as of December 31, 2020. For the nine months ended September 30, 2020, Electric Power Infrastructure Solutions

operating income included $46.9 million of operating losses related to Latin American operations, which negatively impacted operating margin by 80 basis points.

Underground Utility and Infrastructure Solutions Segment Results

The decrease in revenues for the nine months ended September 30, 2021 was partially due to reduced revenues associated with large pipeline projects, as the industry has entered the late-stage of the current construction cycle for these projects and the anticipated next cycle of projects has been delayed due to various factors, including, among other things, permitting delays and worksite access limitations related to environmental regulations. Revenues also declined due to lower demand for our services in end markets where the price of oil is influential, as well as reduced capital spending and deferred regularly scheduled maintenance by our midstream and industrial customers as a result of the COVID-19 pandemic. These decreases were partially offset by increased demand for gas distribution services; approximately $20 million in revenues from acquired businesses; and $19 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate.

The decreases in operating income and operating margin were primarily due to the recognition of a $23.6 million provision for credit loss related to a receivable from a customer that declared bankruptcy in July 2021 and its affiliate, which is described further in Current and Long-Term Accounts Receivable and Allowance for Credit Losses within Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report, and, to a lesser extent, a $2.3 million asset impairment charge related to the planned sale of certain equipment not utilized in our core operations and that was subsequently sold in October 2021. Additionally, operating income for both the nine months ended September 30, 2021 and 2020 were adversely impacted by the COVID-19 pandemic and the overall challenged energy market, which negatively impacted our margins and ability to cover fixed and overhead costs.

Corporate and Non-Allocated Costs

The increase in corporate and non-allocated costs during the nine months ended September 30, 2021 was primarily due to a $10.0 million increase in intangible asset amortization, a $9.2 million increase in incentive and non-cash stock compensation as a result of higher levels of operating performance relative to incentive compensation targets and a $4.5 million increase in expense related to deferred compensation liabilities. The changes in fair market value of deferred compensation liabilities were offset by corresponding changes in the fair market value of assets associated with the deferred compensation plan, which are recorded in other income (expense), net. Also contributing to the increase was a $3.4 million increase in salaries and benefits expense due to increased personnel to support business growth. These increases were partially offset by a $5.2 million decrease in professional fees and a $3.4 million decrease in acquisition and integration costs.

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA, financial measures not recognized under GAAP, when used in connection with net income attributable to common stock, are intended to provide useful information to investors and analysts as they evaluate our performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA is defined as EBITDA adjusted for certain other items as described below. These measures should not be considered as an alternative to net income attributable to common stock or other financial measures of performance that are derived in accordance with GAAP. Management believes that the exclusion of these items from net income attributable to common stock enables it and its investors to more effectively evaluate our operations period over period and to identify operating trends that might not be apparent when including the excluded items.

As to certain of the items below, (i) non-cash stock-based compensation expense varies from period to period due to acquisition activity, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition and integration costs vary from period to period depending on the level of our acquisition activity; (iii) equity in (earnings) losses of non-integral unconsolidated affiliates varies from period to period depending on the activity and financial performance of non-integral unconsolidated affiliates, including gain or loss on sales of investments accounted for using the equity method of accounting; (iv) asset impairment charges can vary from period to period depending on economic and other factors; and (v) change in fair value of contingent consideration liabilities varies from period to period depending on the performance in post-acquisition periods of certain acquired businesses. Because EBITDA and adjusted EBITDA, as defined, exclude some, but not all, items that affect net income attributable to common stock, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net income

attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. The following table shows dollars in thousands.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income attributable to common stock (GAAP as reported)	$	174,365	$	162,913	$	381,159	$	275,545
Interest expense	17,259		11,049		42,843		33,709
Interest income	(72)		(80)		(3,098)		(1,114)
Provision for income taxes	61,581		70,477		116,256		119,626
Depreciation expense	61,616		56,244		186,480		165,180
Amortization of intangible assets	22,772		19,687		65,418		55,374
Income taxes and depreciation included in equity in earnings of integral unconsolidated affiliates	2,825		1,275		6,476		1,682
EBITDA (a)	340,346		321,565		795,534		650,002
Non-cash stock-based compensation	21,642		21,431		64,252		58,323
Acquisition and integration costs	6,193		10,352		9,521		12,882
Equity in (earnings) losses of non-integral unconsolidated affiliates	(526)		(140)		(1,869)		8,372

Asset impairment charges (b)	—		—		2,319		—
Change in fair value of contingent consideration liabilities	(787)		78		(1,360)		598
Adjusted EBITDA	$	366,868	$	353,286	$	868,397	$	730,177

(a) The calculations of EBITDA for the three and nine months ended September 30, 2020 have been amended to conform to the current period calculations of EBITDA.

(b) The amount reflects an asset impairment charge related to the sale of certain equipment not utilized in our core operations.

Remaining Performance Obligations and Backlog

A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Our remaining performance obligations represent management’s estimate of consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work has not yet begun, which includes estimated revenues attributable to consolidated joint ventures and variable interest entities (VIEs), revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized, and revenues from change orders and claims to the extent management believes they will be earned and are probable of collection.

We have also historically disclosed our backlog, a measure commonly used in our industry but not recognized under GAAP. We believe this measure enables management to more effectively forecast our future capital needs and results and better identify future operating trends that may not otherwise be apparent. We believe this measure is also useful for investors in forecasting our future results and comparing us to our competitors. Our remaining performance obligations are a component of backlog, which also includes estimated orders under MSAs, including estimated renewals, and non-fixed price contracts expected to be completed within one year. Our methodology for determining backlog may not be comparable to the methodologies used by other companies.

As of September 30, 2021 and December 31, 2020, MSAs accounted for 62% and 63% of our estimated 12-month backlog and 69% and 70% of total backlog. We anticipate that subsequent to our acquisition of Blattner, MSAs may account for a lower percentage of our backlog because Blattner does not currently have a significant amount of backlog attributable to MSAs. Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and most of our contracts can be terminated on short notice even if we are not in default. We determine the estimated backlog for these MSAs using recurring historical trends, factoring in seasonal demand and projected customer needs based upon ongoing communications. In addition, many of our MSAs are subject to renewal, and these potential renewals are considered in determining estimated backlog. As a result, estimates for remaining performance obligations and backlog are subject to change based on, among other things, project accelerations; project cancellations or delays, including but not limited to those caused by commercial issues, regulatory requirements, natural disasters, emergencies (including the ongoing COVID-19 pandemic) and adverse weather conditions; and final acceptance of change orders by customers. These factors can cause revenues to be realized in periods and at levels that are different than originally projected.

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


	September 30, 2021				December 31, 2020
	12 Month		Total		12 Month		Total
Electric Power Infrastructure Solutions
Remaining performance obligations	$	2,819,561	$	3,706,869	$	2,511,157	$	3,547,838
Estimated orders under MSAs and short-term, non-fixed price contracts	4,299,273		9,025,234		3,559,443		7,433,445
Backlog	$	7,118,834	$	12,732,103	$	6,070,600	$	10,981,283

Underground Utility and Infrastructure Solutions
Remaining performance obligations	$	616,621	$	661,426	$	327,205	$	437,544
Estimated orders under MSAs and short-term, non-fixed price contracts	2,022,995		3,630,889		1,868,820		3,713,607
Backlog	$	2,639,616	$	4,292,315	$	2,196,025	$	4,151,151

Total
Remaining performance obligations	$	3,436,182	$	4,368,295	$	2,838,362	$	3,985,382
Estimated orders under MSAs and short-term, non-fixed price contracts	6,322,268		12,656,123		5,428,263		11,147,052
Backlog	$	9,758,450	$	17,024,418	$	8,266,625	$	15,132,434

Liquidity and Capital Resources

Cash Requirements

Management monitors financial markets and national and global economic conditions for factors that may affect our liquidity and capital resources. We consider our investment policies related to cash and cash equivalents to be conservative in that we maintain a diverse portfolio of what we believe to be high-quality cash and cash equivalent investments with short-term maturities. While the extent of the impact of the challenged energy market, as well as the COVID-19 pandemic, on our future operational and financial performance will depend on future developments and remains uncertain, based on our current business forecast for the next twelve months, we anticipate that our cash and cash equivalents on hand, future cash flows from operations, existing borrowing capacity under our senior credit facility and other available financing alternatives will provide sufficient funds during the next twelve months to enable us to fund ongoing operating needs, facilitate our ability to repurchase stock and pay any future dividends we declare, fund acquisitions or strategic investments that facilitate the long-term growth and sustainability of our business, fund essential capital expenditures and make` payments related to obligations on our outstanding debt.

Our industry is capital intensive, and we expect substantial capital expenditures and commitments under equipment lease and rental arrangements to be needed into the foreseeable future in order to meet anticipated demand for our services. We expect capital expenditures for the year ended December 31, 2021 to be approximately $325 million. Additionally, refer to Contractual Obligations and Contingencies below for a summary of our future contractual obligations and a description of other contingencies as of September 30, 2021 and Off-Balance Sheet Arrangements below for a description of certain contingent obligations that are not recorded on our condensed consolidated balance sheets. Although any of these contingent obligations could require the use of cash in future periods, certain contingent obligations are excluded from the Contractual Obligations table because we are unable to accurately predict the timing and amount of such obligations as of September 30, 2021.

Our available commitments under our senior credit facility and cash and cash equivalents at September 30, 2021 were as follows (in thousands):


	September 30, 2021
Total capacity available for revolving loans and letters of credit	$	2,510,000
Less:
Borrowings of revolving loans	415,851
Letters of credit outstanding	333,900
Available commitments for issuing revolving loans or new letters of credit	1,760,249
Plus:
Cash and cash equivalents	1,696,210
Total available commitments under senior credit facility and cash and cash equivalents	$	3,456,459

We may seek to access the capital markets from time to time to raise additional capital, increase liquidity as necessary, refinance or extend the term of our existing indebtedness, fund acquisitions or otherwise fund our capital needs. For example, as described further in Debt Instruments below, in connection with the financing of our acquisition of Blattner, in September 2021 we issued $1.50 billion aggregate principal amount of senior notes and received net proceeds of $1.48 billion, and in October 2021 we amended our senior credit facility to, among other things, provide for a new $750.0 million term loan facility and increase the aggregate revolving commitments of the lenders from $2.51 billion to $2.64 billion. The proceeds received from our issuance of senior notes in September 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. While our financial strategy and consistent performance have allowed us to maintain investment grade ratings subsequent to these financing transactions, our ability to access the capital markets in the future depends on a number of factors, including our financial performance and financial position, our credit ratings, industry conditions, general economic conditions, our backlog, capital expenditure commitments, market conditions and market perceptions of us and our industry.

Sources and Uses of Cash

In summary, our cash flows for each period were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net cash provided by operating activities	$	17,876	$	114,859	$	332,437	$	839,887
Net cash used in investing activities	$	(96,536)	$	(230,555)	$	(415,713)	$	(356,302)
Net cash provided by (used in) financing activities	$	1,563,590	$	(198,504)	$	1,594,826	$	(435,214)

Operating Activities

Cash flow from operating activities is primarily influenced by demand for our services and operating margins but is also influenced by working capital needs associated with the various types of services that we provide. Our working capital needs may increase when we commence large volumes of work under circumstances where project costs, primarily labor, equipment and subcontractors, are required to be paid before the associated receivables are billed and collected. Accordingly, changes within working capital in accounts receivable, contract assets and contract liabilities are normally related and are typically affected on a collective basis by changes in revenue due to the timing and volume of work performed and variability in the timing of customer billings and payments. Additionally, working capital needs are generally higher during the summer and fall due to increased demand for our services when favorable weather conditions exist in many of our operating regions. Conversely, working capital assets are typically converted to cash during the winter. These seasonal trends can be offset by changes in project timing due to delays or accelerations and other economic factors that may affect customer spending, including market conditions or the impact of the COVID-19 pandemic.

Net cash provided by operating activities during the three and nine months ended September 30, 2021 was negatively impacted primarily by increased working capital requirements, including with respect to progress on two large electric transmission projects in Canada, and the timing of the associated billings. 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 an acceleration of the project timeline, all of which resulted in change orders and an increase in contract assets. Partially offsetting this negative impact was the favorable impact of increased earnings as compared to the three and nine months ended September 30, 2020. As permitted under the CARES Act and other federal and state actions, during the three and nine months ended September 30,

2020, we deferred the payment of $41.0 million and $72.2 million of payroll taxes, 50% of which are due by December 31, 2021 and the remainder of which are due by December 31, 2022. Also during the three months ended September 30, 2020, we paid $58.0 million of federal and state income taxes, the payment of which had been deferred during from the second quarter of 2020 as permitted under the CARES Act and other federal and state actions. Additionally, net cash provided by operating activities during the nine months ended September 30, 2020 was favorably impacted by the receipt of $82.0 million of insurance proceeds associated with the settlement of two pipeline project claims in the fourth quarter of 2019.

Days sales outstanding (DSO) represents the average number of days it takes revenues to be converted into cash, which management believes is an important metric for assessing liquidity. A decrease in DSO has a favorable impact on cash flow from operating activities, while an increase in DSO has a negative impact on cash flow from operating activities. DSO is calculated by using the sum of current accounts receivable, net of allowance (which includes retainage and unbilled balances), plus contract assets less contract liabilities, divided by average revenues per day during the quarter. DSO at September 30, 2021 was 89 days, which was higher than DSO of 82 days at September 30, 2020 and our five-year historical average DSO of 82 days primarily due to increased working capital requirements related to progress on two large electric transmission projects in Canada and the timing of the associated billings. 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 an acceleration of the project timeline, all of which resulted in change orders and an increase in contract assets.

Investing Activities

Net cash used in investing activities in the three months ended September 30, 2021 included $74.6 million of capital expenditures, $33.3 million used for acquisitions and $5.2 million of cash paid for equity and other investments. Partially offsetting these items was $16.4 million of proceeds from the sale of property and equipment. Net cash used in investing activities in the nine months ended September 30, 2021 included $233.0 million of capital expenditures; $119.5 million of cash paid for equity and other investments, which primarily related to the acquisition of a minority interest in a broadband technology company; and $101.4 million used for acquisitions, some of which relates to acquisitions that closed in prior periods. These items were partially offset by $35.1 million of proceeds from the sale of property and equipment.

Net cash used in investing activities in the three months ended September 30, 2020 included $187.7 million used for acquisitions and $50.8 million of capital expenditures, which were partially offset by $5.8 million of proceeds from the sale of property and equipment. Net cash used in investing activities in the nine months ended September 30, 2020 included $212.1 million used for acquisitions, $167.0 million used for capital expenditures, and $9.5 million of cash paid for equity and other investments, which were partially offset by $18.5 million of proceeds from the sale of property and equipment and $11.1 million of proceeds from the disposition of businesses.

Our industry is capital intensive, and we expect substantial capital expenditures and commitments under equipment lease and rental arrangements to be needed into the foreseeable future. We also have various other capital commitments that are detailed in Contractual Obligations and Contingencies below. In addition, we expect to continue to pursue strategic acquisitions and investments, although we cannot predict the timing or amount of the cash needed for these initiatives.

Financing Activities

On September 23, 2021, we received net proceeds from the issuance of the 2024 notes, the 2032 notes and the 2041 notes of $1.49 billion, net of the original issue discount and underwriting discounts but not net of deferred financing costs paid or accrued by us. Deferred financing costs paid directly by us during the three months ended September 30, 2021 were $5.1 million, $0.7 million of which related to the September 2021 issuance of such senior notes and $4.4 million of which related to the bridge facility commitment entered into, but ultimately not utilized, in connection with our acquisition of Blattner. Total deferred financing costs associated with the senior notes that were accrued as of September 30, 2021 were $3.2 million and are expected to be paid primarily in the three months ended December 31, 2021 . See Debt Instruments – Senior Notes below for a further description of the Senior Notes. Although not reflected in the three or nine months ended September 30, 2021 condensed consolidated statements of cash flows, we used these proceeds, together with borrowings under a new term loan and revolving loans under our senior credit facility, to acquire Blattner in October 2021.

Net cash provided by financing activities in the three months ended September 30, 2021 also included $98.4 million of net borrowings under our senior credit facility and $13.6 million of net borrowings of short-term debt. These items were partially offset by $17.8 million of cash payments for common stock repurchases and $8.4 million of cash payments for dividends and cash dividend equivalents. Net cash provided by financing activities in the nine months ended September 30, 2021 also included $267.7 million of net borrowings under our senior credit facility and $9.4 million of net borrowings of short-term debt, partially offset by $66.7 million of cash payments for common stock repurchases, $63.1 million of cash payments to satisfy tax withholding obligations associated with stock-based compensation and $25.6 million of cash payments for dividends and cash dividend equivalents.

On September 22, 2020, we received net proceeds from the issuance of our 2030 notes of $990.1 million, as described further in Debt Instruments – Senior Notes. These proceeds, together with cash on hand, were used to voluntarily prepay then-outstanding term loans, which is reflected in the $1.17 billion of net repayments under our senior credit facility. During the three months ended September 30, 2020, we also paid $7.8 million of deferred financing costs related to the issuance of such senior notes and $7.0 million of cash dividends and dividend equivalents. Net cash used in financing activities in the nine months ended September 30, 2020 included $200.0 million of cash payments for common stock repurchases, $1.15 billion of net repayments under our senior credit facility, $24.4 million of cash payments to satisfy tax withholding obligations associated with stock-based compensation, $21.5 million of cash payments for dividends and cash dividend equivalents, $10.4 million of payments to settle certain contingent consideration liabilities and $7.8 million of deferred financing costs.

Contingent Consideration Liabilities

Certain of our acquisitions include the potential payment of contingent consideration, payable in the event certain performance objectives are achieved by the acquired businesses during designated post-acquisition periods. Although our contingent consideration liabilities were not material as of September 30, 2021, the former owners of Blattner are eligible for the potential payment of up to $300 million of contingent consideration, payable to the extent Blattner achieves certain financial performance objectives over a three-year period beginning in January 2022. The aggregate fair value of the contingent consideration liability associated with Blattner as of the acquisition date has not yet been determined. Any liability would be paid in cash at the end of the three-year period and would include 5% interest, unless we elect to pay a portion at the end of each year within the performance period. Cash payments for these liabilities up to the amount recognized at the respective acquisition dates, including measurement-period adjustments, will be classified as financing activities in our consolidated statements of cash flows. Any cash payments in excess of the amount of contingent consideration liabilities recognized at the respective acquisition dates will be classified as operating activities in our consolidated statements of cash flows.

Stock Repurchases

We repurchased the following shares of common stock in the open market under our 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, we are authorized to repurchase up to an additional $472.8 million in shares of common stock through June 30, 2023 under our existing stock repurchase program. Our policy is to record a stock repurchase as of the trade date; however, the payment of cash related to a 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. During the nine months ended September 30, 2021 and 2020, cash payments related to stock repurchases were $66.7 million and $200.0 million.

Repurchases under our repurchase programs may be implemented through open market or privately negotiated transactions, at management’s discretion, based on market and business conditions, applicable contractual and legal requirements, including restrictions under our senior credit facility, and other factors. We are not obligated to acquire any specific amount of common stock and the repurchase programs may be modified or terminated by our Board of Directors at any time at its sole discretion and without notice.

Dividends

We 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

The declaration, payment and amount of future cash dividends will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, results of operations and cash flows from operating activities; current and anticipated capital requirements and expansion plans; the current and potential impact of the COVID-19 pandemic and other market, industry, economic and political conditions; income tax laws then in effect; and the requirements of Delaware law. In addition, our Amended Credit Agreement restricts the payment of cash dividends unless certain conditions are met.

Debt Instruments

Senior Notes

On September 23, 2021, we issued $1.50 billion aggregate principal amount of senior notes consisting of: $500.0 million aggregate principal amount of the 2024 notes; $500.0 million aggregate principal amount of the 2032 notes; and $500.0 million aggregate principal amount of 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 we used, along with borrowings under our senior credit facility, as amended, to complete the acquisition of Blattner. Additionally, on September 22, 2020, we issued $1.00 billion aggregate principal amount of 2.900% senior notes due October 2030 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	Principal Amount		Interest Amount		Payment Dates	Commencement Date
0.950% Senior Notes due October 2024	$	500,000	$	2,375	April 1 and October 1	April 1, 2022
2.900% Senior Notes due October 2030	$	1,000,000	$	14,500	April 1 and October 1	April 1, 2021
2.350% Senior Notes due January 2032	$	500,000	$	5,875	January 15 and July 15	July 15, 2022
3.050% Senior Notes due October 2041	$	500,000	$	7,625	April 1 and October 1	April 1, 2022

The terms of the senior notes are further described in Notes 6 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report and in the indenture and supplemental indentures governing the senior notes.

Senior Credit Facility

On October 8, 2021, we entered into the Amended Credit Agreement that, among other things, (i) provided for a new $750.0 million term loan facility for the purpose of financing the acquisition of Blattner pursuant to the agreement and plan of merger, (ii) increased the aggregate revolving commitments of the lenders 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. 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, we 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. We are 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.

As of November 1, 2021, we had $1.39 billion of outstanding borrowings under our senior credit facility, composed of $640.0 million of outstanding revolving loans and $750.0 million outstanding under the new term loan facility. Also as of November 1, 2021, subject to the applicable sublimits and the other terms and conditions of the Amended Credit Agreement, the remaining $1.66 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. Subject to the conditions and limitations specified in the Amended Credit Agreement, we have the option to increase the capacity of the credit facility.

Borrowings of revolving loans under our senior credit facility are to be used to refinance existing indebtedness and for working capital, capital expenditures, acquisitions and other general corporate purposes. The Amended Credit Agreement for our senior credit facility contains certain covenants, including, as of the end of any fiscal quarter for us, (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 our 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. 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. As of September 30, 2021, we were in compliance with all of the financial covenants under the Amended Credit Agreement, and subsequent to our acquisition of Blattner, our Consolidated Leverage Ratio increased but remained significantly below such financial covenants.

To address the transition in financial markets away from the London Interbank Offered Rate (LIBOR), our Amended Credit Agreement includes customary LIBOR benchmark replacement provisions. The benchmark replacement for U.S. dollar-denominated loans may be a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York or an alternate benchmark, subject to the terms and conditions set forth in the amended credit agreement. In certain circumstances, loans in U.S. dollars would default to the Base Rate, which under such circumstances would equal the highest of (i) the Federal Funds Rate (as defined in the amended credit agreement) plus 0.5% and (ii) the prime rate publicly announced by Bank of America, N.A. Changing to an alternative interest rate or to the Base Rate may lead to additional volatility in interest rates and could cause our debt service obligations to increase significantly.

Contractual Obligations and Contingencies

The following table summarizes our future contractual obligations as of September 30, 2021, excluding certain amounts discussed below (in thousands):


	Total		Remainder of 2021		2022		2023		2024		2025		Thereafter
Long-term debt - principal (1)	$	2,956,070	$	2,360	$	9,401	$	9,017	$	507,574	$	421,510	$	2,006,208
Long-term debt - cash interest (2)	722,308		15,037		57,022		62,819		62,593		57,843		466,994
Short-term debt (3)	13,471		13,471		—		—		—		—		—
Operating lease obligations (3)	260,531		23,964		80,516		58,265		36,341		24,449		36,996
Operating lease obligations that have not yet commenced (4)	6,984		88		1,152		1,228		1,243		1,079		2,194
Finance lease obligations (5)	2,369		296		872		666		409		126		—
Short-term lease obligations (6)	18,682		9,803		8,879		—		—		—		—

Deferral of tax payments (7)	108,870		54,435		54,435		—		—		—		—
Equipment purchase commitments (8)	165,341		58,451		106,890		—		—		—		—

Total contractual obligations	$	4,254,626	$	177,905	$	319,167	$	131,995	$	608,160	$	505,007	$	2,512,392

(1) Amount represents the principal amount of our long-term debt. The cash interest obligations related to the fixed-rate portion of our long-term debt are included in Long-term debt - cash interest; however, our $415.9 million of outstanding revolving loans under our senior credit facility bear interest at variable market rates. Assuming the principal amount outstanding and interest rate in effect for the revolving loans at September 30, 2021 remained the same, the annual cash interest expense for such loans would be approximately $10.2 million, payable until October 8, 2026, the maturity date of the facility. See Liquidity and Capital Resource - Debt Instruments - Senior Credit Facility above for further information related to borrowings under the credit facility subsequent to September 30, 2021 associated with financing the cash portion of consideration related to the acquisition of Blattner. Amounts borrowed subsequent to September 30, 2021 are not included in this table.

(2) Amount represents cash interest expense associated with our fixed-rate, long-term debt, which primarily includes our senior notes and financing transactions arising from the exercise of our equipment rental purchase options.

(3) Amounts represent undiscounted operating lease obligations at September 30, 2021 for our real estate and equipment leases. The operating lease obligations recorded on our September 30, 2021 condensed consolidated balance sheet represent the present value of these amounts.

(4) Amounts represent undiscounted operating lease obligations that have not commenced as of September 30, 2021. The operating lease obligations will be recorded on our condensed consolidated balance sheet beginning on the commencement date of each lease.

(5) Amounts represent undiscounted finance lease obligations at September 30, 2021. The finance lease obligations recorded on our September 30, 2021 condensed consolidated balance sheet represent the present value of these amounts.

(6) Amounts represent short-term lease obligations that are not recorded on our September 30, 2021 condensed consolidated balance sheet due to our accounting policy election. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because we are unable to accurately predict future rental amounts.

(7) Amounts represent deferral of $108.9 million related to the employer portion of payroll tax payments during the year ended December 31, 2020, which was permitted pursuant to the CARES Act. Payment of these deferred tax obligations are due by December 31, 2021 and December 31, 2022.

(8) Amount represents capital committed for the expansion of our vehicle fleet. Although we have committed to the purchase of these vehicles at the time of their delivery, we expect that these orders will be assigned to third-party leasing companies and made available to us under certain of our master equipment lease agreements.

We have various contingencies and commitments that may require the use of cash in future periods, including those set forth below. The Contractual Obligations table excludes the contingencies described below, as we are unable to accurately predict the timing and amount of any of the following contingent obligations.

Uncollectible accounts receivable - We grant credit under normal payment terms, generally without collateral, to our customers. While we generally have certain statutory lien rights with respect to services provided, we are 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 our customers have experienced significant financial difficulties (including bankruptcy), and customers may experience financial difficulties in the future. These difficulties expose us to increased risk related to collectability of billed and unbilled receivables and contract assets for services we have performed. For example, certain customers within our Underground Utility and Infrastructure segment have experienced operational and/or financial difficulties. For additional information on these matters, see Concentration of Credit Risk in Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report.

Lawsuits and other legal proceedings - We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business, which 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, we record a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. See Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for additional information regarding litigation, claims and other legal proceedings.

Collective bargaining agreements and multiemployer pension plan liabilities - Certain of our operating units are parties to collective bargaining agreements with unions that represent certain of their employees, and from time to time, we are a party to grievance and arbitration actions based on claims arising out of the collective bargaining agreements, which specify that we pay certain wages, provide certain benefits to union employees and contribute certain amounts to multiemployer pension plans and employee benefit trusts. The location and number of union employees that we employ at any given time and the plans in which they may participate vary depending on our need for union resources in connection with our ongoing projects, and therefore we are unable to accurately predict our union employee payroll and the resulting contribution obligations for future periods. Furthermore, we may be required to make additional contributions to our multiemployer pension plans if they become underfunded or if we withdraw or are deemed to have withdrawn from a plan or a plan is terminated or experiences a mass withdrawal. For additional information on these obligations and potential contingencies, see Collective Bargaining Agreements and Multiemployer Pension Plans in Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report*.*

Bonds and parent guarantees - Many customers, particularly in connection with new construction, require us to post performance and payment bonds, which provide a guarantee that we will perform under the terms of a contract and pay subcontractors and vendors. In certain circumstances, the customer may demand that our surety make payments or provide services under the bond, and we must reimburse the surety for any expenses or outlays it incurs. As of September 30, 2021 the total amount of our outstanding performance bonds was estimated to be approximately $3.8 billion. Additionally, from time to time, we guarantee certain obligations and liabilities of our subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, joint venture arrangements and contractor licenses, and may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. For additional information on these obligations and potential contingencies, see Bonds and Parent Guarantees in Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report*.*

Insurance liabilities - Due to the nature of our operations, at any given time we have a significant amount of accrued insurance claims. 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. Additionally, we renew our insurance policies on an annual basis, and therefore deductibles and levels of insurance coverage may change in future periods. In addition, insurers may cancel our coverage or determine to exclude certain items from coverage, or we 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. See Insurance in Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report*.*

Indemnities and assumed liabilities - In connection with our acquisition transactions, we assume certain liabilities and obtain rights to indemnification from the sellers or former owners of acquired businesses for certain risks, liabilities and

obligations arising from their prior operations, such as performance, operational, safety, workforce or tax issues. However, we may not have discovered certain liabilities during due diligence and our indemnities may not cover all of our exposure for such pre-acquisition matters or the indemnitors may be unwilling or unable to pay amounts owed to us. Accordingly, we may incur expenses that are not reimbursed, and such amounts could be material. See Indemnities in Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for further discussion related to these potential contingencies.

Liabilities related to our deferred compensation plans - We maintain non-qualified deferred compensation plans pursuant to which non-employee directors and certain key employees may defer receipt of some or all of their compensation. As of September 30, 2021 and December 31, 2020, obligations under these plans, including amounts contributed by us, were $69.1 million and $58.2 million. These plans are unfunded and unsecured compensation arrangements, and the amount of the obligations can fluctuate based on the market value of participants’ investment elections under the plan. See Deferred Compensation Plans in Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for further discussion related to these plans.

Undistributed earnings of foreign subsidiaries - We generally do not provide for taxes related to undistributed earnings of our foreign subsidiaries and we could be subject to additional foreign withholding taxes if we were to repatriate cash that is indefinitely reinvested outside the United States. However, we do not expect such amount to be material.

Unrecognized tax benefits and valuation allowance on deferred tax assets - As of September 30, 2021, the total amount of unrecognized tax benefits relating to uncertain tax positions was $40.6 million. Our consolidated federal income tax return for the tax year 2019 is currently under examination by the IRS, and our 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, and various state and foreign tax returns filed by us and our subsidiaries for multiple periods remain under examination by various U.S. state, Canadian and other foreign tax authorities. We believe 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. Additionally, we regularly evaluate valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws, and we may not realize deferred tax assets to the extent estimated. See Income Taxes in Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for further discussion related to these potential contingencies.

Commitment fees under our senior credit facility - Fees associated with letters of credit under our senior credit facility and commitment fees under our senior credit facility are variable because they depend on the amount of outstanding letters of credit, availability and applicable fees. Assuming that the amount of letters of credit outstanding and the fees as of September 30, 2021 remained the same, the annual cash expense for our letters of credit would be approximately $4.0 million. See Notes 6 and 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for further discussion related to these obligations and potential contingencies.

Residual Value Guarantees - We have guaranteed the residual value under certain of our 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. Due to the nature of our operations, at any given time we have a significant amount of outstanding residual value guarantees, and as of September 30, 2021 the maximum guaranteed residual value of this equipment was $886.9 million. While we believe 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.

Investment commitment - As of September 30, 2021, we had committed to contribute $13.6 million for certain investments, but the timing of the contributions has not yet been determined.

Off-Balance Sheet Arrangements

As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected in our balance sheets. Our significant off-balance sheet transactions include certain obligations relating to our investments and joint venture arrangements; short-term, non-cancelable leases and leases that have not yet commenced; letters of credit obligations; surety guarantees related to bonds; committed expenditures for the purchase of equipment; and certain multiemployer pension plan liabilities. See Contractual Obligations and Contingencies above and Note 10 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for a description of these arrangements.

Critical Accounting Estimates and Policies Update

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with the rules of the SEC. Certain information and footnote disclosures normally included in annual financial statements, which are prepared in accordance with GAAP, have been condensed or omitted pursuant to those rules and regulations. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the condensed consolidated financial statements are published and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our condensed consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our 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. There can be no assurance that actual results will not differ from those estimates. Management has reviewed its development and selection of critical accounting estimates with the audit committee of our Board of Directors. Our accounting policies are primarily described in Note 2 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of Part II of our 2020 Annual Report and, to a lesser extent, in Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report and should be read in conjunction with our critical accounting estimates detailed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Part II of our 2020 Annual Report.

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