Item 1. Financial Statements.

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)

						March 31, 2022						December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents						$	238,258					$	229,097
Accounts receivable, net of allowances of $49,916 and $49,749						3,356,566						3,400,318
Contract assets						975,342						803,453
Inventories						94,264						84,659
Prepaid expenses and other current assets						201,185						215,050
Total current assets						4,865,615						4,732,577
Property and equipment, net of accumulated depreciation of $1,566,533 and $1,503,498						1,976,249						1,919,697
Operating lease right-of-use assets						238,529						240,605
Other assets, net						656,133						632,244
Other intangible assets, net of accumulated amortization of $799,905 and $682,498						1,685,260						1,801,180
Goodwill						3,593,315						3,528,886
Total assets						$	13,015,101					$	12,855,189
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt and short-term debt						$	21,865					$	29,166
Current portion of operating lease liabilities						76,983						78,251
Accounts payable and accrued expenses						2,318,389						2,254,671
Contract liabilities						800,578						802,872
Total current liabilities						3,217,815						3,164,960
Long-term debt, net of current maturities						3,812,411						3,724,474
Operating lease liabilities, net of current portion						170,347						170,427
Deferred income taxes						183,082						191,098
Insurance and other non-current liabilities						489,458						487,309
Total liabilities						7,873,113						7,738,268
Commitments and Contingencies
Equity:
Common stock, $0.00001 par value, 600,000,000 shares authorized, 170,437,992 and 168,546,513 shares issued, and 143,765,604 and 142,633,934 shares outstanding						2						2
Additional paid-in capital						2,637,240						2,615,410
Retained earnings						3,789,025						3,714,843
Accumulated other comprehensive loss						(224,414)						(237,689)
Treasury stock, 26,672,388 and 25,912,579 common shares						(1,064,334)						(980,265)
Total stockholders’ equity						5,137,519						5,112,301
Non-controlling interests						4,469						4,620
Total equity						5,141,988						5,116,921
Total liabilities and equity						$	13,015,101					$	12,855,189

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

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)

						Three Months Ended
						March 31,
						2022						2021
Revenues						$	3,965,525					$	2,703,581
Cost of services (including depreciation)						3,417,354						2,330,691
Gross profit						548,171						372,890
Equity in earnings of integral unconsolidated affiliates						15,152						5,183
Selling, general and administrative expenses						(324,887)						(243,352)
Amortization of intangible assets						(115,751)						(21,355)
Change in fair value of contingent consideration liabilities						(5,169)						363
Operating income						117,516						113,729
Interest and other financing expenses						(24,728)						(12,475)
Interest income						69						117
Other income (expense), net						(1,273)						3,672
Income before income taxes						91,584						105,043
Provision for income taxes						6,556						13,724
Net income						85,028						91,319
Less: Net income attributable to non-controlling interests						387						1,558
Net income attributable to common stock						$	84,641					$	89,761
Earnings per share attributable to common stock:
Basic						$	0.59					$	0.64
Diluted						$	0.57					$	0.62
Shares used in computing earnings per share:
Weighted average basic shares outstanding						143,541						140,121
Weighted average diluted shares outstanding						148,082						144,447

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

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

						Three Months Ended
						March 31,
						2022						2021
Net income						$	85,028					$	91,319
Other comprehensive income, net of taxes:
Foreign currency translation adjustment, net of tax of $0 and $0						13,528						8,532
Other income (loss), net of tax of $(47) and $2						(253)						7
Other comprehensive income, net of taxes						13,275						8,539
Comprehensive income						98,303						99,858
Less: Comprehensive income attributable to non-controlling interests						387						1,558
Total comprehensive income attributable to common stock						$	97,916					$	98,300

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

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

						Three Months Ended
						March 31,
						2022						2021
Cash Flows from Operating Activities:
Net income						$	85,028					$	91,319
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation						70,954						62,107
Amortization of intangible assets						115,751						21,355
Change in fair value of contingent consideration liabilities						5,169						(363)
Equity in earnings of unconsolidated affiliates						(20,490)						(5,868)
Amortization of deferred financing costs						1,458						846
Gain on sale of property and equipment						(2,193)						(4,982)
Gain on sale of investments						(6,696)						—
Unrealized loss from mark-to-market adjustment on investment						8,393						—
Provision for credit losses						133						43
Deferred income tax expense (benefit)						(8,098)						2,494
Non-cash stock-based compensation						22,992						18,687
Foreign currency (gain) loss						1,581						(576)
Payments for contingent consideration liabilities						(63)						—
Changes in operating assets and liabilities, net of non-cash transactions						(188,829)						(59,449)
Net cash provided by operating activities						85,090						125,613
Cash Flows from Investing Activities:
Capital expenditures						(109,937)						(83,486)
Proceeds from sale of property and equipment						8,810						7,223
Proceeds from insurance settlements related to property and equipment						191						7
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired						—						(32,778)
Investments in unconsolidated affiliates and other						(8,319)						(113,982)
Cash received from investments						16,460						210
Cash paid for intangible assets						(274)						—
Net cash used in investing activities						(93,069)						(222,806)
Cash Flows from Financing Activities:
Borrowings under credit facility						1,369,151						828,496
Payments under credit facility						(1,301,146)						(656,818)
Payments on other long-term debt						(2,079)						(857)
Net borrowings of short-term debt						(15,703)						(4,247)
Deferred financing costs						(48)						—
Payments for contingent consideration liabilities						(1,514)						(263)
Distributions to non-controlling interests						(538)						(1,129)
Payments related to tax withholding for share-based compensation						(11,252)						(23,921)
Payments of dividends						(10,842)						(8,798)
Repurchase of common stock						(9,479)						(19,474)
Net cash provided by financing activities						16,550						112,989
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash						378						11
Net increase in cash, cash equivalents and restricted cash						8,949						15,807
Cash, cash equivalents and restricted cash, beginning of period						231,887						186,808
Cash, cash equivalents and restricted cash, end of period						$	240,836					$	202,615

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

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)

																											Accumulated
															Additional												Other												Total						Non-
			Common Stock												Paid-In						Retained						Comprehensive						Treasury						Stockholders’						Controlling						Total
			Shares						Amount						Capital						Earnings						Income (Loss)						Stock						Equity						Interests						Equity
Balance, December 31, 2021			142,633,934						$	2					$	2,615,410					$	3,714,843					$	(237,689)					$	(980,265)					$	5,112,301					$	4,620					$	5,116,921
Other comprehensive income, net of taxes			—						—						—						—						13,275						—						13,275						—						13,275
Stock-based compensation activity			1,216,468						—						21,830						—						—						(73,643)						(51,813)						—						(51,813)
Common stock repurchases			(84,798)						—						—						—						—						(10,426)						(10,426)						—						(10,426)
Dividends declared ($0.07 per share)			—						—						—						(10,459)						—						—						(10,459)						—						(10,459)
Distributions to non-controlling interests			—						—						—						—						—						—						—						(538)						(538)
Net income			—						—						—						84,641						—						—						84,641						387						85,028
Balance, March 31, 2022			143,765,604						$	2					$	2,637,240					$	3,789,025					$	(224,414)					$	(1,064,334)					$	5,137,519					$	4,469					$	5,141,988

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

QUANTA SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)

																											Accumulated
															Additional												Other												Total						Non-
			Common Stock												Paid-In						Retained						Comprehensive						Treasury						Stockholders’						Controlling						Total
			Shares						Amount						Capital						Earnings						Income (Loss)						Stock						Equity						Interests						Equity
Balance, December 31, 2020			138,300,191						$	2					$	2,170,026					$	3,264,967					$	(232,997)					$	(857,817)					$	4,344,181					$	4,791					$	4,348,972
Other comprehensive income, net of taxes			—						—						—						—						8,539						—						8,539						—						8,539
Stock-based compensation activity			1,368,739						—						13,702						—						—						(55,101)						(41,399)						—						(41,399)
Common stock repurchases			(222,081)						—						—						—												(17,710)						(17,710)						—						(17,710)
Dividends declared ($0.06 per share)			—						—						—						(8,429)						—						—						(8,429)						—						(8,429)
Distributions to non-controlling interests			—						—						—						—						—						—						—						(1,129)						(1,129)
Net income			—						—						—						89,761						—						—						89,761						1,558						91,319
Balance, March 31, 2021			139,446,849						$	2					$	2,183,728					$	3,346,299					$	(224,458)					$	(930,628)					$	4,374,943					$	5,220					$	4,380,163

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

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BUSINESS AND ORGANIZATION:

Quanta Services, Inc. (together with its subsidiaries, Quanta) is a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric and gas utility, renewable energy, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. Quanta reports its results under three reportable segments: (1) Electric Power Infrastructure Solutions, (2) Renewable Energy Infrastructure Solutions and (3) Underground Utility and Infrastructure Solutions.

Electric Power Infrastructure Solutions Segment

The Electric Power Infrastructure Solutions segment provides comprehensive network solutions to customers involved in the electric power industry. Services include design, procurement, new construction, upgrade and repair and maintenance for electric power transmission and distribution infrastructure, both overhead and underground, and substation facilities, along with other engineering and technical services. This includes solutions that support the implementation of upgrades by utilities to modernize and harden the electric power grid in order to ensure its safety and enhance reliability. In addition, this segment provides emergency restoration services, including the repair of infrastructure damaged by fire and inclement weather; the energized installation, maintenance and upgrade of electric power infrastructure utilizing bare hand and hot stick methods and Quanta’s robotic arm techniques; and the installation of “smart grid” technologies on electric power networks. This segment also provides comprehensive design and construction solutions to wireline and wireless communications companies, cable multi-system operators and other customers within the communications industry, including services in connection with 5G wireless deployment; and the design, installation, maintenance and repair services related to commercial and industrial wiring. Additionally, this segment provides aviation services primarily for the utility industry, including the transportation of line workers, the setting of poles and towers and the stringing of wires. The majority of the financial results of Quanta’s postsecondary educational institution, which specializes in pre-apprenticeship training, apprenticeship training and specialized utility task training for electric workers, as well as training for the gas distribution and communications industries, are also included in the segment.

Renewable Energy Infrastructure Solutions Segment

The Renewable Energy Infrastructure Solutions segment provides comprehensive infrastructure solutions to customers involved in the renewable energy industry. Services include engineering, procurement, new construction, repowering and repair and maintenance for renewable generation facilities, such as utility-scale wind, solar, and hydropower generation facilities and battery storage facilities, as well as engineering and construction services for substations and switchyards, transmission and other electrical infrastructure needed to interconnect and transmit renewable energy generation and battery storage facilities.

Underground Utility and Infrastructure Solutions Segment

The Underground Utility and Infrastructure Solutions segment provides comprehensive infrastructure solutions for customers involved in the development, transportation, distribution, storage and processing of natural gas, oil and other products. Services include design, engineering, procurement, new construction, upgrade and repair and maintenance for natural gas systems for gas utility customers, as well as pipeline protection, integrity testing, rehabilitation and replacement services. Quanta also provides catalyst replacement services, high-pressure and critical-path turnaround services, instrumentation and electrical services, piping, fabrication and storage tank services for the midstream and downstream industrial energy markets. This segment also provides engineering and construction services for pipeline systems, storage systems and compressor and pump stations and the fabrication of pipeline support systems and related structures and facilities, as well as trenching, directional boring and mechanized welding services related to the services described above and in connection with Quanta’s electric power infrastructure services. This segment also provides engineering, construction and maintenance services for energy transition and carbon-reduction related projects, such as alternative fuel facilities, carbon capture systems and hydrogen facilities.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES:

Interim Condensed Consolidated Financial Information

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

Quanta recommends that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto of Quanta and its consolidated subsidiaries. Certain of Quanta’s accounting policies are included in Note 2 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of Quanta’s 2021 Annual Report.

3. NEW ACCOUNTING PRONOUNCEMENTS:

New Accounting Pronouncement Not Yet Adopted

In October 2021, FASB issued an update that requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with FASB ASC 606 (Revenue from Contracts with Customers). At the acquisition date, an acquirer should account for the related contract revenue in accordance with FASB ASC 606 as if it had originated the contracts. This update is effective for interim and annual periods beginning after December 15, 2022, with amendments generally applied prospectively. Quanta will adopt this update by January 1, 2023. This update is not expected to have a material impact at the time of adoption, but it could impact the valuation of contract assets and contract liabilities related to business combinations that occur subsequent to adoption.

4. REVENUE RECOGNITION AND RELATED BALANCE SHEET ACCOUNTS:

Contracts

Quanta’s services may be provided pursuant to master service agreements (MSAs), repair and maintenance contracts and fixed price and non-fixed price construction contracts. These contracts are classified into three categories.

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

						Three Months Ended March 31,
						2022												2021
By contract type:
Fixed price contracts						$	1,689,635					42.6		%				$	1,064,247					39.4		%
Unit-price contracts						1,357,602						34.2		%				976,562						36.1		%
Cost-plus contracts						918,288						23.2		%				662,772						24.5		%
Total revenues						$	3,965,525					100.0		%				$	2,703,581					100.0		%

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

						Three Months Ended March 31,
						2022												2021
By primary geographic location:
United States						$	3,323,969					83.8		%				$	2,206,116					81.6		%
Canada						550,905						13.9		%				413,846						15.3		%
Australia						55,201						1.4		%				55,107						2.0		%
Others						35,450						0.9		%				28,512						1.1		%
Total revenues						$	3,965,525					100.0		%				$	2,703,581					100.0		%

Under fixed-price contracts, as well as unit-price contracts with more than an insignificant amount of partially completed units, revenue is recognized as performance obligations are satisfied over time, with the percentage of completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately 51.2% and 44.4% of Quanta’s revenues recognized during the three months ended March 31, 2022 and 2021 were associated with this revenue recognition method.

Performance Obligations

As of March 31, 2022 and December 31, 2021, the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations was approximately $6.84 billion and $5.90 billion, with 78.4% and 81.8% expected to be recognized in the subsequent twelve months. These amounts represent management’s estimates of the consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work had not yet begun as of such dates. For purposes of calculating remaining performance obligations, Quanta includes all estimated revenues attributable to consolidated joint ventures and variable interest entities, revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized and revenues from change orders and claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations are potential orders under MSAs and non-fixed price contracts expected to be completed within one year.

Contract Estimates and Changes in Estimates

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

Additionally, changes in cost estimates on certain contracts may result in the issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. Quanta recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reasonably estimated. As of March 31, 2022 and December 31, 2021, Quanta had recognized revenues of $443.7 million and $367.8 million related to change orders and claims included as contract price adjustments that were in the process of being negotiated in the normal course of business. The largest component of the revenues recognized is associated with change orders and claims arising from delays, administrative requirements and labor issues on two transmission projects in Canada that negatively impacted productivity, which were primarily attributable to governmental requirements and worksite restrictions related to the COVID-19 pandemic. Additionally, during the third quarter of 2021, both of the projects were negatively impacted by unrelated wildfires in the region, and one project was also negatively impacted by acceleration of the project timeline. Quanta believes that the contracts for these projects entitle it to recover certain amounts associated with these delays, which are the subject of certain change orders and claims described above.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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

Revenues were positively impacted by $33.0 million and $54.3 million during the three months ended March 31, 2022 and 2021 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2021 and 2020.

Operating results for the three months ended March 31, 2022 were favorably impacted by $29.3 million, or 5.3%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of December 31, 2021. The overall favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion.

Operating results for the three months ended March 31, 2021 were favorably impacted by $42.9 million, or 11.5%, of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress as of December 31, 2020. The overall favorable impact resulted from net positive changes in estimates across a large number of projects, primarily as a result of favorable performance and successful mitigation of risks and contingencies as the projects progressed to completion. Partially offsetting the net favorable impact to gross profit for the three months ended March 31, 2021 was a negative change in estimate of $14.8 million associated with a communications project in the United States that arose from challenges with subcontractor performance and site conditions. This project has a total contract value of $117.9 million and was approximately 63% complete as of March 31, 2022.

Contract Assets and Liabilities

Contract assets and liabilities consisted of the following (in thousands):

						March 31, 2022						December 31, 2021
Contract assets						$	975,342					$	803,453
Contract liabilities						$	800,578					$	802,872

Contract assets and liabilities fluctuate period to period based on various factors, including, among others, changes in the number and size of projects in progress at period end; variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings, or deferred billings; and unapproved change orders and contract claims recognized as revenues. The increase in contract assets from December 31, 2021 to March 31, 2022 was primarily due to increased working capital requirements and the timing of billings related to progress on the two large transmission projects in Canada described above, as well as the recognition of certain change orders and claims for such projects. Both of the projects were negatively impacted by delays and labor issues related to the COVID-19 pandemic and unrelated wildfires in the region, and one project was also negatively impacted by acceleration of the project timeline, all of which resulted in change orders and an increase in contract assets. This project was substantially complete as of March 31, 2022.

During the three months ended March 31, 2022 and 2021, Quanta recognized revenue of approximately $507.2 million and $245.7 million related to contract liabilities outstanding as of December 31, 2021 and 2020.

Accounts Receivable, Allowance for Credit Losses and Concentrations of Credit Risk

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

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

potential effects from the uncertainties and challenges in the energy market and overall economy caused by the COVID-19 pandemic.

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

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

						Three Months Ended
						March 31,
						2022						2021
Balance at beginning of period						$	49,749					$	16,546
Provision for credit losses						133						43
Direct write-offs charged against the allowance (recoveries of uncollectible receivables)						34						(140)
Balance at end of period						$	49,916					$	16,449

Provision for credit losses is included in “Selling, general and administrative expenses” in the consolidated statements of operations.

Quanta is subject to concentrations of credit risk related primarily to its cash and cash equivalents and its net receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and contract assets net of advanced billings with the same customer. Quanta grants credit under normal payment terms, generally without collateral, to its customers, which primarily include utilities, renewable energy developers, communications providers, industrial companies and energy delivery companies located primarily in the United States, Canada and Australia. One customer represented 13% of Quanta’s consolidated net receivable position as of March 31, 2022 and 11% of Quanta’s consolidated net receivable position as of December 31, 2021. Another customer, when combined with the net receivable position of a joint venture in which such customer owns a 50% interest, also represented 10% of Quanta’s consolidated net receivable position as of March 31, 2022 and 11% of Quanta’s consolidated net receivable position as of December 31, 2021. The same customer represented 11% of Quanta’s consolidated revenues for the three months ended March 31, 2022. The projects associated with these customers were primarily in Quanta’s Electric Power Infrastructure Solutions and Renewable Energy Infrastructure Solutions segments and are the same customers on the two large transmission projects in Canada described above. No customers represented 10% or more of Quanta’s consolidated revenues for the three months ended March 31, 2021.

Certain contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts are generally due upon completion of the contract and acceptance of the project by the customer. Based on Quanta’s experience in recent years, the majority of these retainage balances are expected to be collected within approximately one year. Retainage balances with expected settlement dates within one year of March 31, 2022 and December 31, 2021 were $353.6 million and $406.7 million, which are included in “Accounts receivable.” Retainage balances with expected settlement dates beyond one year were $108.4 million and $93.9 million and are included in “Other assets, net.”

Quanta recognizes unbilled receivables for non-fixed price contracts within “Accounts receivable” in certain circumstances, such as when revenues have been earned and recorded but the amount cannot be billed under the terms of the contract until a later date or when amounts arise from routine lags in billing (for example, work completed during one month but not billed until the next month). These balances do not include revenues recognized for work performed under fixed-price contracts, as these amounts are recorded as “Contract assets.” As of March 31, 2022 and December 31, 2021, unbilled receivables included in “Accounts receivable” were $792.2 million and $679.0 million. The increase in unbilled receivables was primarily due to the ramp up of work and certain delays in billing related to certain large customers. Quanta also recognizes unearned revenues for non-fixed price contracts when cash is received prior to recognizing revenues for the related performance obligation. Unearned revenues, which are included in “Accounts payable and accrued expenses,” were $47.2 million and $51.8 million as of March 31, 2022 and December 31, 2021.

QUANTA SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

5. SEGMENT INFORMATION:

Beginning with the three months ended December 31, 2021, Quanta reports results under three reportable segments: (1) Electric Power Infrastructure Solutions, (2) Renewable Energy Infrastructure Solutions and (3) Underground Utility and Infrastructure Solutions. The Renewable Energy Infrastructure Solutions segment was added primarily due to the acquisition of Blattner Holding Company and its operating subsidiaries (collectively, Blattner) on October 13, 2021. For additional information regarding this acquisition, see Note 6. In conjunction with this change, certain prior period amounts have been recast to conform to this new segment reporting structure. This structure is generally based on the broad end-user markets for Quanta’s services. See Note 1 for additional information regarding Quanta’s reportable segments.

Quanta’s segment results are derived from the types of services provided across its operating companies in each of its end user markets. Quanta’s entrepreneurial business model allows multiple operating companies to serve the same or similar customers and to provide a range of services across end user markets. Reportable segment information, including revenues and operating income by type of work, is gathered from each operating company for the purpose of evaluating segment performance in support of Quanta’s market strategies. Classification of operating company revenues by type of work for segment reporting purposes can require judgment on the part of management. Quanta’s operating companies may perform joint projects for customers in multiple industries, deliver multiple types of services under a single customer contract or provide service offerings to various industries. For example, Quanta performs joint trenching projects to install distribution lines for electric power and natural gas customers.

In addition, integrated operations and common administrative support for Quanta’s operating companies require that certain allocations be made to determine segment profitability, including allocations of corporate shared and indirect operating costs as well as general and administrative costs. Certain corporate costs are not allocated, including facility costs, acquisition and integration 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.

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

						Three Months Ended
						March 31,
						2022						2021
Revenues:
Electric Power Infrastructure Solutions						$	2,138,697					$	1,676,046
Renewable Energy Infrastructure Solutions						875,632						384,074
Underground Utility and Infrastructure Solutions						951,196						643,461
Consolidated revenues						$	3,965,525					$	2,703,581
Operating income (loss):
Electric Power Infrastructure Solutions (1)						$	203,419					$	153,739
Renewable Energy Infrastructure Solutions						69,942						45,296
Underground Utility and Infrastructure Solutions						48,175						8,813
Corporate and Non-Allocated Costs (2)						(204,020)						(94,119)
Consolidated operating income						$	117,516					$	113,729
Depreciation:
Electric Power Infrastructure Solutions						$	36,779					$	34,404
Renewable Energy Infrastructure Solutions						8,233						2,241
Underground Utility and Infrastructure Solutions						20,938						21,087
Corporate and Non-Allocated Costs						5,004						4,375
Consolidated depreciation						$	70,954					$	62,107

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

(2) Corporate and Non-Allocated Costs for the three months ended March 31, 2022 and 2021 included amortization expense of $115.8 million and $21.4 million and non-cash stock-based compensation of $22.4 million and $18.7 million.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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

Foreign Operations

During the three months ended March 31, 2022 and 2021, Quanta derived $641.6 million and $497.5 million of its revenues from foreign operations. Of Quanta’s foreign revenues, 86% and 83% were earned in Canada during the three months ended March 31, 2022 and 2021. In addition, Quanta held property and equipment of $331.2 million and $338.1 million in foreign countries, primarily Canada, as of March 31, 2022 and December 31, 2021.

6. ACQUISITIONS:

The results of operations of acquired businesses have been included in Quanta’s consolidated financial statements since the respective acquisition dates. Quanta did not acquire any businesses during the three months ended March 31, 2022.

On October 13, 2021, Quanta completed the acquisition of Blattner, a large and leading utility-scale renewable energy infrastructure solutions provider that is located in and primarily operates in North America. Blattner provides comprehensive solutions to customers in the renewable energy industry, which generally include front-end engineering, procurement, project management and construction services for wind, solar and energy storage projects. Consideration for this acquisition included $2.43 billion paid or payable in cash, which includes certain post-closing adjustments through March 31, 2022, and 3,326,955 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 the acquisition remains subject to certain remaining post-closing adjustments that are in the process of being completed, including with respect to net working capital (inclusive of cash) and certain assumed liabilities. Additionally, the former owners of Blattner are eligible to receive potential payment of up to $300.0 million of contingent consideration, payable to the extent the acquired business achieves certain financial performance targets each fiscal year over a three-year period beginning in January 2022. Based on the estimated fair value of the contingent consideration, Quanta recorded a $125.6 million liability as of the date of the acquisition. As of March 31, 2022, the fair value of the contingent consideration liability was $137.5 million, including accretion of $4.2 million recorded in the three months ended March 31, 2022. Contingent consideration is earned based on performance during each year of the three-year performance period ending on December 31, 2024, and amounts earned are payable in cash after the end of the applicable performance year. Quanta may defer payment of earned contingent consideration amounts at its sole discretion, until after the end of the entire three-year performance period; however, any deferred amounts will accrue interest at five percent per annum until paid. Blattner’s results are included in Quanta’s consolidated financial statements in the Renewable Energy Infrastructure Solutions segment since the acquisition date.

During the year ended December 31, 2021, Quanta also acquired the following businesses: three businesses located in the United States that provide electric power construction and related services; a communications services business located in the United States that performs data center connection services; a business located in the United States that designs, develops and holds a certification for the manufacture of personal protective breathing equipment and related monitoring devices primarily used in the refining and petrochemical industries, including in connection with catalyst services; a business that provides turnaround and catalyst change-out services to the refining and petrochemical industries primarily in the United States and Canada; a business located in Canada that provides front-end land services for infrastructure development projects in Canada and the United States; a business located in the United States that primarily provides horizontal directional drilling services; and a communications services business located in the United States. The aggregate consideration for these acquisitions was $328.8 million paid or payable in cash (subject to certain adjustments) and 187,093 shares of Quanta common stock, which had a fair value of $16.9 million as of the applicable acquisition dates. The results of the manufacturing business and the turnaround and catalyst change-out business are generally included in the Underground Utility and Infrastructure Solutions segment and the results of the remaining businesses are generally included in the Electric Power Infrastructure Solutions segment.

Purchase Price Allocation

Quanta is finalizing its fair value assessments for the acquired assets and assumed liabilities related to businesses acquired subsequent to March 31, 2021, and further adjustments to the purchase price allocations may occur. As of March 31, 2022, the estimated fair values of the net assets acquired were preliminary, with possible updates primarily related to tax estimates and the finalization of closing working capital adjustments. The aggregate consideration paid or payable for

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

businesses acquired between March 31, 2021 and March 31, 2022 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of $246.4 million to net tangible assets, $1.53 billion to identifiable intangible assets and $1.47 billion to goodwill.

Goodwill represents the amount by which the purchase price for an acquired business exceeds the net fair value of the assets acquired and liabilities assumed. Goodwill, included in the Renewable Energy Infrastructure Solutions Segment, increased by $58.9 million during the three months ended March 31, 2022 as a result of certain post-closing consideration adjustments associated with Quanta’s acquisition of Blattner. The acquisitions completed in the year ended December 31, 2021 strategically expanded Quanta’s domestic renewable energy infrastructure solutions, domestic and international electric power infrastructure solutions, domestic communications service offerings, and domestic and international underground utility and infrastructure solutions, which Quanta believes contributes to the recognition of the goodwill. Approximately $1.5 billion of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in the year ended December 31, 2021.

Contingent Consideration

As described above, certain business acquisitions have contingent consideration liabilities associated with the transactions. Aggregate fair values of these outstanding contingent consideration liabilities and their classification in the accompanying consolidated balance sheets were as follows (in thousands):

						March 31, 2022						December 31, 2021
Accounts payable and accrued expenses						$	1,979					$	2,591
Insurance and other non-current liabilities						144,685						140,482
Total contingent consideration liabilities						$	146,664					$	143,073

As of March 31, 2022, the fair value of the contingent consideration liability for the Blattner acquisition is $137.5 million as discussed above. Quanta’s aggregate contingent consideration liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, accretion in present value and changes in the estimated fair value of amounts owed based on the performance of acquired businesses in post-acquisition periods. These changes are reflected in “Change in fair value of contingent consideration liabilities” in the accompanying consolidated statements of operations. The majority of Quanta’s outstanding contingent consideration liabilities are subject to a maximum payment amount, which totaled $312.2 million as of March 31, 2022.

Pro Forma Results of Operations

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

												Three Months Ended
												March 31,
												2021
Revenues												$	3,317,615
Gross profit												$	499,561
Selling, general and administrative expenses												$	(306,426)
Amortization of intangible assets												$	(67,575)
Net income												$	96,008
Net income attributable to common stock												$	94,450
Earnings per share attributable to common stock:
Basic												$	0.66
Diluted												$	0.64

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The pro forma combined results of operations for the three months ended March 31, 2021 were prepared by adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2021 as if they occurred January 1, 2020. These pro forma combined historical results were adjusted for the following: a reduction of interest and other financing expenses as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest and other financing expenses as a result of the cash consideration paid and debt incurred by Quanta for the purpose of financing the acquisition of Blattner; an increase in amortization expense due to the intangible assets recorded; elimination of inter-company sales; changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies; an increase in the number of outstanding shares of Quanta common stock; reclassifications to conform the acquired businesses’ presentation to Quanta’s accounting policies; and elimination of certain transaction costs incurred by Blattner and directly related to the acquisition of the business by Quanta. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs incurred by Quanta or any cost savings or other synergies that resulted or may result from the acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.

There were nominal amounts of revenues and income before income taxes included in Quanta’s condensed consolidated results of operations for the three months ended March 31, 2021 related to the acquisition completed in the three months ended March 31, 2021.

7. GOODWILL AND OTHER INTANGIBLE ASSETS:

Goodwill

Goodwill, net of accumulated impairment losses, represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses and is stated at cost.

Quanta’s reporting units for the purpose of assessing goodwill impairment align with its three reportable segments. Goodwill is not amortized but is tested for impairment annually in the fourth quarter of the fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired. Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic conditions; declining financial performance; deterioration in the operational environment; an expectation of selling or disposing of a portion of a reporting unit; a significant change in market, management, business strategy or business climate; a loss of a significant customer; increased competition; a sustained decrease in share price; or a decrease in Quanta’s market capitalization below book value. Quanta did not identify any triggering events in and did not recognize any goodwill impairments for the three months ended March 31, 2022.

Intangible Assets

Quanta’s intangible assets include customer relationships; backlog; trade names; non-compete agreements; patented rights, developed technology, and process certifications; and curriculum, all of which are subject to amortization, as well as an engineering license, which is not subject to amortization. Quanta did not identify any triggering events in and did not recognize any intangible asset impairments for the three months ended March 31, 2022.

In connection with its annual goodwill assessment in 2021, Quanta also considered the sensitivity of its fair value estimates to changes in certain valuation assumptions, including with respect to reporting units within Quanta’s Underground Utility and Infrastructure Solutions segment that were negatively impacted by energy market challenges. In particular, two Canadian pipeline-related businesses were identified in the annual goodwill assessment to have an increased risk of goodwill impairment in the near and medium term. After taking into account a 10% decrease in fair value, these reporting units would have had fair values below their carrying amounts as of December 31, 2021. The aggregate goodwill and intangible asset balances for these two businesses totaled $77.4 million and $11.9 million as of March 31, 2022. Quanta will continue to monitor the goodwill associated with these reporting units, and should they suffer additional declines in actual or forecasted financial results, the risk of goodwill impairment would increase.

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(Unaudited)

8. INVESTMENTS IN AFFILIATES AND OTHER ENTITIES:

Investments in Affiliates and Other Entities

The carrying values for Quanta’s unconsolidated equity method investments were $123.3 million and $101.2 million as of March 31, 2022 and December 31, 2021 and are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. Quanta’s share of net income or losses of these investments is included within operating income in the accompanying condensed consolidated statements of operations when the investee is operationally integral to the operations of Quanta and is reported as “Equity in earnings (losses) of integral unconsolidated affiliates.” Quanta’s share of net income or losses for investments considered non-integral to the operations of Quanta is reported as “Other income (expense).”

Quanta’s equity method investment balance includes investments in various entities, one of which is Quanta’s 50% interest in LUMA Energy, LLC (LUMA), an integral equity method investment, with a carrying investment value of $39.9 million and $30.6 million as of March 31, 2022 and December 31, 2021. During 2020, the LUMA joint venture was selected for a 15-year operation and maintenance agreement to operate, maintain and modernize the approximately 18,000-mile electric transmission and distribution system in Puerto Rico, and in June 2021 completed the steps necessary to transition operation and maintenance of the system from the owner to LUMA and entered into an interim services agreement. During the interim services period covered by this agreement, LUMA receives a fixed annual management fee, payable in monthly installments, and is reimbursed for costs and expenses. The 15-year operation and maintenance period is scheduled to begin once the owner emerges from its Title III debt restructuring process, and during this period LUMA will continue to be reimbursed for costs and expenses and receive a fixed annual management fee, with the opportunity to receive additional annual performance-based incentive fees. LUMA has not assumed and will not assume ownership of the electric transmission and distribution system assets and is not responsible for operation of the power generation assets. Quanta’s ownership interest and participation in LUMA is accounted for as an equity method investment due to Quanta’s and its joint venture partner’s equal ownership of LUMA. LUMA is operationally integral to the operations of Quanta, and therefore Quanta’s share of LUMA’s net income or losses is reported within operating income in “Equity in earnings (losses) of integral unconsolidated affiliates.”

Also included within the equity method investments described above is a 44% interest in an entity that provides right-of-way solutions, including site preparation and clearing, materials delivery and installation and management of permitting requirements and traffic control, which Quanta acquired in October 2021. As of March 31, 2022, the carrying value of the investment was $33.7 million. This investment is operationally integral to the operations of Quanta, and therefore Quanta’s share of the entity’s net income or losses is reported within operating income in “Equity in earnings (losses) of integral unconsolidated affiliates.”

As of March 31, 2022, Quanta had receivables of $54.9 million and payables of $62.0 million from its integral unconsolidated affiliates. During the three months ended March 31, 2022, Quanta had revenues of $25.1 million and costs of sales of $50.4 million from its integral unconsolidated affiliates.

As of March 31, 2022, the carrying value for an investment accounted for using the accounting guidance for equity securities with a readily determinable fair value was $83.1 million, which is described further below; and the carrying value for investments accounted for using the accounting guidance for equity securities without a readily determinable fair value was $28.1 million. This is compared to the carrying value of investments as of December 31, 2021 of $130.2 million for equity securities without readily determinable fair values. These amounts are included in “Other assets, net” in the accompanying condensed consolidated balance sheets.

During the three months ended March 31, 2021, Quanta acquired a preferred non-controlling interest in a broadband technology provider for $90.0 million. On March 29, 2022, pursuant to the terms of an agreement and plan of merger with a special purpose acquisition company, the broadband technology provider became Starry Group Holdings, Inc. (Starry), which became a publicly traded company in March 2022, and Quanta’s preferred equity interest converted to a common equity interest, without preferential liquidation rights, in the publicly traded company. Additionally, during the three months ended March 31, 2022, Quanta entered into a subscription agreement pursuant to which it acquired an additional common equity interest in the publicly traded company for $1.5 million. Quanta remeasured the fair value of this investment based on the market price of the publicly traded company’s stock as of March 31, 2022, which resulted in a $8.4 million decrease in the fair value of the investment balance to $83.1 million. The change in fair value was recorded within “Other income (expense), net” on Quanta’s condensed consolidated statements of operations for the three months ended March 31, 2022. Additionally, the shares of common equity held by Quanta in Starry remain subject to a lock-up period that restricts the transfer of such shares for 180 days after March 29, 2022.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

During the three months ended March 31, 2022, Quanta sold its non-controlling ownership interest in a technology company and recognized a gain of $6.7 million ($5.0 million, net of tax expense). The gain was recorded in “Other income (expense), net.”

During the three months ended March 31, 2021, Quanta also purchased, through its wholly-owned captive insurance company, certain real property, including associated buildings and facilities, that is being developed for its future corporate headquarters. A portion of this property is currently leased to third-party lessees and is expected to continue to be leased to third-party lessees in the future. As a result, an investment in real estate of $23.5 million was recognized at cost for the third-party leased portion of the property during the three months ended March 31, 2021, and the carrying amount of $23.2 million is included in “Other assets, net” in the accompanying condensed consolidated balance sheet as of March 31, 2022.

9. PER SHARE INFORMATION:

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

						Three Months Ended
						March 31,
						2022						2021
Amounts attributable to common stock:
Net income attributable to common stock						$	84,641					$	89,761
Weighted average shares:
Weighted average shares outstanding for basic earnings per share attributable to common stock						143,541						140,121
Effect of dilutive unvested non-participating stock-based awards						4,541						4,326
Weighted average shares outstanding for diluted earnings per share attributable to common stock						148,082						144,447

Basic and diluted earnings per share attributable to common stock are computed using the weighted average number of shares of common stock outstanding during the applicable period. Additionally, unvested stock-based awards that contain non-forfeitable rights to dividends or dividend equivalents (participating securities) have been included in the calculation of basic and diluted earnings per share attributable to common stock for the portion of the periods that the awards were outstanding. Weighted average shares outstanding for basic and diluted earnings per share attributable to common stock included 0.3 million and 1.1 million weighted average participating securities for the three months ended March 31, 2022 and 2021.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

10. DEBT OBLIGATIONS:

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

						March 31, 2022						December 31, 2021
0.950% Senior Notes due October 2024						$	500,000					$	500,000
2.900% Senior Notes due October 2030						1,000,000						1,000,000
2.350% Senior Notes due January 2032						500,000						500,000
3.050% Senior Notes due October 2041						500,000						500,000
Borrowings under senior credit facility						1,272,879						1,199,841
Other long-term debt						86,421						64,800
Finance leases						3,341						2,546
Unamortized discount and debt issuance costs related to senior notes and term loan						(28,365)						(29,295)
Total long-term debt obligations						3,834,276						3,737,892
Less — Current maturities of long-term debt						21,865						13,418
Total long-term debt obligations, net of current maturities						$	3,812,411					$	3,724,474

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

						March 31, 2022						December 31, 2021
Short-term debt						$	—					$	15,748
Current maturities of long-term debt						21,865						13,418
Current maturities of long-term debt and short-term debt						$	21,865					$	29,166

Senior Notes

The interest amounts due on Quanta’s senior notes are set forth below (dollars in thousands).

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

Senior Credit Facility

The credit agreement for Quanta’s senior credit facility (the credit agreement) provides for a $750.0 million term loan facility and aggregate revolving commitments of $2.64 billion, with a maturity date of October 8, 2026. Borrowings under the senior credit facility and the applicable interest rates were as follows (dollars in thousands):

						Three Months Ended
						March 31,
						2022						2021
Maximum amount outstanding under the senior credit facility during the period						$	1,451,597					$	363,054
Average daily amount outstanding under the senior credit facility						$	1,256,150					$	214,389
Weighted-average interest rate of the senior credit facility						1.71		%				2.18		%

The credit agreement contains certain covenants, including, as of the end of any fiscal quarter of Quanta, (i) a maximum Consolidated Leverage Ratio (as defined in the credit agreement) of 3.5 to 1.0 (except that in connection with certain permitted acquisitions in excess of $200.0 million, 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 credit agreement) of 3.0 to 1.0. As of March 31, 2022, Quanta was in compliance with all of the financial covenants under the credit agreement.

QUANTA SERVICES, INC. AND SUBSIDIARIES

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(Unaudited)

Term Loans. As of March 31, 2022, Quanta had $750.0 million outstanding under its term loan facility. Quanta is required to make quarterly principal payments on the first business day of each January, April, July and October, beginning in January 2023, on outstanding borrowings under the term loan facility in an amount equal to $4.7 million per quarter in 2023 and 2024, $9.4 million per quarter in 2025 and $18.8 million per quarter in 2026. The aggregate remaining principal amount outstanding for the new term loan facility must be paid on the maturity date of the senior credit facility.

Revolving Loans. As of March 31, 2022, Quanta had $522.9 million of outstanding revolving loans under the senior credit facility. Of the total outstanding borrowings, $135.0 million were denominated in U.S. dollars, $343.0 million were denominated in Canadian dollars and $44.9 million were denominated in Australian dollars. As of March 31, 2022, Quanta also had $324.1 million of letters of credit issued under the senior credit facility, of which $241.3 million were denominated in U.S. dollars and $82.8 million were denominated in currencies other than the U.S. dollar, primarily Canadian dollars. As of March 31, 2022, subject to the applicable sublimits and other terms and conditions, the remaining $1.79 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.

Deferred Financing Costs. As of March 31, 2022 and December 31, 2021, capitalized deferred financing costs, net of accumulated amortization, related to Quanta’s revolving loans under its senior credit facility were $9.5 million and $10.1 million.

11. LEASES:

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

									Three Months Ended
									March 31,
Lease cost			Classification						2022						2021
Finance lease cost:
Amortization of lease assets			Depreciation (1)						$	440					$	244
Interest on lease liabilities			Interest and other financing expenses						27						27
Operating lease cost			Cost of services and Selling, general and administrative expenses						24,877						27,776
Short-term and variable lease cost (2)			Cost of services and Selling, general and administrative expenses						219,299						157,899
Total lease cost									$	244,643					$	185,946

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

(2) Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant.

Quanta has entered into arrangements with certain related parties to lease certain real property and facilities. Typically, the parties are employees of Quanta who are also the former owners of businesses acquired by Quanta, and the real properties and facilities continue to be utilized by Quanta subsequent to the acquisitions. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to 10 years, subject to renewal options. Related party lease expense was $3.6 million and $4.8 million for the three months ended March 31, 2022 and 2021.

Certain of Quanta’s equipment rental agreements contain purchase options pursuant to which the purchase price is offset by a portion of the rental payments. When these purchase options are exercised and a substantive benefit is deemed to be transferred to a third-party lessor, the transaction is deemed to be a financing transaction for accounting purposes, which results in the recognition of an asset equal to the purchase price in “Property, plant and equipment, net of accumulated depreciation,” and a corresponding liability in “Current maturities of long-term debt and short-term debt” and “Long-term debt, net of current maturities.” As of March 31, 2022 and December 31, 2021, the assets recorded related to these financing transactions, net of accumulated depreciation, totaled $76.2 million and $53.9 million.

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

						As of March 31, 2022
						Operating Leases						Finance Leases						Total
Remainder of 2022						$	65,288					$	1,056					$	66,344
2023						68,263						1,165						69,428
2024						47,616						682						48,298
2025						34,187						363						34,550
2026						23,408						235						23,643
Thereafter						28,401						7						28,408
Total future minimum operating and finance lease payments						267,163						3,508						270,671
Less imputed interest						(19,833)						(167)						(20,000)
Total lease liabilities						$	247,330					$	3,341					$	250,671

Future minimum lease payments for short-term leases, which are not recorded in the condensed consolidated balance sheets due to Quanta’s accounting policy election, were $16.5 million as of March 31, 2022. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future rental amounts.

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

						As of March 31, 2022
Weighted average remaining lease term (in years):
Operating leases						4.31
Finance leases						3.11
Weighted average discount rate:
Operating leases						3.6		%
Finance leases						3.2		%

Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of March 31, 2022, the maximum guaranteed residual value of this equipment was $951.1 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.

As of March 31, 2022, Quanta entered into a real estate lease, that has not yet commenced, but for which Quanta expects to exercise a purchase option in 2022 in the amount of $53.7 million.

12. INCOME TAXES:

Quanta’s effective tax rates for the three months ended March 31, 2022 and 2021 were 7.2% and 13.1%. Quanta’s effective tax rate for the three months ended March 31, 2022 and 2021 was impacted by the recognition of $20.3 million and $18.0 million of tax benefits resulting from non-cash stock-based compensation awards vesting at higher fair market value than their grant date fair value.

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

As of March 31, 2022, the total amount of unrecognized tax benefits relating to uncertain tax positions was $40.2 million, an increase of $2.5 million from December 31, 2021. The increase resulted primarily from a $2.5 million increase in reserves for uncertain tax positions expected to be taken in 2022. Quanta’s consolidated federal income tax return for tax year 2019 is

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currently under examination by the Internal Revenue Services (IRS), and Quanta’s consolidated federal income tax returns for tax years 2017, 2018, 2020 and 2021 remain open to examination by the IRS, as these statute of limitations periods have not yet expired. Additionally, various state and foreign tax returns filed by Quanta and certain subsidiaries for multiple periods remain under examination by various U.S. state and foreign tax authorities. Quanta does not consider any state in which it does business to be a major tax jurisdiction. Quanta believes it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to $8.1 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods.

13. EQUITY:

Stock repurchases

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

Quarter ended:						Shares						Amount
March 31, 2022						85						$	10,426
December 31, 2021						—						$	—
September 30, 2021						185						$	16,828
June 30, 2021						314						$	29,450
March 31, 2021						222						$	17,710

Quanta’s policy is to record a stock repurchase as of the trade date of the transaction; however, the payment of cash related to the repurchase is made on the settlement date of the transaction. During the three months ended March 31, 2022 and 2021, cash payments related to stock repurchases were $9.5 million and $19.5 million. Repurchases may be implemented through open market repurchases or privately negotiated transactions, at management’s discretion, based on market and business conditions, applicable contractual and legal requirements, including restrictions under Quanta’s senior credit facility, and other factors. Quanta is not obligated to acquire any specific amount of common stock, and the repurchase program may be modified or terminated by Quanta’s Board of Directors at any time at its sole discretion and without notice.

Dividends

Quanta declared and paid the following cash dividends and cash dividend equivalents during 2021 and the first three months of 2022 (in thousands, except per share amounts):

Declaration						Record						Payment						Dividend						Dividends
Date						Date						Date						Per Share						Declared
March 30, 2022						April 11, 2022						April 18, 2022						$	0.07					$	10,459
December 1, 2021						January 4, 2022						January 14, 2022						$	0.07					$	10,363
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

14. STOCK-BASED COMPENSATION:

Quanta has stock-based compensation awards outstanding under two equity incentive plans, the Quanta Services, Inc. 2011 Omnibus Equity Incentive Plan and the Quanta Services, Inc. 2019 Omnibus Equity Incentive Plan. For descriptions and further information regarding these plans, refer to Note 14 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2021 Annual Report.

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Restricted Stock Units (RSUs) to be Settled in Common Stock

A summary of the activity for RSUs to be settled in common stock for the three months ended March 31, 2022 and 2021 is as follows (RSUs in thousands):

			2022												2021
			RSUs						Weighted Average Grant Date Fair Value (Per Unit)						RSUs						Weighted Average Grant Date Fair Value (Per Unit)
Unvested at January 1			3,880						$61.64						3,869						$37.57
Granted			768						$110.24						898						$82.21
Vested			(1,177)						$48.50						(1,334)						$36.85
Forfeited			(38)						$63.66						(42)						$37.37
Unvested at March 31			3,433						$77.09						3,391						$49.69

The grant date fair value for RSUs to be settled in common stock is based on the market value of Quanta common stock on the date of grant. The approximate fair value of RSUs that vested during the three months ended March 31, 2022 and 2021 was $132.9 million and $111.2 million.

During the three months ended March 31, 2022 and 2021, Quanta recognized $19.5 million and $15.1 million of non-cash stock compensation expense related to RSUs to be settled in common stock. Such expense is recorded in “Selling, general and administrative expenses.” As of March 31, 2022, there was $195.3 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 4.04 years.

Performance Stock Units (PSUs) to be Settled in Common Stock

A summary of the activity for PSUs to be settled in common stock for the three months ended March 31, 2022 and 2021 is as follows (PSUs in thousands):

			2022												2021
			PSUs						Weighted Average Grant Date Fair Value (Per Unit)						PSUs						Weighted Average Grant Date Fair Value (Per Unit)
Unvested at January 1			931						$47.27						1,047						$37.65
Granted			148						$119.04						172						$90.28
Vested			(334)						$40.15						(268)						$38.28
Forfeited			—						N/A						(11)						$36.90
Unvested at March 31			745						$64.69						940						$47.14

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

						2022						2021
Valuation date price based on March 2, 2022 and March 25, 2021 closing stock prices of Quanta common stock						$110.24						$83.48
Expected volatility						39		%				36		%
Risk-free interest rate						1.64		%				0.26		%
Term in years						2.83						2.77

During the three months ended March 31, 2022 and 2021, Quanta recognized $3.5 million and $3.6 million of non-cash stock compensation expense related to PSUs to be settled in common stock. Such expense is recorded in “Selling, general and administrative expenses.” As of March 31, 2022, there was $30.5 million of total unrecognized compensation expense related to unvested PSUs. This cost is expected to be recognized over a weighted average period of 2.09 years.

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During the three months ended March 31, 2022 and 2021, 0.7 million and 0.5 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs. The approximate fair values of PSUs earned during the three months ended March 31, 2022 and 2021 were $72.4 million and $45.2 million.

RSUs to be Settled in Cash

During the three months ended March 31, 2022 and 2021, compensation expense related to RSUs to be settled in cash was $3.7 million and $4.9 million. Such expense is recorded in “Selling, general and administrative expenses.” RSUs that are anticipated to be settled in cash are not included in the calculation of weighted average shares outstanding for earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid $8.6 million and $7.4 million to settle liabilities related to cash-settled RSUs in the three months ended March 31, 2022 and 2021. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $6.2 million and $11.1 million as of March 31, 2022 and December 31, 2021.

15. EMPLOYEE BENEFIT PLANS:

Collective Bargaining Agreements and Multiemployer Pension Plans

Certain of Quanta’s operating companies are parties to collective bargaining agreements with unions that represent certain of their employees. Quanta contributes to a number of multiemployer defined benefit pension plans pursuant to the terms of these collective bargaining agreements. For descriptions and further information regarding these plans and Quanta’s contributions, refer to Note 15 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2021 Annual Report.

Quanta 401(k) Plan

Quanta maintains a 401(k) plan pursuant to which employees who are not provided retirement benefits through a collective bargaining agreement may make contributions through payroll deductions. For descriptions and further information regarding this plan and Quanta’s contributions, refer to Note 15 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2021 Annual Report.

Deferred Compensation Plans

As of March 31, 2022 and December 31, 2021, the deferred compensation liability under Quanta’s deferred compensation plans, including amounts contributed by Quanta, was $74.8 million and $74.2 million, the majority of which was included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. To provide for future obligations related to these deferred compensation plans, Quanta has invested in corporate-owned life insurance (COLI) policies covering certain participants in the deferred compensation plans, the underlying investments of which are intended to be aligned with the investment alternatives elected by plan participants. The COLI policies are recorded at their cash surrender value, which is considered their fair market value, and as of March 31, 2022 and December 31, 2021, the fair market values were $72.4 million and $73.8 million and were included in “Other assets, net” in the accompanying condensed consolidated balance sheets.

During the three months ended March 31, 2022 and 2021, the fair market value of the COLI policies decreased $4.1 million and increased $1.6 million. These changes in fair market value of the COLI policies are recorded in “Other income (expense), net” and were largely offset by corresponding changes in the fair market value of the liabilities associated with Quanta’s deferred compensation plan, which are recorded in “Selling, general and administrative expenses.” During the three months ended March 31, 2022 and 2021, the fair market value of the deferred compensation liability decreased $3.9 million and increased $2.4 million.

16. COMMITMENTS AND CONTINGENCIES:

Legal Proceedings

Quanta is from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, property damage, breach of contract, negligence or gross negligence, environmental liabilities, wage and hour and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With

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respect to all such lawsuits, claims and proceedings, Quanta records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, Quanta discloses matters for which management believes a material loss is at least reasonably possible.

The assessment of whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success and taking into account, among other things, negotiations with claimants, discovery, settlements and payments, judicial rulings, arbitration and mediation decisions, advice of internal and external legal counsel, and other information and events pertaining to a particular matter. Costs incurred for litigation are expensed as incurred. Except as otherwise stated below, none of these proceedings are expected to have a material adverse effect on Quanta’s consolidated financial position, results of operations or cash flows. However, management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.

Peru Project Dispute

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

During the construction phase, the project experienced numerous challenges and delays, primarily related to issues which Quanta believes were outside of the control of and not attributable to Redes, including, among others, weather-related issues, local opposition to the project, permitting delays, the inability to acquire clear title to certain required parcels of land and other delays which Quanta believes were attributable to FITEL/PRONATEL. In response to various of these challenges and delays, Redes requested and received multiple extensions to certain contractual deadlines and relief from related liquidated damages. However, in April 2019, PRONATEL provided notice to Redes claiming that Redes was in default under the contracts due to the delays and that PRONATEL would terminate the contracts if the alleged defaults were not cured. Redes responded by claiming that it was not in default, as the delays were due to events not attributable to Redes, and therefore PRONATEL was not entitled to terminate the contracts. PRONATEL subsequently terminated the contracts for alleged cause prior to completion of Redes’ scope of work, exercised the on-demand performance bonds and advance payment bonds against Redes, and indicated its intention to claim damages, including a verbal allegation of approximately $45 million of liquidated damages under the contracts. In August 2020, Redes received a formal claim from PRONATEL for liquidated damages in the amount of approximately $43 million, which represents the U.S. dollar equivalent of the amount asserted based on the March 31, 2022 exchange rate.

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

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PRONATEL. In addition, PRONATEL alleges that Redes did not satisfy the contractual requirements for the transfer of the networks, which Redes disputes. In July 2021, Redes filed its statement of defense in reply to the counter memorial and counterclaims of PRONATEL and the MTC, in which it disputes all claims made by PRONATEL and the MTC and maintains the positions on its claims against PRONATEL and the MTC in the arbitration. In August 2021, PRONATEL and the MTC filed a rejoinder statement with their position on the merits and damages, which did not present any new claims, and in October 2021, Redes filed a rejoinder with respect to the counterclaims of PRONATEL and the MTC. The arbitration hearing on the merits occurred in the fourth quarter of 2021 and a decision is expected during 2022.

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

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

As of March 31, 2022, after taking into account the above charge, Quanta had a contract receivable of approximately $120 million related to the project which includes the approximately $87 million PRONATEL collected through exercise of the advance payment bonds.. The contract receivable from PRONATEL is included in “Other assets, net” in the accompanying condensed consolidated balance sheet as of March 31, 2022.

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

If Quanta is not successful in the pending arbitration proceedings, including the ICC arbitration proceeding held in the fourth quarter of 2021, this matter could result in an additional significant loss that could have a material adverse effect on Quanta’s consolidated results of operations and cash flows. However, based on the information currently available and the

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status of the pending arbitration proceedings, Quanta is not able to determine a range of reasonably possible additional loss, if any, with respect to this matter.

Maurepas Project Dispute

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

As of March 31, 2022, Quanta had recorded an accrual with respect to this matter, which represents its current estimated amount of probable loss. Based on the information currently available, including documentation received in the discovery process, Quanta estimates the range of additional reasonably possible loss in connection with this matter is between no additional loss and the amount claimed by Maurepas with respect to the alleged warranty defects and liquidated damages, less the currently accrued amount. Upon final resolution of this matter, any liquidated damages or warranty defect damages in excess of Quanta’s current loss accrual would be recorded as additional costs on the project.

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

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

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

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

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court, Quanta believes the maximum recoverable amount of attorneys’ fees and costs is approximately $17.3 million, and that such maximum amount would only be recoverable in the event Quanta’s appeal of the trial court’s rulings with respect to liability and damages is unsuccessful.

Hallen Acquisition Assumed Liability

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

As of March 31, 2022, Quanta had not recorded an accrual related to this matter. Hallen’s liabilities associated with this matter are expected to be covered under applicable insurance policies or contractual remedies negotiated by Quanta with the former owners of Hallen. If a loss becomes probable and estimable with respect to this matter, Quanta expects to accrue its estimated liability and a receivable in the same amount. However, the ultimate amount of liability in connection with this matter remains subject to uncertainties associated with pending litigation, including, among other things, the apportionment of liability among the defendants and other responsible parties and the likelihood and amount of potential damages claims. As a result, this matter could result in a loss that is in excess of, or not covered by, such insurance or contractual remedies, which could have a material adverse effect on Quanta’s consolidated financial condition, results of operations and cash flows.

Silverado Wildfire Matter

During 2022, two of Quanta’s subsidiaries have received tenders of defense and demands for preservation of evidence from Southern California Edison Company (SCE) related to lawsuits filed in April 2021, November 2021 and February 2022 against SCE and T-Mobile USA, Inc. (T-Mobile) in the Superior Court of California, County of Orange. The lawsuits generally assert property damage and related claims on behalf of certain individuals and subrogation claims on behalf of insurers relating to damages caused by a wildfire that began in October 2020 in Orange County, California (the Silverado Fire) and that is purported to have damaged approximately 13,000 acres. The lawsuits allege the Silverado Fire originated from utility poles in the area, generally claiming that each defendant failed to adequately maintain, inspect, repair or replace its overhead facilities, equipment and utility poles and remove vegetation in the vicinity; that the utility poles were overloaded with equipment from shared usage; and that SCE failed to de-energize its facilities during red flag warnings for a Santa Ana wind event. The lawsuits allege the Silverado Fire started when SCE and T-Mobile equipment contacted each other and note the Orange County Fire Department is investigating whether a T-Mobile lashing wire contacted an SCE overhead primary conductor in high winds. T-Mobile has filed cross-complaints against SCE alleging, among other things, that the ignition site of the Silverado Fire encompassed two utility poles replaced by SCE or a third party engaged by SCE, and that certain equipment, including T-Mobile’s lashing wire, was not sufficiently re-secured after the utility pole replacements. One of Quanta’s subsidiaries performed planning and other services related to the two utility poles, and another Quanta subsidiary replaced the utility poles and reattached the electrical and telecommunication equipment to the new utility poles in March 2019, approximately 19 months before the Silverado Fire. Pursuant to the general terms of a master services agreement and a master consulting services agreement between the Quanta subsidiaries and SCE, the subsidiaries agreed to defend and indemnify SCE against certain claims arising with respect to performance or nonperformance under the agreements. The SCE tender letters seek contractual indemnification and defense from Quanta’s subsidiaries for the claims asserted against SCE in the lawsuits and the T-Mobile cross-complaints.

Quanta’s subsidiaries intend to vigorously defend against the lawsuits, the T-Mobile cross-complaints and any other claims asserted in connection with the Silverado Fire. Quanta will continue to review additional information in connection with this matter as litigation and resolution efforts progress, and any such information may potentially allow Quanta to determine an estimate of potential loss, if any. As of March 31, 2022, Quanta had not recorded an accrual with respect to this matter, and Quanta is currently unable to reasonably estimate a range of reasonably possible loss, if any, because there are a number of unknown facts and legal considerations that may impact the amount of any potential liability. Quanta also believes that to the extent its subsidiaries are determined to be liable for any damages resulting from this matter, its insurance would be applied to

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any such liabilities over its deductible amount and its insurance coverage would be adequate to cover such potential liabilities. However, the ultimate amount of any potential liability and insurance coverage in connection with this matter remains subject to uncertainties associated with pending and potential future litigation.

Insurance

Quanta is insured for, among other things, employer’s liability, workers’ compensation, auto liability, aviation and general liability claims. Quanta manages and maintains a portion of its casualty risk through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs.

As of March 31, 2022 and December 31, 2021, the gross amount accrued for employer’s liability, workers’ compensation, auto liability, general liability, and group health claims totaled $326.6 million and $318.2 million, with $233.3 million and $238.0 million considered to be long-term and included in “Insurance and other non-current liabilities.” Related insurance recoveries/receivables as of March 31, 2022 and December 31, 2021 were $30.8 million and $28.6 million, of which $0.3 million and $0.4 million are included in “Prepaid expenses and other current assets” and $30.5 million and $28.2 million are included in “Other assets, net.”

Letters of Credit

Certain of Quanta’s vendors require letters of credit to ensure reimbursement for amounts they are disbursing on Quanta’s behalf, such as to beneficiaries under its insurance programs. In addition, from time to time, certain customers require Quanta to post letters of credit to ensure payment of subcontractors and vendors and guarantee performance under contracts. As of March 31, 2022, Quanta had $324.1 million in outstanding letters of credit under its senior credit facility securing its casualty insurance program and various contractual commitments. These are irrevocable stand-by letters of credit with maturities generally expiring at various times throughout 2022 and 2023. Quanta expects to renew the majority of the letters of credit related to the casualty insurance program for subsequent one-year periods upon their maturity. Quanta is not aware of any claims currently asserted or threatened under any of these letters of credit that are material, individually or in the aggregate.

Bonds and Parent Guarantees

Many customers, particularly in connection with new construction, require Quanta to post performance and payment bonds. These bonds provide a guarantee that Quanta will perform under the terms of a contract and pay its subcontractors and vendors. In certain circumstances, the customer may demand that the surety make payments or provide services under the bond, and Quanta must reimburse the surety for any expenses or outlays it incurs. Quanta may also be required to post letters of credit in favor of the sureties, which would reduce the borrowing availability under its senior credit facility. Quanta has not been required to make any material reimbursements to its sureties for bond-related costs, except related to the exercise of approximately $112 million advance payment and performance bonds in 2019 related to the terminated telecommunications project in Peru, which is described further in Legal Proceedings - Peru Project Dispute above. However, to the extent further reimbursements are required, the amounts could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows. As of March 31, 2022, Quanta is not aware of any outstanding material obligations for payments related to bond obligations, and the estimated total amount of the outstanding performance bonds was approximately $3.8 billion. Quanta’s estimated maximum exposure related to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a performance bond generally extinguishes concurrently with the expiration of its related contractual obligation. The estimated cost to complete these bonded projects was approximately $1.4 billion as of March 31, 2022.

Additionally, from time to time, Quanta guarantees certain obligations and liabilities of its subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, joint venture arrangements and contractor licenses. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. Quanta is not aware of any claims under any guarantees that are material, except as described in Legal Proceedings – Maurepas Project Dispute above.

Collective Bargaining Agreements and Multiemployer Pension Plans

Certain of Quanta’s operating companies are parties to collective bargaining agreements with unions that represent certain of their employees, and from time to time, Quanta is a party to grievance and arbitration actions based on claims arising out of the collective bargaining agreements. In addition, Quanta may also be subject to liabilities as a result of its participation in, or withdrawal from, multiemployer defined benefit pension plans. Additional information regarding these agreements and plans associated with these potential obligations is set forth in Note 15.

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Contingent Consideration Liabilities

The terms of certain of Quanta’s business acquisitions have included the potential payment of contingent consideration. Additional information regarding the liabilities associated with these potential obligations is included in Note 6.

Indemnities

Quanta generally indemnifies its customers for the services it provides under its contracts and other specified liabilities, which may subject Quanta to indemnity claims and liabilities and related litigation. Quanta is not aware of any indemnity claims in connection with these obligations that are material, except as described in Legal Proceedings - Silverado Wildfire Matter above.

In the normal course of Quanta’s acquisition transactions, Quanta also has granted indemnification rights to various parties against certain potential liabilities related to the transaction or the acquired business and obtained rights to indemnification from the sellers or former owners of the acquired businesses for certain risks, liabilities, and obligations arising from their respective business operations prior to the date of acquisition. For example, Quanta has obtained certain indemnification rights from the former owners of Hallen with respect to contingent liabilities that were assumed in connection with the acquisition, as described in Legal Proceedings — Hallen Acquisition Assumed Liability above.

Investments in Affiliates and Other Entities

As described in Note 8, Quanta holds investments in various entities, including joint venture entities that provide infrastructure-related services under specific customer contracts and partially owned entities that own, operate and/or maintain certain infrastructure assets. Quanta is not aware of circumstances that would lead to future claims against it for material amounts in connection with joint and several liabilities associated with its joint venture structures.

Committed Expenditures

Quanta has capital commitments for the expansion of its equipment fleet in order to accommodate manufacturer lead times on certain types of vehicles. As of March 31, 2022, Quanta had $104.0 million of production orders with expected delivery dates in 2022 and $17.3 million of production orders with expected delivery dates in 2023. Although Quanta has committed to purchase these vehicles at the time of their delivery, Quanta anticipates that the majority of these orders will be assigned to third party leasing companies and made available under certain master equipment lease agreements, thereby releasing Quanta from its capital commitments.

Residual Value Guarantees

As described in Note 11, Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of March 31, 2022, the maximum guaranteed residual value of this equipment was $951.1 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.

Deferral of Employer Payroll Taxes

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

Employment Agreements

Quanta has various employment agreements with certain executives and other employees, which provide for compensation, other benefits and, under certain circumstances, severance payments and post-termination stock-based compensation benefits. Certain employment agreements also contain clauses that require the potential payment of specified amounts to such employees upon the occurrence of a defined change in control event.

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17. FAIR VALUE MEASUREMENTS:

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

Goodwill and Other Intangible Assets

As discussed in Note 6, Quanta has recorded goodwill and identifiable intangible assets in connection with certain of its historical business acquisitions. Quanta utilizes the fair value premise as the primary basis for its impairment valuation procedures. The Goodwill and Other Intangible Assets sections in Notes 2 and 7 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data in Part II of the 2021 Annual Report provide information regarding valuation methods and assumptions used to determine the fair value of these assets. Quanta periodically engages the services of an independent valuation firm when a new business is acquired to assist management with the valuation process, including assistance with the selection of appropriate valuation methodologies and the development of market-based valuation assumptions. The level of inputs used for these fair value measurements is the lowest level (Level 3).

Investments

Quanta has various equity investments, which are further described in Note 8. Equity investments with readily determinable fair values are measured and recorded at fair value on a recurring basis, with changes in fair value, whether realized or unrealized, recognized in net income. In cases where those readily determinable values are quoted market prices, the level of input used for these fair value measurements is the highest level (Level 1).

Equity investments without readily determinable fair values and equity method investments are measured on a nonrecurring basis. Equity investments without readily determinable fair values are measured and recorded at cost minus impairment, if any, plus or minus changes from qualifying observable price changes. Equity method investments are measured at cost minus impairment, if any, plus or minus our share of equity method investee income or loss. Quanta utilizes the fair value premise as the basis for its impairment valuation and recognizes impairment if there are sufficient indicators that the fair value of the investment is less than its carrying value, and, in the case of equity method investments, if that decline is other-than-temporary. These types of fair market value assessments are similar to other nonrecurring fair value measures used by Quanta, which include the use of significant judgments and available relevant market data. The level of inputs used for these fair value measurements is the lowest level (Level 3).

During the three months ended March 31, 2022, Quanta’s investment in Starry became a common equity interest in a publicly traded company, as further described in Note 8. As a result, the fair value of this investment was remeasured based on the market price of Starry’s common stock, which is considered to be fair value. The level of input used for this fair value measurement is Level 1. Quanta also has COLI policies related to its deferred compensation plan as further described in Note 15. These policies are carried at their cash surrender value, which is considered their fair value. The level of input used for these fair value measurements is Level 2.

Financial Instruments

The carrying amounts of cash equivalents, accounts receivable, contract assets, accounts payable, accrued expenses and contract liabilities approximate fair value due to the short-term nature of these instruments. All of Quanta’s cash equivalents were categorized as Level 1 assets as of March 31, 2022 and December 31, 2021, as all values were based on unadjusted quoted prices for identical assets in an active market that Quanta has the ability to access.

Contingent Consideration Liabilities

Financial instruments required to be measured at fair value on a recurring basis consist primarily of Quanta’s liabilities related to contingent consideration associated with certain acquisitions, payable in the event certain performance objectives are achieved by the acquired businesses during designated post-acquisition periods.

The fair values of these liabilities described in Note 6 were primarily determined using a Monte Carlo simulation valuation methodology based on probability-weighted performance projections and other inputs, including a discount rate and an expected volatility factor for each acquisition. The expected volatility factor was 50.0% based on historical asset volatility of selected guideline public companies. Depending on contingent consideration payment terms, the present values of the estimated payments are discounted based on a risk-free rate and/or Quanta’s cost of debt and ranged from 0.04% to 3.9% and had a weighted average of 1.9% based on the fair value at the dates of the respective acquisitions. The fair value determinations

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incorporate significant inputs not observable in the market. Accordingly, the level of inputs used for these fair value measurements is the lowest level (Level 3). Significant changes in any of these assumptions could result in a significantly higher or lower potential liability.

Long-Term Debt

The carrying amount of variable rate debt, which includes borrowings under Quanta’s senior credit facility, approximates fair value. Quanta’s fixed rate debt primarily includes its senior notes. The fair value of Quanta’s Senior Notes, which are described further in Note 10, was $2.25 billion as of March 31, 2022, compared to a carrying value of $2.47 billion net of unamortized bond discount, underwriting discounts and deferred financing costs of $26.2 million. The fair value of the Senior Notes is based on the quoted market prices for the same issue, and the Senior Notes are categorized as Level 1 liabilities. See Note 10 for additional information regarding Quanta’s senior credit facility and Senior Notes.

18. DETAIL OF CERTAIN ACCOUNTS:

Cash and Cash Equivalents

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

						March 31, 2022						December 31, 2021
Cash and cash equivalents held in domestic bank accounts						$	211,128					$	205,781
Cash and cash equivalents held in foreign bank accounts						27,130						23,316
Total cash and cash equivalents						$	238,258					$	229,097

Quanta considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents, which are carried at fair value. As of March 31, 2022 and December 31, 2021, cash equivalents were $141.4 million and $140.0 million and consisted primarily of money market investments and money market mutual funds and are discussed further in Note 17.

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

						March 31, 2022						December 31, 2021
Cash and cash equivalents held by domestic joint ventures						$	17,309					$	21,828
Cash and cash equivalents held by foreign joint ventures						5,914						3,461
Total cash and cash equivalents held by joint ventures						23,223						25,289
Cash and cash equivalents held by captive insurance company						134,758						133,302
Cash and cash equivalents not held by joint ventures or captive insurance company						80,277						70,506
Total cash and cash equivalents						$	238,258					$	229,097

Accounts Payable and Accrued Expenses

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

						March 31, 2022						December 31, 2021
Accounts payable, trade						$	1,341,088					$	1,251,118
Accrued compensation and related expenses						442,264						547,161
Other accrued expenses						535,037						456,392
Accounts payable and accrued expenses						$	2,318,389					$	2,254,671

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19. SUPPLEMENTAL CASH FLOW INFORMATION:

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

						Three Months Ended
						March 31,
						2022						2021
Accounts and notes receivable						$	25,182					$	35,521
Contract assets						(165,549)						(62,278)
Inventories						(9,488)						(435)
Prepaid expenses and other current assets						21,094						9,948
Accounts payable and accrued expenses and other non-current liabilities						(57,903)						(4,780)
Contract liabilities						(2,797)						(29,225)
Other, net						632						(8,200)
Net change in operating assets and liabilities, net of non-cash transactions						$	(188,829)					$	(59,449)

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

						March 31,
						2022						2021
Cash and cash equivalents (1)						$	238,258					$	200,218
Restricted cash included in “Prepaid expenses and other current assets” (2)						1,628						1,518
Restricted cash included in “Other assets, net” (2)						950						879
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows						$	240,836					$	202,615

						December 31,
						2021						2020
Cash and cash equivalents (1)						$	229,097					$	184,620
Restricted cash included in “Prepaid expenses and other current assets” (2)						1,836						1,275
Restricted cash included in “Other assets, net” (2)						954						913
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows						$	231,887					$	186,808

(1) Cash and cash equivalents as of March 31, 2022 and March 31, 2021 includes $134.8 million and $131.8 million held by Quanta’s wholly-owned captive insurance company, and cash and cash equivalents as of December 31, 2021 and December 31, 2020 includes $133.3 million and $85.0 million held by Quanta’s wholly-owned captive insurance company. Such amounts are generally not available for use in support of Quanta’s other operations.

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

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

						Three Months Ended
						March 31,
						2022						2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	(25,057)					$	(27,610)
Operating cash flows from finance leases						$	(27)					$	(27)
Financing cash flows from finance leases						$	(365)					$	(249)
Lease assets obtained in exchange for lease liabilities:
Operating leases						$	9,106					$	17,927
Finance leases						$	1,134					$	168
Rental purchase option assets obtained in exchange for rental purchase option liabilities						$	23,233					$	303

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

						Three Months Ended
						March 31,
						2022						2021
Cash (paid) received during the period for —
Interest paid						$	(7,470)					$	(4,039)
Income taxes paid						$	(4,832)					$	(4,602)
Income tax refunds						$	2,957					$	6,137

Accrued capital expenditures were $21.4 million and $27.4 million as of March 31, 2022 and 2021. The impact of these items has been excluded from Quanta’s capital expenditures in the accompanying condensed consolidated statements of cash flows due to their non-cash nature.