Form 10-Q QUANTA SERVICES, INC. For: Mar 31

May 5, 2022 4:45 PM EDT

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)  
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022.
or
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from          to          .
Commission File Number:001-13831
pwr-20220331_g1.jpg
Quanta Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware74-2851603
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2800 Post Oak Boulevard, Suite 2600
Houston, Texas 77056
(Address of principal executive offices, including zip code)
(713629-7600
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00001 par valuePWRNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No 
As of May 2, 2022, the number of outstanding shares of Common Stock of the registrant was 143,709,009.



QUANTA SERVICES, INC. AND SUBSIDIARIES
INDEX
Page

1


Cautionary Statement About Forward-Looking Statements and Information
This Quarterly Report on Form 10-Q (Quarterly Report) of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) includes forward-looking statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “project,” “forecast,” “may,” “will,” “should,” “could,” “expect,” “believe,” “plan,” “intend” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:
Projected revenues, net income, earnings per share, margins, cash flows, liquidity, weighted average shares outstanding, capital expenditures, interest rates and tax rates, as well as other projections of operating results and GAAP (as defined below) and non-GAAP financial results;
Expectations regarding our business or financial outlook;
Expectations regarding opportunities, technological developments, competitive positioning, future economic and regulatory conditions and other trends in particular markets or industries, including with respect to our increased operations in the renewable energy market after our acquisition of Blattner (as defined below) and the transition to a carbon-neutral economy;
Expectations regarding the pandemic associated with the novel coronavirus disease that began in 2019 (COVID-19), including the continued and potential impact of the COVID-19 pandemic and of governmental and customer responses to the pandemic on our business, operations, supply chain, personnel, financial condition, results of operations, cash flows and liquidity;
Expectations regarding our plans and strategies;
The business plans or financial condition of our customers, including with respect to the COVID-19 pandemic and the transition to a carbon-neutral economy;
The potential impact of commodity prices and production volumes on our business, financial condition, results of operations, cash flows and demand for our services;
The potential benefits from, and future financial and operational performance of, acquired businesses and our investments, including Blattner and our equity interests in LUMA and Starry (each as defined below);
Beliefs and assumptions about the collectability of receivables;
The expected value of contracts or intended contracts with customers, as well as the scope, services, term or results of any awarded or expected projects;
The development of and opportunities with respect to future projects, including renewable energy projects and other projects designed to support transition to a carbon-neutral economy, electrical grid modernization, upgrade and hardening projects and larger transmission and pipeline projects;
Expectations regarding the future availability and price of materials and equipment necessary for the performance of our business;
The expected impact of inflation;
The expected impact of changes and potential changes in climate;
Future capital allocation initiatives, including the amount and timing of, and strategies with respect to, any future acquisitions, investments, stock repurchases and cash dividends;
The impact of existing or potential legislation or regulation;
Potential opportunities that may be indicated by bidding activity or similar discussions with customers;
The future demand for, availability of and costs related to labor resources in the industries we serve;
The expected recognition and realization of our remaining performance obligations or backlog;
The expected outcome of pending or threatened legal proceedings;
Expectations with respect to our ability to reduce our debt and maintain our current credit ratings; and
Possible recovery of pending or contemplated insurance claims, change orders and claims asserted against customers or third parties.
These forward-looking statements are not guarantees of future performance, involve or rely on a number of risks, uncertainties, and assumptions that are difficult to predict or are beyond our control, and reflect management’s beliefs and assumptions based on information available at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements and that any or
2


all of our forward-looking statements may turn out to be inaccurate or incorrect. These statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties, including the following:
Market, industry, economic, financial or political conditions that are outside of our control, including economic, energy, infrastructure and environmental policies and plans that are adopted or proposed by the U.S. federal and state governments or other governments in territories or countries in which we operate, geopolitical conflicts (including the conflict involving Ukraine) and political unrest, and inflation;
Quarterly variations in our operating and financial results, liquidity, financial condition, cash flows, capital requirements, and reinvestment opportunities, including the ongoing and potential impact to our business, operations, workforce and supply chains resulting from the COVID-19 pandemic and governmental responses thereto;
The severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of business and governmental responses thereto on our operations, personnel and supply chains, and on commercial activity and demand across our business and our customers’ businesses, as well as our inability to predict the extent to which the COVID-19 pandemic will adversely impact our business, financial performance, results of operations, financial position, liquidity, cash flows, the price of our securities and the achievement of our strategic objectives;
Trends and growth opportunities in relevant markets, including our ability to obtain future project awards;
Delays, deferrals, reductions in scope or cancellations of anticipated, pending or existing projects as a result of, among other things, the COVID-19 pandemic, supply chain disruptions and other logistical challenges, weather, regulatory or permitting issues, environmental processes, project performance issues, claimed force majeure events, protests or other political activity, legal challenges, reductions or eliminations in governmental funding or customer capital constraints;
The effect of commodity prices and commodity production volumes on our operations and growth opportunities and on our customers’ capital programs and demand for our services;
The successful negotiation, execution, performance and completion of anticipated, pending and existing contracts;
Events arising from operational hazards, including, among others, wildfires and explosions, that can arise due to the nature of the services we provide and the conditions in which we operate and can be due to failure of infrastructure on which we have performed services and result in significant liabilities that may be exacerbated in certain geographies and locations;
Unexpected costs, liabilities, fines or penalties that may arise from legal proceedings, indemnity obligations, reimbursement obligations associated with letters of credit or bonds, multiemployer pension plans (e.g., underfunding of liabilities, termination or withdrawal liability) or other claims or actions asserted against us, including amounts that are not covered by, or are in excess of the coverage under, our third-party insurance;
Potential unavailability or cancellation of third-party insurance coverage, as well as the exclusion of coverage for certain losses, potential increases in premiums for coverage deemed beneficial to us, or the unavailability of coverage deemed beneficial to us at reasonable and competitive rates (e.g., coverage for wildfire events);
Damage to our brands or reputation arising as a result of cyber-security breaches, environmental and occupational health and safety matters, corporate scandal, failure to successfully perform or negative publicity regarding a high-profile project, involvement in a catastrophic event (e.g., fire, explosion) or other negative incidents;
Disruptions in, or failure to adequately protect, our information technology systems;
Our dependence on suppliers, subcontractors, equipment manufacturers and other third parties and the impact of the COVID-19 pandemic on these service providers;
Estimates and assumptions related to our financial results, remaining performance obligations and backlog;
Our inability to attract, the potential shortage of, and increased costs with respect to skilled employees, as well as our ability to retain and attract key personnel and qualified employees;
Our dependence on fixed price contracts and the potential that we incur losses with respect to these contracts, including as a result of inaccurate estimates of project costs or inability to meet project schedule requirements or achieve guaranteed performance or quality standards for a project;
3


Adverse weather conditions, natural disasters and other emergencies, including wildfires, pandemics (including the ongoing COVID-19 pandemic), hurricanes, tropical storms, floods, debris flows, earthquakes and other geological- and weather-related hazards, as well as the impact of climate change;
Our ability to generate internal growth;
Competition in our business, including our ability to effectively compete for new projects and market share;
The future development of natural resources;
The failure of existing or potential legislative actions and initiatives to result in increased demand for our services;
The unavailability of, or increased prices for, materials, equipment and fuel used in our and our customers’ businesses, including as a result of inflation, supply chain disruptions, governmental regulations on sourcing, the imposition of tariffs, duties, taxes or other assessments, and other changes in U.S. trade relationships with foreign countries;
Cancellation provisions within our contracts and the risk that contracts expire and are not renewed or are replaced on less favorable terms;
Loss of customers with whom we have long-standing or significant relationships;
The potential that our participation in joint ventures or similar structures exposes us to liability or harm to our reputation as a result of acts or omissions by our partners;
Our inability or failure to comply with the terms of our contracts, which may result in additional costs, unexcused delays, warranty claims, failure to meet performance guarantees, damages or contract terminations;
The inability or refusal of our customers or third-party contractors to pay for services, which could be attributable to, among other things, the COVID-19 pandemic or challenged energy markets, and which could result in our inability to collect our outstanding receivables, failure to recover amounts billed to, or avoidance of certain payments received from, customers in bankruptcy or failure to recover on change orders or contract claims;
Budgetary or other constraints that may reduce or eliminate tax incentives or government funding for projects, including renewable energy projects, which may result in project delays or cancellations;
Our inability to successfully complete our remaining performance obligations or realize our backlog;
Technological advancements and market developments that could reduce demand for our services;
Risks associated with operating in international markets and U.S. territories, including instability of governments, currency exchange fluctuations, and compliance with unfamiliar legal and labor systems and cultural practices, the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery and anti-corruption laws, and complex U.S. and foreign tax regulations and international treaties;
Our inability to successfully identify, complete, integrate and realize synergies from acquisitions, including the inability to retain key personnel from acquired businesses;
The potential adverse impact of acquisitions and investments, including the potential increase in risks already existing in our operations, poor performance or decline in value of acquired businesses or investments and unexpected costs or liabilities that may arise from acquisitions or investments;
The adverse impact of impairments of goodwill, other intangible assets, receivables, long-lived assets or investments;
Difficulties arising from our decentralized management structure;
The impact of the unionized portion of our workforce on our operations, including labor stoppages or interruptions due to strikes or lockouts;
An inability to access sufficient funding to finance desired growth and operations, including our ability to access capital markets on favorable terms, as well as fluctuations in the price and trading volume of our common stock, debt covenant compliance, interest rate fluctuations, a downgrade in our credit ratings and other factors affecting our financing and investing activities;
Our ability to obtain bonds, letters of credit and other project security;
Risks related to the implementation of new information technology systems;
4


New or changed tax laws, treaties or regulations;
Inability to realize deferred tax assets;
Significant fluctuations in foreign currency exchange rates; and
The other risks and uncertainties described elsewhere herein, including in Item 1A. Risk Factors of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Annual Report), and as may be detailed from time to time in our other public filings with the U.S. Securities and Exchange Commission (SEC).
All of our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this report. Although forward-looking statements reflect our good faith beliefs at the time they are made, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. In addition, we do not undertake and expressly disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or otherwise.
5


PART I - FINANCIAL INFORMATION

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 assets975,342 803,453 
Inventories94,264 84,659 
Prepaid expenses and other current assets201,185 215,050 
Total current assets4,865,615 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 assets238,529 240,605 
Other assets, net656,133 632,244 
Other intangible assets, net of accumulated amortization of $799,905 and $682,498
1,685,260 1,801,180 
Goodwill3,593,315 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 liabilities76,983 78,251 
Accounts payable and accrued expenses2,318,389 2,254,671 
Contract liabilities800,578 802,872 
Total current liabilities3,217,815 3,164,960 
Long-term debt, net of current maturities3,812,411 3,724,474 
Operating lease liabilities, net of current portion170,347 170,427 
Deferred income taxes183,082 191,098 
Insurance and other non-current liabilities489,458 487,309 
Total liabilities7,873,113 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 capital2,637,240 2,615,410 
Retained earnings3,789,025 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’ equity5,137,519 5,112,301 
Non-controlling interests4,469 4,620 
Total equity5,141,988 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.
6


QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)

Three Months Ended
March 31,
 20222021
Revenues$3,965,525 $2,703,581 
Cost of services (including depreciation)3,417,354 2,330,691 
Gross profit548,171 372,890 
Equity in earnings of integral unconsolidated affiliates15,152 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 income117,516 113,729 
Interest and other financing expenses(24,728)(12,475)
Interest income69 117 
Other income (expense), net(1,273)3,672 
Income before income taxes91,584 105,043 
Provision for income taxes6,556 13,724 
Net income85,028 91,319 
Less: Net income attributable to non-controlling interests387 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 outstanding143,541 140,121 
Weighted average diluted shares outstanding148,082 144,447 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7



QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended
March 31,
20222021
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 taxes13,275 8,539 
Comprehensive income98,303 99,858 
Less: Comprehensive income attributable to non-controlling interests387 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.
8


QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
 20222021
Cash Flows from Operating Activities:  
Net income$85,028 $91,319 
Adjustments to reconcile net income to net cash provided by operating activities— 
Depreciation70,954 62,107 
Amortization of intangible assets115,751 21,355 
Change in fair value of contingent consideration liabilities5,169 (363)
Equity in earnings of unconsolidated affiliates(20,490)(5,868)
Amortization of deferred financing costs1,458 846 
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 investment8,393  
Provision for credit losses133 43 
Deferred income tax expense (benefit)(8,098)2,494 
Non-cash stock-based compensation22,992 18,687 
Foreign currency (gain) loss1,581 (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 activities85,090 125,613 
Cash Flows from Investing Activities:  
Capital expenditures(109,937)(83,486)
Proceeds from sale of property and equipment8,810 7,223 
Proceeds from insurance settlements related to property and equipment191 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 investments16,460 210 
Cash paid for intangible assets(274) 
Net cash used in investing activities(93,069)(222,806)
Cash Flows from Financing Activities:  
Borrowings under credit facility1,369,151 828,496 
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 activities16,550 112,989 
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash378 11 
Net increase in cash, cash equivalents and restricted cash
8,949 15,807 
Cash, cash equivalents and restricted cash, beginning of period231,887 186,808 
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.
9


QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)

Accumulated
AdditionalOtherTotalNon-
Common StockPaid-InRetainedComprehensiveTreasuryStockholders’ControllingTotal
SharesAmountCapitalEarningsIncome (Loss)StockEquityInterestsEquity
Balance, December 31, 2021142,633,934 $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 activity1,216,468 — 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, 2022143,765,604 $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.

10


QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)
Accumulated
AdditionalOtherTotalNon-
Common StockPaid-InRetainedComprehensiveTreasuryStockholders’ControllingTotal
SharesAmountCapitalEarningsIncome (Loss)StockEquityInterestsEquity
Balance, December 31, 2020138,300,191 $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 activity1,368,739 — 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, 2021139,446,849 $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.


11



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.

12

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,
20222021
By contract type:
Fixed price contracts$1,689,635 42.6 %$1,064,247 39.4 %
Unit-price contracts1,357,602 34.2 %976,562 36.1 %
Cost-plus contracts918,288 23.2 %662,772 24.5 %
Total revenues$3,965,525 100.0 %$2,703,581 100.0 %
13

QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Three Months Ended March 31,
20222021
By primary geographic location:
United States$3,323,969 83.8 %$2,206,116 81.6 %
Canada550,905 13.9 %413,846 15.3 %
Australia55,201 1.4 %55,107 2.0 %
Others35,450 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.
14

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, 2022December 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
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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,
 20222021
Balance at beginning of period$49,749 $16,546 
Provision for credit losses133 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.

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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,
 20222021
Revenues:  
Electric Power Infrastructure Solutions$2,138,697 $1,676,046 
Renewable Energy Infrastructure Solutions875,632 384,074 
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 Solutions69,942 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 Solutions8,233 2,241 
Underground Utility and Infrastructure Solutions
20,938 21,087 
Corporate and Non-Allocated Costs5,004 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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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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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, 2022December 31, 2021
Accounts payable and accrued expenses$1,979 $2,591 
Insurance and other non-current liabilities144,685 140,482 
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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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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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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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,
20222021
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 stock143,541 140,121 
Effect of dilutive unvested non-participating stock-based awards4,541 4,326 
Weighted average shares outstanding for diluted earnings per share attributable to common stock148,082 144,447 
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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10. DEBT OBLIGATIONS:
Quanta’s long-term debt obligations consisted of the following (in thousands):
March 31, 2022December 31, 2021
0.950% Senior Notes due October 2024
$500,000 $500,000 
2.900% Senior Notes due October 2030
1,000,000 1,000,000 
2.350% Senior Notes due January 2032
500,000 500,000 
3.050% Senior Notes due October 2041
500,000 500,000 
Borrowings under senior credit facility1,272,879 1,199,841 
Other long-term debt86,421 64,800 
Finance leases3,341 2,546 
Unamortized discount and debt issuance costs related to senior notes and term loan(28,365)(29,295)
Total long-term debt obligations3,834,276 3,737,892 
Less — Current maturities of long-term debt21,865 13,418 
Total long-term debt obligations, net of current maturities$