XML 31 R12.htm IDEA: XBRL DOCUMENT
v3.19.3

Acquisitions | 9 Months Ended
--- | ---
Sep. 30, 2019
Business Combinations [Abstract] |
Acquisitions | ACQUISITIONS: During the nine months ended September 30, 2019, Quanta acquired Hallen, a pipeline and industrial services business located in the United States that specializes in gas distribution and transmission services, and to a lesser extent, underground electric distribution and transmission services; two specialty utility foundation and pole-setting contractors serving the southeast United States; an electric power specialty contracting business located in the United States that provides aerial power line and construction support services; a business located in the United States that provides technical training materials to electric utility workers; and an electrical infrastructure services business located in Canada. The aggregate consideration for these acquisitions was $395.0 million paid or payable in cash, subject to certain adjustments, and 60,860 shares of Quanta common stock, which had a fair value of approximately $1.8 million as of the respective acquisition date. A portion of the cash consideration in connection with the Hallen acquisition was placed in an escrow account, which, subject to certain conditions, could be utilized to reimburse Quanta for obligations associated with certain contingent liabilities assumed by Quanta in the transaction. See Legal Proceedings — Hallen Acquisition Assumed Liability in Note 11 for additional information related to these liabilities. Beginning on the respective acquisition dates, the results of the acquired businesses have been included in Quanta’s consolidated financial statements, with the results of Hallen generally included in the Pipeline and Industrial Infrastructure Services segment and the other acquired businesses generally included in the Electric Power Infrastructure Services segment. During the year ended December 31, 2018, Quanta acquired an electrical infrastructure services business specializing in substation construction and relay services, a postsecondary educational institution that provides training and programs for workers in the industries Quanta serves, and two communications infrastructure services businesses, all of which are located in the United States. The aggregate consideration for these acquisitions was $108.3 million paid or payable in cash, subject to certain adjustments, and 679,668 shares of Quanta common stock, which had a fair value of approximately $22.9 million as of the respective acquisition dates. Additionally, the acquisitions of the postsecondary educational institution and one of the communications infrastructure services businesses include the potential payment of up to $18.0 million of contingent consideration, payable if the acquired businesses achieve certain performance objectives over five- and three-year post-acquisition periods. Based on the estimated fair value of the contingent consideration, Quanta recorded $16.5 million of liabilities as of the respective acquisition dates. Beginning on the respective acquisition dates, the results of the acquired businesses have been included in Quanta’s consolidated financial statements, generally within the Electric Power Infrastructure Services segment. Quanta is finalizing its fair value assessments for the acquired assets and assumed liabilities related to businesses acquired subsequent to September 30, 2018, and further adjustments to the purchase price allocations may occur. As of September 30, 2019, the estimated fair values of the net assets acquired were preliminary, with possible updates primarily related to the valuation of certain intangible assets and pre-acquisition contingent liabilities, as further described in Legal Proceedings — Hallen Acquisition Assumed Liability in Note 11, and tax-related estimates. The aggregate consideration paid for businesses acquired between September 30, 2018 and September 30, 2019 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of $111.8 million to net tangible assets, $190.8 million to identifiable intangible assets and $97.3 million to goodwill. The following table summarizes the aggregate consideration paid or payable as of September 30, 2019 for the acquisitions completed in 2019 and 2018 and presents the allocation of these amounts to net tangible and identifiable intangible assets based on their estimated fair values as of the respective acquisition dates, inclusive of any purchase price adjustments. These allocations require significant use of estimates and are based on information that was available to management at the time these consolidated financial statements were prepared. Quanta uses a variety of information to estimate fair values, including quoted market prices, carrying amounts and valuation techniques such as discounted cash flows. When deemed appropriate, third-party appraisal firms are engaged to assist in fair value determination of fixed assets, intangible assets and certain other assets and liabilities (in thousands).
|  | 2019 |  | 2018
Consideration: |  |  |  |
Cash paid or payable |  | $ | 395,019 |  |  | $ | 108,307 |
Value of Quanta common stock issued |  | 1,791 |  |  | 22,882 |
Contingent consideration |  | — |  |  | 16,471 |
Fair value of total consideration transferred or estimated to be transferred |  | $ | 396,810 |  |  | $ | 147,660 |
Accounts receivable |  | $ | 107,362 |  |  | $ | 18,405 |
Contract assets |  | 9,445 |  |  | 1,905 |
Other current assets |  | 13,548 |  |  | 8,484 |
Property and equipment |  | 60,133 |  |  | 23,674 |
Other assets |  | 149 |  |  | 576 |
Identifiable intangible assets |  | 190,785 |  |  | 52,364 |
Contract liabilities |  | (1,782 | ) |  | (175 | )
Other current liabilities |  | (64,687 | ) |  | (11,205 | )
Deferred tax liabilities, net |  | (7,002 | ) |  | (4,208 | )
Other long-term liabilities |  | (5,345 | ) |  | — |
Total identifiable net assets |  | 302,606 |  |  | 89,820 |
Goodwill |  | 97,343 |  |  | 57,840 |
Fair value of net assets acquired |  | 399,949 |  |  | 147,660 |
Bargain purchase gain |  | (3,139 | ) |  | — |
Fair value of total consideration transferred or estimated to be transferred |  | $ | 396,810 |  |  | $ | 147,660 |
The acquisition of Hallen included the assumption of the assets and liabilities of a defined benefit pension plan. As of the acquisition date, the funded status of the acquired defined benefit pension plan was a net liability of $5.3 million, included in “Other long-term liabilities” above. The amount consisted of a projected benefit obligation of $26.5 million, net of pension plan assets of $21.2 million. Subsequent to September 30, 2019, the accrued benefits under the defined benefit plan will be frozen and accounted for as a curtailment. Settlement of the accrued benefit obligation is expected to be complete upon liquidation of the plan in early 2020. 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, and a bargain purchase gain results when the amount of the net fair value of the assets acquired and liabilities assumed exceeds the purchase price for an acquired business. The acquisition of the electrical infrastructure services business in Canada that occurred during the three months ended June 30, 2019 included the recognition of a bargain purchase gain of $3.1 million, which was recorded in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. The acquisitions completed in 2019 and 2018 strategically expanded Quanta’s domestic pipeline and industrial and domestic and international electric power and communications service offerings, which Quanta believes contributes to the recognition of the goodwill. Approximately $77.8 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in 2019, and $21.6 million is expected to be deductible for income tax purposes related to acquisitions completed in 2018. The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in 2019 as of the acquisition dates and the related weighted average amortization periods by type (in thousands, except for weighted average amortization periods, which are in years).
|  | Estimated Fair Value |  | Weighted Average Amortization Period in Years
Customer relationships |  | $ | 168,263 |  |  | 7.9
Backlog |  | 5,276 |  |  | 0.5
Trade names |  | 11,752 |  |  | 15.0
Non-compete agreements |  | 3,712 |  |  | 4.3
Curriculum |  | 1,782 |  |  | 10.0
Total intangible assets subject to amortization related to the 2019 acquisitions |  | $ | 190,785 |  |  | 8.0
The following unaudited supplemental pro forma results of operations for Quanta, which incorporates the acquisitions completed in 2019 and 2018, have been provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors (in thousands, except per share amounts):
|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | September 30,
|  | 2019 |  | 2018 |  | 2019 |  | 2018
Revenues |  | $ | 3,446,437 |  |  | $ | 3,149,694 |  |  | $ | 9,391,582 |  |  | $ | 8,560,960 |
Gross profit |  | 495,994 |  |  | 463,109 |  |  | 1,246,605 |  |  | 1,175,470 |
Selling, general and administrative expenses |  | 250,187 |  |  | 235,637 |  |  | 725,801 |  |  | 682,342 |
Amortization of intangible assets |  | 18,918 |  |  | 18,329 |  |  | 55,503 |  |  | 59,463 |
Net income |  | 145,602 |  |  | 135,311 |  |  | 316,941 |  |  | 267,108 |
Net income attributable to common stock |  | 144,648 |  |  | 134,963 |  |  | 314,325 |  |  | 265,422 |
Earnings per share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.99 |  |  | $ | 0.88 |  |  | $ | 2.16 |  |  | $ | 1.72 |
Diluted |  | $ | 0.98 |  |  | $ | 0.88 |  |  | $ | 2.14 |  |  | $ | 1.71 |
The pro forma combined results of operations for the three and nine months ended September 30, 2019 and 2018 were prepared by adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2019 as if they occurred January 1, 2018. The pro forma combined results of operations for the three and nine months ended September 30, 2018 were prepared by also adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2018 as if they occurred January 1, 2017. These pro forma combined historical results were adjusted for the following: a reduction of interest expense as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest expense as a result of the cash consideration paid; an increase in amortization expense due to the incremental intangible assets recorded; 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; and reclassifications to conform the acquired businesses’ presentation to Quanta’s accounting policies. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs or any cost savings or other synergies that resulted or may result from the acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future. Revenues of approximately $56.7 million and a loss before income taxes of approximately $10.1 million, which included $17.0 million of acquisition-related costs, are included in Quanta’s consolidated results of operations for the three months ended September 30, 2019 related to the acquisitions completed in 2019. Revenues of approximately $78.4 million and a loss before income taxes of approximately $6.0 million, which included $19.4 million of acquisition-related costs, are included in Quanta’s consolidated results of operations for the nine months ended September 30, 2019 related to the acquisitions completed in 2019. Revenues of approximately $12.9 million and a loss before income taxes of approximately $5.1 million, which included $5.0 million of acquisition-related costs, are included in Quanta’s consolidated results of operations for the three months ended September 30, 2018 related to the acquisitions completed in 2018. Revenues of approximately $32.2 million and a loss before income taxes of approximately $11.7 million, which included $11.0 million of acquisition-related costs, are included in Quanta’s consolidated results of operations for the nine months ended September 30, 2018 related to the acquisitions completed in 2018.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration