Equity

9 Months Ended

Sep. 30, 2019

EQUITY:

Exchangeable Shares and Preferred Stock

In connection with certain prior acquisitions of Canadian businesses, the former owners of the acquired businesses received exchangeable shares of certain Canadian subsidiaries of Quanta, which may be exchanged at the option of the holders for Quanta common stock on a one-for-one basis. Additionally, in connection with two of such acquisitions, Quanta issued one share of Quanta Series F preferred stock and one share of Quanta Series G preferred stock to voting trusts on behalf of the respective holders of the exchangeable shares issued in such acquisitions, which provided such holders with voting rights in Quanta common stock equivalent to the number of exchangeable shares outstanding. The share of Quanta Series F preferred stock was redeemed and retired effective October 6, 2017. All holders of exchangeable shares have rights equivalent to Quanta common stockholders with respect to dividends and other economic rights.

During the three months ended March 31, 2019, 0.4 million exchangeable shares were exchanged for Quanta common stock, and as of September 30, 2019, 36,183 exchangeable shares remained outstanding. After completion of the exchange during the three months ended March 31, 2019, no exchangeable shares associated with the share of Quanta Series G preferred stock remained outstanding. Accordingly, that share was redeemed, deemed retired and canceled and may not be reissued.

Treasury Stock

General

Treasury stock is recorded at cost. Under Delaware law, treasury stock is not counted for quorum purposes or entitled to vote.

Shares withheld for tax withholding obligations

The tax withholding obligations of employees upon vesting of RSUs and PSUs settled in common stock are typically satisfied by Quanta making tax payments and withholding the number of vested shares having a value on the date of vesting equal to the tax withholding obligation. For the settlement of these liabilities, Quanta withheld a nominal amount of Quanta common stock during the three months ended September 30, 2019 and 2018, which had a total market value of $0.6 million and $0.5 million, and withheld 0.5 million and 0.4 million shares of Quanta common stock during the nine months ended September 30, 2019 and 2018, which had a total market value of $16.7 million and $14.7 million. These shares and the related costs to acquire them were accounted for as adjustments to the balance of treasury stock.

Notional amounts recorded related to deferred compensation plans

For RSUs and PSUs that vest but the settlement of which is deferred under a deferred compensation plan, Quanta records a notional amount to “Treasury stock” and an offsetting amount to “Additional paid-in capital” (APIC). At vesting, only shares withheld for tax liabilities other than income taxes are added to outstanding treasury shares, as the shares of Quanta common stock associated with deferred equity awards are not issued until settlement of the award. Upon settlement of the deferred equity awards and issuance of the associated Quanta common stock, the original accounting entry is reversed. The net amounts recorded to treasury stock related to the deferred compensation plans were nominal amounts during the three months ended September 30, 2019 and 2018 and $3.7 million and $3.3 million during the nine months ended September 30, 2019 and 2018.

Stock repurchases

During the second quarter of 2017, Quanta’s Board of Directors approved a stock repurchase program that authorized Quanta to purchase, from time to time through June 30, 2020, up to $300.0 million of its outstanding common stock (the 2017 Repurchase Program). During the third quarter of 2018, Quanta’s Board of Directors approved an additional stock repurchase program that authorizes Quanta to purchase, from time to time through June 30, 2021, up to $500.0 million of its outstanding common stock (the 2018 Repurchase Program).

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



Quarter ended:	Shares	Amount
September 30, 2019	—	$	—
June 30, 2019	—	$	—
March 31, 2019	376	$	11,953
December 31, 2018	7,652	$	233,633
September 30, 2018	701	$	23,751
June 30, 2018	595	$	19,993
March 31, 2018	4,969	$	173,913

Quanta’s policy is to record a stock repurchase as of the trade date; however, the payment of cash related to the repurchase is made on the settlement date of the trade. During the three months ended September 30, 2019 and 2018, cash payments related to stock repurchases were none and $26.8 million, and during the nine months ended September 30, 2019 and 2018, cash payments related to stock repurchases were $20.1 million and $216.7 million.

As of September 30, 2019, $286.8 million remained authorized under the 2018 Repurchase Program. Repurchases under the 2018 Repurchase Program 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 secured credit facility, and other factors. Quanta is not obligated to acquire any specific amount of common stock, and the 2018 Repurchase Program may be modified or terminated by Quanta’s Board of Directors at any time at its sole discretion and without notice.

Non-controlling Interests

Quanta holds interests in various entities through both joint venture entities that provide infrastructure services under specific customer contracts, either directly or through subcontracting relationships, and other equity investments in partially owned entities that own and operate certain infrastructure assets, including investments that may be entered into through the partnership structure Quanta has formed with certain infrastructure investors. Quanta has determined that certain of these joint ventures where Quanta provides the majority of the infrastructure services, which management believes most significantly influences the economic

performance of such joint ventures, are VIEs. Management has concluded that Quanta is the primary beneficiary of these joint ventures and has accounted for each on a consolidated basis. The other parties’ equity interests in these joint ventures have been accounted for as “Non-controlling interests” in Quanta’s condensed consolidated balance sheets. Net income attributable to the other participants in the amounts of $1.0 million and $0.3 million for the three months ended September 30, 2019 and 2018 and $2.6 million and $1.7 million for the nine months ended September 30, 2019 and 2018 has been accounted for as a reduction of net income in deriving “Net income attributable to common stock” in Quanta’s condensed consolidated statements of operations.

The carrying amount of the investments in VIEs held by Quanta was $10.2 million and $9.6 million at September 30, 2019 and December 31, 2018. The carrying amount of investments held by the non-controlling interests in these VIEs at September 30, 2019 and December 31, 2018 was $1.8 million and $1.3 million. During the three months ended September 30, 2019 and 2018, net distributions to non-controlling interests were $0.5 million and $1.3 million. During the nine months ended September 30, 2019 and 2018, net distributions to non-controlling interests were $2.1 million and $2.9 million. During the three and nine months ended September 30, 2018, notes receivable of $0.5 million and $1.4 million were discharged by a joint venture partner, which were accounted for as a “Buyout of a non-controlling interest” in the accompanying condensed consolidated statements of equity. There were no other changes in equity as a result of transfers to/from the non-controlling interests during the three months ended September 30, 2019 or 2018. See Note 11 for further disclosures related to Quanta’s joint venture arrangements.

Dividends

Quanta declared and paid the following cash dividends and cash dividend equivalents during 2018 and the first nine months of 2019 (in thousands, except per share amounts):



Declaration	Record	Payment	Dividend		Dividends
Date	Date	Date	Per Share		Declared
August 28, 2019	October 1, 2019	October 15, 2019	0.04		$	5,564
May 24, 2019	July 1, 2019	July 15, 2019	$	0.04	$	6,233
March 21, 2019	April 5, 2019	April 19, 2019	$	0.04	$	5,896
December 6, 2018	January 2, 2019	January 16, 2019	$	0.04	$	5,838

A significant majority of the dividends declared were paid on the corresponding payment dates. Holders of RSUs awarded under the Quanta Services, Inc. 2011 Omnibus Equity Incentive Plan (the 2011 Plan) generally received cash dividend equivalent payments on the payment dates. Holders of exchangeable shares of certain Canadian subsidiaries of Quanta were paid a cash dividend of $0.04 per exchangeable share on the payment dates. Holders of RSUs awarded under the Quanta Services, Inc. 2019 Omnibus Equity Incentive Plan (the 2019 Plan) and holders of unearned and unvested PSUs receive cash dividend equivalent payments only to the extent such RSUs and PSUs become earned and/or vest. Additionally, cash dividend equivalents related to certain equity awards that have been deferred pursuant to the terms of a deferred compensation plan maintained by Quanta are recorded as liabilities in such plans until the deferred awards are settled.

The declaration, payment and amount of future cash dividends will be at the discretion of Quanta’s Board of Directors after taking into account various factors, including Quanta’s financial condition, results of operations, cash flows from operations, current and anticipated capital requirements and expansion plans, income tax laws then in effect and the requirements of Delaware law. In addition, as discussed in Note 7, Quanta’s credit agreement restricts the payment of cash dividends unless certain conditions are met.