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Leases
 9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Leases LEASES:
Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. As of September 30, 2020, the majority of Quanta’s leases had remaining lease terms not exceeding ten years. Certain leases include options to extend their terms in increments of up to five years and/or options to terminate. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):
Three Months EndedNine Months Ended
 September 30, September 30,
Lease costClassification2020201920202019
Finance lease cost:
Amortization of lease assets
Depreciation (1)
$53 $320 $515 $976 
Interest on lease liabilitiesInterest expense16 15 50 54 
Operating lease costCost of services and Selling, general and administrative expenses29,577 30,543 89,289 91,278 
Short-term and variable lease cost (2)
Cost of services and Selling, general and administrative expenses160,365 212,007 478,683 619,906 
Total lease cost $190,011 $242,885 $568,537 $712,214 
(1)     Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.
(2) Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant and primarily relates to real estate leases and consists of common area maintenance charges, real estate taxes, insurance and other variable costs.
Quanta has entered into lease arrangements for real property and facilities with certain related parties, typically an employee of Quanta who is the former owner of a business acquired by Quanta that continues to utilize the leased premises. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to ten years, subject to renewal options. Related party lease expense was $4.5 million and $4.2 million for the three months ended September 30, 2020 and 2019 and $13.2 million and $12.3 million for the nine months ended September 30, 2020 and 2019.
The components of leases in the accompanying condensed consolidated balance sheet were as follows (in thousands):
Lease typeClassificationSeptember 30, 2020December 31, 2019
Assets:
Operating lease right-of-use assetsOperating lease right-of-use assets$266,487 $284,369 
Finance lease assetsProperty and equipment, net of accumulated depreciation1,547 1,043 
Total lease assets $268,034 $285,412 
Liabilities:
Current:
OperatingCurrent portion of operating lease liabilities$88,162 $92,475 
FinanceCurrent maturities of long-term debt and short-term debt517 440 
Non-current:
OperatingOperating lease liabilities, net of current portion185,003 196,521 
FinanceLong-term debt, net of current maturities911 517 
Total lease liabilities $274,593 $289,953 
Certain of Quanta’s equipment rental agreements contain purchase options pursuant to which the purchase price is offset by a portion of the rental payments. When rental purchase options are exercised and a substantive benefit is deemed to be transferred to a third-party lessor, the transaction is deemed to be a financing transaction for accounting purposes. This results in the recognition of an asset equal to the purchase price being recorded in “Property, plant and equipment, net of accumulated depreciation,” and the recognition of a corresponding liability in “Current maturities of long-term debt and short-term debt” and “Long-term debt, net of current maturities.” As of September 30, 2020 and December 31, 2019, the assets recorded, net of accumulated depreciation, totaled $23.9 million and $11.8 million.
Future minimum lease payments for operating and finance leases were as follows (in thousands):
 As of September 30, 2020
 Operating LeasesFinance LeasesTotal
Remainder of 2020$26,795 $147 $26,942 
202190,838 564 91,402 
202265,176 390 65,566 
202344,619 280 44,899 
202427,344 149 27,493 
Thereafter44,001 — 44,001 
Total future minimum operating and finance lease payments$298,773 $1,530 $300,303 
Less imputed interest(25,608)(102)(25,710)
Total lease liabilities $273,165 $1,428 $274,593 
Future minimum lease payments for short-term leases, which are not recorded in the consolidated balance sheets due to Quanta’s accounting policy election, were $15.4 million as of September 30, 2020. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future rental amounts.
The weighted average remaining lease terms and discount rates were as follows:
 As of September 30, 2020
Weighted average remaining lease term (in years):
Operating leases4.27
Finance leases3.14
Weighted average discount rate:
Operating leases4.2 %
Finance leases4.2 %
Quanta has also guaranteed the residual value on certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. At September 30, 2020, the maximum guaranteed residual value of this equipment was $786.2 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.
As of September 30, 2020, Quanta had additional operating lease obligations of $3.1 million for leases that had not yet commenced and that are expected to commence in the fourth quarter of 2020 or the first quarter of 2021 and have lease terms of one to seven years.
Leases LEASES:
Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. As of September 30, 2020, the majority of Quanta’s leases had remaining lease terms not exceeding ten years. Certain leases include options to extend their terms in increments of up to five years and/or options to terminate. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):
Three Months EndedNine Months Ended
 September 30, September 30,
Lease costClassification2020201920202019
Finance lease cost:
Amortization of lease assets
Depreciation (1)
$53 $320 $515 $976 
Interest on lease liabilitiesInterest expense16 15 50 54 
Operating lease costCost of services and Selling, general and administrative expenses29,577 30,543 89,289 91,278 
Short-term and variable lease cost (2)
Cost of services and Selling, general and administrative expenses160,365 212,007 478,683 619,906 
Total lease cost $190,011 $242,885 $568,537 $712,214 
(1)     Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.
(2) Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant and primarily relates to real estate leases and consists of common area maintenance charges, real estate taxes, insurance and other variable costs.
Quanta has entered into lease arrangements for real property and facilities with certain related parties, typically an employee of Quanta who is the former owner of a business acquired by Quanta that continues to utilize the leased premises. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to ten years, subject to renewal options. Related party lease expense was $4.5 million and $4.2 million for the three months ended September 30, 2020 and 2019 and $13.2 million and $12.3 million for the nine months ended September 30, 2020 and 2019.
The components of leases in the accompanying condensed consolidated balance sheet were as follows (in thousands):
Lease typeClassificationSeptember 30, 2020December 31, 2019
Assets:
Operating lease right-of-use assetsOperating lease right-of-use assets$266,487 $284,369 
Finance lease assetsProperty and equipment, net of accumulated depreciation1,547 1,043 
Total lease assets $268,034 $285,412 
Liabilities:
Current:
OperatingCurrent portion of operating lease liabilities$88,162 $92,475 
FinanceCurrent maturities of long-term debt and short-term debt517 440 
Non-current:
OperatingOperating lease liabilities, net of current portion185,003 196,521 
FinanceLong-term debt, net of current maturities911 517 
Total lease liabilities $274,593 $289,953 
Certain of Quanta’s equipment rental agreements contain purchase options pursuant to which the purchase price is offset by a portion of the rental payments. When rental purchase options are exercised and a substantive benefit is deemed to be transferred to a third-party lessor, the transaction is deemed to be a financing transaction for accounting purposes. This results in the recognition of an asset equal to the purchase price being recorded in “Property, plant and equipment, net of accumulated depreciation,” and the recognition of a corresponding liability in “Current maturities of long-term debt and short-term debt” and “Long-term debt, net of current maturities.” As of September 30, 2020 and December 31, 2019, the assets recorded, net of accumulated depreciation, totaled $23.9 million and $11.8 million.
Future minimum lease payments for operating and finance leases were as follows (in thousands):
 As of September 30, 2020
 Operating LeasesFinance LeasesTotal
Remainder of 2020$26,795 $147 $26,942 
202190,838 564 91,402 
202265,176 390 65,566 
202344,619 280 44,899 
202427,344 149 27,493 
Thereafter44,001 — 44,001 
Total future minimum operating and finance lease payments$298,773 $1,530 $300,303 
Less imputed interest(25,608)(102)(25,710)
Total lease liabilities $273,165 $1,428 $274,593 
Future minimum lease payments for short-term leases, which are not recorded in the consolidated balance sheets due to Quanta’s accounting policy election, were $15.4 million as of September 30, 2020. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future rental amounts.
The weighted average remaining lease terms and discount rates were as follows:
 As of September 30, 2020
Weighted average remaining lease term (in years):
Operating leases4.27
Finance leases3.14
Weighted average discount rate:
Operating leases4.2 %
Finance leases4.2 %
Quanta has also guaranteed the residual value on certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. At September 30, 2020, the maximum guaranteed residual value of this equipment was $786.2 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.
As of September 30, 2020, Quanta had additional operating lease obligations of $3.1 million for leases that had not yet commenced and that are expected to commence in the fourth quarter of 2020 or the first quarter of 2021 and have lease terms of one to seven years.