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Leases
 12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases LEASES:
Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. As of December 31, 2020, the majority of Quanta’s leases had remaining lease terms not exceeding 9.8 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 consolidated statements of operations are as follows (in thousands):
 Year Ended December 31,
Lease costClassification20202019
Finance lease cost:
Amortization of lease assets
Depreciation (1)
$1,234 $1,393 
Interest on lease liabilitiesInterest expense107 64 
Operating lease costCost of services and Selling, general and administrative expenses116,672 121,767 
Short-term and variable lease cost (2)
Cost of services and Selling, general and administrative expenses656,649 837,244 
Total lease cost $774,662 $960,468 
(1)     Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying 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.
For the year ended December 31, 2018, rent expense related to operating leases was $309.7 million; however, this amount did not include rent expense related to certain equipment under month-to-month rental periods, which is included in short-term and variable lease cost for the years ended December 31, 2020 and 2019 in the table above.
Additionally, Quanta has entered into arrangements with certain related parties, typically employees of Quanta who are the former owners of acquired businesses, to lease certain real property and facilities that continue to be utilized by Quanta subsequent to an acquisition. 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 $14.3 million, $16.7 million and $14.0 million for the years ended December 31, 2020, 2019 and 2018.
The components of leases in the accompanying consolidated balance sheet were as follows (in thousands):
December 31,
Lease typeClassification20202019
Assets:
Operating lease right-of-use assetsOperating lease right-of-use assets$256,845 $284,369 
Finance lease assetsProperty and equipment, net of accumulated depreciation2,370 1,043 
Total lease assets $259,215 $285,412 
Liabilities:
Current:
OperatingCurrent portion of operating lease liabilities$85,134 $92,475 
FinanceCurrent maturities of long-term debt and short-term debt846 440 
Non-current:
OperatingOperating lease liabilities, net of current portion178,822 196,521 
FinanceLong-term debt, net of current maturities1,382 517 
Total lease liabilities $266,184 $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 December 31, 2020 and 2019, the assets recorded, net of accumulated depreciation, totaled $45.7 million and $11.8 million.
Future minimum lease payments for operating and finance leases were as follows (in thousands):
 As of December 31, 2020
 Operating LeasesFinance LeasesTotal
2021$94,166 $920 $95,086 
202268,284 690 68,974 
202347,872 493 48,365 
202429,362 264 29,626 
202518,685 — 18,685 
Thereafter30,311 — 30,311 
Total future minimum operating and finance lease payments288,680 2,367 291,047 
Less imputed interest(24,724)(139)(24,863)
Total lease liabilities $263,956 $2,228 $266,184 
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 $13.6 million as of December 31, 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 December 31, 2020
Weighted average remaining lease term (in years):
Operating leases4.28
Finance leases3.06
Weighted average discount rate:
Operating leases4.2 %
Finance leases4.1 %
Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. At December 31, 2020, the maximum guaranteed residual value of this equipment was $779.1 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.
As of December 31, 2020, Quanta had additional operating lease obligations of $3.4 million for leases that had not yet commenced and that are expected to commence in 2021 or 2022 and have lease terms of one to seven years.
Leases LEASES:
Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. As of December 31, 2020, the majority of Quanta’s leases had remaining lease terms not exceeding 9.8 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 consolidated statements of operations are as follows (in thousands):
 Year Ended December 31,
Lease costClassification20202019
Finance lease cost:
Amortization of lease assets
Depreciation (1)
$1,234 $1,393 
Interest on lease liabilitiesInterest expense107 64 
Operating lease costCost of services and Selling, general and administrative expenses116,672 121,767 
Short-term and variable lease cost (2)
Cost of services and Selling, general and administrative expenses656,649 837,244 
Total lease cost $774,662 $960,468 
(1)     Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying 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.
For the year ended December 31, 2018, rent expense related to operating leases was $309.7 million; however, this amount did not include rent expense related to certain equipment under month-to-month rental periods, which is included in short-term and variable lease cost for the years ended December 31, 2020 and 2019 in the table above.
Additionally, Quanta has entered into arrangements with certain related parties, typically employees of Quanta who are the former owners of acquired businesses, to lease certain real property and facilities that continue to be utilized by Quanta subsequent to an acquisition. 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 $14.3 million, $16.7 million and $14.0 million for the years ended December 31, 2020, 2019 and 2018.
The components of leases in the accompanying consolidated balance sheet were as follows (in thousands):
December 31,
Lease typeClassification20202019
Assets:
Operating lease right-of-use assetsOperating lease right-of-use assets$256,845 $284,369 
Finance lease assetsProperty and equipment, net of accumulated depreciation2,370 1,043 
Total lease assets $259,215 $285,412 
Liabilities:
Current:
OperatingCurrent portion of operating lease liabilities$85,134 $92,475 
FinanceCurrent maturities of long-term debt and short-term debt846 440 
Non-current:
OperatingOperating lease liabilities, net of current portion178,822 196,521 
FinanceLong-term debt, net of current maturities1,382 517 
Total lease liabilities $266,184 $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 December 31, 2020 and 2019, the assets recorded, net of accumulated depreciation, totaled $45.7 million and $11.8 million.
Future minimum lease payments for operating and finance leases were as follows (in thousands):
 As of December 31, 2020
 Operating LeasesFinance LeasesTotal
2021$94,166 $920 $95,086 
202268,284 690 68,974 
202347,872 493 48,365 
202429,362 264 29,626 
202518,685 — 18,685 
Thereafter30,311 — 30,311 
Total future minimum operating and finance lease payments288,680 2,367 291,047 
Less imputed interest(24,724)(139)(24,863)
Total lease liabilities $263,956 $2,228 $266,184 
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 $13.6 million as of December 31, 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 December 31, 2020
Weighted average remaining lease term (in years):
Operating leases4.28
Finance leases3.06
Weighted average discount rate:
Operating leases4.2 %
Finance leases4.1 %
Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. At December 31, 2020, the maximum guaranteed residual value of this equipment was $779.1 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.
As of December 31, 2020, Quanta had additional operating lease obligations of $3.4 million for leases that had not yet commenced and that are expected to commence in 2021 or 2022 and have lease terms of one to seven years.