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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, 2021.

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

Quanta Services, Inc.
(Exact name of registrant as specified in its charter)

Delaware | 74-2851603
(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)
(713) 629-7600
(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 class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.00001 par value |  | PWR |  | New 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 4, 2021, the number of outstanding shares of Common Stock of the registrant was 139,346,092.

QUANTA SERVICES, INC. AND SUBSIDIARIES
INDEX

|  | Page
| PART I. FINANCIAL INFORMATION |
ITEM 1. | Financial Statements (Unaudited) |
| Condensed Consolidated Balance Sheets | 6
| Condensed Consolidated Statements of Operations | 7
| Condensed Consolidated Statements of Comprehensive Income (Loss) | 8
| Condensed Consolidated Statements of Cash Flows | 9
| Condensed Consolidated Statements of Equity | 10
| Notes to Condensed Consolidated Financial Statements | 12
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 49
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 68
ITEM 4. | Controls and Procedures | 69
| PART II. OTHER INFORMATION |
ITEM 1. | Legal Proceedings | 70
ITEM 1A. | Risk Factors | 70
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 71
ITEM 3. | Defaults Upon Senior Securities | 71
ITEM 4. | Mine Safety Disclosures | 71
ITEM 5. | Other Information | 71
ITEM 6. | Exhibits | 72
Signature | 73

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, tax rates and other projections of operating or 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;
•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 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 transition to a carbon-neutral economy;
•The potential impact of commodity prices and production volumes on our business, financial condition, results of operations and cash flows and demand for our services;
•The potential benefits from, and future financial and operational performance of, acquired businesses and our investments, including our investment in LUMA Energy, LLC (LUMA);
•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 larger electric transmission and pipeline projects;
•Future capital allocation initiatives, including the amount, timing and strategies with respect to any future stock repurchases, and expectations regarding the declaration, amount and timing of any future 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 and availability of labor resources in the industries we serve;
•The expected realization of remaining performance obligations or backlog;
•The expected outcome of pending or threatened legal proceedings; 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 all of our forward-looking statements may turn out to be inaccurate or incorrect. Those 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 outside our control, including economic, energy, infrastructure and environmental policies and plans that are adopted or proposed by the U.S. federal and state governments and weakness in the capital markets or the ongoing and potential impact to financial markets and worldwide economic activity resulting from the COVID-19 pandemic and related governmental actions;
•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 and supply chains resulting from the COVID-19 pandemic and related governmental actions;
•The severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of business and governmental responses to the pandemic on our operations, personnel and supply chains, and on
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commercial activity and demand across our 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;
•The time and costs required to exit our Latin American operations, as well as the business and political climate in Latin America;
•Delays, deferrals, reductions in scope or cancellations of anticipated, pending or existing projects as a result of, among other things, the COVID-19 pandemic, 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, including as a result of the recent significant decrease in commodity prices;
•The successful negotiation, execution, performance and completion of anticipated, pending and existing contracts;
•Risks associated with operational hazards that arise due to the nature of the services we provide and the conditions in which we operate, including, among others, wildfires and explosions;
•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, 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;
•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 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 ability to attract and the potential shortage of skilled employees and our ability to retain key personnel and qualified employees;
•Our dependence on fixed price contracts and the potential to 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;
•Adverse weather conditions, natural disasters and other emergencies, including wildfires, pandemics (including the ongoing COVID-19 pandemic), hurricanes, tropical storms, floods, earthquakes and other geological- and weather-related hazards;
•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;
•Fluctuations of prices of certain materials used in our and our customers’ businesses, including as a result of the imposition of tariffs, governmental regulations affecting the sourcing of certain materials and equipment and other changes in U.S. trade relationships with other countries;
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•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 participation in joint ventures or similar structures exposes us to liability and/or harm to our reputation for 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 the recent decrease in commodity prices and which could include the failure to collect our outstanding receivables, failure to recover amounts billed to 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, which may result in project delays or cancellations;
•Our ability to successfully complete our remaining performance obligations or realize our backlog;
•Technological advancements and market developments that could reduce the demand for our services;
•Risks associated with operating in international markets, including instability of foreign governments, currency exchange fluctuations, and compliance with unfamiliar foreign legal 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 ability to successfully identify, complete, integrate and realize synergies from acquisitions, including the ability to retain key personnel from acquired businesses;
•The potential adverse impact resulting from uncertainty surrounding acquisitions and investments, including the potential increase in risks already existing in our operations and poor performance or decline in value of our 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 our unionized workforce on our operations, including labor stoppages or interruptions due to strikes or lockouts;
•The ability 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 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;
•New or changed tax laws, treaties or regulations;
•Our ability to realize deferred tax assets;
•Significant fluctuations in foreign currency exchange rates; and
•The other risks and uncertainties described elsewhere herein and in Item 1A. Risk Factors of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 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 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
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disclaim any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or otherwise.
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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, 2021 |  | December 31, 2020
ASSETS |  |  |  |
Current Assets: |  |  |  |
Cash and cash equivalents |  | $ | 200,218 |  |  | $ | 184,620 |
Accounts receivable, net of allowances of $16,449 and $16,546 |  | 2,666,983 |  |  | 2,716,083 |
Contract assets |  | 518,256 |  |  | 453,832 |
Inventories |  | 51,009 |  |  | 50,472 |
Prepaid expenses and other current assets |  | 169,105 |  |  | 183,382 |
Total current assets |  | 3,605,571 |  |  | 3,588,389 |
Property and equipment, net of accumulated depreciation of $1,417,734 and $1,372,132 |  | 1,583,451 |  |  | 1,560,656 |
Operating lease right-of-use assets |  | 252,206 |  |  | 256,845 |
Other assets, net |  | 576,975 |  |  | 435,713 |
Other intangible assets, net of accumulated amortization of $539,986 and $517,574 |  | 415,122 |  |  | 435,655 |
Goodwill |  | 2,124,089 |  |  | 2,121,014 |
Total assets |  | $ | 8,557,414 |  |  | $ | 8,398,272 |
LIABILITIES AND EQUITY |  |  |  |
Current Liabilities: |  |  |  |
Current maturities of long-term debt and short-term debt |  | $ | 10,709 |  |  | $ | 14,764 |
Current portion of operating lease liabilities |  | 83,799 |  |  | 85,134 |
Accounts payable and accrued expenses |  | 1,506,025 |  |  | 1,509,794 |
Contract liabilities |  | 499,527 |  |  | 528,864 |
Total current liabilities |  | 2,100,060 |  |  | 2,138,556 |
Long-term debt, net of current maturities |  | 1,347,560 |  |  | 1,174,294 |
Operating lease liabilities, net of current portion |  | 176,008 |  |  | 178,822 |
Deferred income taxes |  | 170,059 |  |  | 166,407 |
Insurance and other non-current liabilities |  | 383,564 |  |  | 391,221 |
Total liabilities |  | 4,177,251 |  |  | 4,049,300 |
Commitments and Contingencies |  |  |  |
Equity: |  |  |  |
Common stock, $0.00001 par value, 600,000,000 shares authorized, 164,810,123 and 162,710,792 shares issued, and 139,446,849 and 138,300,191 shares outstanding |  | 2 |  |  | 2 |
Additional paid-in capital |  | 2,183,728 |  |  | 2,170,026 |
Retained earnings |  | 3,346,299 |  |  | 3,264,967 |
Accumulated other comprehensive loss |  | (224,458) |  |  | (232,997) |
Treasury stock, 25,363,274 and 24,410,601 common shares |  | (930,628) |  |  | (857,817) |
Total stockholders’ equity |  | 4,374,943 |  |  | 4,344,181 |
Non-controlling interests |  | 5,220 |  |  | 4,791 |
Total equity |  | 4,380,163 |  |  | 4,348,972 |
Total liabilities and equity |  | $ | 8,557,414 |  |  | $ | 8,398,272 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Revenues |  | $ | 2,703,581 |  |  | $ | 2,764,095 |  |  |  |  |
Cost of services (including depreciation) |  | 2,330,691 |  |  | 2,431,899 |  |  |  |  |
Gross profit |  | 372,890 |  |  | 332,196 |  |  |  |  |
Equity in earnings of integral unconsolidated affiliates |  | 5,183 |  |  | — |  |  |  |  |
Selling, general and administrative expenses |  | (243,352) |  |  | (230,793) |  |  |  |  |
Amortization of intangible assets |  | (21,355) |  |  | (17,908) |  |  |  |  |
Change in fair value of contingent consideration liabilities |  | 363 |  |  | (2,758) |  |  |  |  |
Operating income |  | 113,729 |  |  | 80,737 |  |  |  |  |
Interest expense |  | (12,475) |  |  | (14,006) |  |  |  |  |
Interest income |  | 117 |  |  | 759 |  |  |  |  |
Other income (expense), net |  | 3,672 |  |  | (9,827) |  |  |  |  |
Income before income taxes |  | 105,043 |  |  | 57,663 |  |  |  |  |
Provision for income taxes |  | 13,724 |  |  | 16,160 |  |  |  |  |
Net income |  | 91,319 |  |  | 41,503 |  |  |  |  |
Less: Net income attributable to non-controlling interests |  | 1,558 |  |  | 2,817 |  |  |  |  |
Net income attributable to common stock |  | $ | 89,761 |  |  | $ | 38,686 |  |  |  |  |
Earnings per share attributable to common stock: |  |  |  |  |  |  |  |
Basic |  | $ | 0.64 |  |  | $ | 0.27 |  |  |  |  |
Diluted |  | $ | 0.62 |  |  | $ | 0.26 |  |  |  |  |
Shares used in computing earnings per share: |  |  |  |  |  |  |  |
Weighted average basic shares outstanding |  | 140,121 |  |  | 144,454 |  |  |  |  |
Weighted average diluted shares outstanding |  | 144,447 |  |  | 146,787 |  |  |  |  |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Net income |  | $ | 91,319 |  |  | $ | 41,503 |  |  |  |  |
Other comprehensive income (loss), net of tax provision: |  |  |  |  |  |  |  |
Foreign currency translation adjustment, net of tax of $0 and $0 |  | 8,532 |  |  | (82,968) |  |  |  |  |
Other, net of tax of $2 and $0 |  | 7 |  |  | — |  |  |  |  |
Other comprehensive income (loss) |  | 8,539 |  |  | (82,968) |  |  |  |  |
Comprehensive income (loss) |  | 99,858 |  |  | (41,465) |  |  |  |  |
Less: Comprehensive income attributable to non-controlling interests |  | 1,558 |  |  | 2,817 |  |  |  |  |
Total comprehensive income (loss) attributable to common stock |  | $ | 98,300 |  |  | $ | (44,282) |  |  |  |  |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Cash Flows from Operating Activities: |  |  |  |  |  |  |  |
Net income |  | $ | 91,319 |  |  | $ | 41,503 |  |  |  |  |
Adjustments to reconcile net income to net cash provided by operating activities— |  |  |  |  |  |  |  |
Depreciation |  | 62,107 |  |  | 54,410 |  |  |  |  |
Amortization of intangible assets |  | 21,355 |  |  | 17,908 |  |  |  |  |
Change in fair value of contingent consideration liabilities |  | (363) |  |  | 2,758 |  |  |  |  |
Equity in (earnings) losses of unconsolidated affiliates |  | (5,868) |  |  | 2,683 |  |  |  |  |
Amortization of debt discount and issuance costs |  | 846 |  |  | 589 |  |  |  |  |
Gain on sale of property and equipment |  | (4,982) |  |  | (814) |  |  |  |  |
Provision for credit losses |  | 43 |  |  | 273 |  |  |  |  |
Deferred income tax provision |  | 2,494 |  |  | 4,210 |  |  |  |  |
Non-cash stock-based compensation |  | 18,687 |  |  | 14,912 |  |  |  |  |
Foreign currency gain |  | (576) |  |  | (353) |  |  |  |  |
Changes in operating assets and liabilities, net of non-cash transactions |  | (59,449) |  |  | 89,470 |  |  |  |  |
Net cash provided by operating activities |  | 125,613 |  |  | 227,549 |  |  |  |  |
Cash Flows from Investing Activities: |  |  |  |  |  |  |  |
Capital expenditures |  | (83,486) |  |  | (68,109) |  |  |  |  |
Proceeds from sale of property and equipment |  | 7,223 |  |  | 4,790 |  |  |  |  |
Proceeds from insurance settlements related to property and equipment |  | 7 |  |  | 198 |  |  |  |  |
Cash paid for acquisitions, net of cash, cash equivalents and restricted cash acquired |  | (32,778) |  |  | (22,794) |  |  |  |  |
Proceeds from disposition of businesses |  | — |  |  | 2,474 |  |  |  |  |
Investments in unconsolidated affiliates and other |  | (113,982) |  |  | (5,692) |  |  |  |  |
Cash received from investments in unconsolidated affiliates and other entities |  | 210 |  |  | — |  |  |  |  |
Net cash used in investing activities |  | (222,806) |  |  | (89,133) |  |  |  |  |
Cash Flows from Financing Activities: |  |  |  |  |  |  |  |
Borrowings under credit facility |  | 828,496 |  |  | 1,474,452 |  |  |  |  |
Payments under credit facility |  | (656,818) |  |  | (1,171,059) |  |  |  |  |
Payments of other long-term debt |  | (857) |  |  | (446) |  |  |  |  |
Net repayments of short-term debt, net of borrowings |  | (4,247) |  |  | (2,799) |  |  |  |  |
Payments for contingent consideration liabilities |  | (263) |  |  | (989) |  |  |  |  |
Distributions to non-controlling interests |  | (1,129) |  |  | (1,963) |  |  |  |  |
Payments related to tax withholding for stock-based compensation |  | (23,921) |  |  | (15,886) |  |  |  |  |
Payment of dividends |  | (8,798) |  |  | (7,384) |  |  |  |  |
Repurchase of common stock |  | (19,474) |  |  | (200,000) |  |  |  |  |
Net cash provided by financing activities |  | 112,989 |  |  | 73,926 |  |  |  |  |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash |  | 11 |  |  | (449) |  |  |  |  |
Net increase in cash, cash equivalents and restricted cash |  | 15,807 |  |  | 211,893 |  |  |  |  |
Cash, cash equivalents and restricted cash, beginning of period |  | 186,808 |  |  | 169,745 |  |  |  |  |
Cash, cash equivalents and restricted cash, end of period |  | $ | 202,615 |  |  | $ | 381,638 |  |  |  |  |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)

|  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |
|  |  |  |  | Additional |  |  |  | Other |  |  |  | Total |  |  |  |
| Common Stock |  | Paid-In |  | Retained |  | Comprehensive |  | Treasury |  | Stockholders' |  | Non-controlling |  | Total
| Shares |  | Amount |  | Capital |  | Earnings |  | Income (Loss) |  | Stock |  | Equity |  | Interests |  | Equity
Balance, December 31, 2020 | 138,300,191 |  |  | $ | 2 |  |  | $ | 2,170,026 |  |  | $ | 3,264,967 |  |  | $ | (232,997) |  |  | $ | (857,817) |  |  | $ | 4,344,181 |  |  | $ | 4,791 |  |  | $ | 4,348,972 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | 8,539 |  |  | — |  |  | 8,539 |  |  | — |  |  | 8,539 |
Stock-based compensation activity | 1,368,739 |  |  | — |  |  | 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, 2021 | 139,446,849 |  |  | $ | 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.
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QUANTA SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)

|  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |
|  |  |  |  | Exchangeable |  | Additional |  |  |  | Other |  |  |  | Total |  |  |  |
| Common Stock |  | Shares |  | Paid-In |  | Retained |  | Comprehensive |  | Treasury |  | Stockholders' |  | Non-controlling |  | Total
| Shares |  | Amount |  | Shares |  | Amount |  | Capital |  | Earnings |  | Income (Loss) |  | Stock |  | Equity |  | Interests |  | Equity
Balance, December 31, 2019 | 142,324,318 |  |  | $ | 2 |  |  | 36,183 |  |  | $ | — |  |  | $ | 2,024,610 |  |  | $ | 2,854,271 |  |  | $ | (241,818) |  |  | $ | (586,773) |  |  | $ | 4,050,292 |  |  | $ | 3,539 |  |  | $ | 4,053,831 |
Credit loss cumulative effect adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,841) |  |  | — |  |  | — |  |  | (3,841) |  |  |  |  | (3,841) |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (82,968) |  |  | — |  |  | (82,968) |  |  | — |  |  | (82,968) |
Acquisitions | 121,089 |  |  | — |  |  | — |  |  | — |  |  | 4,329 |  |  | — |  |  | — |  |  | — |  |  | 4,329 |  |  |  |  | 4,329 |
Stock-based compensation activity | 1,124,530 |  |  | — |  |  | — |  |  | — |  |  | 11,444 |  |  | — |  |  | — |  |  | (19,750) |  |  | (8,306) |  |  | — |  |  | (8,306) |
Exchange of exchangeable shares | 36,183 |  |  | — |  |  | (36,183) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Common stock repurchases | (5,960,134) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | (200,000) |  |  | (200,000) |  |  | — |  |  | (200,000) |
Dividends declared ($0.05 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (7,184) |  |  | — |  |  | — |  |  | (7,184) |  |  | — |  |  | (7,184) |
Distributions to non-controlling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,963) |  |  | (1,963) |
Other | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (516) |  |  | — |  |  | — |  |  | (516) |  |  | 293 |  |  | (223) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 38,686 |  |  | — |  |  | — |  |  | 38,686 |  |  | 2,817 |  |  | 41,503 |
Balance, March 31, 2020 | 137,645,986 |  |  | $ | 2 |  |  | — |  |  | $ | — |  |  | $ | 2,040,383 |  |  | $ | 2,881,416 |  |  | $ | (324,786) |  |  | $ | (806,523) |  |  | $ | 3,790,492 |  |  | $ | 4,686 |  |  | $ | 3,795,178 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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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, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. Quanta reports its results under two reportable segments: (1) Electric Power Infrastructure Solutions and (2) Underground Utility and Infrastructure Solutions.
Electric Power Infrastructure Solutions Segment
The Electric Power Infrastructure Solutions segment provides comprehensive network solutions to customers in the electric power and other industries. Services performed by the Electric Power Infrastructure Solutions segment generally include the design, new construction, upgrade and repair and maintenance of electric power transmission and distribution infrastructure and substation facilities, along with other engineering and technical services. This includes solutions for utilities to implement system upgrades to modernize and harden the electric power grid in order to ensure its safety and enhance reliability. This segment also 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 unique bare hand and hot stick methods and Quanta’s proprietary robotic arm techniques; and the installation of “smart grid” technologies on electric power networks. In addition, this segment provides the engineering and construction services for the switchyards and transmission infrastructure needed to interconnect renewable energy generation, including solar, wind, hydro power and backup natural gas generation facilities. Engineering and construction services related to, among other things, electric vehicle charging infrastructure, micro-grids and battery storage are also performed in this segment. 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 of commercial and industrial wiring. This segment also provides aviation services in support of the above services and includes 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.
Underground Utility and Infrastructure Solutions Segment
The Underground Utility and Infrastructure Solutions segment provides comprehensive infrastructure solutions, including design, engineering, new construction, upgrade and repair and maintenance services, to customers involved in the transportation, distribution, storage and processing of natural gas, oil and other products. Services include the upgrade, new construction and repair and maintenance of natural gas systems for gas utility customers, as well as pipeline protection, integrity testing, rehabilitation and replacement. Quanta also provides catalyst replacement services, high-pressure and critical-path turnaround services, instrumentation and electrical services, piping, fabrication and storage tank services to 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 above services and in connection with electric power infrastructure solutions. To a lesser extent, this segment includes construction services for the offshore energy market and designs, installs and maintains fueling systems and water and sewer infrastructure.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The condensed consolidated financial statements of Quanta include the accounts of Quanta Services, Inc. and its wholly-owned subsidiaries, which are also referred to as its operating units. The condensed consolidated financial statements also include the accounts of certain of Quanta’s investments in joint ventures, which are either consolidated or proportionately consolidated, as discussed in the following summary of significant accounting policies. Investments in affiliated entities in which Quanta does not have a controlling financial interest, but over which Quanta has significant influence, usually because Quanta holds a voting interest of between 20% and 50%, are accounted for using the equity method. All significant
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intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, references to Quanta include Quanta Services, Inc. and its consolidated subsidiaries.
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 included in Quanta’s 2020 Annual Report.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses recognized during the periods presented. Quanta reviews all significant estimates affecting its consolidated financial statements on a recurring basis and records the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on Quanta’s beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. Estimates are primarily used in Quanta’s assessment of revenue recognition for construction contracts, including contractual change orders and claims; allowance for credit losses; valuation of inventory; useful lives of assets; fair value assumptions in analyzing goodwill, other intangibles and long-lived asset impairments; equity and other investments; purchase price allocations; acquisition-related contingent consideration liabilities; multiemployer pension plan withdrawal liabilities; contingent liabilities associated with, among other things, legal proceedings and claims, parent guarantees and indemnity obligations; estimated insurance claim recoveries; stock-based compensation; operating results of reportable segments; provision for income taxes; and uncertain tax positions.
Revenue Recognition
Contracts
Quanta’s services include the design, new construction, upgrade and repair and maintenance of infrastructure in the electric power, communications and energy industries. These 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 based on how transaction prices are determined and revenue is recognized: unit-price contracts, cost-plus contracts and fixed price contracts. Transaction prices for unit-price contracts are determined on a per unit basis, transaction prices for cost-plus contracts are determined by applying a profit margin to costs incurred on the contracts and transaction prices for fixed price contracts are determined on a lump-sum basis. All of Quanta’s revenues are recognized from contracts with its customers. In addition to the considerations described below, revenue is not recognized unless collectability under the contract is considered probable, the contract has commercial substance and the contract has been approved. Additionally, the contract must contain payment terms, as well as the rights and commitments of both parties.
Performance Obligations
A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Most of Quanta’s contracts are considered to have a single performance obligation whereby Quanta is required to integrate complex activities and equipment into a deliverable for a customer. For contracts with multiple performance obligations, Quanta allocates a portion of the total transaction price to each performance obligation using its best estimate of the standalone selling price of the distinct good or service associated with each performance obligation. Standalone selling price is estimated using the expected costs plus a margin.
At March 31, 2021 and December 31, 2020, the aggregate transaction price allocated to unsatisfied or partially satisfied
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performance obligations was approximately $4.13 billion and $3.99 billion, of which 76.7% and 71.2% were expected to be recognized in the subsequent twelve months. These amounts represent management’s estimate 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. 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.
Recognition of Revenue Upon Satisfaction of Performance Obligations
A transaction price is determined for each contract, and that amount is allocated to each performance obligation within the contract and recognized as revenue when, or as, the performance obligation is satisfied. Quanta generally recognizes revenue over time as it performs its obligations because there is a continuous transfer of control of the deliverable to the customer. Under unit-price contracts with an insignificant amount of partially completed units, Quanta recognizes revenue as units are completed based on contractual pricing amounts. Under unit-price contracts with more than an insignificant amount of partially completed units and fixed price contracts, Quanta recognizes revenues as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Under cost-plus contracts, Quanta recognizes revenue on an input basis, as labor hours are incurred, materials are utilized and services are performed.
Under contracts where Quanta has a right to consideration in an amount that directly corresponds to the value of completed performance, Quanta recognizes revenue in such amount and does not include such performance as a remaining performance obligation. Also, contract consideration is not adjusted for a significant financing component if payment is expected to be collected less than one year from when the services are performed.
Contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. The majority of the materials associated with Quanta’s work are owner-furnished, and therefore not included in contract revenues and costs. Additionally, Quanta may incur incremental costs to obtain certain contracts, such as selling and marketing costs, bid and proposal costs, sales commissions, and legal fees or initial set-up or mobilization costs, certain of which can be capitalized. Such costs were not material during the three months ended March 31, 2021 and 2020.
Contract 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. The estimating process is based on the professional knowledge and experience of Quanta’s project estimators, project managers and finance professionals. Some of the factors that can lead to 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 may lead to 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 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 ongoing pandemic as a result of the novel coronavirus disease (COVID-19) that began in 2019); and performance and quality issues causing delay (including payment of liquidated damages) or requiring rework or replacement. These factors, along with other risks inherent in performing services under fixed price contracts, are routinely evaluated by management. Any changes in estimates could result in changes to profitability or losses associated with the related performance obligations. For example, estimated costs for a performance obligation may increase from an original estimate, and contractual provisions may not allow for adequate compensation or reimbursement for such additional costs. Changes in estimated revenues, costs and profit are recorded in the period they are determined to be probable and can be reasonably estimated. Contract losses are recognized in full when they are determined to be probable and can be reasonably estimated.
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 determines the probability that costs associated with change orders and claims will be recovered based on, among other things, contractual entitlement, past practices with the
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customer, specific discussions or preliminary negotiations with the customer and verbal approvals by the customer. 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 reliably estimated. Most of Quanta’s change orders are for services that are not distinct from an existing contract and are accounted for as part of an existing contract on a cumulative catch-up basis. Quanta accounts for a change order as a separate contract if the additional goods or services are distinct from and increase the scope of the contract, and the price of the contract increases by an amount commensurate to Quanta’s standalone selling price for the additional goods or services.
As of March 31, 2021 and December 31, 2020, Quanta had recognized revenues of $158.6 million and $141.2 million related to change orders and claims included as contract price adjustments and that were in the process of being negotiated in the normal course of business. The largest component of recognized change orders and claims is associated with delays to an electric transmission project in Canada, the most significant of which occurred in the first quarter of 2021 due to governmental requirements related to the COVID-19 pandemic. These requirements to on-site protocols caused challenging scheduling and site conditions, which resulted in these delays and negatively impacted productivity. Quanta believes that the contract for this project entitles it to recover certain amounts associated with the delays on the project. The aggregate amounts related to change orders and claims, which are included in “Contract assets” in the accompanying condensed consolidated balance sheets, represent management’s estimates of additional contract revenues that have been earned and are probable of collection. However, Quanta’s estimates could change, and the amount ultimately realized could be significantly higher or lower than the estimated amount.
Variable consideration amounts, including performance incentives, early pay discounts and penalties, may also cause changes in contract estimates. The amount of variable consideration is estimated based on the most likely amount that is deemed probable of realization. Contract consideration is adjusted for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty related to the variable consideration is resolved.
Changes in contract estimates are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. 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 current estimate differs from 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.
Operating results for the three months ended March 31, 2021 were favorably impacted by 11.5% of gross profit as a result of aggregate changes in contract estimates related to projects that were in progress at 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 had a total contract value of $91.8 million and was approximately 56% complete as of March 31, 2021.
Operating results for the three months ended March 31, 2020 were favorably impacted by 7.3% of gross profit, as a result of aggregate changes in contract estimates related to projects that were in progress at December 31, 2019. 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, 2020 was a negative change in estimate of $11.6 million related to project delays associated with subcontractor performance and severe weather impacts on a larger pipeline transmission project in Canada that had a contract value of $114 million and was approximately 98% complete as of March 31, 2021.
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Revenues by Category
The following tables present Quanta’s revenue disaggregated by geographic location, as determined by the job location, and contract type (in thousands):

|  | Three Months Ended March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
By primary geographic location: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 2,206,116 |  |  | 81.6 | % |  | $ | 2,268,086 |  |  | 82.1 | % |  |  |  |  |  |  |  |
Canada |  | 413,846 |  |  | 15.3 | % |  | 384,225 |  |  | 13.9 | % |  |  |  |  |  |  |  |
Australia |  | 55,107 |  |  | 2.0 | % |  | 51,050 |  |  | 1.8 | % |  |  |  |  |  |  |  |
Others |  | 28,512 |  |  | 1.1 | % |  | 60,734 |  |  | 2.2 | % |  |  |  |  |  |  |  |
Total revenues |  | $ | 2,703,581 |  |  | 100.0 | % |  | $ | 2,764,095 |  |  | 100.0 | % |  |  |  |  |  |  |  |

|  | Three Months Ended March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
By contract type: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unit-price contracts |  | $ | 976,562 |  |  | 36.1 | % |  | $ | 974,651 |  |  | 35.3 | % |  |  |  |  |  |  |  |
Cost-plus contracts |  | 662,772 |  |  | 24.5 | % |  | 688,084 |  |  | 24.9 | % |  |  |  |  |  |  |  |
Fixed price contracts |  | 1,064,247 |  |  | 39.4 | % |  | 1,101,360 |  |  | 39.8 | % |  |  |  |  |  |  |  |
Total revenues |  | $ | 2,703,581 |  |  | 100.0 | % |  | $ | 2,764,095 |  |  | 100.0 | % |  |  |  |  |  |  |  |

As described above, under unit-price contracts with more than an insignificant amount of partially completed units and fixed price contracts, revenue is recognized as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to total estimated costs for such performance obligation. Approximately 44.4% and 48.1% of Quanta’s revenues recognized during the three months ended March 31, 2021 and 2020 were associated with this revenue recognition method.
Contract Assets and Liabilities
With respect to Quanta’s contracts, interim payments are typically received as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. As a result, under fixed price contracts, the timing of revenue recognition and contract billings results in contract assets and contract liabilities. Contract assets represent revenues recognized in excess of amounts billed for fixed price contracts and are current assets that are transferred to accounts receivable when billed or the billing rights become unconditional. Contract assets are not considered a significant financing component as they are intended to protect the customer in the event Quanta does not perform on its obligations under the contract.
Conversely, contract liabilities represent billings in excess of revenues recognized for fixed price contracts. These arise under certain contracts that allow for upfront payments from the customer or contain contractual billing milestones, which result in billings that exceed the amount of revenues recognized for certain periods. Contract liabilities are current liabilities and are not considered to have a significant financing component, as they are used to meet working capital requirements that are generally higher in the early stages of a contract and are intended to protect Quanta from the other party failing to meet its obligations under the contract. Contract assets and liabilities are recorded on a performance obligation basis at the end of each reporting period.
Contract assets and liabilities consisted of the following (in thousands):

|  | March 31, 2021 |  | December 31, 2020
Contract assets |  | $ | 518,256 |  |  | $ | 453,832 |
Contract liabilities |  | $ | 499,527 |  |  | $ | 528,864 |

As described above, 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 and variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings, or deferred billings. The increase in contract assets from December
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31, 2020 to March 31, 2021 was primarily due to increased working capital requirements related to the ramp up of two larger electric transmission projects in Canada and the timing of the billings.
Revenues were positively impacted by $54.3 million during the three months ended March 31, 2021 as a result of changes in estimates associated with performance obligations on fixed price contracts partially satisfied prior to December 31, 2020. During the three months ended March 31, 2021, Quanta recognized revenue of approximately $245.7 million related to contract liabilities outstanding at December 31, 2020.
Current and Long-Term Accounts Receivable and Allowance for Credit Losses
The assessment of allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Expected credit losses are estimated by evaluating trends in historical write-off experience and applying historical loss ratios to pools of financial assets with similar risk characteristics. Quanta has determined that it has one pool for the purpose of calculating its historical credit loss experience.
Quanta’s historical loss ratio and its determination of risk pools, which are used to calculate expected credit losses, may be adjusted for changes in customer credit concentrations within its portfolio of financial assets, customers’ ability to pay, and other considerations, such as economic and market changes, changes to the 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 factors, including any potential effects from the currently challenged energy market and the ongoing COVID-19 pandemic.
Additional allowance for credit losses is established for financial asset balances with specific customers where collectability has been determined to be improbable based on customer specific facts and circumstances. 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 have been outstanding for at least 90 days. In addition to monitoring delinquent accounts, management monitors the credit quality of its receivables 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, |  |
|  | 2021 |  | 2020 |  |  |  |
Balance at beginning of period |  | $ | 16,546 |  |  | $ | 9,398 |  |  |  |  |
Cumulative effect of adoption of new credit loss standard |  | — |  |  | 5,067 |  |  |  |  |
Provision for credit losses |  | 43 |  |  | 273 |  |  |  |  |
Direct write-offs charged against the allowance |  | (140) |  |  | (292) |  |  |  |  |
Balance at end of period |  | $ | 16,449 |  |  | $ | 14,446 |  |  |  |  |

Long-term accounts receivable are included within “Other assets, net” in the accompanying condensed consolidated balance sheets. As of March 31, 2021 and December 31, 2020, long-term accounts receivable were $13.5 million and $13.4 million.
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 twelve months. Retainage balances with expected settlement dates within the next twelve months as of March 31, 2021 and December 31, 2020 were $275.9 million and $306.3 million, which are included in “Accounts receivable.” Retainage balances with expected settlement dates beyond the next twelve months are included in “Other assets, net,” and as of March 31, 2021 and December 31, 2020 were $112.3 million and $88.2 million.
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
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contract until a later date or amounts arise from routine lags in billing (for example, work completed 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.” At March 31, 2021 and December 31, 2020, unbilled receivables included in “Accounts receivable” were $561.3 million and $472.3 million. 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 $41.2 million and $53.6 million at March 31, 2021 and December 31, 2020.
Cash and Cash Equivalents
Amounts related to Quanta’s cash and cash equivalents based on geographic location of the bank accounts were as follows (in thousands):

|  | March 31, 2021 |  | December 31, 2020
Cash and cash equivalents held in domestic bank accounts |  | $ | 170,128 |  |  | $ | 156,122 |
Cash and cash equivalents held in foreign bank accounts |  | 30,090 |  |  | 28,498 |
Total cash and cash equivalents |  | $ | 200,218 |  |  | $ | 184,620 |

Cash consisting of interest-bearing demand deposits is carried at cost, which approximates fair value. Quanta considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents, which are carried at fair value. At March 31, 2021 and December 31, 2020, cash equivalents were $125.8 million and $98.0 million and consisted primarily of money market investments and money market mutual funds and are discussed further in the Fair Value Measurements section within this Note 2.
Cash and cash equivalents held by joint ventures, which are either consolidated or proportionately consolidated, are available to support joint venture operations, but Quanta cannot utilize those assets to support its other operations. Quanta generally has no right to cash and cash equivalents held by a joint venture other than participating in distributions and in the event of dissolution. Cash and cash equivalents held by Quanta’s wholly-owned captive insurance company are generally not available for use in support of its other operations. Amounts related to cash and cash equivalents held by joint ventures and the captive insurance company, which are included in Quanta’s total cash and cash equivalents balances, were as follows (in thousands):

|  | March 31, 2021 |  | December 31, 2020
Cash and cash equivalents held by domestic joint ventures |  | $ | 4,091 |  |  | $ | 7,714 |
Cash and cash equivalents held by foreign joint ventures |  | 3,780 |  |  | 3,973 |
Total cash and cash equivalents held by joint ventures |  | 7,871 |  |  | 11,687 |
Cash and cash equivalents held by captive insurance company |  | 131,839 |  |  | 85,014 |
Cash and cash equivalents not held by joint ventures or captive insurance company |  | 60,508 |  |  | 87,919 |
Total cash and cash equivalents |  | $ | 200,218 |  |  | $ | 184,620 |

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 has recorded goodwill in connection with its historical acquisitions of businesses. Upon acquisition, these businesses were either combined into one of Quanta’s existing operating units or managed on a stand-alone basis as an individual operating unit. Quanta’s operating units are organized into two divisions: the Electric Power Infrastructure Solutions Division and the Underground Utility and Infrastructure Solutions Division. As most of the companies acquired by Quanta provide multiple types of services for multiple types of customers, these divisional designations are based on the predominant type of work performed by an operating unit at the point in time the divisional designation is made. Goodwill is required to be measured for impairment at the reporting unit level, which represents the operating segment level or one level below the operating segment level for which discrete financial information is available. Quanta has determined that its individual operating units represent its reporting units for the purpose of assessing goodwill impairment.
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. The assessment can be performed by first
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completing a qualitative assessment on none, some or all of Quanta’s reporting units. Quanta can also bypass the qualitative assessment for any reporting unit in any period and proceed directly to a quantitative impairment test, and then resume the qualitative assessment in any subsequent period. 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, or an expectation of selling or disposing of a portion of a reporting unit. Additionally, an interim impairment test of a reporting unit may be triggered by 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.
If Quanta believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test involves comparing the fair value of each of Quanta’s reporting units with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding charge to “Asset impairment charges” in the consolidated statements of operations. The income tax effect associated with an impairment of tax-deductible goodwill is also considered in the measurement of the goodwill impairment. A goodwill impairment for any reporting unit is limited to the total amount of goodwill allocated to such reporting unit.
Quanta generally determines the fair value of its reporting units using a weighted combination of the income approach (discounted cash flow method) and market multiple valuation techniques (market guideline transaction method and market guideline public company method), with greater weight placed on the discounted cash flow method because management believes this method results in the most appropriate calculation of fair value and reflects an expectation of market value as determined by a “held and used” model. However, Quanta determined the fair value of its reporting units as of December 31, 2020 using only the income approach due to the impact of the challenged energy market and the exacerbating effect of the COVID-19 pandemic during 2020, which has continued into 2021. Quanta determined that the use of market multiple valuations applied to 2020 and 2021 financial results would not yield valuations reflective of fair market value.
Under the discounted cash flow method, Quanta determines fair value based on the estimated future cash flows for each reporting unit, discounted to present value using a risk-adjusted industry weighted average cost of capital, which reflects the overall level of inherent risk for each reporting unit and the rate of return an outside investor would expect to earn. Cash flow projections are derived from budgeted amounts (typically a one-year model) and subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur. A terminal value is derived from a multiple of the reporting unit’s earnings before interest, taxes, depreciation and amortization (EBITDA). The EBITDA multiples for each reporting unit are based on observed purchase transactions for similar businesses adjusted for size, volatility and risk.
Under the market guideline transaction and market guideline public company methods, Quanta determines the estimated fair value for each of its reporting units by applying transaction multiples and public company multiples, respectively, to each reporting unit’s projected and historical EBITDA average. The transaction multiples are based on observed purchase transactions for similar businesses adjusted for size, volatility and risk. The public company multiples are based on peer group multiples adjusted for size, volatility and risk. For the market guideline public company method, Quanta adds a reasonable control premium, which is estimated as the premium that would be appropriate to convert the reporting unit value to a controlling interest basis.
In connection with the annual goodwill assessment performed during the fourth quarter of 2020, Quanta assessed qualitative factors to determine whether it was necessary to perform a quantitative fair value impairment analysis and identified certain reporting units for which a quantitative goodwill impairment assessment was deemed appropriate based on financial performance indicators. The subsequent quantitative analysis indicated that the fair value of each reporting unit was in excess of its carrying amount. Accordingly, Quanta did not record any impairment charges related to goodwill during the fourth quarter of 2020. Quanta also did not identify any triggering events in the first quarter of 2021, and therefore did not recognize any goodwill impairments for the three months ended March 31, 2021.
In connection with its annual goodwill assessment in 2020, 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 Division that have recently been negatively impacted by energy market challenges. The potential future impact of these challenges is uncertain and depends on numerous factors and could continue or increase in future periods. In particular, two Canadian pipeline-related businesses and a United States material handling services business were identified in the annual goodwill assessment to have an increased risk of goodwill impairment in the near and medium term due to the significant decline in commodity prices and volatility in commodity production volumes, the effect of which
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was exacerbated by the COVID-19 pandemic. 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, 2020. The aggregate goodwill and intangible asset balances for these three businesses totaled $100.9 million and $18.5 million as of March 31, 2021. In addition, a specialized industrial services business located in the United States experienced lower demand for certain services during the year ended December 31, 2020, which has continued in 2021, as customers reduced and deferred regularly scheduled maintenance due to lack of demand for refined products as a result of the COVID-19 pandemic, particularly certain transportation related fuels. After taking into account a 10% decrease in fair value, the reporting unit would have had a fair value in excess of its carrying amount as of December 31, 2020; however, uncertainty as to the timing and extent of recovery of demand for refined products poses an increased risk of goodwill impairment to this reporting unit. The goodwill and intangible asset balances for this business were $303.1 million and $49.9 million as of March 31, 2021.
The determination of a reporting unit’s fair value requires judgment and the use of significant estimates and assumptions. While Quanta believes the estimates and assumptions used in its impairment assessments are reasonable and based on available market information obtained from relevant industry sources, variations in any of the assumptions could result in materially different calculations of fair value and impairment determinations. Quanta will continue to monitor the goodwill associated with its reporting units, and should any of its reporting units suffer additional declines in actual or forecasted financial results, the risk of goodwill impairment would increase.
Other Intangible Assets
Quanta’s intangible assets include customer relationships, backlog, trade names, non-compete agreements, patented rights and developed technology and curriculum, all of which are subject to amortization, as well as an engineering license, which is not subject to amortization. The fair value of customer relationships is estimated as of the date a business is acquired based on the value-in-use concept utilizing the income approach, specifically the multi-period excess earnings method. This method discounts to present value the projected cash flows attributable to the customer relationships, with consideration given to customer contract renewals and estimated customer attrition rates. The significant estimates used by management in determining the fair values of customer relationship intangible assets include future revenues, discount rates and customer attrition rates. The following table presents the rates during the three months ended March 31, 2021 and the ranges of rates and weighted average rates for the year ended December 31, 2020 based on acquisition date fair values for discount and attrition rates used in the valuation of customer relationship intangible assets:

|  | 2021 |  | 2020
|  | Rate |  |  |  | Range |  | Weighted Average
Discount rates |  | 22% |  |  |  | 19% to 25% |  | 20%
Customer attrition rates |  | 25% |  |  |  | 10% to 43% |  | 13%

Quanta values backlog for acquired businesses as of the acquisition date based upon the contractual nature of the backlog within each service line, discounted to present value. The values of trade names and curriculum are estimated using the relief-from-royalty method of the income approach, which is based on the assumption that in lieu of ownership, a company would be willing to pay a royalty for use of the trade name or curriculum. The value of a non-compete agreement is estimated based on the difference between the present value of the prospective cash flows with the agreement in place and the present value of the prospective cash flows without the agreement in place. The value of the engineering license is based on cash paid to acquire the asset.
Quanta amortizes the intangible assets that are subject to amortization based upon the estimated consumption of their economic benefits, or on a straight-line basis if the pattern of economic benefit cannot otherwise be reliably estimated. Intangible assets are reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For instance, a significant change in business climate or a loss of a significant customer, among other things, may trigger the need for impairment testing of intangible assets. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value.
As a result of the broader challenges in the energy market, the effect of which continues to be exacerbated by the COVID-19 pandemic, Quanta assessed the expected negative impact related to its intangible assets, particularly intangible assets associated with reporting units within the Underground Utility and Infrastructure Solutions Division. Quanta concluded that such impact is not likely to result in intangible asset impairments, and therefore no intangible asset impairments were recognized during the three months ended March 31, 2021. However, the potential impact of the energy market challenges and of the COVID-19 pandemic is uncertain and depends on numerous factors, and therefore the negative impact on certain of
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Quanta’s reporting units and related intangible assets could increase in future periods. Quanta will continue to monitor the impact of these events and should any of the reporting units suffer additional declines in actual or forecasted financial results, the risk of intangible asset impairment would increase.
Leases
Lease liabilities are recognized as the present value of the future minimum lease payments over the lease term as of the commencement date. Lease assets are recognized as the present value of future minimum lease payments over the lease term as of the commencement date, plus any initial direct costs incurred and lease payments made, less any lease incentives received.
Quanta determines if an arrangement contains a lease at inception. If an arrangement is considered a lease, Quanta determines at the commencement date whether the lease is an operating or finance lease. Finance leases are leases that meet any of the following criteria: the lease transfers ownership of the underlying asset at the end of the lease term; the lessee is reasonably certain to exercise an option to purchase the underlying asset; the lease term is for the major part of the remaining economic life of the underlying asset (except when the commencement date falls at or near the end of such economic life); the present value of the sum of the lease payments and any additional residual value guarantee by the lessee equals or exceeds substantially all of the fair value of the underlying asset; or the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease that does not meet any of these criteria is considered an operating lease. After the commencement date, lease cost for an operating lease is recognized over the remaining lease term on a straight-line basis, while lease cost for a finance lease is based on the depreciation of the lease asset and interest on the lease liability.
The terms of Quanta’s lease arrangements vary, and certain leases include one or more of the following: renewal option(s), a cancellation option, a residual value guarantee, a purchase option or an escalation clause. An option to extend or terminate a lease is accounted for when assessing a lease term when it is reasonably certain that Quanta will exercise such option. Quanta has made a policy election to classify leases with an initial lease term of 12 months or less as short-term leases, and these leases are not recorded in the accompanying condensed consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised. Lease cost related to short-term leases is recognized on a straight-line basis over the lease term.
Determinations with respect to lease term (including any extension thereof), discount rate, variable lease cost and future minimum lease payments require the use of judgment based on the facts and circumstances related to each lease. Quanta considers various factors, including economic incentives and penalties and business need, to determine the likelihood that a renewal option will be exercised. Unless a renewal option is reasonably certain to be exercised, which is typically at Quanta’s sole discretion, the initial non-cancelable lease term is used. Quanta generally uses its incremental borrowing rates to determine the present value of future minimum lease payments.
Certain real estate and equipment arrangements contain both lease and non-lease components (e.g., maintenance services). Quanta does not separate lease components from their associated non-lease components for such arrangements and accounts for both lease and non-lease components under the lease accounting guidance.
Investments in Affiliates and Other Entities
In the normal course of business, Quanta enters into various types of investment arrangements, each having unique terms and conditions. These investments may include equity interests held by Quanta in business entities, including general or limited partnerships, contractual joint ventures, or other forms of equity or profit participation. These investments may also include Quanta’s participation in different financing structures, such as the extension of loans to project-specific entities, the acquisition of convertible notes issued by project specific entities, or other strategic financing arrangements. Quanta also enters into strategic partnerships with customers and infrastructure investors to provide fully integrated infrastructure solutions on certain projects, including planning and feasibility analyses, engineering, design, procurement, construction and project operation and maintenance. These projects include public-private partnerships and concessions, along with private infrastructure projects such as build, own, operate (and in some cases transfer) and build-to-suit arrangements.
Quanta determines whether investments involve a variable interest entity (VIE) based on the characteristics of the subject entity. If the entity is determined to be a VIE, then management determines if Quanta is the primary beneficiary of the entity and whether or not consolidation of the VIE is required. The primary beneficiary consolidating the VIE must normally have both (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb significant losses of, or the right to receive significant benefits from, the VIE. When Quanta is deemed to be the primary beneficiary, the VIE is consolidated and the other party’s equity interest in the VIE is accounted for as a non-controlling interest. In cases where Quanta determines that it has an undivided interest in the assets, liabilities, revenues and profits of an
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unincorporated VIE (e.g., a general partnership interest), such amounts are consolidated on a basis proportional to Quanta’s ownership interest in the unincorporated entity.
Investments in entities of which Quanta is not the primary beneficiary, but over which Quanta has the ability to exercise significant influence, are accounted for using the equity method of accounting. Equity method investments are carried at original cost adjusted for Quanta’s proportionate share of the investees’ income, losses and distributions. The carrying value for these investments was $51.1 million at March 31, 2021 and is included in “Other assets, net” in the accompanying condensed consolidated balance sheets. Quanta’s share of net income or losses of unconsolidated equity method 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 of unconsolidated equity method investments that are not operationally integral to the operations of Quanta are included in “Other income (expense), net” below operating income in the accompanying condensed consolidated statements of operations. As of March 31, 2021, Quanta had receivables of $7.9 million and payables of $3.1 million from its unconsolidated affiliates.
Equity method investments are reviewed for impairment by assessing whether there has been a decline in the fair value of the investment below the carrying amount and whether any such decline is other-than-temporary. In making this determination, factors such as the ability to recover the carrying amount of the investment and the inability of the investee to sustain its earnings capacity are evaluated in determining whether a loss in value should be recognized. During the three months ended March 31, 2020, Quanta recognized impairment losses of $3.1 million related to a non-integral equity method investment primarily due to the decline in commodity prices and production volume during 2020. These impairment losses are included in “Other income (expense), net” in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2020.
Investments in entities of which Quanta is not the primary beneficiary, and over which Quanta does not have the ability to exercise significant influence are accounted for using the cost method of accounting. Additionally, certain investments provide for significant influence over the investee, but also include preferential liquidation rights, which preclude accounting for the investments under the equity method. These cost method investments are required to be measured at fair value, with changes in fair value recognized in net income, unless the investments do not have readily determinable fair values, in which case the investments are measured at cost minus impairment, if any, plus or minus observable price changes in orderly transactions for an identical or similar investment in the same company. Earnings on investments accounted for using the cost method of accounting are recognized as dividends are declared. These earnings and any impairments of cost method investments are reported in “Other income (expense), net” in the accompanying condensed consolidated statements of operations.
The carrying value for these investments accounted for using the cost method of accounting was $129.3 million at March 31, 2021, and this amount is included in “Other assets, net” in the accompanying condensed consolidated balance sheet. The carrying value included $9.3 million of cumulative impairments that were recorded in 2020 to an investment in a water and gas infrastructure contractor. Quanta had, but did not exercise, an option to acquire the remaining interest in this business at an agreed price based on a multiple of the company’s earnings during a designated performance period. During the three months ended March 31, 2021, Quanta acquired a minority interest in a broadband technology provider for $90.0 million. This investment includes preferential liquidation rights and is accounted for using the cost method of accounting. 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, and such property is expected to be 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 $23.7 million was recognized at cost for the portion of the property currently leased to third party lessees and is included in “Other assets, net” in the accompanying condensed consolidated balance sheet.
See Note 11 for additional information related to investments.
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Puerto Rico Joint Venture
During the three months ended June 30, 2020, a joint venture in which Quanta owns a 50% interest, LUMA Energy, LLC (LUMA), 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. The 15-year operation and maintenance period is scheduled to begin following a transition period that is expected to end in mid-2021. During the transition period, LUMA will complete numerous steps necessary to transition operation and maintenance from the current operator and receives a fixed transition services fee, payable in monthly installments, and is reimbursed for costs and expenses. During the operation and maintenance period, LUMA will continue to be reimbursed for costs and expenses and will receive a fixed annual management fee, with the opportunity to receive additional annual performance-based incentive fees. LUMA will not assume ownership of any electric transmission and distribution system assets and will not be 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 equal ownership and management of LUMA with its joint venture partner. 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.” Included within the equity method investment described above is Quanta’s investment balance related to LUMA of $16.2 million.
Accounts payable and accrued expenses
Accounts payable and accrued expenses consisted of the following (in thousands):

|  | March 31, 2021 |  | December 31, 2020
Accounts payable, trade |  | $ | 842,110 |  |  | $ | 798,023 |
Accrued compensation and related expenses |  | 353,391 |  |  | 378,002 |
Other accrued expenses |  | 310,524 |  |  | 333,769 |
Accounts payable and accrued expenses |  | $ | 1,506,025 |  |  | $ | 1,509,794 |

Income Taxes
Quanta follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded based on future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled.
Quanta regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs from these estimates, Quanta may not realize deferred tax assets to the extent estimated.
Quanta records reserves for income taxes related to certain tax positions when management considers it more likely than not that additional taxes may be due in excess of amounts reflected on income tax returns filed. When recording these reserves, Quanta assumes that taxing authorities have full knowledge of the position and all relevant facts. Quanta continually reviews exposure to additional tax obligations, and as further information is known or events occur, changes in tax reserves may be recorded. To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and included in the provision for income taxes.
As of March 31, 2021, the total amount of unrecognized tax benefits relating to uncertain tax positions was $35.9 million, an increase of $2.7 million from December 31, 2020. Quanta and certain subsidiaries remain under examination by various U.S. state and foreign tax authorities for multiple periods. Quanta believes it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to $13.6 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods.
U.S. federal and state and foreign income tax laws and regulations are voluminous and often ambiguous. As such, Quanta is required to make many subjective assumptions and judgments regarding its tax positions that could materially affect amounts recognized in future consolidated balance sheets, statements of operations and statements of comprehensive income.
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(Unaudited)
Earnings Per Share
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. 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. 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.
Insurance
Quanta is insured for, among other things, employer’s liability, workers’ compensation, auto liability, aviation and general liability claims. Deductibles for the employer’s liability and workers' compensation programs are $5.0 million per occurrence, and deductibles for the auto liability and general liability programs are $15.0 million per occurrence. Quanta manages and maintains a portion of its casualty risk through its wholly-owned captive insurance company, which insures all claims up to the amount of the applicable deductible of its third-party insurance programs. In connection with Quanta’s casualty insurance programs, Quanta is required to issue letters of credit to secure its obligations. Quanta also has employee health care benefit plans for most employees not subject to collective bargaining agreements, of which the primary plan is subject to a deductible of $0.8 million per claimant per year.
Losses under all of these insurance programs are accrued based upon Quanta’s estimate of the ultimate liability for claims reported and an estimate of claims incurred but not reported, with assistance from third-party actuaries. These insurance liabilities are difficult to assess and estimate due to unknown factors, including the severity of an injury, the extent of damage, the determination of Quanta’s liability in proportion to other parties and the number of incidents not reported. The accruals are based upon known facts and historical trends, and management believes such accruals are adequate.
Collective Bargaining Agreements and Multiemployer Pension Plans
Certain of Quanta’s operating units are parties to collective bargaining agreements with unions that represent certain of their employees. The collective bargaining agreements expire at various times and have typically been renegotiated and renewed on terms similar to those in the expiring agreements. The agreements require the operating units to pay specified wages, provide certain benefits to union employees and contribute certain amounts to multiemployer pension plans and employee benefit trusts pursuant to specified rates. Quanta’s multiemployer pension plan contribution rates generally are made to the plans on a “pay-as-you-go” basis based on its union employee payrolls. The location and number of union employees that Quanta employs at any given time and the plans in which they may participate vary depending on Quanta’s need for union resources in connection with its ongoing projects. Therefore, Quanta is unable to accurately predict its union employee payroll and the resulting multiemployer pension plan contribution obligations for future periods.
Stock-Based Compensation
Quanta recognizes compensation expense for restricted stock units (RSUs) and performance stock units (PSUs) to be settled in common stock based on the fair value of the awards, net of estimated forfeitures. The fair value of RSU awards is determined based on the number of units granted and the closing price of Quanta’s common stock on the date of grant. The grant date fair value of the PSUs is determined as follows: (i) for the portion of the awards based on company performance metrics, by utilizing the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the awards based on relative total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. An estimate of future forfeitures, based on historical data, is also utilized to determine compensation expense for the period, and these forfeiture estimates are subject to change and may impact the value that will ultimately be recognized as compensation expense. The resulting compensation expense for PSU and time-based RSU awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period, and the resulting compensation expense for performance-based RSU awards is recognized using the graded vesting method over the requisite service period. The compensation expense related to outstanding PSUs can also vary from period to period based on changes in forecasted achievement of established performance goals and the total number of shares of common stock that Quanta anticipates will be issued upon vesting of such PSUs. Payments made by Quanta to satisfy employee tax withholding obligations associated with awards settled in common stock are classified as financing cash flows.
Compensation expense associated with liability-based awards, such as RSUs that are expected to or may settle in cash, is recognized based on a remeasurement of the fair value of the award at the end of each reporting period. Upon settlement, the holders receive for each RSU an amount in cash equal to the fair market value of one share of Quanta common stock on the
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settlement date, as specified in the applicable award agreement. For additional information on Quanta’s RSU and PSU awards, see Note 10.
Functional Currency and Translation of Financial Statements
The U.S. dollar is the functional currency for the majority of Quanta’s operations, which are primarily located within the United States. The functional currency for Quanta’s foreign operations, which are primarily located in Canada and Australia, is typically the currency of the country where the foreign operating unit is located and transacts the majority of its activities, including billings, financing, payroll and other expenditures. When preparing its consolidated financial statements, Quanta translates the financial statements of its foreign operating units from their functional currency into U.S. dollars. Statements of operations, comprehensive income and cash flows are translated at average monthly rates, while balance sheets are translated at month-end exchange rates or historical rates for certain equity accounts. The translation of the balance sheet results in translation gains or losses, which are included as a separate component of equity under “Accumulated other comprehensive income (loss).” Gains and losses arising from transactions not denominated in functional currencies are included within “Other income (expense), net” in the accompanying condensed consolidated statements of operations.
Comprehensive Income
Components of comprehensive income include all changes in equity during a period except those resulting from changes in Quanta’s capital-related accounts. Quanta records other comprehensive income (loss) for foreign currency translation adjustments related to its foreign operations and for other revenues, expenses, gains and losses that are included in comprehensive income but excluded from net income.
Litigation Costs and Reserves
Quanta records reserves when the likelihood of incurring a loss is probable and the amount of loss can be reasonably estimated. Costs incurred for litigation are expensed as incurred. See Note 11 for additional information related to legal proceedings and other contingencies.
Fair Value Measurements
For disclosure purposes, qualifying assets and liabilities are categorized into three broad levels based on the priority of the inputs used to determine their fair values. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Certain assumptions and other information as they relate to these qualifying assets and liabilities are described below.
Goodwill and Other Intangible Assets
As discussed in the Goodwill and Other Intangible Assets sections within this Note 2, Quanta has recorded goodwill and identifiable intangible assets in connection with certain of its historical business acquisitions. Quanta utilizes the fair value premise as the primary basis for its impairment valuation procedures. The Goodwill and Other Intangible Assets sections provide information regarding valuation methods, including the income approach, market approach and cost approach, and assumptions used to determine the fair value of these assets based on the appropriateness of each method in relation to the type of asset being valued. Quanta believes that these valuation methods appropriately represent the methods that would be used by other market participants in determining fair value, and periodically engages the services of an independent valuation firm when a new business is acquired to assist management with the valuation process, including assistance with the selection of appropriate valuation methodologies and the development of market-based valuation assumptions. The level of inputs used for these fair value measurements is the lowest level (Level 3).
Investments
Equity investments with readily determinable fair values are measured at fair value, with changes in fair value recognized in net income. In cases where those readily determinable values are quoted market prices, the level of input used for these fair value measurements is the highest level (Level 1). Equity investments without readily determinable fair values are measured on a nonrecurring basis. These types of fair market value assessments are similar to other nonrecurring fair value measures used by Quanta, which include the use of significant judgments and available relevant market data. Such market data may include observations of the valuation of comparable companies, risk-adjusted discount rates and an evaluation of the expected performance of the underlying portfolio asset, including historical and projected levels of profitability or cash flows. In addition, a variety of additional factors may be reviewed by management, including, but not limited to, contemporaneous financing and sales transactions with third parties, changes in market outlook and the third-party financing environment. The level of inputs used for these fair value measurements is the lowest level (Level 3).
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As discussed in the Investments in Affiliates and Other Entities section within this Note 2, Quanta has investments accounted for using the equity and cost methods of accounting. Quanta utilizes the fair value premise as the basis for its impairment valuation and recognizes impairment if there are sufficient indicators that the fair value of the investment is less than its carrying value.
Financial Instruments
The carrying amounts of cash equivalents, accounts receivable, contract assets, accounts payable and accrued expenses and contract liabilities approximate fair value due to the short-term nature of these instruments. All of Quanta’s cash equivalents were categorized as Level 1 assets at March 31, 2021 and December 31, 2020, as all values were based on unadjusted quoted prices for identical assets in an active market that Quanta has the ability to access.
Long-term Debt
The carrying amount of variable rate debt, which includes borrowings under Quanta’s senior credit facility, approximates fair value. The fair value of Quanta’s 2.900% Senior Notes due October 1, 2030 was $1.01 billion at March 31, 2021. The fair value of the senior notes is based on the quoted market prices for the same issue and are categorized as Level 1 liabilities. See Note 7 for additional information regarding Quanta’s senior credit facility and the senior notes.
3. NEW ACCOUNTING PRONOUNCEMENTS:
Adoption of New Accounting Pronouncements
In December 2019, the FASB issued an update that, among other things, amends the guidance related to accounting for tax law changes when an entity has a year-to-date loss in an interim period and provides guidance on how to evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. This update is effective for interim and annual periods beginning after December 15, 2020, and certain amendments should be applied prospectively, while other amendments should be applied on a modified retrospective basis. Quanta adopted the guidance effective January 1, 2021, and it did not have a material impact on Quanta’s condensed consolidated financial statements at the date of adoption.
In January 2020, the FASB issued an update that clarified the applicable guidance for measurement of the fair value of equity and cost method investments when there is a change in the level of ownership or degree of influence. Quanta adopted this standard effective January 1, 2021 and will prospectively apply this update.
4. ACQUISITIONS:
During the three months ended March 31, 2021, Quanta acquired a business located in the United States that primarily provides horizontal directional drilling services. The consideration for this acquisition was $3.5 million paid in cash. During the year ended December 31, 2020, Quanta acquired a contractor located in the United States that provides electric power distribution, transmission and substation maintenance and construction, directional boring and emergency restoration services; a professional engineering business located in the United States that provides infrastructure engineering and design services to electric utilities, gas utilities and communications services companies, as well as permitting and utility locating services; a business located in the United States that provides aviation services primarily for the utility industry; an electric power infrastructure business located in the United States that primarily provides underground conduit services; a business located in the United States that specializes in the deployment of short- and long-haul fiber optic cable and utilities; an industrial services business located in Canada that performs catalyst handling services, including changeover and shutdown maintenance, for customers in the refining and chemical industries; and a business located in the United States that provides heavy, civil, industrial and energy related services and specializes in the construction and maintenance of pipelines and metering stations. The aggregate consideration for these acquisitions was $349.3 million paid or payable in cash (subject to certain adjustments) and 1,334,469 shares of Quanta common stock, which had a fair value of $57.1 million as of the respective acquisition dates. Additionally, one of the acquisitions includes the potential payment of up to $6.9 million of contingent consideration, payable if the acquired business achieves certain performance objectives over a five-year post-acquisition period. Based on the estimated fair value of the contingent consideration, Quanta recorded $2.3 million of liabilities as of the acquisition date.
The results of the acquired businesses have been included in Quanta’s consolidated financial statements beginning on the respective acquisition dates, with the results of the industrial services business and the business that specializes in the construction and maintenance of pipelines and metering stations generally included in the Underground Utility and
26

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Infrastructure Solutions segment and the results of the remaining businesses generally included in the Electric Power Infrastructure Solutions segment.
The following table summarizes the aggregate consideration paid or payable as of March 31, 2021 for the acquisitions completed in 2021 and 2020 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 condensed 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.
Quanta is finalizing its fair value assessments for the acquired assets and assumed liabilities related to businesses acquired subsequent to March 31, 2020, and further adjustments to the purchase price allocations may occur. As of March 31, 2021, the estimated fair values of the net assets acquired were preliminary, with possible updates primarily related to tax estimates and inventory. Consideration amounts are also subject to the finalization of closing working capital adjustments and the completion of conditions precedent in order to close on agreements for the purchase of real property related to a business acquired in 2020. The aggregate consideration paid or payable for businesses acquired between March 31, 2020 and March 31, 2021 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of $217.5 million to net tangible assets, $92.7 million to identifiable intangible assets and $75.8 million to goodwill. The following table summarizes the fair value of total consideration transferred or estimated to be transferred and the fair value of assets acquired and liabilities assumed (in thousands).

|  | 2021 |  | 2020
Consideration: |  |  |  |
Cash paid or payable |  | $ | 3,500 |  |  | $ | 349,310 |
Value of Quanta common stock issued |  | — |  |  | 57,119 |
Contingent consideration |  | — |  |  | 2,250 |
Fair value of total consideration transferred or estimated to be transferred |  | $ | 3,500 |  |  | $ | 408,679 |
Accounts receivable |  | $ | — |  |  | $ | 74,492 |
Contract assets |  | — |  |  | 8,919 |
Other current assets |  | — |  |  | 51,807 |
Property and equipment |  | 1,327 |  |  | 133,511 |
Other assets |  | — |  |  | 14 |
Identifiable intangible assets |  | 393 |  |  | 96,827 |
Contract liabilities |  | — |  |  | (3,750) |
Other current liabilities |  | — |  |  | (34,890) |
Deferred tax liabilities, net |  | — |  |  | (3,185) |
Total identifiable net assets |  | 1,720 |  |  | 323,745 |
Goodwill |  | 1,780 |  |  | 84,934 |
Fair value of net assets acquired |  | $ | 3,500 |  |  | $ | 408,679 |

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.
The acquisitions completed in 2021 and 2020 strategically expanded Quanta’s domestic and international underground utility and infrastructure solutions and domestic electric power infrastructure solutions, which Quanta believes contributes to the recognition of goodwill. Approximately $1.8 million and $73.3 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in 2021 and 2020.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the estimated fair values of identifiable intangible assets for the acquisition completed in 2021 as of the acquisition date 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 |  | $ | 218 |  |  | 3.0
Trade names |  | 50 |  |  | 2.0
Non-compete agreements |  | 125 |  |  | 5.0
Total intangible assets subject to amortization |  | $ | 393 |  |  | 3.5

The following unaudited supplemental pro forma results of operations for Quanta, which incorporate the acquisitions completed in 2021 and 2020, 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 |  | 2020 |  |  |  |
Revenues |  | $ | 2,704,247 |  |  | $ | 2,840,654 |  |  |  |  |
Gross profit |  | $ | 373,332 |  |  | $ | 350,910 |  |  |  |  |
Selling, general and administrative expenses |  | $ | (243,748) |  |  | $ | (241,089) |  |  |  |  |
Amortization of intangible assets |  | $ | (21,375) |  |  | $ | (22,025) |  |  |  |  |
Net income |  | $ | 91,328 |  |  | $ | 43,091 |  |  |  |  |
Net income attributable to common stock |  | $ | 89,770 |  |  | $ | 40,274 |  |  |  |  |
Earnings per share attributable to common stock: |  |  |  |  |  |  |  |
Basic |  | $ | 0.64 |  |  | $ | 0.28 |  |  |  |  |
Diluted |  | $ | 0.62 |  |  | $ | 0.27 |  |  |  |  |

The pro forma combined results of operations for the three months ended March 31, 2021 and 2020 were prepared by adjusting the historical results of Quanta to include the historical results of the acquisition completed in 2021 as if it occurred January 1, 2020. The pro forma combined results of operations for the three months ended March 31, 2020 were prepared by also adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2020 as if they occurred January 1, 2019. 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.
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 2021. Revenues of $1.9 million and a loss before income taxes of $0.9 million, which included $0.8 million of acquisition-related costs, are included in Quanta’s condensed consolidated results of operations for the three months ended March 31, 2020 related to the acquisitions completed in 2020.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
5. GOODWILL AND OTHER INTANGIBLE ASSETS:
As described in Note 2, Quanta’s operating units are organized into one of Quanta’s two internal divisions, and accordingly, the goodwill associated with the operating units has been aggregated on a divisional basis in the table below. These divisions are closely aligned with Quanta’s reportable segments, and operating units are assigned to a division based on the predominant type of work performed. From time to time, an operating unit may be reorganized between divisions if warranted due to changes in its predominant business.
A summary of changes in Quanta’s goodwill is as follows (in thousands):

|  | Electric Power Infrastructure Solutions Division |  | Underground Utility and Infrastructure Solutions Division |  | Total
Balance at December 31, 2019: |  |  |  |  |  |
Goodwill |  | $ | 1,365,163 |  |  | $ | 753,938 |  |  | $ | 2,119,101 |
Accumulated impairment |  | — |  |  | (96,426) |  |  | (96,426) |
|  | 1,365,163 |  | 657,512 |  | 2,022,675
Goodwill related to acquisitions completed in 2020 |  | 79,889 |  |  | 6,308 |  |  | 86,197 |
Purchase price allocation adjustments |  | 1,730 |  |  | 19 |  |  | 1,749 |
Foreign currency translation adjustments |  | 2,992 |  |  | 7,401 |  |  | 10,393 |
Balance at December 31, 2020: |  |  |  |  |  |
Goodwill |  | 1,449,774 |  |  | 768,868 |  |  | 2,218,642 |
Accumulated impairment |  | — |  |  | (97,628) |  |  | (97,628) |
|  | 1,449,774 |  |  | 671,240 |  |  | 2,121,014 |
Goodwill related to acquisitions completed in 2021 |  | 1,780 |  |  | — |  |  | 1,780 |
Purchase price allocation adjustments |  | (1,264) |  |  | — |  |  | (1,264) |
Foreign currency translation adjustments |  | 2,239 |  |  | 320 |  |  | 2,559 |
Balance at March 31, 2021: |  |  |  |  |  |
Goodwill |  | 1,452,529 |  |  | 769,017 |  |  | 2,221,546 |
Accumulated impairment |  | — |  |  | (97,457) |  |  | (97,457) |
|  | $ | 1,452,529 |  |  | $ | 671,560 |  |  | $ | 2,124,089 |

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Quanta’s intangible assets and the remaining weighted average amortization periods related to its intangible assets subject to amortization were as follows (in thousands except for weighted average amortization periods, which are in years):

|  | As of |  | As of
|  | March 31, 2021 |  | December 31, 2020
|  | Remaining Weighted Average Amortization Period in Years |  | Intangible Assets |  | Accumulated Amortization |  | Intangible Assets, Net |  | Intangible Assets |  | Accumulated Amortization |  | Intangible Assets, Net
Customer relationships |  | 5.4 |  | $ | 618,035 |  |  | $ | (295,700) |  |  | $ | 322,335 |  |  | $ | 616,875 |  |  | $ | (277,647) |  |  | $ | 339,228 |
Backlog |  | 1.1 |  | 150,096 |  |  | (146,852) |  |  | 3,244 |  |  | 149,769 |  |  | (145,476) |  |  | 4,293 |
Trade names |  | 13.6 |  | 101,711 |  |  | (33,960) |  |  | 67,751 |  |  | 101,533 |  |  | (32,471) |  |  | 69,062 |
Non-compete agreements |  | 3.0 |  | 47,537 |  |  | (38,105) |  |  | 9,432 |  |  | 47,333 |  |  | (36,973) |  |  | 10,360 |
Patented rights and developed technology |  | 3.3 |  | 22,496 |  |  | (21,940) |  |  | 556 |  |  | 22,486 |  |  | (21,894) |  |  | 592 |
Curriculum |  | 7.1 |  | 12,233 |  |  | (3,429) |  |  | 8,804 |  |  | 12,233 |  |  | (3,113) |  |  | 9,120 |
Total intangible assets subject to amortization |  | 6.7 |  | 952,108 |  |  | (539,986) |  |  | 412,122 |  |  | 950,229 |  |  | (517,574) |  |  | 432,655 |
Engineering license |  |  |  | 3,000 |  |  | — |  |  | 3,000 |  |  | 3,000 |  |  | — |  |  | 3,000 |
Total intangible assets |  |  |  | $ | 955,108 |  |  | $ | (539,986) |  |  | $ | 415,122 |  |  | $ | 953,229 |  |  | $ | (517,574) |  |  | $ | 435,655 |

Amortization expense for intangible assets was $21.4 million and $17.9 million for the three months ended March 31, 2021 and 2020.
The estimated future aggregate amortization expense of intangible assets subject to amortization as of March 31, 2021 is set forth below (in thousands):

Year Ending December 31: |  |
Remainder of 2021 |  | $ | 63,453 |
2022 |  | 77,104 |
2023 |  | 68,280 |
2024 |  | 55,249 |
2025 |  | 43,634 |
Thereafter |  | 104,402 |
Total |  | $ | 412,122 |

6. 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, |  |
|  | 2021 |  | 2020 |  |  |  |
Amounts attributable to common stock: |  |  |  |  |  |  |  |
Net income attributable to common stock |  | $ | 89,761 |  |  | $ | 38,686 |  |  |  |  |
Weighted average shares: |  |  |  |  |  |  |  |
Weighted average shares outstanding for basic earnings per share attributable to common stock |  | 140,121 |  |  | 144,454 |  |  |  |  |
Effect of dilutive unvested non-participating stock-based awards |  | 4,326 |  |  | 2,333 |  |  |  |  |
Weighted average shares outstanding for diluted earnings per share attributable to common stock |  | 144,447 |  |  | 146,787 |  |  |  |  |

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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. 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 1.1 million and 2.3 million weighted average participating securities for the three months ended March 31, 2021 and 2020.
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.
7. DEBT OBLIGATIONS:
Quanta’s long-term debt obligations consisted of the following (in thousands):

|  | March 31, 2021 |  | December 31, 2020
2.900% Senior Notes due 2030 |  | $ | 1,000,000 |  |  | $ | 1,000,000 |
Borrowings under senior credit facility |  | 321,703 |  |  | 148,508 |
Other long-term debt |  | 46,511 |  |  | 46,981 |
Finance leases |  | 2,615 |  |  | 2,228 |
Unamortized discount and debt issuance costs related to senior notes |  | (12,560) |  |  | (12,892) |
Total long-term debt obligations |  | 1,358,269 |  |  | 1,184,825 |
Less — Current maturities of long-term debt |  | 10,709 |  |  | 10,531 |
Total long-term debt obligations, net of current maturities |  | $ | 1,347,560 |  |  | $ | 1,174,294 |

Quanta’s current maturities of long-term debt and short-term debt consisted of the following (in thousands):

|  | March 31, 2021 |  | December 31, 2020
Short-term debt |  | $ | — |  |  | $ | 4,233 |
Current maturities of long-term debt |  | 10,709 |  |  | 10,531 |
Current maturities of long-term debt and short-term debt |  | $ | 10,709 |  |  | $ | 14,764 |

2.900% Senior Notes Due 2030
On September 22, 2020, Quanta issued $1.00 billion aggregate principal amount of 2.900% Senior Notes due October 1, 2030 (the senior notes). Quanta received proceeds of $986.7 million from the offering, net of the original issue discount, underwriting discounts and debt issuance costs, and used such proceeds, together with cash on hand, to voluntarily prepay the $1.21 billion of term loans then-outstanding under Quanta’s credit agreement for its senior credit facility (the credit agreement).
Interest on the senior notes of $14.5 million is payable semi-annually in arrears on April 1 and October 1 of each year. The senior notes are Quanta’s senior unsecured obligations and rank equally in right of payment with Quanta’s existing and future senior indebtedness and senior in right of payment to all future subordinated indebtedness of Quanta (subject to applicable law). The senior notes are effectively subordinated to all secured indebtedness of Quanta to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all liabilities, including trade payables, of Quanta’s subsidiaries.
Quanta may redeem all or a portion of the senior notes at any time prior to July 1, 2030 at a price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest, and at any time on or after July 1, 2030 at a price equal to 100% of the principal amount plus accrued and unpaid interest, in each case as further specified by terms of the senior notes and the indenture and supplemental indenture governing the senior notes (together, the indenture). Additionally, upon the occurrence of a Change of Control Triggering Event (as defined in the indenture), unless Quanta has exercised its right to redeem the senior notes in full by giving irrevocable notice to the trustee, each noteholder will have the right to require Quanta to purchase all or a portion of such holder’s senior notes at a purchase price equal to 101% of the principal amount thereof plus any accrued and unpaid interest.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The indenture also contains customary events of default and covenants that, among other things, limit Quanta’s ability to incur liens securing indebtedness, to engage in certain sale and leaseback transactions with respect to certain properties and to sell all or substantially all of its assets or merge or consolidate with or into other companies.
Senior Credit Facility
Quanta has a credit agreement with various lenders that provides for $2.51 billion of aggregate revolving commitments and has a maturity date of September 22, 2025. Additionally, subject to the conditions specified in the credit agreement, Quanta has the option to increase the capacity of the credit facility, in the form of an increase in the revolving commitments, term loans or a combination thereof, from time to time, upon receipt of additional commitments from new or existing lenders by up to an additional (i) $400.0 million plus (ii) additional amounts so long as the Incremental Leverage Ratio Requirement (as defined in the credit agreement) is satisfied at the time of such increase. The Incremental Leverage Ratio Requirement requires, among other things, after giving pro forma effect to such increase and the use of proceeds therefrom, compliance with the credit agreement’s financial covenants as of the most recent fiscal quarter end for which financial statements were required to be delivered.
Subject to compliance with the financial covenants described below, the entire amount available under the credit facility may be used by Quanta for revolving loans and letters of credit in U.S. dollars and certain alternative currencies, subject to a $900.0 million sublimit for Financial Letters of Credit (as defined in the credit agreement). Up to $800.0 million may be used by certain subsidiaries of Quanta for revolving loans and letters of credit, including in certain alternative currencies. Up to $100.0 million may be used for swing line loans in U.S. dollars, up to $50.0 million may be used for swing line loans in Canadian dollars and up to $50.0 million may be used for swing line loans in Australian dollars. Borrowings under the credit agreement are to be used to refinance existing indebtedness and for working capital, capital expenditures, acquisitions and other general corporate purposes.
As of March 31, 2021, Quanta had $321.7 million of outstanding revolving loans under the senior credit facility. Of the total outstanding borrowings, $175.2 million were denominated in Australian dollars, $113.1 million were denominated in U.S. dollars and $33.4 million were denominated in Canadian dollars. As of March 31, 2021, Quanta also had $319.9 million of letters of credit issued under the senior credit facility, of which $100.8 million were denominated in currencies other than the U.S. dollar, primarily Canadian dollars. As of March 31, 2021, subject to the applicable sublimits, the remaining $1.87 billion of available commitments under the senior credit facility was available for loans or issuing new letters of credit in U.S. dollars and certain alternative currencies.
Borrowings under the senior credit facility and the applicable interest rates were as follows (dollars in thousands):

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Maximum amount outstanding |  | $ | 363,054 |  |  | $ | 2,024,473 |  |  |  |  |
Average daily amount outstanding |  | $ | 214,389 |  |  | $ | 1,458,311 |  |  |  |  |
Weighted-average interest rate |  | 2.18 | % |  | 3.11 | % |  |  |  |

Revolving loans borrowed in U.S. dollars bear interest, at Quanta’s option, at a rate equal to either (i) the Eurocurrency Rate (as defined in the credit agreement) plus 1.125% to 2.000%, as determined based on Quanta’s Consolidated Leverage Ratio, or (ii) the Base Rate (as described below) plus 0.125% to 1.000%, as determined based on Quanta’s Consolidated Leverage Ratio. Revolving loans borrowed in any currency other than U.S. dollars bear interest at a rate equal to the Eurocurrency Rate plus 1.125% to 2.000%, as determined based on Quanta’s Consolidated Leverage Ratio. Additionally, standby or commercial letters of credit issued under the credit agreement are subject to a letter of credit fee of 1.125% to 2.000%, based on Quanta’s Consolidated Leverage Ratio, and Performance Letters of Credit (as defined in the credit agreement) issued under the credit agreement in support of certain contractual obligations are subject to a letter of credit fee of 0.675% to 1.150%, based on Quanta’s Consolidated Leverage Ratio. The Base Rate equals the highest of (i) the Federal Funds Rate (as defined in the credit agreement) plus 0.5%, (ii) the prime rate publicly announced by Bank of America, N.A. and (iii) the Eurocurrency Rate plus 1.00%. Quanta is also subject to a commitment fee of 0.275% to 0.425%, based on its Consolidated Leverage Ratio, on any unused availability under the senior credit facility. Prior to the amendment on September 22, 2020, Quanta was subject to a commitment fee of 0.200% to 0.400%.
Consolidated Leverage Ratio is the ratio of Quanta’s Consolidated Funded Indebtedness to Consolidated EBITDA (as those terms are defined in the credit agreement). For purposes of calculating Quanta’s Consolidated Leverage Ratio, Consolidated Funded Indebtedness is reduced by available cash and Cash Equivalents (as defined in the credit agreement) in
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
excess of $25.0 million. Consolidated Interest Coverage Ratio is the ratio of (i) Consolidated EBIT (as defined in the credit agreement) for the four fiscal quarters most recently ended to (ii) Consolidated Interest Expense (as defined in the credit agreement) for such period (excluding all interest expense attributable to capitalized loan costs and the amount of fees paid in connection with the issuance of letters of credit on behalf of Quanta during such period).
The credit agreement contains certain covenants, including (i) a maximum Consolidated Leverage Ratio of 3.5 to 1.0 (except that in connection with certain permitted acquisitions in excess of $200.0 million, such ratio is 4.0 to 1.0 for the fiscal quarter in which the acquisition is completed and the four subsequent fiscal quarters) and (ii) a minimum Consolidated Interest Coverage Ratio of 3.0 to 1.0. As of March 31, 2021, Quanta was in compliance with all of the financial covenants under the credit agreement.
The credit agreement also limits certain acquisitions, mergers and consolidations, indebtedness, asset sales and prepayments of indebtedness and, subject to certain exceptions, prohibits liens on Quanta’s assets. The credit agreement allows cash payments for dividends and stock repurchases subject to compliance with the following requirements (including after giving effect to the dividend or stock repurchase): (i) no default or event of default under the credit agreement; (ii) continued compliance with the financial covenants in the credit agreement; and (iii) at least $100.0 million of availability under the senior credit facility and/or cash and cash equivalents on hand. The credit agreement provides for customary events of default and contains cross-default provisions with other debt instruments exceeding $150.0 million in borrowings or availability. If an Event of Default (as defined in the credit agreement) occurs and is continuing, on the terms and subject to the conditions set forth in the credit agreement, the lenders may declare all amounts outstanding and accrued and unpaid interest immediately due and payable, require that Quanta provide cash collateral for all outstanding letter of credit obligations and terminate the commitments under the credit agreement.
Additionally, Quanta voluntarily prepaid certain term loans outstanding under the credit agreement in September 2020. Quanta had borrowed $600.0 million in October 2018 under a term loan facility and $687.5 million in September 2019 under the term loan facility and used the majority of such proceeds to repay then-outstanding revolving loans under the credit agreement. Term loans bore interest at rates generally consistent with the revolving loans borrowed in U.S. dollars, except that the additional amount over the Eurocurrency Rate was 1.125% to 1.875%, as determined based on Quanta’s Consolidated Leverage Ratio. Quanta made quarterly principal payments of $16.1 million on the term loans during the first half of 2020.
8. LEASES:
Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. As of March 31, 2021, the majority of Quanta’s leases had remaining lease terms not exceeding 10 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 Ended |  |
|  |  | March 31, |  |
Lease cost | Classification |  | 2021 |  | 2020 |  |  |  |
Finance lease cost: |  |  |  |  |  |  |  |  |
Amortization of lease assets | Depreciation (1) |  | $ | 244 |  |  | $ | 202 |  |  |  |  |
Interest on lease liabilities | Interest expense |  | 27 |  |  | 17 |  |  |  |  |
Operating lease cost | Cost of services and Selling, general and administrative expenses |  | 27,776 |  |  | 29,737 |  |  |  |  |
Short-term and variable lease cost (2) | Cost of services and Selling, general and administrative expenses |  | 157,899 |  |  | 170,365 |  |  |  |  |
Total lease cost |  |  | $ | 185,946 |  |  | $ | 200,321 |  |  |  |  |

(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 arrangements with certain related parties to lease certain real property and facilities. Typically, the parties are employees of Quanta who are also the former owners of businesses acquired by Quanta, and the real properties and facilities continue to be utilized by Quanta subsequent to the acquisitions. Quanta utilizes third party market valuations to
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to 10 years, subject to renewal options. Related party lease expense was $4.8 million and $4.4 million for the three months ended March 31, 2021 and 2020.
The components of leases in the accompanying condensed consolidated balance sheet were as follows (in thousands):

Lease type | Classification |  | March 31, 2021 |  | December 31, 2020
Assets: |  |  |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets |  | $ | 252,206 |  |  | $ | 256,845 |
Finance lease assets | Property and equipment, net of accumulated depreciation |  | 2,715 |  |  | 2,370 |
Total lease assets |  |  | $ | 254,921 |  |  | $ | 259,215 |
Liabilities: |  |  |  |  |
Current: |  |  |  |  |
Operating | Current portion of operating lease liabilities |  | $ | 83,799 |  |  | $ | 85,134 |
Finance | Current maturities of long-term debt and short-term debt |  | 988 |  |  | 846 |
Non-current: |  |  |  |  |
Operating | Operating lease liabilities, net of current portion |  | 176,008 |  |  | 178,822 |
Finance | Long-term debt, net of current maturities |  | 1,627 |  |  | 1,382 |
Total lease liabilities |  |  | $ | 262,422 |  |  | $ | 266,184 |

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 March 31, 2021 and December 31, 2020, the assets recorded, net of accumulated depreciation, totaled $45.2 million and $45.7 million.
Future minimum lease payments for operating and finance leases were as follows (in thousands):

|  | As of March 31, 2021
|  | Operating Leases |  | Finance Leases |  | Total
Remainder of 2021 |  | $ | 71,358 |  |  | $ | 836 |  |  | $ | 72,194 |
2022 |  | 73,550 |  |  | 847 |  |  | 74,397 |
2023 |  | 52,368 |  |  | 626 |  |  | 52,994 |
2024 |  | 32,349 |  |  | 394 |  |  | 32,743 |
2025 |  | 21,287 |  |  | 62 |  |  | 21,349 |
Thereafter |  | 32,342 |  |  | — |  |  | 32,342 |
Total future minimum operating and finance lease payments |  | $ | 283,254 |  |  | $ | 2,765 |  |  | $ | 286,019 |
Less imputed interest |  | (23,447) |  |  | (150) |  |  | (23,597) |
Total lease liabilities |  | $ | 259,807 |  |  | $ | 2,615 |  |  | $ | 262,422 |

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Future minimum lease payments for short-term leases, which are not recorded in the condensed consolidated balance sheets due to Quanta’s accounting policy election, were $20.3 million as of March 31, 2021. 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 March 31, 2021
Weighted average remaining lease term (in years): |  |  |  |
Operating leases |  | 4.22 |  |
Finance leases |  | 3.09 |  |
Weighted average discount rate: |  |  |  |
Operating leases |  | 4.1 | % |  |
Finance leases |  | 4.1 | % |  |

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. As of March 31, 2021, the maximum guaranteed residual value of this equipment was $860.9 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 March 31, 2021, Quanta had additional operating lease obligations of $1.6 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.
9. EQUITY:
Stock repurchases
During the third quarter of 2018, Quanta’s Board of Directors approved a stock repurchase program that authorizes Quanta to purchase, from time to time through June 30, 2021, up to $500 million of its outstanding common stock. In August 2020, Quanta’s Board of Directors authorized Quanta to repurchase, from time to time through June 30, 2023, up to an additional $500 million in shares of its outstanding common stock under a new stock repurchase program. As of March 31, 2021, an aggregate $519.1 million remained under the stock repurchase programs.
Quanta repurchased the following shares of common stock in the open market under the stock repurchase programs (in thousands):

Quarter ended: |  | Shares |  | Amount
March 31, 2021 |  | 222 |  |  | $ | 17,710 |
December 31, 2020 |  | 720 |  |  | $ | 49,949 |
September 30, 2020 |  | — |  |  | $ | — |
June 30, 2020 |  | — |  |  | $ | — |
March 31, 2020 |  | 5,960 |  |  | $ | 200,000 |

Repurchases under the repurchase programs 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 credit facility, and other factors. Quanta is not obligated to acquire any specific amount of common stock, and the repurchase programs may be modified or terminated by Quanta’s Board of Directors at any time at its sole discretion and without notice.
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 March 31, 2021 and 2020, cash payments related to stock repurchases were $19.5 million and $200.0 million.
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(Unaudited)
Dividends
Quanta declared the following cash dividends and cash dividend equivalents during 2020 and the first three months of 2021 (in thousands, except per share amounts):

Declaration |  | Record |  | Payment |  | Dividend |  | Dividends
Date |  | Date |  | Date |  | Per Share |  | Declared
March 25, 2021 |  | April 6, 2021 |  | April 15, 2021 |  | $ | 0.06 |  |  | $ | 8,429 |
December 11, 2020 |  | January 4, 2021 |  | January 15, 2021 |  | $ | 0.06 |  |  | $ | 8,933 |
August 26, 2020 |  | October 1, 2020 |  | October 15, 2020 |  | $ | 0.05 |  |  | $ | 7,244 |
May 28, 2020 |  | July 1, 2020 |  | July 15, 2020 |  | $ | 0.05 |  |  | $ | 7,182 |
March 26, 2020 |  | April 6, 2020 |  | April 15, 2020 |  | $ | 0.05 |  |  | $ | 7,184 |

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 equal to the cash dividend payable on account of the underlying Quanta common stock. Holders of RSUs awarded under the Quanta Services, Inc. 2019 Omnibus Equity Incentive Plan (the 2019 Plan) and holders of unearned and unvested PSUs awarded under the 2011 Plan and the 2019 Plan receive cash dividend equivalent payments only to the extent such RSUs and PSUs become earned and/or vest. Additionally, cash dividend equivalent payments related to certain stock-based 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 and cash flows from operating activities; current and anticipated capital requirements and expansion plans; the current and potential impact of the COVID-19 pandemic and other market, industry, economic and political conditions; 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.
Non-controlling Interests
Quanta holds interests in various entities through both joint venture entities that provide infrastructure-related 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 entered into through the partnership structure Quanta formed with certain infrastructure investors. Quanta has determined that certain of these joint ventures for which 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 parties in the amounts of $1.6 million and $2.8 million for the three months ended March 31, 2021 and 2020 have 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 $13.7 million and $13.2 million at March 31, 2021 and December 31, 2020. The carrying amount of investments held by the non-controlling interests in these VIEs as of March 31, 2021 and December 31, 2020 was $5.2 million and $4.8 million. During the three months ended March 31, 2021 and 2020, net distributions to non-controlling interests were $1.1 million and $2.0 million. There were no other material changes in equity as a result of transfers to or from the non-controlling interests during the three months ended March 31, 2021 or 2020. See Note 11 for further disclosures related to Quanta’s joint venture arrangements.
10. STOCK-BASED COMPENSATION:
Stock Incentive Plans
The 2019 Plan was approved by Quanta’s stockholders in May 2019 and provides for the award of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, RSUs, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Current and prospective
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(Unaudited)
employees, directors, officers, advisors or consultants of Quanta or its affiliates are eligible to participate in the 2019 Plan. Subject to certain adjustments, the maximum number of shares available for issuance under the 2019 Plan is 7,466,592 shares, plus any shares underlying share-settling awards previously awarded pursuant to the 2011 Plan that are ultimately forfeited, canceled, expired or settled in cash subsequent to stockholder approval of the 2019 Plan. All awards subsequent to stockholder approval of the 2019 Plan have been and will be made pursuant to the 2019 Plan and applicable award agreements. Awards made under the 2011 Plan prior to approval of the 2019 Plan remain subject to the terms of the 2011 Plan and applicable award agreements.
RSUs to be Settled in Common Stock
A summary of the activity for RSUs to be settled in common stock for the three months ended March 31, 2021 is set forth below (shares in thousands):

| RSUs |  | Weighted Average Grant Date Fair Value (Per share)
Unvested at December 31, 2020 | 3,869 |  |  | $37.57
Granted | 898 |  |  | $82.21
Vested | (1,334) |  |  | $36.85
Forfeited | (42) |  |  | $37.37
Unvested at March 31, 2021 | 3,391 |  |  | $49.69

The grant date fair value for RSUs to be settled in common stock is based on the market value of Quanta common stock on the date of grant. RSU awards to be settled in common stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in three equal annual installments following the date of grant. Holders of RSUs to be settled in common stock awarded under the 2011 Plan generally are entitled to receive a cash dividend equivalent payment equal to any cash dividend payable on account of the underlying Quanta common stock on the payment date of any such dividend. Holders of RSUs to be settled in common stock awarded under the 2019 Plan are entitled to cash dividend equivalent payments in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the RSUs vest, such that the dividend equivalent payments are subject to forfeiture.
During the three months ended March 31, 2021 and 2020, vesting activity consisted of 1.3 million and 1.1 million RSUs settled in common stock, and the approximate fair values of such stock at the time of vesting were $111.2 million and $43.7 million.
During the three months ended March 31, 2021 and 2020, Quanta recognized $15.1 million and $12.0 million of non-cash stock-based compensation expense related to RSUs to be settled in common stock. Such expense is recorded in “Selling, general and administrative expenses.” As of March 31, 2021, there was $129.3 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 2.59 years.
PSUs to be Settled in Common Stock
PSUs provide for the issuance of shares of common stock upon vesting, which occurs at the end of a three-year performance period based on achievement of certain company performance metrics established by the Compensation Committee of Quanta’s Board of Directors, including financial and operational goals and Quanta’s total stockholder return as compared to a predetermined group of peer companies. The final number of shares of common stock issuable upon vesting of PSUs can range from 0% to 200% of the number of PSUs initially granted, depending on the level of achievement, as determined by the Compensation Committee of Quanta’s Board of Directors. Holders of PSUs are entitled to cash dividend equivalent payments in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the PSUs vest, such that the dividend equivalent payments are subject to forfeiture.
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(Unaudited)
A summary of the activity for PSUs to be settled in common stock for the three months ended March 31, 2021 is set forth below (shares in thousands):

| PSUs |  | Weighted Average Grant Date Fair Value (Per share)
Unvested at December 31, 2020 | 1,047 |  |  | $37.65
Granted | 172 |  |  | $90.28
Vested | (268) |  |  | $38.28
Forfeited | (11) |  |  | $36.90
Unvested at March 31, 2021 | 940 |  |  | $47.14

The grant date fair values of the PSUs were determined as follows: (i) for the portion of the awards based on company financial and operational performance metrics, by utilizing the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the awards based on total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. The Monte Carlo simulation valuation methodology applied the following key inputs:

|  | 2021
Valuation date price based on March 25, 2021 closing stock prices of Quanta common stock |  | $83.48
Expected volatility |  | 36 | %
Risk-free interest rate |  | 0.26 | %
Term in years |  | 2.77

Quanta recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted achievement of the company financial and operational performance metrics and forecasted performance with respect to relative total stockholder return, multiplied by the completed portion of the three-year period and the fair value of the total number of shares of common stock that Quanta anticipates will be issued based on such achievement. During the three months ended March 31, 2021 and 2020, Quanta recognized $3.6 million and $2.9 million in compensation expense associated with PSUs. Such expense is recorded in “Selling, general and administrative expenses.” During the three months ended March 31, 2021 and 2020, 0.5 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs.
RSUs to be Settled in Cash
Certain RSUs granted by Quanta are settled solely in cash. These cash-settled RSUs are intended to provide plan participants with cash performance incentives that are substantially equivalent to the risks and rewards of stock ownership in Quanta, typically vest in three equal annual installments following the date of grant, and are subject to forfeiture under certain conditions, primarily termination of service. Additionally, subject to certain restrictions, Quanta’s non-employee directors may elect to settle a portion of their RSU awards in cash. For RSUs settled in cash, the holders receive for each vested RSU an amount in cash equal to the fair market value of one share of Quanta common stock on the settlement date, as specified in the applicable award agreement.
Compensation expense related to RSUs to be settled in cash was $4.9 million and $1.1 million for the three months ended March 31, 2021 and 2020. Such expense is recorded in “Selling, general and administrative expenses.” RSUs that are anticipated to be settled in cash are not included in the calculation of weighted average shares outstanding for earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid $7.4 million and $3.3 million to settle liabilities related to cash-settled RSUs in the three months ended March 31, 2021 and 2020. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $6.2 million and $8.7 million at March 31, 2021 and December 31, 2020.
11. COMMITMENTS AND CONTINGENCIES:
Investments in Affiliates and Other Entities
As described in Notes 2 and 9, Quanta holds investments in various entities, including joint venture entities that provide infrastructure-related services under specific customer contracts and partially owned entities that own, operate and/or maintain certain infrastructure assets. Losses incurred by these entities are generally shared ratably based on the percentage ownership of the participants in these structures. However, in Quanta’s joint venture structures that provide infrastructure-related services, each participant is typically jointly and severally liable for all of the obligations of the joint venture entity pursuant to the contract with the customer, as a general partner or through a parent guarantee, and therefore Quanta can be liable for full
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(Unaudited)
performance of the contract with the customer. In circumstances where Quanta’s participation in a joint venture qualifies as a general partnership, the joint venture partners are jointly and severally liable for all obligations of the joint venture, including obligations owed to the customer or any other person or entity. Quanta is not aware of circumstances that would lead to future claims against it for material amounts in connection with these joint and several liabilities. Additionally, typically each joint venture participant agrees to indemnify the other participant for any liabilities incurred in excess of what the other participant is obligated to bear under the respective joint venture agreement or in accordance with the scope of work subcontracted to each participant. It is possible, however, that Quanta could be required to pay or perform obligations in excess of its share if another participant is unable or refuses to pay or perform its share of the obligations. Quanta is not aware of circumstances that would lead to future claims against it for material amounts that would not be indemnified. However, to the extent any such claims arise, they could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.
Committed Expenditures
Quanta has capital commitments for the expansion of its equipment fleet in order to accommodate manufacturer lead times on certain types of vehicles. As of March 31, 2021, Quanta had $98.7 million and $7.6 million of production orders with expected delivery dates in 2021 and 2022. Although Quanta has committed to purchase these vehicles at the time of their delivery, Quanta anticipates that the majority of these orders will be assigned to third party leasing companies and made available under certain master equipment lease agreements, thereby releasing Quanta from its capital commitments.
Legal Proceedings
Quanta is from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, property damage, breach of contract, negligence or gross negligence, environmental liabilities, wage and hour and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, Quanta records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, Quanta discloses matters for which management believes a material loss is at least reasonably possible. Except as otherwise stated below, none of these proceedings are expected to have a material adverse effect on Quanta’s consolidated financial position, results of operations and cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.
Peru Project Dispute
In 2015, Redes Andinas de Comunicaciones S.R.L. (Redes), a majority-owned subsidiary of Quanta, entered into two separate contracts with an agency of the Peruvian Ministry of Transportation and Communications (MTC), currently Programa Nacional de Telecomunicaciones (PRONATEL), as successor to Fondo de Inversion en Telecomunicaciones (FITEL), pursuant to which Redes would design, construct and operate certain telecommunication networks in rural regions of Peru. The aggregate consideration provided for in the contracts was approximately $248 million, consisting of approximately $151 million to be paid during the construction period and approximately $97 million to be paid during a 10-year post-construction operation and maintenance period. At the beginning of the project, FITEL made advance payments totaling approximately $87 million to Redes, which were secured by two on-demand advance payment bonds posted by Redes to guarantee proper use of the payments in the execution of the project. Redes also provided two on-demand performance bonds in the aggregate amount of $25 million to secure performance of its obligations under the contracts.
During the construction phase, the project experienced numerous challenges and delays, primarily related to issues which Quanta believes were outside of the control of and not attributable to Redes, including, among others, weather-related issues, local opposition to the project, permitting delays, the inability to acquire clear title to certain required parcels of land and other delays which Quanta believes were attributable to FITEL/PRONATEL. In response to various of these challenges and delays, Redes requested and received multiple extensions to certain contractual deadlines and relief from related liquidated damages. However, in April 2019, PRONATEL provided notice to Redes claiming that Redes was in default under the contracts due to the delays and that PRONATEL would terminate the contracts if the alleged defaults were not cured. Redes responded by claiming that it was not in default, as the delays were due to events not attributable to Redes, and therefore PRONATEL was not entitled to terminate the contracts. PRONATEL subsequently terminated the contracts for alleged cause prior to completion of Redes’ scope of work, exercised the on-demand performance bonds and advance payment bonds against Redes, and indicated its intention to claim damages, including a verbal allegation of approximately $45 million of liquidated damages
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(Unaudited)
under the contracts. In August 2020, Redes received a formal claim from PRONATEL for liquidated damages in the amount of approximately $42 million, which represents the U.S. dollar equivalent of the amount asserted based on the March 31, 2021 exchange rate.
In May 2019, Redes filed for arbitration before the Court of International Arbitration of the International Chamber of Commerce (ICC) against PRONATEL and the MTC. In the arbitration, Redes claims that PRONATEL: (i) breached and wrongfully terminated the contracts; (ii) wrongfully executed the advance payment bonds and the performance bonds; and (iii) is not entitled to the alleged amount of liquidated damages. In addition, Redes is seeking compensation for all damages arising from PRONATEL’s actions, including but not limited to (i) repayment of the amounts collected by PRONATEL under the advance payment bonds and the performance bonds; (ii) payment of amounts owed for work completed by Redes under the contracts; (iii) lost income in connection with Redes’ future operation and maintenance of the networks; and (iv) other related costs and damages to Redes as a result of the breach and improper termination of the contracts (including construction costs caused by the delays and costs related to the transfer of the networks). The amount claimed by Redes in this arbitration is approximately $190 million. The arbitration hearing on the merits is presently scheduled to take place in November 2021.
As of the date of the contract terminations, Redes had incurred costs of approximately $157 million related to the design and construction of the project and had received approximately $100 million of payments (inclusive of the approximately $87 million advance payments). Furthermore, upon completion of the transfer of the networks (as completed at the time of the contract terminations) to PRONATEL, which was required upon termination of the contracts and was completed in 2020, PRONATEL and the MTC are able to possess the networks, for which PRONATEL has paid approximately $100 million while also collecting approximately $112 million of bond proceeds. Quanta believes that PRONATEL’s actions represent an abuse of power and unfair and inequitable treatment and that PRONATEL and the MTC have been unjustly enriched. Specifically, under the terms of the contracts, the advance payment bonds were to be exercised only if it is determined that Redes did not use the advance payments for their intended purpose, in which case Redes would be obligated to return the portion of the advance payments not properly used. In connection with PRONATEL exercising the bonds, Redes was not afforded the opportunity to provide evidence of its proper use of the advance payments for project expenditures. Redes has incurred substantially more than the advance payment amounts in the execution of the project, and Quanta believes Redes has used the advance payment amounts for their intended purpose.
Quanta believes Redes is entitled to all amounts described in the claims above and intends to vigorously pursue those claims in this pending arbitration proceeding. However, as a result of the contract terminations and the inherent uncertainty involved in arbitration proceedings and recovery of amounts owed, there can be no assurance that Redes will prevail on those claims or in defense of liquidated damages claims or any other claims that may be asserted by PRONATEL. As a result, during the three months ended June 30, 2019, Quanta recorded a charge to earnings of $79.2 million, which included a reduction of previously recognized earnings on the project, a reserve against a portion of the project costs incurred through the project termination date, an accrual for a portion of the alleged liquidated damages, and the estimated costs to complete the project turnover and close out the project. The reduction of previously recognized earnings on the project included $14.5 million related to the correction of prior period errors associated with the determination of total estimated project costs and the resulting revenue recognized. Quanta assessed the materiality of the prior period errors and determined that the errors were immaterial individually and in the aggregate to its previously issued financial statements.
As of March 31, 2021, after taking into account the above charge, Quanta had a contract receivable of approximately $120 million related to the project, which includes the approximately $87 million PRONATEL collected through exercise of the advance payment bonds. The contract receivable from PRONATEL is included in “Other assets, net” in the accompanying condensed consolidated balance sheet as of March 31, 2021.
Quanta also reserves the right to seek full compensation for the loss of its investment under applicable legal regimes, including investment treaties and customary international law, as well as to seek resolution through direct discussions with PRONATEL or the MTC. In connection with these rights, in May 2020 Quanta’s Dutch subsidiary delivered to the Peruvian government an official notice of dispute arising from the termination of the contracts and related acts by PRONATEL (which are attributable to Peru) under the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Peru (Investment Treaty). The Investment Treaty protects Quanta’s subsidiary’s indirect ownership stake in Redes and the project, and provides for rights and remedies distinct from the ICC arbitration. In December 2020, Quanta’s Dutch subsidiary filed a request for the institution of an arbitration proceeding against Peru with the International Centre for Settlement of Investment Disputes (ICSID) related to Peru’s breach of the Investment Treaty, which was registered by ICSID in January 2021. In the ICSID arbitration, Quanta’s Dutch subsidiary claims, without limitation, that Peru: (i) treated the subsidiary’s investment in Redes and the project unfairly and inequitably; and (ii) effectively expropriated the subsidiary’s investment in Redes and the project. In addition, Quanta’s Dutch subsidiary is seeking full
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(Unaudited)
compensation for all damages arising from Peru’s actions, including but not limited to (i) the fair market value of the investment and/or lost profits; (ii) attorneys’ fees and arbitration costs; (iii) other related costs and damages and (iv) pre- and post-award interest.
If Quanta is not successful in these pending arbitration proceedings, this matter could result in an additional significant loss that could have a material adverse effect on Quanta’s consolidated results of operations and cash flows. However, based on the information currently available and the status of the pending arbitration proceedings, Quanta is not able to determine a range of reasonably possible additional loss, if any, with respect to this matter.
Maurepas Project Dispute
During the third quarter of 2017, Maurepas Pipeline, LLC (Maurepas) notified QPS Engineering, LLC (QPS), a subsidiary of Quanta, of its claim for liquidated damages allegedly arising from delay in mechanical completion of a project in Louisiana. Quanta disputes the claim and believes that QPS is not responsible for liquidated damages under the contract terms, and in June 2019 QPS filed suit against SemGroup Corporation, (now Energy Transfer LP), the parent company of Maurepas, under the parent guarantee issued to secure payment from Maurepas on the project. QPS is seeking to recover $22 million that it believes has been wrongfully withheld, which represents the maximum liability for liquidated damages pursuant to the contract terms. In July and August 2018, QPS also received notice from Maurepas claiming certain warranty defects on the project. In July 2019, Maurepas filed suit against QPS and Quanta, pursuant to a parent guarantee, for damages related to the warranty defects and for a declaratory judgment related to the liquidated damages claim, subsequently claiming approximately $59 million in damages related to a portion of the alleged warranty defects. The lawsuits relating to these claims have been consolidated and are pending in the Tulsa County District Court in Oklahoma. Quanta is continuing to evaluate the claimed warranty defects and, if they exist, the appropriate remedy. At this time, Quanta disputes the extent of the alleged defects or has not been able to substantiate them.
As of March 31, 2021, Quanta had recorded an accrual with respect to this matter based on the current estimated amount of probable loss. However, based on the information currently available, Quanta cannot estimate the range of additional reasonably possible loss in connection with this matter. If, upon final resolution of this matter, Quanta is unsuccessful, any liquidated damages or warranty defect damages in excess of Quanta’s current loss accrual would be recorded as additional costs on the project.
Lorenzo Benton v. Telecom Network Specialists, Inc., et al.
In June 2006, plaintiff Lorenzo Benton filed a class action complaint in the Superior Court of California, County of Los Angeles, alleging various wage and hour violations against Telecom Network Specialists (TNS), a former subsidiary of Quanta. Quanta retained liability associated with this matter pursuant to the terms of Quanta’s sale of TNS in December 2012. Benton represents a class of workers that includes all persons who worked on certain TNS projects, including individuals that TNS retained through numerous staffing agencies. The plaintiff class in this matter is seeking damages for unpaid wages, penalties associated with the failure to provide meal and rest periods and overtime wages, interest and attorneys’ fees. In January 2017, the trial court granted a summary judgment motion filed by the plaintiff class and found that TNS was a joint employer of the class members and that it failed to provide adequate meal and rest breaks and failed to pay overtime wages. During 2019 and 2020, the parties filed additional summary judgment and other motions and a bench trial on liability and damages was held. Liability and damages have been determined by the trial court, with the amount of liability for TNS, including interest through the date of the trial court’s orders, determined to be approximately $9.5 million. This amount includes damages and interest, but does not include attorneys’ fees or costs, which are yet to be determined. Quanta believes the court’s decisions on liability and damages are not supported by controlling law and continues to contest its liability and the damage calculation asserted by the plaintiff class in this matter.
Additionally, in November 2007, TNS filed cross complaints for indemnity and breach of contract against the staffing agencies, which employed many of the individuals in question. In December 2012, the trial court heard cross-motions for summary judgment filed by TNS and the staffing agencies pertaining to TNS’s demand for indemnity. The court denied TNS’s motion and granted the motions filed by the staffing agencies; however, the California Appellate Court reversed the trial court’s decision in part and instructed the trial court to reconsider its ruling. In February 2017, the court denied a new motion for summary judgment filed by the staffing companies and has since stated that the staffing companies would be liable to TNS for any damages owed to the class members that the staffing companies employed.
The final amount of liability, if any, payable in connection with this matter remains the subject of pending litigation and will ultimately depend on various factors, including the outcome of Quanta’s appeal of the trial court’s rulings on liability and damages, the final determination with respect to any additional costs or damages owed by Quanta, and the solvency of the staffing agencies. Based on review and analysis of the trial court’s rulings on liability, Quanta does not believe, at this time, that
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it is probable this matter will result in a material loss. However, if Quanta is unsuccessful in this litigation and the staffing agencies are unable to fund damages owed to class members, Quanta believes the range of reasonably possible loss to Quanta upon final resolution of this matter could be up to approximately $9.5 million, plus attorneys’ fees and expenses of the plaintiff class.
Hallen Acquisition Assumed Liability
In August 2019, in connection with the acquisition of The Hallen Construction Co., Inc. (Hallen), Quanta assumed certain contingent liabilities associated with a March 2014 natural gas-fed explosion and fire in the Manhattan borough of New York City, New York. The incident resulted in, among other things, loss of life, personal injury and the destruction of two buildings and other property damage. After investigation, the National Transportation Safety Board determined that the probable cause of the incident was the failure of certain natural gas infrastructure installed by Consolidated Edison, Inc. (Con Ed) and the failure of certain sewer infrastructure maintained by the City of New York. Pursuant to a contract with Con Ed, Hallen had performed certain work related to such natural gas infrastructure and agreed to indemnify Con Ed for certain claims, liabilities and costs associated with its work. Numerous lawsuits are pending in New York state courts related to the incident, which generally name Con Ed, the City of New York and Hallen as defendants. These lawsuits are at various preliminary stages and generally seek unspecified damages and, in some cases, punitive damages, for wrongful death, personal injury, property damage and business interruption.
Hallen’s liabilities associated with this matter are expected to be covered under applicable insurance policies or contractual remedies negotiated by Quanta with the former owners of Hallen. As of March 31, 2021, Quanta had not recorded an accrual for any probable and estimable loss related to this matter. However, the ultimate amount of liability in connection with this matter remains subject to uncertainties associated with pending litigation, including, among other things, the apportionment of liability among the defendants and other responsible parties and the likelihood and amount of potential damages claims. As a result, this matter could result in a loss that is in excess of, or not covered by, such insurance or contractual remedies, which could have a material adverse effect on Quanta’s consolidated financial condition, results of operations and cash flows.
Concentrations of Credit Risk
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. Substantially all of Quanta’s cash and cash equivalents are managed by what it believes to be high credit quality financial institutions. In accordance with Quanta’s investment policies, these institutions are authorized to invest cash and cash equivalents in a diversified portfolio of what Quanta believes to be high quality cash and cash equivalent investments, which consist primarily of interest-bearing demand deposits, money market investments and money market mutual funds. Although Quanta does not currently believe the principal amount of these cash and cash equivalents is subject to any material risk of loss, changes in economic conditions could impact the interest income Quanta receives from these investments. In addition, Quanta grants credit under normal payment terms, generally without collateral, to its customers, which include electric power, communications and energy companies, governmental entities, general contractors, and builders, owners and managers of commercial and industrial properties located primarily in the United States, Canada and Australia. While Quanta generally has certain statutory lien rights with respect to services provided, Quanta is subject to potential credit risk related to business, economic and financial market conditions that affect these customers and locations, which has been heightened as a result of the unfavorable and uncertain economic and financial market conditions resulting from the ongoing COVID-19 pandemic and the significant decline in commodity prices and volatility in commodity production volumes. Some of Quanta’s customers have experienced significant financial difficulties (including bankruptcy), and customers may experience financial difficulties in the future. These difficulties expose Quanta to increased risk related to collectability of billed and unbilled receivables and contract assets for services Quanta has performed.
For example, a customer within Quanta’s Underground Utility and Infrastructure Solutions segment encountered financial difficulties during 2020 that resulted in nonpayment of $27.5 million of receivables, plus accrued interest. As a result of the nonpayment, Quanta decided to foreclose the liens on the pipeline asset in order to recover the outstanding amount. Quanta believes that the value of the pipeline asset is in excess of the amount owed. However, the ultimate outcome remains uncertain and is based on a number of assumptions that are potentially subject to change, and therefore the amount collected could be materially less than the amount owed.
At March 31, 2021 and December 31, 2020, no customer represented 10% or more of Quanta’s consolidated net receivable position. No customer represented 10% or more of Quanta’s consolidated revenues for the three months ended March 31, 2021 or 2020.
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(Unaudited)
Insurance
As discussed in Note 2, Quanta carries various insurance policies. As of March 31, 2021 and December 31, 2020, the gross amount accrued for employer’s liability, workers’ compensation, auto liability, general liability, and group health claims totaled $303.1 million and $319.5 million, with $224.9 million and $238.0 million considered to be long-term and included in “Insurance and other non-current liabilities.” Related insurance recoveries/receivables as of March 31, 2021 and December 31, 2020 were $26.1 million and $35.6 million, of which $0.4 million and $0.4 million are included in “Prepaid expenses and other current assets” and $25.7 million and $35.2 million are included in “Other assets, net.”
Quanta renews its insurance policies on an annual basis, and therefore deductibles and levels of insurance coverage may change in future periods. In addition, insurers may cancel Quanta’s coverage or determine to exclude certain items from coverage, or Quanta may elect not to obtain certain types or incremental levels of insurance based on the potential benefits considered relative to the cost of such insurance, or coverage may not be available at reasonable and competitive rates. In any such event, Quanta’s overall risk exposure would increase, which could negatively affect its results of operations, financial condition and cash flows. For example, due to the increased occurrence and future risk of wildfires in California and other areas in the western United States, Australia and other locations, insurers have reduced coverage availability and increased the cost of insurance coverage for such events in recent years. As a result, Quanta’s level of insurance coverage for wildfire events has decreased, including in connection with recent annual insurance renewals, and the current level of coverage may not be sufficient to cover potential losses in connection with these events. Additionally, the cost of such insurance coverage has increased in connection with Quanta’s recent annual insurance renewals. Quanta’s third-party insurers could decide to further reduce, exclude or increase the cost of coverage for wildfires or other events in connection with insurance renewals in the future. In any such event, Quanta’s overall risk exposure would increase, which could negatively affect its financial condition, results of operations and cash flows.
Letters of Credit
Certain of Quanta’s vendors require letters of credit to ensure reimbursement for amounts they are disbursing on Quanta’s behalf, such as to beneficiaries under its insurance programs. In addition, from time to time, certain customers require Quanta to post letters of credit to ensure payment of subcontractors and vendors and guarantee performance under contracts. Such letters of credit are generally issued by a bank or similar financial institution, typically pursuant to Quanta’s senior credit facility. Each letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit if the holder claims that Quanta has failed to perform specified actions. If this were to occur, Quanta would be required to reimburse the issuer of the letter of credit. Depending on the circumstances of such a reimbursement, Quanta may also be required to record a charge to earnings for the reimbursement.
As of March 31, 2021, Quanta had $319.9 million in outstanding letters of credit under its senior credit facility securing its casualty insurance program and various contractual commitments. These are irrevocable stand-by letters of credit with maturities generally expiring at various times throughout 2021 and 2022. Quanta expects to renew the majority of the letters of credit related to the casualty insurance program for subsequent one-year periods upon maturity. Quanta is not aware of any claims currently asserted or threatened under any of these letters of credit that are material, individually or in the aggregate. However, to the extent payment is required for any such claims, the amount paid could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.
Bonds and Parent Guarantees
Many customers, particularly in connection with new construction, require Quanta to post performance and payment bonds. These bonds provide a guarantee that Quanta will perform under the terms of a contract and pay its subcontractors and vendors. In certain circumstances, the customer may demand that the surety make payments or provide services under the bond, and Quanta must reimburse the surety for any expenses or outlays it incurs. Quanta may also be required to post letters of credit in favor of the sureties, which would reduce the borrowing availability under its senior credit facility. Quanta has not been required to make any material reimbursements to its sureties for bond-related costs except related to the exercise of approximately $112 million advance payment and performance bonds in 2019 in connection with the terminated telecommunications project in Peru, as set forth in Legal Proceedings - Peru Project Dispute above. However, to the extent further reimbursements are required, the amounts could be material and could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows. As of March 31, 2021, Quanta is not aware of any outstanding material obligations for payments related to bond obligations.
Performance bonds expire at various times ranging from mechanical completion of a project to a period extending beyond contract completion in certain circumstances, and as such a determination of maximum potential amounts outstanding requires the use of certain estimates and assumptions. Such amounts can also fluctuate from period to period based upon the mix and
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(Unaudited)
level of Quanta’s bonded operating activity. As of March 31, 2021, the total amount of the outstanding performance bonds was estimated to be approximately $4.0 billion. Quanta’s estimated maximum exposure as it relates to the value of the performance bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a performance bond generally extinguishes concurrently with the expiration of its related contractual obligation. The estimated cost to complete these bonded projects was approximately $1.4 billion as of March 31, 2021.
Additionally, from time to time, Quanta guarantees certain obligations and liabilities of its subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, joint venture arrangements and contractor licenses. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. For example, with respect to customer contracts, a guarantee may cover a variety of obligations and liabilities arising during the ordinary course of the subsidiary’s business or operations, including, among other things, warranty and breach of contract claims, third party and environmental liabilities arising from the subsidiary’s work and for which it is responsible, liquidated damages, or indemnity claims. Quanta is not aware of any claims under any of these guarantees that are material, except as set forth in Legal Proceedings – Maurepas Project Dispute above. To the extent a subsidiary incurs a material obligation or liability and Quanta has guaranteed the performance or payment of such liability, the recovery by a customer or other counterparty or a third party will not be limited to the assets of the subsidiary. As a result, responsibility under the guarantee could exceed the amount recoverable from the subsidiary alone and could materially and adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.
Employment Agreements
Quanta has various employment agreements with certain executives and other employees, which provide for compensation, other benefits and, under certain circumstances, severance payments and post-termination stock-based compensation benefits. Certain employment agreements also contain clauses that require the potential payment of specified amounts to such employees upon the occurrence of a defined change in control event.
Collective Bargaining Agreements and Multiemployer Pension Plans
Certain of Quanta’s operating units are parties to collective bargaining agreements with unions that represent certain of their employees. The collective bargaining agreements expire at various times and have typically been renegotiated and renewed on terms similar to those in the expiring agreements. From time to time, Quanta is a party to grievance and arbitration actions based on claims arising out of the collective bargaining agreements. The agreements require the operating units to pay specified wages, provide certain benefits to union employees and contribute certain amounts to multiemployer pension plans and employee benefit trusts. Quanta’s multiemployer pension plan contribution rates generally are made to the plans on a “pay-as-you-go” basis based on its union employee payrolls. The location and number of union employees that Quanta employs at any given time and the plans in which they may participate vary depending on Quanta’s need for union resources in connection with its ongoing projects. Therefore, Quanta is unable to accurately predict its union employee payroll and the resulting multiemployer pension plan contribution obligations for future periods.
The Pension Protection Act of 2006 may require Quanta to make additional contributions to its multiemployer pension plans if they become underfunded, and these additional contributions will be determined based on Quanta’s union employee payrolls. Special funding and operational rules are generally applicable to plan years beginning after 2007 for multiemployer plans that are classified as “endangered,” “seriously endangered” or “critical” status based on multiple factors (including, for example, the plan’s funded percentage, the plan’s cash flow position and whether the plan is projected to experience a minimum funding deficiency). Plans in these classifications must adopt measures to improve their funded status through a funding improvement or rehabilitation plan, as applicable, which may require additional contributions from employers (e.g., a surcharge on benefit contributions) and/or modifications to retiree benefits. Certain plans to which Quanta contributes or may contribute in the future are in “endangered,” “seriously endangered” or “critical” status. The amount, if any, that Quanta may be obligated to contribute to these plans cannot be reasonably estimated due to uncertainty regarding the amount of future work involving covered union employees, future contribution levels and possible surcharges on plan contributions.
Quanta may be subject to additional liabilities imposed by law as a result of its participation in multiemployer defined benefit pension plans. For example, the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, imposes certain liabilities upon an employer who is a contributor to a multiemployer pension plan if the employer withdraws or is deemed to have withdrawn from the plan or the plan is terminated or experiences a mass withdrawal. These liabilities include an allocable share of the unfunded vested benefits in the plan for all plan participants, not merely the benefits payable to a contributing employer’s own retirees. As a result, participating employers may bear a higher proportion of liability for unfunded vested benefits if other participating employers cease to contribute or withdraw, with the reallocation of liability being more acute in cases when a withdrawn employer is insolvent or otherwise fails to pay its
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(Unaudited)
withdrawal liability. Quanta is not aware of any material withdrawal liabilities that have been incurred or asserted and that remain outstanding as a result of a withdrawal by Quanta from a multiemployer defined benefit pension plan. However, Quanta’s future contribution obligations and potential withdrawal liability exposure could vary based on the investment and actuarial performance of the multiemployer pension plans to which it contributes and other factors, which could be negatively impacted as a result of the unfavorable and uncertain economic and financial market conditions resulting from the ongoing COVID-19 pandemic and related issues. Quanta has been subject to significant withdrawal liabilities in the past, including in connection with its withdrawal from the Central States, Southeast and Southwest Areas Pension Plan. To the extent Quanta is subject to material withdrawal liabilities in the future, such liability could adversely affect its business, financial condition, results of operations and cash flows.
Deferred Compensation Plans
Quanta maintains non-qualified deferred compensation plans pursuant to which non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and/or settlement of certain stock-based awards, subject to certain limitations. These plans are unfunded and unsecured compensation arrangements. Individuals participating in these plans may allocate deferred cash amounts among a group of notional accounts that mirror the gains and losses of various investment alternatives. Generally, participants receive distributions of deferred balances based on predetermined payout schedules or other events.
The plan covering key employees provides for employer matching contributions for certain officers and employees whose benefits under the 401(k) plan are limited by federal tax law. Quanta may also make discretionary employer contributions to such plan. Matching contributions vest immediately, and discretionary employer contributions may be subject to a vesting schedule determined at the time of the contribution, provided that vesting accelerates upon a change in control or the participant’s death or retirement. All matching and discretionary employer contributions, whether vested or not, are forfeited upon a participant’s termination of employment for cause or upon the participant engaging in competition with Quanta or any of its affiliates.
Quanta made matching contributions to the eligible participants’ accounts under the deferred compensation plans of $0.5 million during each the three months ended March 31, 2021 and 2020. Quanta made no discretionary contributions during the three months ended March 31, 2021 and 2020. At March 31, 2021 and December 31, 2020, obligations under these plans, including amounts contributed by Quanta, were $63.4 million and $58.2 million and were included in “Insurance and other non-current liabilities” in the accompanying condensed consolidated balance sheets. Quanta maintains investments to provide for future obligations related to these deferred compensation plans. At March 31, 2021 and December 31, 2020, these investments were primarily comprised of company-owned life insurance policies, had fair market values of $61.5 million and $56.5 million and were included in “Other assets, net” in the accompanying condensed consolidated balance sheets.
Indemnities
Quanta generally indemnifies its customers for the services it provides under its contracts and other specified liabilities, which may subject Quanta to indemnity claims and liabilities and related litigation. Additionally, in connection with certain acquisitions and dispositions, Quanta has indemnified various parties against specified liabilities that those parties might incur in the future. The indemnities under acquisition or disposition agreements are usually contingent upon the other party incurring liabilities that reach specified thresholds. Quanta is not aware of any indemnity claims in connection with its indemnity obligations that are material. However, to the extent indemnification is required, the amount could adversely affect Quanta’s consolidated business, financial condition, results of operations and cash flows.
In the normal course of Quanta’s acquisition transactions, Quanta obtains rights to indemnification from the sellers or former owners of acquired businesses for certain risks, liabilities and obligations arising from their prior operations, such as performance, operational, safety, workforce or tax issues, some of which Quanta may not have discovered during due diligence. However, the indemnities may not cover all of Quanta’s exposure for such pre-acquisition matters, or the indemnitors may be unwilling or unable to pay amounts owed to Quanta. Accordingly, Quanta may incur expenses for which it is not reimbursed, and such amounts could be material and could have a material adverse effect on Quanta’s business or consolidated financial condition, results of operations and cash flows. For example, Quanta has obtained certain indemnification rights from the former owners of Hallen with respect to contingent liabilities that were assumed in connection with the acquisition, as set forth in Legal Proceedings — Hallen Acquisition Assumed Liability above.
Residual Value Guarantees
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. As of
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(Unaudited)
March 31, 2021, the maximum guaranteed residual value of this equipment was $860.9 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.
12. SEGMENT INFORMATION:
Quanta presents its operations under two reportable segments: (1) Electric Power Infrastructure Solutions and (2) Underground Utility and Infrastructure Solutions. 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 units in each of its end user markets. Quanta’s entrepreneurial business model allows multiple operating units to serve the same or similar customers and to provide a range of services across end user markets. Quanta’s operating units are organized into one of two internal divisions: the Electric Power Infrastructure Solutions Division and the Underground Utility and Infrastructure Solutions Division. These internal divisions are closely aligned with the reportable segments, and operating units are assigned to divisions based on the predominant type of work performed.
Reportable segment information, including revenues and operating income by type of work, is gathered from each operating unit for the purpose of evaluating segment performance in support of Quanta’s market strategies. Classification of operating unit revenues by type of work for segment reporting purposes can require judgment on the part of management. Quanta’s operating units 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, Quanta’s integrated operations and common administrative support for its operating units require that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs (e.g., facility costs), indirect operating expenses (e.g., depreciation), and general and administrative costs. Certain corporate costs are not allocated and include payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs and amortization related to intangible assets.
Summarized financial information for Quanta’s reportable segments is presented in the following table (in thousands):

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Revenues: |  |  |  |  |  |  |  |
Electric Power Infrastructure Solutions |  | $ | 2,060,120 |  |  | $ | 1,767,027 |  |  |  |  |
Underground Utility and Infrastructure Solutions |  | 643,461 |  |  | 997,068 |  |  |  |  |
Consolidated revenues |  | $ | 2,703,581 |  |  | $ | 2,764,095 |  |  |  |  |
Operating income (loss): |  |  |  |  |  |  |  |
Electric Power Infrastructure Solutions (1) |  | $ | 199,035 |  |  | $ | 128,758 |  |  |  |  |
Underground Utility and Infrastructure Solutions |  | 8,813 |  |  | 31,277 |  |  |  |  |
Corporate and non-allocated costs |  | (94,119) |  |  | (79,298) |  |  |  |  |
Consolidated operating income |  | $ | 113,729 |  |  | $ | 80,737 |  |  |  |  |
Depreciation: |  |  |  |  |  |  |  |
Electric Power Infrastructure Solutions |  | $ | 36,645 |  |  | $ | 28,713 |  |  |  |  |
Underground Utility and Infrastructure Solutions |  | 21,087 |  |  | 21,535 |  |  |  |  |
Corporate and non-allocated costs |  | 4,375 |  |  | 4,162 |  |  |  |  |
Consolidated depreciation |  | $ | 62,107 |  |  | $ | 54,410 |  |  |  |  |

(1) As of December 31, 2020, Quanta had substantially completed the exit of its operations in Latin America. For the three months ended March 31, 2020, Electric Power Infrastructure Solutions operating income included $16.3 million of operating losses related to Latin American operations.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 unit level, include operating machinery, equipment and vehicles, office equipment, buildings and leasehold improvements, and 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, 2021 and 2020, Quanta derived $497.5 million and $496.0 million of its revenues from foreign operations. Of Quanta’s foreign revenues, 83% and 77% were earned in Canada during the three months ended March 31, 2021 and 2020. In addition, Quanta held property and equipment of $329.9 million and $336.4 million in foreign countries, primarily Canada, as of March 31, 2021 and December 31, 2020.
13. SUPPLEMENTAL CASH FLOW INFORMATION:
The net effects of changes in operating assets and liabilities, net of non-cash transactions, on cash flows from operating activities are as follows (in thousands):

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Accounts and notes receivable |  | $ | 35,521 |  |  | $ | 122,330 |  |  |  |  |
Contract assets |  | (62,278) |  |  | 16,372 |  |  |  |  |
Inventories |  | (435) |  |  | (4,368) |  |  |  |  |
Prepaid expenses and other current assets |  | 9,948 |  |  | 84,078 |  |  |  |  |
Accounts payable and accrued expenses and other non-current liabilities |  | (4,780) |  |  | (110,394) |  |  |  |  |
Contract liabilities |  | (29,225) |  |  | (12,886) |  |  |  |  |
Other, net |  | (8,200) |  |  | (5,662) |  |  |  |  |
Net change in operating assets and liabilities, net of non-cash transactions |  | $ | (59,449) |  |  | $ | 89,470 |  |  |  |  |

Reconciliations of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts shown in the statements of cash flows are as follows (in thousands):

|  | March 31,
|  | 2021 |  | 2020
Cash and cash equivalents |  | $ | 200,218 |  |  | $ | 377,205 |
Restricted cash included in “Prepaid expenses and other current assets” |  | 1,518 |  |  | 3,514 |
Restricted cash included in “Other assets, net” |  | 879 |  |  | 919 |
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows |  | $ | 202,615 |  |  | $ | 381,638 |

|  | December 31,
|  | 2020 |  | 2019
Cash and cash equivalents |  | $ | 184,620 |  |  | $ | 164,798 |
Restricted cash included in “Prepaid expenses and other current assets” |  | 1,275 |  |  | 4,026 |
Restricted cash included in “Other assets, net” |  | 913 |  |  | 921 |
Total cash, cash equivalents, and restricted cash reported in the statements of cash flows |  | $ | 186,808 |  |  | $ | 169,745 |

Restricted cash includes any cash that is legally restricted as to withdrawal or usage.
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(Unaudited)
Supplemental cash flow information related to leases is as follows (in thousands):

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | (27,610) |  |  | $ | (29,482) |  |  |  |  |
Operating cash flows from finance leases |  | $ | (27) |  |  | $ | (17) |  |  |  |  |
Financing cash flows from finance leases |  | $ | (249) |  |  | $ | (201) |  |  |  |  |
Lease assets obtained in exchange for lease liabilities: |  |  |  |  |  |  |  |
Operating leases |  | $ | 17,927 |  |  | $ | 29,693 |  |  |  |  |
Finance leases |  | $ | 1,505 |  |  | $ | 866 |  |  |  |  |

Additional supplemental cash flow information is as follows (in thousands):

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Cash (paid) received during the period for — |  |  |  |  |  |  |  |
Interest paid |  | $ | (4,039) |  |  | $ | (13,272) |  |  |  |  |
Income taxes paid |  | $ | (4,602) |  |  | $ | (54,221) |  |  |  |  |
Income tax refunds |  | $ | 6,137 |  |  | $ | 2,339 |  |  |  |  |

During the three months ended March 31, 2020, in connection with the disposition of a small business, Quanta recorded a note receivable in exchange for the transfer of $8.5 million of inventory.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report) and with our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Annual Report), which was filed with the Securities and Exchange Commission (SEC) on March 1, 2021 and is available on the SEC’s website at www.sec.gov and on our website at www.quantaservices.com. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in Cautionary Statement About Forward-Looking Statements and Information above and Item 1A. Risk Factors of Part I of our 2020 Annual Report.
Overview
We are a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric and gas utility, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. The performance of our business generally depends on our ability to obtain contracts with customers and to effectively deliver the services provided under those contracts. The services we provide include the design, engineering, new construction, upgrade and repair and maintenance of infrastructure within each of the industries we serve, such as electric power transmission and distribution networks; substation facilities; communications and cable multi-system operator networks; gas utility systems; and pipeline transmission systems and facilities. Our customers include many of the leading companies in the industries we serve, and we endeavor to develop and maintain strategic alliances and preferred service provider status with our customers. Our services are typically provided pursuant to master service agreements, repair and maintenance contracts and fixed price and non-fixed price new construction contracts.
We report our results under two reportable segments: (1) Electric Power Infrastructure Solutions and (2) Underground Utility and Infrastructure Solutions. This structure is generally focused on broad end-user markets for our services. Included within the Electric Power Infrastructure Solutions segment are the results related to our telecommunications infrastructure services.
Current Quarter Financial Results and Significant Operational Trends and Events
Key financial results for the three months ended March 31, 2021 included:
•Consolidated revenues decreased 2.2% to $2.70 billion as compared to consolidated revenues of $2.76 billion for the three months ended March 31, 2020;
•Operating income increased 40.9%, or $33.0 million, to $113.7 million as compared to $80.7 million for the three months ended March 31, 2020;
•Net income attributable to common stock increased 132.0%, or $51.1 million, to $89.8 million as compared to $38.7 million for the three months ended March 31, 2020;
•Diluted earnings per share increased 136.6%, or $0.36, to $0.62 as compared to $0.26 for the three months ended March 31, 2020;
•EBITDA (a non-GAAP measure) increased 43.0%, or $60.4 million, to $200.8 million, as compared to $140.4 million for the three months ended March 31, 2020, and adjusted EBITDA (a non-GAAP measure) increased 35.4%, or $57.6 million, to $220.2 million, as compared to $162.6 million for the three months ended March 31, 2020;
•Net cash provided by operating activities decreased by $101.9 million to $125.6 million, as compared to net cash provided by operating activities of $227.5 million for the three months ended March 31, 2020;
•Remaining performance obligations increased 3.8%, or $149.5 million, to $4.13 billion as of March 31, 2021 as compared to $3.99 billion as of December 31, 2020; and
•Total backlog (a non-GAAP measure) increased 4.6%, or $697.9 million, to $15.83 billion as of March 31, 2021, as compared to $15.13 billion as of December 31, 2020.
For a reconciliation of EBITDA and adjusted EBITDA to net income attributable to common stock, the most comparable GAAP measure, and a reconciliation of backlog to remaining performance obligations, the most comparable GAAP measure, see Non-GAAP Reconciliations below.
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As described below, during the three months ended March 31, 2021, our results were impacted by certain significant operational trends and events as compared to the three months ended March 31, 2020.
Electric Power Infrastructure Solutions Segment
•Revenues increased by 16.6% to $2.06 billion, as compared to $1.77 billion.
•Operating income increased by 54.6% to $199.0 million, as compared to $128.8 million, and operating income as a percentage of revenues increased to 9.7%, as compared to 7.3%.
•Revenues increased primarily due to continued favorable dynamics across our core utility market and increased demand for our electric power services, including larger transmission projects in Canada, and approximately $70 million of revenues from acquired businesses.
•Revenues for the three months ended March 31, 2021 also included a $50 million increase in emergency restoration services revenues and a $26 million positive impact related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate.
•Operating income and operating income as a percentage of revenues increased primarily due to improved performance across the segment, including increased revenues for larger transmission projects in Canada and emergency restoration services revenues, both of which contributed to improved equipment utilization and fixed cost absorption. Partially offsetting these positive impacts were losses resulting from poor subcontractor performance, challenging site conditions and weather and seasonal impacts on certain communications projects.
Underground Utility and Infrastructure Solutions Segment
•Revenues declined by 35.5% to $643.5 million, as compared to $997.1 million.
•Operating income decreased by 71.8% to $8.8 million, as compared to $31.3 million, and operating income as a percentage of revenues decreased to 1.4%, as compared to 3.1%.
•Revenues declined primarily due to reduced revenues associated with larger pipeline projects, lower demand for our services in end-markets where the price of oil is influential and reduced capital spending and deferred regularly scheduled maintenance by our midstream and industrial customers.
•Operating income and operating income as a percentage of revenues decreased primarily due to the decline in revenues, including revenues related to larger pipeline projects, which generally yield higher margins. The overall challenged energy market and the COVID-19 pandemic also contributed to lower operating income for the segment for the three months ended March 31, 2021.
See COVID-19 Pandemic, Results of Operations and Liquidity and Capital Resources below for additional information and discussion related to consolidated and segment results.
COVID-19 Pandemic
During 2020 and the first part of 2021, the COVID-19 pandemic has significantly impacted global economies, resulting in workforce and travel restrictions, supply chain and production disruptions and reduced demand and spending across many sectors. While we have continued to operate substantially all of our activities as a provider of essential services, during the course of the pandemic our operations and financial results have been adversely impacted by, among other things, the items set forth below.
•Broader challenges in the energy market that have been compounded by the COVID-19 pandemic, which have materially impacted, and are expected to continue to materially impact, our Underground Utility and Infrastructure Solutions segment. In particular, demand for our midstream and industrial services operations has declined as customers are reducing and deferring regularly scheduled maintenance and capital projects due to lack of demand for refined products.
•Shut-down orders and limitations on work site practices implemented by the Canadian government, which negatively impacted our Canadian operations and financial results in 2020 and have continued to have a negative impact in 2021.
•Disruptions created by shelter-in-place restrictions in major U.S. metropolitan markets that were meaningfully impacted by the pandemic, which had a significant negative impact on our financial results in the first and second quarters of 2020, and in Latin America, which contributed to significant losses during 2020 for those operations.
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We are focused on maintaining a strong balance sheet as part of supporting our strategic operations, but also to help us navigate the remaining challenges presented by the COVID-19 pandemic. As of March 31, 2021, we had $200.2 million of cash and cash equivalents and $1.87 billion of availability under our senior credit facility. We generated $125.6 million of cash flow from operating activities in the three months ended March 31, 2021 and $1.12 billion in cash flow from operating activities in the year ended December 31, 2020. We plan to continue to maintain capital discipline and monitor rapidly changing market dynamics and adjust our costs and financing strategies accordingly, and we expect capital expenditures for 2021 to be approximately $325 million.
Additionally, we continue to assess the expected negative impact of the challenged energy market, which has been compounded by the COVID-19 pandemic, on our goodwill, intangible assets, long-lived assets, and investments. We did not recognize any impairments during the three months ended March 31, 2021; however, the potential impacts remain uncertain and may change based on numerous factors. We are continuing to monitor these conditions and should a reporting unit or investment suffer additional significant declines in actual or forecasted financial results, the risk of impairment would increase.
During 2020, the U.S. federal government also enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which provides for various tax relief and tax incentive measures. These measures are not expected to have a material impact on our results of operations. However, pursuant to the CARES Act , we deferred the payment of $108.9 million of the employer portion of payroll taxes during the year ended December 31, 2020, 50% of which are due by December 31, 2021 and the remainder of which are due by December 31, 2022.
The broader and longer-term implications of the COVID-19 pandemic on our results of operations and overall financial performance and position remain highly uncertain and variable, and we expect continued operational challenges in 2021 for portions of our operations. The future impact that the pandemic, or any resulting market disruption and volatility, will have on our business, cash flows, liquidity, financial condition and results of operations will depend on future developments, including, among others, the duration and severity of the pandemic; the development, availability and administration of effective treatments and vaccines; the actions taken by governmental authorities, customers, suppliers and other third parties and the consequences of those actions; our workforce availability; and the timing and extent to which normal economic and operating conditions resume and continue. For additional discussion regarding risks associated with the COVID-19 pandemic, see Item 1A. Risk Factors of Part I of our 2020 Annual Report.
Business Environment
We believe there are long-term growth opportunities across our industries, and we continue to have a positive long-term outlook. Although not without risks and challenges, including those discussed in Overview and in Cautionary Statement About Forward-Looking Statements and Information and referred to in Item 1A. Risk Factors of Part I of our 2020 Annual Report, we believe, with our full-service operations, broad geographic reach, financial position and technical expertise, we are well positioned to capitalize on opportunities and trends in our industries.
Electric Power Infrastructure Solutions Segment. Utilities are investing significant capital in their electric power delivery systems, particularly transmission, substation and distribution infrastructure, through multi-year, multi-billion dollar grid modernization and reliability programs, which have provided, and are expected to continue to provide, demand for our services. Utilities are accommodating a changing fuel generation mix that is moving toward more sustainable sources such as renewables and natural gas and replacing aging infrastructure to support long-term economic growth. In order to reliably and efficiently deliver power, and in response to federal reliability standards, utilities are also integrating smart grid technologies into distribution systems in order to improve grid management and create efficiencies, and in preparation for emerging technologies such as electric vehicles. A number of utilities have and continue to implement system upgrades or hardening programs in response to recurring severe weather events, such as hurricanes and wildfires, and in particular there are significant system resiliency initiatives in California and other regions in the western U.S. underway that are designed to prevent and manage the impact of wildfires. These resiliency initiatives provide additional opportunities for our services; however, they also increase our potential exposure to significant liabilities attributable to those events.
While the COVID-19 pandemic has resulted in an overall decline in electricity usage in the near term, primarily related to commercial and industrial users, we expect demand for electricity in North America to grow over the long term and believe that certain segments of the North American electric power grid are not adequate to efficiently serve the power needs of the future. Furthermore, to the extent that electrification trends increase, including electric vehicle (EV) adoption, demand for electricity could be greater than currently anticipated. As demand for a carbon-neutral economy and cleaner power generation increases, we also expect an increase in new power generation facilities powered by renewable energy sources (e.g. solar and wind) and certain traditional energy sources (e.g., natural gas). To accommodate this growth, we expect continued demand for new or expanded transmission and substation infrastructure to reliably transport power and interconnect new generation facilities and the modification and reengineering of existing infrastructure as existing coal and nuclear generation facilities are retired or shut down.
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With respect to our communications service offerings, consumer and commercial demand for communication and data-intensive, high-bandwidth wireline and wireless services and applications is driving significant investment in infrastructure and the deployment of new technologies. In particular, communications providers in North America are in the early stages of developing new fifth generation wireless services (5G), which are intended to facilitate bandwidth-intensive services at high speeds for consumers and commercial applications. Additionally, the Federal Communications Commission has enacted the Rural Digital Opportunity Fund for the purpose of deploying billions of dollars in federal funds for high speed fixed broadband service to underserved rural homes and small businesses. As a result of these industry trends, we believe there will be meaningful demand for our engineering and construction services. We also reoriented our communications service offerings to strategically focus on the North American market, substantially completing the exit of our Latin American communications operations during 2020, which we anticipate will result in improved profitability.
Underground Utility and Infrastructure Solutions Segment. For several years we have focused on increasing our underground utility and infrastructure solutions related to specialty services and industries that we believe are driven by regulated utility spending, regulation, replacement and rehabilitation of aging infrastructure and safety and environmental initiatives, which we believe provide a greater level of business sustainability and predictability. These service offerings include gas utility services, pipeline integrity services and downstream industrial services. We believe focusing on these services helps to offset the seasonality and cyclicality of our larger pipeline project business, and although our strategic focus on larger pipeline projects has decreased, we continue to pursue project opportunities to the extent they satisfy our margin and risk profiles and support the needs of our customers. Though we experienced short-term disruptions in 2020 due to the COVID-19 pandemic, we believe demand for our gas utility distribution services will increase as a result of customer desire to upgrade and replace aging infrastructure, lower natural gas prices, and increasing regulatory requirements. In particular, natural gas utilities have implemented multi-decade modernization programs to replace aging cast iron, bare steel, gas and plastic system infrastructure with modern materials for safety, reliability and environmental purposes.
We believe there are also growth opportunities for our pipeline integrity, rehabilitation and replacement services, as regulatory measures have increased the frequency or stringency of pipeline integrity testing requirements that require our customers to test, inspect, repair, maintain and replace pipeline infrastructure to ensure that it operates in a safe, reliable and environmentally conscious manner. Further, permitting challenges associated with construction of new pipelines can make existing pipeline infrastructure more valuable, motivating owners to extend the useful life of existing pipeline assets through integrity initiatives.
Our services to downstream industrial energy customers, which are primarily located along the Gulf Coast of the United States and in other select markets in North America, have been negatively impacted by the challenging overall energy market conditions that resulted in an overall decline in global demand for refined products during 2020 and thus far in 2021. While demand for our critical path catalyst services has remained solid, in the second half of 2020 customers began reducing onsite activity for our other services and have deferred maintenance and certain turnaround projects to late 2021 and 2022. Despite the current market conditions, we believe there are significant long-term opportunities for these services, including our high-pressure and critical-path turnaround services, as well as our capabilities with respect to instrumentation and electrical services, piping, fabrication and storage tanks services, and other industrial services, and that processing facilities located along the U.S. Gulf Coast region should have certain long-term strategic advantages due to their proximity to affordable hydrocarbon resources. However, these processing facilities can also be negatively impacted for short-term periods due to severe weather events, such as hurricanes, tropical storms and floods.
Furthermore, the broader oil and gas industry is highly cyclical and subject to price and production volume volatility, such as the current low commodity price environment, which can impact demand for our services. For example, certain of our end markets where the price of oil is influential, such as Australia, the Canadian Oil Sands and certain oil-driven U.S. shale formations, have been materially impacted by the current challenged energy market. We have also entered the late-stage of the current construction cycle of larger pipeline projects, while the anticipated next cycle of larger projects has been delayed due to various factors, including, among other things, permitting delays and worksite access limitations related to environmental regulations. For example, during 2020 an approximately 600-mile natural gas pipeline under construction in the eastern United States, which we had been contracted to construct a portion of, was terminated due to, among other things, continued regulatory delay and risk. As a result of these dynamics, our revenues related to larger pipeline projects have declined significantly over the last few years, including by approximately $830 million from 2019 to 2020. This dynamic is an example of why we have increased our focus on underground utility and infrastructure solutions related to specialty services and industries that we believe are driven by regulated utility spending, regulation, replacement and rehabilitation of aging infrastructure and safety and environmental initiatives, which we believe provide a greater level of business sustainability and predictability.
Lastly, we believe natural gas, due to its abundant supply and current low price, will remain a fuel of choice for both primary power generation and backup power generation for renewable power plants in North America, which we believe could position the United States as a leading competitor in the global LNG export market. In certain areas, the existing pipeline system infrastructure is insufficient to support any future LNG export facilities, which could provide additional opportunities.
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Regulatory Challenges and Opportunities. The regulatory environment creates both challenges and opportunities for our business, and in recent years electric power solutions and underground utility and infrastructure solutions margins have been impacted by regulatory and permitting delays in certain periods, particularly with respect to larger electric transmission and larger pipeline projects. Regulatory and environmental permitting processes continue to create uncertainty for projects and negatively impact customer spending, and delays have increased as the COVID-19 pandemic has impacted regulatory agency operations. For example, a recent challenge and changes to the U.S. Army Corps of Engineers Clean Water Act Section 404 Nationwide Permit 12 have impacted certain projects and could result in increased costs and project interruptions or delays if we or our customers are forced to seek additional or revised individual permits from the U.S. Army Corps of Engineers.
However, we believe that there are also several existing, pending or proposed legislative or regulatory actions that may alleviate certain regulatory and permitting issues and positively impact long-term demand, particularly in connection with electric power infrastructure and renewable energy spending. For example, regulatory changes affecting siting and right-of-way processes could potentially accelerate construction for transmission projects, and state and federal reliability standards are creating incentives for system investment and maintenance. We also consider renewable energy, including solar and wind generation facilities, to be an ongoing opportunity for our engineering, project management and installation services; however, the economic feasibility of some of these projects remains subject to the continued availability of tax incentive programs.
Labor Resource Availability. We continue to address the longer-term need for additional labor resources in our markets, as our customers continue to seek additional specialized labor resources to address an aging utility workforce and longer-term labor availability issues, increasing pressure to reduce costs and improve reliability, and increasing duration and complexity of their capital programs. We believe these trends will continue, possibly to the point where demand for labor resources will outpace supply. Furthermore, the cyclical nature of the natural gas and oil industry can create shortages of qualified labor in those markets during periods of high demand. Our ability to capitalize on available opportunities is limited by our ability to employ, train and retain the necessary skilled personnel, and therefore we are taking proactive steps to develop our workforce, including through strategic relationships with universities, the military and unions and the expansion and development of our training facility and postsecondary educational institution. Although we believe these initiatives will help address workforce needs, meeting our customers’ demand for labor resources could remain challenging.
Acquisitions and Investments. We believe potential acquisition and investment opportunities exist in our industries and adjacent industries, primarily due to the highly fragmented and evolving nature of those industries and inability of many companies to expand due to capital or liquidity constraints. We continue to evaluate opportunities that are expected to, among other things, broaden our customer base, expand our geographic area of operations, and grow and diversify our portfolio of services.
Significant Factors Impacting Results
Our revenues, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Cautionary Statement About Forward-Looking Statements and Information above and Item 1A. Risk Factors of Part I of our 2020 Annual Report, and those factors have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain of those factors is provided below.
Seasonality. Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. In addition, infrastructure projects often do not begin in a meaningful way until our customers finalize their capital budgets, which typically occurs during the first quarter. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact productivity. Third quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. Generally, revenues during the fourth quarter are lower than the third quarter but higher than the second quarter, as many projects are completed and customers often seek to spend their capital budgets before year end. However, the holiday season and inclement weather can sometimes cause delays during the fourth quarter, reducing revenues and increasing costs. These seasonal impacts are typical for our U.S. operations, but seasonality for our international operations may differ. For example, revenues in Canada are typically higher in the first quarter because projects are often accelerated in order to complete work while the ground is frozen and prior to the break up, or seasonal thaw, as productivity is adversely affected by wet ground conditions during warmer months. Additionally, the COVID-19 pandemic affected typical seasonality during 2020, and due to continued uncertainty regarding the future impact of the pandemic, our typical seasonality could also be impacted in 2021.
Weather, natural disasters and emergencies. The results of our business in a given period can be impacted by adverse weather conditions, severe weather events, natural disasters or other emergencies, which include, among other things, heavy or prolonged snowfall or rainfall, hurricanes, tropical storms, tornadoes, floods, blizzards, extreme temperatures, wildfires, pandemics (including the ongoing COVID-19 pandemic) and earthquakes. These conditions and events can negatively impact
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our financial results due to, among other things, the termination, deferral or delay of projects, reduced productivity and exposure to significant liabilities. See Overview – COVID-19 Pandemic above for further discussion regarding the impact of the COVID-19 pandemic. However, in some cases, severe weather events can increase our emergency restoration services, which typically yield higher margins due in part to higher equipment utilization and absorption of fixed costs.
Demand for services. We perform the majority of our services under existing contracts, including master service agreements (MSAs) and similar agreements pursuant to which our customers are not committed to specific volumes of our services. Therefore our volume of business can be positively or negatively affected by fluctuations in the amount of work our customers assign us in a given period, which may vary by geographic region. For example, to the extent our customers accelerate grid modernization or hardening programs or face deadlines to meet regulatory requirements for rehabilitation, reliability or efficiency, our volume of work could increase under existing agreements. Also, as described above in Overview – COVID 19 Pandemic, we have experienced reductions in demand for certain services as a result of disruptions due to shelter-in-place and worksite access restrictions and delays in regulatory agency operations due to the COVID-19 pandemic, as well as the decline in commodity prices and decreased demand for refined products. Examples of other items that may cause demand for our services to fluctuate materially from quarter to quarter include: the financial condition of our customers, their capital spending and their access to capital; economic and political conditions on a regional, national or global scale, including interest rates, governmental regulations affecting the sourcing of materials and equipment, and other changes in U.S. and global trade relationships; and project deferrals and cancellations.
Revenue mix and impact on margins. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Larger or more complex projects with higher voltage capacities; larger-diameter throughput capacities; increased engineering, design or construction complexities; more difficult terrain or geographical requirements; or longer distance requirements typically yield opportunities for higher margins than our recurring services described above, as we assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. However, larger projects are subject to additional risk of regulatory delay and cyclicality. For example, our revenues with respect to larger electric transmission and pipeline projects have declined significantly in recent years, and a significant number of larger projects have been delayed or cancelled during that same period. Project schedules also fluctuate, particularly in connection with larger, more complex or longer-term projects, which can affect the amount of work performed in a given period. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a larger number of smaller projects versus continuous production on fewer larger projects. As a result, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.
Project variability and performance. Margins for a single project may fluctuate period to period due to changes in the volume or type of work performed, the pricing structure under the project contract or job productivity. Additionally, our productivity and performance on a project can vary period to period based on a number of factors, including unexpected project difficulties or site conditions (including in connection with difficult geographic characteristics); project location, including locations with challenging operating conditions; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; protests, other political activity or legal challenges related to a project; and the performance of third parties. Moreover, we currently generate, and expect to continue generating, a significant portion of our revenues under fixed price contracts, and fixed price contracts are more common in connection with our larger and more complex projects that typically involve greater performance risk. Under these contracts, we assume risks related to project estimates and execution, and project revenues can vary, sometimes substantially, from our original projections due to a variety of factors, including the additional complexity, timing uncertainty or extended bidding, regulatory and permitting processes associated with these projects. These variations can result in a reduction in expected profit or the incurrence of losses on a project. See Revenue Recognition - Contract Estimates in Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report for further information regarding changes in estimated contract revenues and/or project costs, including any significant project gains or losses in connection with fixed price contracts that have impacted our results.
Subcontract work and provision of materials. Work that is subcontracted to other service providers generally yields lower margins, and therefore an increase in subcontract work in a given period can decrease margins. In recent years, we have subcontracted approximately 15% to 20% of our work to other service providers. Our customers are usually responsible for supplying the materials for their projects; however, under some contracts we agree to procure all or part of the required materials. Margins may be lower on projects where we furnish a significant amount of materials, including projects where we provide engineering, procurement and construction (EPC) services, as our markup on materials is generally lower than our markup on labor costs. Furthermore, fluctuations in the price or availability of materials and equipment we or our customers procure, including as a result of changes in U.S. or global trade relationships, governmental regulations affecting the sourcing
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of certain materials and equipment or other economic or political conditions, may impact our margins or cause delays. In a given period, an increase in the percentage of work with higher materials procurement requirements may decrease our overall margins.
Foreign currency risk. Our financial performance is reported on a U.S. dollar-denominated basis but is partially subject to fluctuations in foreign currency exchange rates. Fluctuations in exchange rates relative to the U.S. dollar, primarily Canadian and Australian dollars, can materially impact margins and comparisons of our results of operations between periods.
Results of Operations
The results of acquired businesses have been included in the following results of operations beginning on their respective acquisition dates. The following table sets forth selected statements of operations data, such data as a percentage of revenues for the periods indicated, as well as the dollar and percentage change from the prior period (dollars in thousands):
Consolidated Results

|  | Three Months Ended March 31, |  | Change |
|  | 2021 |  | 2020 |  | $ |  | % |  |  |
Revenues |  | $ | 2,703,581 |  |  | 100.0 | % |  | $ | 2,764,095 |  |  | 100.0 | % |  | $ | (60,514) |  |  | (2.2) | % |  |  |  |  |  |  |
Cost of services (including depreciation) |  | 2,330,691 |  |  | 86.2 |  |  | 2,431,899 |  |  | 88.0 |  |  | (101,208) |  |  | (4.2) | % |  |  |  |  |  |  |
Gross profit |  | 372,890 |  |  | 13.8 |  |  | 332,196 |  |  | 12.0 |  |  | 40,694 |  |  | 12.2 | % |  |  |  |  |  |  |
Equity in earnings of integral unconsolidated affiliates |  | 5,183 |  |  | 0.2 |  |  | — |  |  | — |  |  | 5,183 |  |  | * |  |  |  |  |  |  |
Selling, general and administrative expenses |  | (243,352) |  |  | (9.0) |  |  | (230,793) |  |  | (8.3) |  |  | (12,559) |  |  | 5.4 | % |  |  |  |  |  |  |
Amortization of intangible assets |  | (21,355) |  |  | (0.8) |  |  | (17,908) |  |  | (0.7) |  |  | (3,447) |  |  | 19.2 | % |  |  |  |  |  |  |
Change in fair value of contingent consideration liabilities |  | 363 |  |  | — |  |  | (2,758) |  |  | (0.1) |  |  | 3,121 |  |  | (113.2) | % |  |  |  |  |  |  |
Operating income |  | 113,729 |  |  | 4.2 |  |  | 80,737 |  |  | 2.9 |  |  | 32,992 |  |  | 40.9 | % |  |  |  |  |  |  |
Interest expense |  | (12,475) |  |  | (0.5) |  |  | (14,006) |  |  | (0.4) |  |  | 1,531 |  |  | (10.9) | % |  |  |  |  |  |  |
Interest income |  | 117 |  |  | — |  |  | 759 |  |  | — |  |  | (642) |  |  | (84.6) | % |  |  |  |  |  |  |
Other income (expense), net |  | 3,672 |  |  | 0.2 |  |  | (9,827) |  |  | (0.4) |  |  | 13,499 |  |  | (137.4) | % |  |  |  |  |  |  |
Income before income taxes |  | 105,043 |  |  | 3.9 |  |  | 57,663 |  |  | 2.1 |  |  | 47,380 |  |  | 82.2 | % |  |  |  |  |  |  |
Provision for income taxes |  | 13,724 |  |  | 0.5 |  |  | 16,160 |  |  | 0.6 |  |  | (2,436) |  |  | (15.1) | % |  |  |  |  |  |  |
Net income |  | 91,319 |  |  | 3.4 |  |  | 41,503 |  |  | 1.5 |  |  | 49,816 |  |  | 120.0 | % |  |  |  |  |  |  |
Less: Net income attributable to non-controlling interests |  | 1,558 |  |  | 0.1 |  |  | 2,817 |  |  | 0.1 |  |  | (1,259) |  |  | (44.7) | % |  |  |  |  |  |  |
Net income attributable to common stock |  | $ | 89,761 |  |  | 3.3 | % |  | $ | 38,686 |  |  | 1.4 | % |  | $ | 51,075 |  |  | 132.0 | % |  |  |  |  |  |  |

* The percentage change is not meaningful.
Revenues. Revenues decreased primarily due to a reduction in services related to larger pipeline transmission projects and the challenged energy market conditions, exacerbated by the impact of the COVID-19 pandemic, which resulted in lower revenues of $353.6 million from our Underground Utility and Infrastructure Solutions segment. This decrease was partially offset by increased revenues of $293.1 million from our Electric Power Infrastructure Solutions segment due to strong demand for our electric power services. See Segment Results below for additional information and discussion related to segment revenues.
Gross profit. The increase in gross profit was due to an increase in revenues and improved utilization and fixed cost absorption from our Electric Power Infrastructure Solutions segment, partially offset by reduced revenues and decreased utilization and fixed cost absorption from our Underground Utility and Infrastructure Solutions segment. See Segment Results below for additional information and discussion related to segment operating income (loss).
Equity in earnings of integral unconsolidated affiliates. The amount for the three months ended March 31, 2021 primarily relates to our portion of amounts earned by LUMA Energy, LLC (LUMA) for transition services performed under the agreement awarded in June 2020 for the operation and maintenance of the electric transmission and distribution system in Puerto Rico.
Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of revenues increased to 9.0% for the three months ended March 31, 2021, as compared to 8.3% for the three months ended March 31,
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2020, which was partially due to the decrease in revenues described above. The increase in selling, general and administrative expenses was also attributable to a $9.8 million increase in expenses associated with acquired businesses and a $4.8 million increase in compensation expense, which was primarily due to increased incentive and non-cash stock-based compensation awarded as a result of higher levels of operating performance. These increases were partially offset by certain cost containment measures we implemented in the current operating environment, including a $5.8 million decrease in travel and related expenses. Also contributing to the increase was a $2.4 million increase in the fair market value of deferred compensation liabilities during the three months ended March 31, 2021, as compared to a $7.8 million decrease in the fair market value of deferred compensation liabilities during the three months ended March 31, 2020. These changes in fair market value of deferred compensation liabilities were offset by corresponding changes in the fair market value of assets associated with the deferred compensation plan, and these corresponding changes are included in other income (expense), net.
Amortization of intangible assets. The increase was primarily due to increased amortization of intangible assets associated with recently acquired businesses, partially offset by reduced amortization expense from previously acquired intangible assets, as certain of those assets became fully amortized.
Change in fair value of contingent consideration liabilities. Contingent consideration liabilities are payable in the event certain performance objectives are achieved by an acquired business during designated post-acquisition periods. The change in fair value associated with these liabilities was primarily due to changes in performance in post-acquisition measurement periods by certain acquired businesses and the effect of present value accretion on fair value calculations. Further changes in fair value are expected to be recorded periodically until the contingent consideration liabilities are settled.
Interest expense. Interest expense decreased primarily due to a lower weighted average interest rate associated with our senior credit facility and a lower average overall debt balance outstanding, considering both our senior credit facility and senior notes.
Other income (expense), net. The net other income for the three months ended March 31, 2021 includes a $1.6 million increase in the fair market value of assets associated with our deferred compensation plan, as compared to a $7.4 million decrease in the fair market value of assets associated with our deferred compensation plan during the three months ended March 31, 2020. These changes in fair market value of the assets were largely offset by corresponding changes in the fair market value of the liabilities associated with our deferred compensation plan, which are recorded in selling, general, and administrative expenses, as discussed above. Also impacting the three months ended March 31, 2021 was $0.7 million of equity in earnings of non-integral unconsolidated affiliates, as compared to $2.7 million of equity in losses of non-integral unconsolidated affiliates during the three months ended March 31, 2020, which included the recognition of impairment losses of $3.1 million related to an investment that was impacted by the decline in commodity prices and production volumes.
Provision for income taxes. The effective tax rates for the three months ended March 31, 2021 and 2020 were 13.1% and 28.0%. The lower rate for the three months ended March 31, 2021 was primarily due to the recognition of an $18.0 million tax benefit that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair market value, as compared to the recognition of $2.3 million associated with this tax benefit for the three months ended March 31, 2020, which was due to a smaller difference between the vest date fair market value and grant date fair market value of vested equity incentive awards.
Other comprehensive income (loss). Other comprehensive income (loss) results from translation of the balance sheets of our foreign operating units, which are primarily located in Canada and Australia and have functional currencies other than the U.S. dollar, and therefore are affected by the strengthening or weakening of the U.S. dollar against such currencies. The gain in the three months ended March 31, 2021 was primarily impacted by the weakening of the U.S. dollar against the Canadian dollar as of March 31, 2021 when compared to December 31, 2020. The loss in the three months ended March 31, 2020 was primarily impacted by the strengthening of the U.S. dollar against the Canadian dollar as of March 31, 2020 when compared to December 31, 2019.
Segment Results
Reportable segment information, including revenues and operating income by type of work, is gathered from each operating unit for the purpose of evaluating segment performance. Classification of our operating unit revenues by type of work for segment reporting purposes can at times require judgment on the part of management. Our operating units 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, we perform joint trenching projects to install distribution lines for electric power and natural gas customers. Our integrated operations and common administrative support for operating units require that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs (e.g., facility costs), indirect operating expenses (e.g., depreciation), and general and administrative costs. Certain corporate costs are not allocated, including payroll and benefits, employee travel expenses, facility costs, professional fees, acquisition costs, non-cash
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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.
The following table sets forth segment revenues, segment operating income (loss) and operating margins for the periods indicated, as well as the dollar and percentage change from the prior period. Operating margins are calculated by dividing operating income by revenues. Management utilizes operating margins as a measure of profitability, which can be helpful for monitoring how effectively we are performing under our contracts. Management also believes operating margins are a useful metric for investors to utilize in evaluating our performance. The following table shows dollars in thousands.

|  | Three Months Ended March 31, |  | Change |  |  |  |
|  | 2021 |  | 2020 |  | $ |  | % |  |  |  |  |  |  |  |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Electric Power Infrastructure Solutions |  | $ | 2,060,120 |  |  | 76.2 | % |  | $ | 1,767,027 |  |  | 63.9 | % |  | $ | 293,093 |  |  | 16.6 | % |  |  |  |  |  |  |  |  |  |  |  |
Underground Utility and Infrastructure Solutions |  | 643,461 |  |  | 23.8 |  |  | 997,068 |  |  | 36.1 |  |  | (353,607) |  |  | (35.5) | % |  |  |  |  |  |  |  |  |  |  |  |
Consolidated revenues |  | $ | 2,703,581 |  |  | 100.0 | % |  | $ | 2,764,095 |  |  | 100.0 | % |  | $ | (60,514) |  |  | (2.2) | % |  |  |  |  |  |  |  |  |  |  |  |
Operating income (loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Electric Power Infrastructure Solutions before equity in earnings of integral unconsolidated affiliates |  | $ | 193,852 |  |  | 9.4 | % |  | $ | 128,758 |  |  | 7.3 | % |  | $ | 65,094 |  |  | 50.6 | % |  |  |  |  |  |  |  |  |  |  |  |
Equity in earnings of integral unconsolidated affiliates |  | 5,183 |  |  | N/A |  | — |  |  | N/A |  | 5,183 |  |  | * |  |  |  |  |  |  |  |  |  |  |  |
Electric Power Infrastructure Solutions |  | 199,035 |  |  | 9.7 | % |  | 128,758 |  |  | 7.3 | % |  | $ | 70,277 |  |  | 54.6 | % |  |  |  |  |  |  |  |  |  |  |  |
Underground Utility and Infrastructure Solutions |  | 8,813 |  |  | 1.4 | % |  | 31,277 |  |  | 3.1 | % |  | (22,464) |  |  | (71.8) | % |  |  |  |  |  |  |  |  |  |  |  |
Corporate and non-allocated costs |  | (94,119) |  |  | N/A |  | (79,298) |  |  | N/A |  | (14,821) |  |  | 18.7 | % |  |  |  |  |  |  |  |  |  |  |  |
Consolidated operating income |  | $ | 113,729 |  |  | 4.2 | % |  | $ | 80,737 |  |  | 2.9 | % |  | $ | 32,992 |  |  | 40.9 | % |  |  |  |  |  |  |  |  |  |  |  |

* The percentage or percentage change is not meaningful.
Electric Power Infrastructure Solutions Segment Results
The increase in revenues for the three months ended March 31, 2021 was primarily due to continued favorable dynamics across our core utility market and increased demand for our electric power services, as well as increased revenues from larger transmission projects in Canada and a $70 million increase in revenues attributable to acquired businesses. Additionally, revenues for the three months ended March 31, 2021 were positively impacted by a $50 million increase in emergency restoration services revenues and $26 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate.
In early 2020, we decided to pursue an exit of our operations in Latin America and substantially completed such exit as of December 31, 2020. For the three months ended March 31, 2020, Electric Power Infrastructure Solutions operating income included $16.3 million of operating losses related to Latin American operations, which negatively impacted operating margin by 90 basis points.
Operating income and operating income as a percentage of revenues were positively impacted by improved performance across the segment, including increased revenues from larger transmission projects in Canada and emergency restoration services revenues, both of which contributed to improved equipment utilization and fixed cost absorption. Partially offsetting these positive impacts were losses resulting from poor subcontractor performance, challenging site conditions and weather and seasonal impacts on certain communications projects. The equity in earnings of integral unconsolidated affiliates primarily relates to the commencement of transition services under the agreement awarded to LUMA in June 2020.
Underground Utility and Infrastructure Solutions Segment Results
The decrease in revenues for the three months ended March 31, 2021 was partially due to reduced revenues associated with larger pipeline projects, as the industry has entered the late-stage of the current construction cycle for these projects and the anticipated next cycle of projects has been delayed due to various factors, including, among other things, permitting delays and worksite access limitations related to environmental regulations. Revenues also declined due to lower demand for our services in end-markets where the price of oil is influential, as well as reduced capital spending and deferred regularly scheduled maintenance by our midstream and industrial customers as a result of the COVID-19 pandemic.
The decreases in operating income and operating income as a percentage of revenues were primarily due to the reduction of revenues, including revenues related to larger pipeline projects, which generally yield higher margins. Additionally, the
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adverse impact of the COVID-19 pandemic and the overall challenged energy market have contributed to the continued low segment operating income, as those dynamics have resulted in reduced revenues from our industrial services, which negatively impacted our margins and ability to cover fixed and overhead costs. Partially offsetting these adverse impacts were proactive cost management activities across the impacted operations.
Corporate and Non-allocated Costs
The increase in corporate and non-allocated costs was partially due to a $6.5 million increase in incentive and non-cash stock-based compensation awarded as a result of higher levels of operating performance and a $3.4 million increase in intangible asset amortization. Partially offsetting these increases were a $3.2 million decrease in professional fees, primarily related to a reduction in ongoing legal expenses, and with respect to contingent consideration liabilities, a $0.4 million decrease in the fair value recognized during the three months ended March 31, 2021 as compared to a $2.8 million increase in the fair value recognized during the three months ended March 31, 2020. Also contributing to the increase was a $2.4 million increase in the fair market value of deferred compensation liabilities during the three months ended March 31, 2021, as compared to a $7.8 million decrease in the fair market value of deferred compensation liabilities during the three months ended March 31, 2020. These changes in fair market value of deferred compensation liabilities were offset by corresponding changes in the fair market value of assets associated with the deferred compensation plan recorded within other income (expense) net.
Non-GAAP Reconciliations
EBITDA and Adjusted EBITDA
EBITDA and adjusted EBITDA, measures not recognized under generally accepted accounting principles in the United States (GAAP), when used in connection with net income attributable to common stock, are intended to provide useful information to investors and analysts as they evaluate our performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA is defined as EBITDA adjusted for certain other items as described below. These measures should not be considered as an alternative to net income attributable to common stock or other measures of performance that are derived in accordance with GAAP. Management believes that the exclusion of these items from net income attributable to common stock enables it and its investors to more effectively evaluate our operations period over period and to identify operating trends that might not be apparent when including the excluded items.
As to certain of the items below, (i) non-cash stock-based compensation expense varies from period to period due to acquisition activity, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition and integration costs vary from period to period depending on the level of our acquisition activity; (iii) equity in (earnings) losses of non-integral unconsolidated affiliates varies from period to period depending on the activity and financial performance of non-integral unconsolidated affiliates, including gain or loss on sales of investments accounted for using the equity method of accounting; and (iv) change in fair value of contingent consideration liabilities varies from period to period depending on the performance in post-acquisition periods of certain acquired businesses. Because EBITDA and adjusted EBITDA, as defined, exclude some, but not all, items that affect net income attributable to common stock, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP
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financial measure, net income attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. The following table shows dollars in thousands.

|  |  |  | Three Months Ended
|  |  |  | March 31,
|  |  |  | 2021 |  | 2020
Net income attributable to common stock (GAAP as reported) |  | $ | 89,761 |  |  | $ | 38,686 |
Interest expense |  | 12,475 |  |  | 14,006 |
Interest income |  | (117) |  |  | (759) |
Provision for income taxes |  | 13,724 |  |  | 16,160 |
Depreciation expense |  | 62,107 |  |  | 54,410 |
Amortization of intangible assets |  | 21,355 |  |  | 17,908 |
Income taxes and depreciation included in equity in earnings of integral unconsolidated affiliates |  | 1,501 |  |  | — |
EBITDA (a) |  | 200,806 |  |  | 140,411 |
Non-cash stock-based compensation |  | 18,687 |  |  | 14,912 |
Acquisition and integration costs |  | 1,761 |  |  | 1,883 |
Equity in (earnings) losses of non-integral unconsolidated affiliates |  | (685) |  |  | 2,683 |
Change in fair value of contingent consideration liabilities |  | (363) |  |  | 2,758 |
Adjusted EBITDA |  | $ | 220,206 |  |  | $ | 162,647 |

(a) The calculation of EBITDA for the three months ended March 31, 2020 has been amended to conform to the current period’s calculation of EBITDA.
Remaining Performance Obligations and Backlog
A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Our remaining performance obligations represent management’s estimate of 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 has not yet begun, which includes estimated revenues attributable to consolidated joint ventures and variable interest entities (VIEs), 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 they will be earned and are probable of collection.
We have also historically disclosed our backlog, a measure commonly used in our industry but not recognized under GAAP. We believe this measure enables management to more effectively forecast our future capital needs and results and better identify future operating trends that may not otherwise be apparent. We believe this measure is also useful for investors in forecasting our future results and comparing us to our competitors. Our remaining performance obligations are a component of backlog, which also includes estimated orders under MSAs, including estimated renewals, and non-fixed price contracts expected to be completed within one year. Our methodology for determining backlog may not be comparable to the methodologies used by other companies.
As of March 31, 2021 and December 31, 2020, MSAs accounted for 65% and 63% of our estimated 12-month backlog and 72% and 70% of total backlog. Generally, our customers are not contractually committed to specific volumes of services under our MSAs, and most of our contracts can be terminated on short notice even if we are not in default. We determine the estimated backlog for these MSAs using recurring historical trends, factoring in seasonal demand and projected customer needs based upon ongoing communications. In addition, many of our MSAs are subject to renewal, and these potential renewals are considered in determining estimated backlog. As a result, estimates for remaining performance obligations and backlog are subject to change based on, among other things, project accelerations; project cancellations or delays, including but not limited to those caused by commercial issues, regulatory requirements, natural disasters, emergencies (including the ongoing COVID-19 pandemic) and adverse weather conditions; and final acceptance of change orders by customers. These factors can cause revenues to be realized in periods and at levels that are different than originally projected.
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The following table reconciles total remaining performance obligations to our backlog (a non-GAAP measure) by reportable segment along with estimates of amounts expected to be realized within 12 months (in thousands):

|  | March 31, 2021 |  | December 31, 2020 |  |
|  | 12 Month |  | Total |  | 12 Month |  | Total |  |  |  |
Electric Power Infrastructure Solutions |  |  |  |  |  |  |  |  |  |  |  |
Remaining performance obligations |  | $ | 2,562,017 |  |  | $ | 3,494,556 |  |  | $ | 2,511,157 |  |  | $ | 3,547,838 |  |  |  |  |
Estimated orders under MSAs and short-term, non-fixed price contracts |  | 3,887,302 |  |  | 8,166,517 |  |  | 3,559,443 |  |  | 7,433,445 |  |  |  |  |
Backlog |  | $ | 6,449,319 |  |  | $ | 11,661,073 |  |  | $ | 6,070,600 |  |  | $ | 10,981,283 |  |  |  |  |
Underground Utility and Infrastructure Solutions |  |  |  |  |  |  |  |  |  |  |  |
Remaining performance obligations |  | $ | 607,660 |  |  | $ | 640,302 |  |  | $ | 327,205 |  |  | $ | 437,544 |  |  |  |  |
Estimated orders under MSAs and short-term, non-fixed price contracts |  | 1,875,156 |  |  | 3,528,941 |  |  | 1,868,820 |  |  | 3,713,607 |  |  |  |  |
Backlog |  | $ | 2,482,816 |  |  | $ | 4,169,243 |  |  | $ | 2,196,025 |  |  | $ | 4,151,151 |  |  |  |  |
Total |  |  |  |  |  |  |  |  |  |  |  |
Remaining performance obligations |  | $ | 3,169,677 |  |  | $ | 4,134,858 |  |  | $ | 2,838,362 |  |  | $ | 3,985,382 |  |  |  |  |
Estimated orders under MSAs and short-term, non-fixed price contracts |  | 5,762,458 |  |  | 11,695,458 |  |  | 5,428,263 |  |  | 11,147,052 |  |  |  |  |
Backlog |  | $ | 8,932,135 |  |  | $ | 15,830,316 |  |  | $ | 8,266,625 |  |  | $ | 15,132,434 |  |  |  |  |

Liquidity and Capital Resources
Cash Requirements
Management monitors financial markets and national and global economic conditions for factors that may affect our liquidity and capital resources. We consider our investment policies related to cash and cash equivalents to be conservative in that we maintain a diverse portfolio of what we believe to be high-quality cash and cash equivalent investments with short-term maturities. While the extent of the impact of the challenged energy market, as well as the COVID-19 pandemic, on our future operational and financial performance will depend on future developments and remains uncertain, based on our current business forecast for the remainder of 2021, we anticipate that our cash and cash equivalents on hand, future cash flows from operations, existing borrowing capacity under our senior credit facility and other available financing alternatives will provide sufficient funds during 2021 to enable us to fund ongoing operating needs, facilitate our ability to repurchase stock and pay any future dividends we declare, fund acquisitions or strategic investments that facilitate the long-term growth and sustainability of our business, fund essential capital expenditures and meet the interest payment obligations on our outstanding debt.
Our industry is capital intensive, and we expect substantial capital expenditures and commitments under equipment lease and rental arrangements to be needed into the foreseeable future in order to meet anticipated demand for our services. We expect capital expenditures for the year ended December 31, 2021 to be approximately $325 million. Additionally, refer to Contractual Obligations and Contingencies below for a summary of our future contractual obligations and a description of other contingencies as of March 31, 2021 and Off-Balance Sheet Arrangements below for a description of certain contingent obligations that are not recorded on our condensed consolidated balance sheets. Although any of these contingent obligations
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could require the use of cash in future periods, certain contingent obligations are excluded from the Contractual Obligations table because we are unable to accurately predict the timing and amount of such obligations as of March 31, 2021.
Our available commitments under our senior credit facility and cash and cash equivalents at March 31, 2021 were as follows (in thousands):

|  | March 31, 2021
Total capacity available for revolving loans and letters of credit |  | $ | 2,510,000 |
Less: |  |
Borrowings of revolving loans |  | 321,703 |
Letters of credit outstanding |  | 319,900 |
Available commitments for issuing revolving loans or new letters of credit |  | 1,868,397 |
Plus: |  |
Cash and cash equivalents |  | 200,218 |
Total available commitments under senior credit facility and cash and cash equivalents |  | $ | 2,068,615 |

We may seek to access the capital markets from time to time to raise additional capital, increase liquidity as necessary, refinance or extend the term of our existing indebtedness or otherwise fund our capital needs. For example, on September 22, 2020, we issued $1.00 billion aggregate principal amount of our senior notes, receiving proceeds of $986.7 million, net of the original issue discount, underwriting discounts and debt issuance costs. We utilized those proceeds, together with cash on hand, to voluntarily prepay $1.21 billion of outstanding term loans under our senior credit facility. Additionally, we entered into an amendment to our senior credit facility that, among other things, increased the aggregate revolving commitments from $2.14 billion to $2.51 billion and extended the maturity date to September 2025. While our financial strategy and consistent performance have earned us an investment grade rating, our ability to access the capital markets in the future depends on a number of factors, including our financial performance and financial position, our credit rating, industry conditions, general economic conditions, our backlog, capital expenditure commitments, market conditions and market perceptions of us and our industry.
Sources and Uses of Cash
In summary, our cash flows for each period were as follows (in thousands):

|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2021 |  | 2020 |  |  |  |
Net cash provided by operating activities |  | $ | 125,613 |  |  | $ | 227,549 |  |  |  |  |
Net cash used in investing activities |  | $ | (222,806) |  |  | $ | (89,133) |  |  |  |  |
Net cash provided by financing activities |  | $ | 112,989 |  |  | $ | 73,926 |  |  |  |  |

Operating Activities
Cash flow from operating activities is primarily influenced by demand for our services and operating margins but is also influenced by working capital needs associated with the various types of services that we provide. Our working capital needs may increase when we commence large volumes of work under circumstances where project costs, primarily labor, equipment and subcontractors, are required to be paid before the associated receivables are billed and collected. Accordingly, changes within working capital in accounts receivable, contract assets and contract liabilities are normally related and are typically affected on a collective basis by changes in revenue due to the timing and volume of work performed and variability in the timing of customer billings and payments. Additionally, working capital needs are generally higher during the summer and fall due to increased demand for our services when favorable weather conditions exist in many of our operating regions. Conversely, working capital assets are typically converted to cash during the winter. These seasonal trends can be offset by changes in project timing due to delays or accelerations and other economic factors that may affect customer spending, including market conditions or the impact of the COVID-19 pandemic.
Net cash provided by operating activities during the three months ended March 31, 2021 was negatively impacted primarily by increased working capital requirements related to the ramp up of two larger electric transmission projects in Canada and the timing of the billings. Partially offsetting this negative impact was the favorable impact of increased earnings as compared to the three months ended March 31, 2020. Additionally, net cash provided by operating activities during the three
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months ended March 31, 2020 included the receipt of $82.0 million of insurance proceeds associated with the settlement of two pipeline project claims in the fourth quarter of 2019.
Days sales outstanding (DSO) represents the average number of days it takes revenues to be converted into cash, which management believes is an important metric for assessing liquidity. A decrease in DSO has a favorable impact on cash flow from operating activities, while an increase in DSO has a negative impact on cash flow from operating activities. DSO is calculated by using the sum of current accounts receivable, net of allowance (which includes retainage and unbilled balances), plus contract assets less contract liabilities, divided by average revenues per day during the quarter. DSO at March 31, 2021 was 89 days, which was higher than DSO at March 31, 2020 of 85 days and our historical average over the last five years of 81 days, primarily due to increased working capital requirements related to the ramp up of two larger electric transmission projects in Canada and the timing of the billings.
Investing Activities
Net cash used in investing activities in the three months ended March 31, 2021 included $114.0 million of cash paid for equity and other investments, which primarily related to the acquisition of a minority interest in a broadband technology company; $83.5 million of capital expenditures; and $32.8 million used for acquisitions, primarily related to acquisitions closed in prior periods. These items were partially offset by $7.2 million of proceeds from the sale of property and equipment.
Net cash used in investing activities in the three months ended March 31, 2020 included $68.1 million used for capital expenditures, $22.8 million used for acquisitions and $5.7 million of cash paid for investments in unconsolidated affiliates and other entities. These items were partially offset by $4.8 million of proceeds from the sale of property and equipment.
Our industry is capital intensive, and we expect substantial capital expenditures and commitments under equipment lease and rental arrangements to be needed into the foreseeable future. We also have various other capital commitments that are detailed in Contractual Obligations and Contingencies below. In addition, we expect to continue to pursue strategic acquisitions and investments, although we cannot predict the timing or amount of the cash needed for these initiatives.
Financing Activities
Net cash provided by financing activities in the three months ended March 31, 2021 included $171.7 million of net borrowings under our senior credit facility, partially offset by $23.9 million of cash payments to satisfy tax withholding obligations associated with stock-based compensation, $19.5 million of cash payments for common stock repurchases, and $8.8 million of cash payments for dividends and cash dividend equivalents.
Net cash provided by financing activities in the three months ended March 31, 2020 included $303.4 million of net borrowings under our senior credit facility, partially offset by $200.0 million of cash payments for common stock repurchases, $15.9 million of payments to satisfy tax withholding obligations associated with stock-based compensation, and $7.4 million of cash payments for dividends and cash dividend equivalents.
Stock Repurchases
We repurchased the following shares of common stock in the open market under our stock repurchase programs (in thousands):

Quarter ended: |  | Shares |  | Amount
March 31, 2021 |  | 222 |  |  | $ | 17,710 |
December 31, 2020 |  | 720 |  |  | $ | 49,949 |
September 30, 2020 |  | — |  |  | $ | — |
June 30, 2020 |  | — |  |  | $ | — |
March 31, 2020 |  | 5,960 |  |  | $ | 200,000 |

Our policy is to record a stock repurchase as of the trade date; however, the payment of cash related to a repurchase is made on the settlement date of the trade. During the three months ended March 31, 2021 and 2020, cash payments related to stock repurchases were $19.5 million and $200.0 million.
As of March 31, 2021, $19.1 million remained authorized under our stock repurchase program approved during the third quarter of 2018, which permits us to repurchase outstanding common stock from time to time through June 30, 2021. In August 2020, our Board of Directors authorized us to repurchase, from time to time through June 30, 2023, up to an additional $500.0 million in shares of our outstanding common stock under a new stock repurchase program, for an aggregate stock repurchase authorization of $519.1 million as of March 31, 2021.
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Repurchases under our repurchase programs may be implemented through open market or privately negotiated transactions, at management’s discretion, based on market and business conditions, applicable contractual and legal requirements, including restrictions under our senior credit facility, and other factors. We are not obligated to acquire any specific amount of common stock and the repurchase programs may be modified or terminated by our Board of Directors at any time at its sole discretion and without notice. For additional detail about our stock repurchases, refer to Note 9 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements.
Dividends
We declared the following cash dividends and cash dividend equivalents during 2020 and the first three months of 2021 (in thousands, except per share amounts):

Declaration |  | Record |  | Payment |  | Dividend |  | Dividends
Date |  | Date |  | Date |  | Per Share |  | Declared
March 25, 2021 |  | April 6, 2021 |  | April 15, 2021 |  | $ | 0.06 |  |  | $ | 8,429 |
December 11, 2020 |  | January 4, 2021 |  | January 15, 2021 |  | $ | 0.06 |  |  | $ | 8,933 |
August 26, 2020 |  | October 1, 2020 |  | October 15, 2020 |  | $ | 0.05 |  |  | $ | 7,244 |
May 28, 2020 |  | July 1, 2020 |  | July 15, 2020 |  | $ | 0.05 |  |  | $ | 7,182 |
March 26, 2020 |  | April 6, 2020 |  | April 15, 2020 |  | $ | 0.05 |  |  | $ | 7,184 |

The declaration, payment and amount of future cash dividends will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, results of operations and cash flows from operating activities; current and anticipated capital requirements and expansion plans; the current and potential impact of the COVID-19 pandemic and other market, industry, economic and political conditions; income tax laws then in effect; and the requirements of Delaware law. In addition, as discussed below, our credit agreement restricts the payment of cash dividends unless certain conditions are met.
Debt Instruments
2.900% Senior Notes due October 2030
On September 22, 2020, we issued $1.00 billion aggregate principal amount of the senior notes and received proceeds of $986.7 million from the offering, net of the original issue discount, underwriting discounts and debt issuance costs. Interest on the senior notes in the amount of $14.5 million is payable semi-annually in arrears on April 1 and October 1 of each year. The maturity date for the senior notes is October 1, 2030. We may redeem all or a portion of the senior notes at any time prior to July 1, 2030 at a price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest, and at any time on or after July 1, 2030 at a price equal to 100% of the principal amount plus accrued and unpaid interest, in each case as further specified by terms of the senior notes and the indenture and supplemental indenture governing the senior notes (together, the indenture). Additionally, upon the occurrence of a Change of Control Triggering Event (as defined in the indenture), unless we have exercised our right to redeem the senior notes in full by giving irrevocable notice to the trustee, each noteholder will have the right to require us to purchase all or a portion of such holder’s senior notes at a purchase price equal to 101% of the principal amount thereof plus any accrued and unpaid interest. The indenture also contains customary events of default and covenants that, among other things, limit our ability to incur liens securing indebtedness, to engage in certain sale and leaseback transactions with respect to certain properties and to sell all or substantially all of our assets or merge or consolidate with or into other companies.
Senior Credit Facility
We have a credit agreement with various lenders that provides for $2.51 billion of aggregate revolving commitments and has a maturity date of September 22, 2025. Additionally, subject to the conditions specified in the credit agreement, we have the option to increase the capacity of the credit facility, in the form of an increase in the revolving commitments, term loans or a combination thereof, from time to time, upon receipt of additional commitments from new or existing lenders by up to an additional (i) $400.0 million plus (ii) additional amounts so long as the Incremental Leverage Ratio Requirement (as defined in the credit agreement) is satisfied at the time of such increase. The Incremental Leverage Ratio Requirement requires, among other things, after giving pro forma effect to such increase and the use of proceeds therefrom, compliance with the credit agreement’s financial covenants as of the most recent fiscal quarter end for which financial statements were required to be delivered. Borrowings under the credit agreement are to be used to refinance existing indebtedness and for working capital, capital expenditures, acquisitions and other general corporate purposes. As of March 31, 2021, we were in compliance with all of the financial covenants under the credit agreement, which are further described in Note 7 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report.
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During the three months ended March 31, 2021 and 2020, our weighted average interest rates associated with our senior credit facility were 2.18% and 3.11%. As of March 31, 2021, we had $321.7 million of outstanding revolving loans under the credit agreement and $319.9 million of letters of credit issued under our senior credit facility. As of March 31, 2021, subject to the applicable sublimits, the remaining $1.87 billion of available commitments under the senior credit facility was available for additional revolving loans or letters of credit in U.S. dollars and certain alternative currencies.
To address the transition in financial markets away from the London Interest Bank Offered Rate (LIBOR) by the end of 2021, our senior credit facility agreement includes provisions related to the replacement of LIBOR with a LIBOR Successor Rate (as defined in the credit agreement for such facility), which may be a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York. If no LIBOR Successor Rate has been determined at the time certain circumstances are present, the lenders’ obligation to make or maintain loans based on a Eurocurrency rate could be suspended, and loans in U.S. dollars would default to the Base Rate (as described in Senior Credit Facility within Note 7 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements) rather than a rate using the Eurocurrency Rate. Changing to an alternative interest rate or to the Base Rate may lead to additional volatility in interest rates and could cause our debt service obligations to increase significantly.
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Contractual Obligations and Contingencies
The following table summarizes our future contractual obligations as of March 31, 2021, excluding certain amounts discussed below (in thousands):

|  | Total |  | Remainder of 2021 |  | 2022 |  | 2023 |  | 2024 |  | 2025 |  | Thereafter
Long-term debt - principal (1) |  | $ | 1,368,214 |  |  | $ | 7,310 |  |  | $ | 8,451 |  |  | $ | 8,427 |  |  | $ | 8,432 |  |  | $ | 330,134 |  |  | $ | 1,005,460 |
Long-term debt - cash interest (2) |  | 293,931 |  |  | 30,140 |  |  | 29,980 |  |  | 29,769 |  |  | 29,558 |  |  | 29,347 |  |  | 145,137 |
Operating lease obligations (3) |  | 283,254 |  |  | 71,358 |  |  | 73,550 |  |  | 52,368 |  |  | 32,349 |  |  | 21,287 |  |  | 32,342 |
Operating lease obligations that have not yet commenced (4) |  | 1,731 |  |  | 201 |  |  | 312 |  |  | 288 |  |  | 279 |  |  | 280 |  |  | 371 |
Finance lease obligations (5) |  | 2,765 |  |  | 836 |  |  | 847 |  |  | 626 |  |  | 394 |  |  | 62 |  |  | — |
Short-term lease obligations (6) |  | 20,307 |  |  | 19,537 |  |  | 770 |  |  | — |  |  | — |  |  | — |  |  | — |
Deferral of tax payments (7) |  | 108,870 |  |  | 54,435 |  |  | 54,435 |  |  | — |  |  | — |  |  | — |  |  | — |
Equipment purchase commitments (8) |  | 106,287 |  |  | 98,672 |  |  | 7,615 |  |  | — |  |  | — |  |  | — |  |  | — |
Total contractual obligations |  | $ | 2,185,359 |  |  | $ | 282,489 |  |  | $ | 175,960 |  |  | $ | 91,478 |  |  | $ | 71,012 |  |  | $ | 381,110 |  |  | $ | 1,183,310 |

_______________________________________
(1) Amount represents the principal amount of our long-term debt. The cash interest obligations related to the fixed-rate portion of our long-term debt are included in Long-term debt - cash interest; however, our $321.7 million of outstanding revolving loans under our senior credit facility bear interest at variable market rates. Assuming the principal amount outstanding and interest rate in effect for the revolving loans at March 31, 2021 remained the same, the annual cash interest expense for such loans would be approximately $7.6 million, payable until September 22, 2025, the maturity date of the facility.
(2) Amount represents cash interest expense associated with our fixed-rate, long-term debt, which primarily includes our senior notes and financing transactions arising from the exercise of our equipment rental purchase options.
(3) Amounts represent undiscounted operating lease obligations at March 31, 2021 for our real estate and equipment leases. The operating lease obligations recorded on our March 31, 2021 condensed consolidated balance sheet represent the present value of these amounts.
(4) Amounts represent undiscounted operating lease obligations that have not commenced as of March 31, 2021. The operating lease obligations will be recorded on our condensed consolidated balance sheet beginning on the commencement date of each lease.
(5) Amounts represent undiscounted finance lease obligations at March 31, 2021. The finance lease obligations recorded on our March 31, 2021 condensed consolidated balance sheet represent the present value of these amounts.
(6) Amounts represent short-term lease obligations that are not recorded on our March 31, 2021 condensed consolidated balance sheet due to our accounting policy election. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because we are unable to accurately predict future rental amounts.
(7) Amounts represent deferral of $108.9 million related to the employer portion of payroll tax payments during the year ended December 31, 2020, which was permitted pursuant to the CARES Act. Payment of these deferred tax obligations are due by December 31, 2021 and December 31, 2022.
(8) Amount represents capital committed for the expansion of our vehicle fleet. Although we have committed to the purchase of these vehicles at the time of their delivery, we expect that these orders will be assigned to third-party leasing companies and made available to us under certain of our master equipment lease agreements.
We have various contingencies and commitments that may require the use of cash in future periods, including those set forth below. The Contractual Obligations table excludes the contingencies described below, as we are unable to accurately predict the timing and amount of any of the following contingent obligations.
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Uncollectible accounts receivable - We grant credit under normal payment terms, generally without collateral, to our customers. While we generally have certain statutory lien rights with respect to services provided, we are subject to potential credit risk related to business, economic and financial market conditions that affect these customers and locations, which has been heightened as a result of the unfavorable and uncertain economic and financial market conditions resulting from the ongoing COVID-19 pandemic and the significant decline in commodity prices and volatility in commodity production volumes. Some of our customers have experienced significant financial difficulties (including bankruptcy), and customers may experience financial difficulties in the future. These difficulties expose us to increased risk related to collectability of billed and unbilled receivables and contract assets for services we have performed. See Concentration of Credit Risk in Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for further discussion related to these potential contingencies.
Lawsuits and other legal proceedings - We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business, which typically seek, among other things, compensation for alleged personal injury, property damage, breach of contract, negligence or gross negligence, environmental liabilities, wage and hour and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. See Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for additional information regarding litigation, claims and other legal proceedings.
Collective bargaining agreements and multiemployer pension plan liabilities - Certain of our operating units are parties to collective bargaining agreements with unions that represent certain of their employees, and from time to time, we are a party to grievance and arbitration actions based on claims arising out of the collective bargaining agreements, which specify that we pay certain wages, provide certain benefits to union employees and contribute certain amounts to multiemployer pension plans and employee benefit trusts. The location and number of union employees that we employ at any given time and the plans in which they may participate vary depending on our need for union resources in connection with our ongoing projects, and therefore we are unable to accurately predict our union employee payroll and the resulting contribution obligations for future periods. Furthermore, we may be required to make additional contributions to our multiemployer pension plans if they become underfunded or if we withdraw or are deemed to have withdrawn from a plan or a plan is terminated or experiences a mass withdrawal. For additional information on these obligations and potential contingencies, see Collective Bargaining Agreements and Multiemployer Pension Plans in Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements.
Bonds and parent guarantees - Many customers, particularly in connection with new construction, require us to post performance and payment bonds, which provide a guarantee that we will perform under the terms of a contract and pay subcontractors and vendors. In certain circumstances, the customer may demand that our surety make payments or provide services under the bond, and we must reimburse the surety for any expenses or outlays it incurs. As of March 31, 2021 the total amount of our outstanding performance bonds was estimated to be approximately $4.0 billion. Additionally, from time to time, we guarantee certain obligations and liabilities of our subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, joint venture arrangements and contractor licenses, and may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. For additional information on these obligations and potential contingencies, see Bonds and Parent Guarantees in Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements.
Insurance liabilities - Due to the nature of our operations, at any given time we have a significant amount of accrued insurance claims. As of March 31, 2021 and December 31, 2020, the gross amount accrued for employer’s liability, workers’ compensation, auto liability, general liability, and group health claims totaled $303.1 million and $319.5 million. Additionally, we renew our insurance policies on an annual basis, and therefore deductibles and levels of insurance coverage may change in future periods. In addition, insurers may cancel our coverage or determine to exclude certain items from coverage, or we may elect not to obtain certain types or incremental levels of insurance based on the potential benefits considered relative to the cost of such insurance, or coverage may not be available at reasonable and competitive rates. See Insurance in Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements.
Indemnities and assumed liabilities - In connection with our acquisition transactions, we assume certain liabilities and obtain rights to indemnification from the sellers or former owners of acquired businesses for certain risks, liabilities and obligations arising from their prior operations, such as performance, operational, safety, workforce or tax issues. However, we may not have discovered certain liabilities during due diligence and our indemnities may not cover all of our exposure for such pre-acquisition matters or the indemnitors may be unwilling or unable to pay amounts owed to us. Accordingly, we may incur
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expenses that are not reimbursed, and such amounts could be material. See Indemnities in Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for further discussion related to these potential contingencies.
Liabilities related to our deferred compensation plans - We maintain non-qualified deferred compensation plans pursuant to which non-employee directors and certain key employees may defer receipt of some or all of their compensation. As of March 31, 2021 and December 31, 2020, obligations under these plans, including amounts contributed by Quanta, were $63.4 million and $58.2 million. These plans are unfunded and unsecured compensation arrangements, and the amount of the obligations can fluctuate based on the market value of participants’ investment elections under the plan. See Deferred Compensation Plans in Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for further discussion related to these plans.
Undistributed earnings of foreign subsidiaries - We generally do not provide for taxes related to undistributed earnings of our foreign subsidiaries and we could be subject to additional foreign withholding taxes if we were to repatriate cash that is indefinitely reinvested outside the United States. See Income Taxes in Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for further discussion related to these potential contingencies.
Unrecognized tax benefits - We remain under examination by various U.S. state, Canadian and other foreign tax authorities for multiple periods and believe it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to $13.6 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods. See Income Taxes in Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for further discussion related to these potential contingencies.
Commitment fees under our senior credit facility - Fees associated with letters of credit under our senior credit facility and commitment fees under our senior credit facility are variable because they depend on the amount of outstanding letters of credit, availability and applicable fees. Assuming that the amount of letters of credit outstanding and the fees as of March 31, 2021 remained the same, the annual cash expense for our letters of credit would be approximately $4.2 million. See Note 7 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for further discussion related to these obligations and potential contingencies.
Residual Value Guarantees - We have guaranteed the residual value under certain of our 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. Due to the nature of our operations, at any given time we have a significant amount of outstanding residual value guarantees, and as of March 31, 2021 the maximum guaranteed residual value of this equipment was $860.9 million. While we believe 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.
Off-Balance Sheet Arrangements
As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected in our balance sheets. Our significant off-balance sheet transactions include certain obligations relating to our investments and joint venture arrangements; short-term, non-cancelable leases and leases that have not yet commenced; letters of credit obligations; surety guarantees related to bonds; committed expenditures for the purchase of equipment; and certain multiemployer pension plan liabilities. See Contractual Obligations and Contingencies above and Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for a description of these arrangements.
Critical Accounting Estimates and Policies Update
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date the condensed consolidated financial statements are published and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our condensed consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from those estimates. Management has reviewed its development and selection of critical accounting estimates with the audit committee of our Board of Directors. Our accounting policies are primarily described in Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements and should be read in conjunction with our critical
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accounting estimates detailed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of our 2020 Annual Report.
Item 3.Quantitative and Qualitative Disclosures about Market Risk.
The information in this section should be read in connection with the information on financial market risk related to changes in interest rates and currency exchange rates in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of Part II of our 2020 Annual Report. Our primary exposure to market risk relates to unfavorable changes in concentration of credit risk, interest rates and currency exchange rates.
Credit Risk. We are subject to concentrations of credit risk related to our cash and cash equivalents and 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. Substantially all of our cash and cash equivalents are managed by what we believe to be high credit quality financial institutions. In accordance with our investment policies, these institutions are authorized to invest cash and cash equivalents in a diversified portfolio of what we believe to be high-quality investments, which primarily include interest-bearing demand deposits, money market investments and money market mutual funds. Although we do not currently believe the principal amounts of these cash and cash equivalents are subject to any material risk of loss, changes in economic conditions could impact the interest income we receive from these investments.
In addition, we grant credit under normal payment terms, generally without collateral, and therefore are subject to potential credit risk related to our customers’ inability to pay for services provided. Furthermore, the risk of nonpayment may be heightened as a result of depressed economic and financial market conditions, including in connection with the ongoing COVID-19 pandemic and the significant decline in commodity prices and volatility in commodity production volumes. We believe the concentration of credit risk related to billed and unbilled receivables and contract assets is limited because of the diversity of our customers, and we perform ongoing credit risk assessments of our customers and financial institutions and in some cases obtain collateral or other security from our customers. For example, a customer within our Underground Utility and Infrastructure Solutions segment encountered financial difficulties during 2020 that resulted in nonpayment of $27.5 million of receivables, plus accrued interest. As a result, we decided to foreclose our liens on a pipeline asset in order to recover the outstanding amount. We believe that the value of the pipeline asset is in excess of the amount owed; however, the ultimate outcome remains uncertain and is based on a number of assumptions that are potentially subject to change, and the amount collected could be materially less than the amounts owed. See Concentrations of Credit Risk in Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements for additional information.
Interest Rate Risk. As of March 31, 2021, we had no derivative financial instruments to manage interest rate risk. As such, we were exposed to earnings and fair value risk due to changes in interest rates with respect to our variable rate debt, which is comprised of borrowings under the credit agreement for our senior credit facility. As of March 31, 2021, the fair value of our variable rate debt of $321.7 million approximated book value, and our weighted average interest rate on our variable rate debt for the three months ended March 31, 2021 was 2.18%. The annual effect on our pretax earnings of a hypothetical 50 basis point increase or decrease in variable interest rates would be approximately $1.6 million based on our March 31, 2021 balance of variable rate debt.
Additionally, the transition in financial markets away from the London Interest Bank Offered Rate by the end of 2021 may lead to additional volatility in interest rates and could cause our debt service obligations to increase significantly as further described in Item 2. Management’s Discussion and Analysis - Liquidity and Capital Resources.
Foreign Currency Risk. The U.S. dollar is the functional currency for the majority of our operations, which are primarily located within the United States. The functional currency for our foreign operations, which are primarily located in Canada and Australia, is typically the currency of the country in which the foreign operating unit is located. Accordingly, our financial performance is subject to fluctuation due to changes in foreign currency exchange rates relative to the U.S. dollar. During the three months ended March 31, 2021, revenues from our foreign operations accounted for 18.4% of our consolidated revenues. Fluctuations in foreign currency exchange rates during the three months ended March 31, 2021 caused a net increase of approximately $32 million related to foreign revenues when compared to the three months ended March 31, 2020.
We are also subject to foreign currency risk with respect to sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of our operating units. To minimize the risk from changes in foreign currency exchange rates, we may enter into foreign currency derivative contracts to hedge our foreign currency risk on a cash flow basis. There were no outstanding foreign currency derivative contracts at March 31, 2021.
We also have foreign exchange risk related to cash and cash equivalents in foreign banks. Based on the balance of cash and cash equivalents in foreign banks of $30.1 million as of March 31, 2021, an assumed 5% adverse change to foreign exchange rates would result in a fair value decline of $1.1 million.
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Item 4.Controls and Procedures.
Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of Quanta’s Chief Executive Officer and Chief Financial Officer that are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the Exchange Act). This item includes information concerning the controls and controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Evaluation of Disclosure Controls and Procedures
Our management has established and maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. The disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Quarterly Report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, these officers have concluded that, as of March 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance of achieving their objectives.
Evaluation of Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Design and Operation of Control Systems
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and breakdowns can occur because of simple errors or mistakes. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, property damage, breach of contract, negligence or gross negligence, environmental liabilities, wage and hour claims and other employment-related damages, punitive damages, consequential damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record a reserve when it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. See Note 11 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements of Part I of this Quarterly Report, which is incorporated by reference in this Item 1, for additional information regarding litigation, claims and other legal proceedings.
Item 1A. Risk Factors.
Our business is subject to a variety of risks and uncertainties that are difficult to predict and many of which are outside of our control. For a detailed discussion of the risks that affect our business, refer to Item 1A. Risk Factors of Part I of our 2020 Annual Report. As of the date of this filing, there have been no material changes to the risk factors previously described in our 2020 Annual Report. The matters specifically identified are not the only risks and uncertainties facing our company, and additional risks and uncertainties not known to us or not specifically identified may also impair our business. If any of these risks and uncertainties occur, our business, financial condition, results of operations and cash flows could be negatively impacted, which could negatively impact the value of an investment in our company.
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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities During the First Quarter of 2021
The following table contains information about our purchases of equity securities during the three months ended March 31, 2021.

Period |  | Total Number of Shares Purchased (1)(2) |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |  | Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs (1)
January 1 - 31, 2021 |  |  |  |  |  |  |  |
Open Market Stock Repurchases (1) |  | 67,507 |  |  | $ | 71.96 |  |  | 67,507 |  |  | $ | 531,949,527 |
Tax Withholding Obligations (2) |  | 90,270 |  |  | $ | 72.33 |  |  | — |  |  |
February 1 - 28, 2021 |  |  |  |  |  |  |  |
Open Market Stock Repurchases (1) |  | 28,485 |  |  | $ | 73.74 |  |  | 28,485 |  |  | $ | 529,849,073 |
Tax Withholding Obligations (2) |  | 210,374 |  |  | $ | 82.34 |  |  | — |  |  |
March 1 - 31, 2021 |  |  |  |  |  |  |  |
Open Market Stock Repurchases (1) |  | 126,089 |  |  | $ | 85.27 |  |  | 126,089 |  |  | $ | 519,097,725 |
Tax Withholding Obligations (2) |  | 429,948 |  |  | $ | 84.26 |  |  | — |  |  |
Total |  | 952,673 |  |  |  |  | 222,081 |  |  | $ | 519,097,725 |

_______________________________________
(1)Includes shares repurchased as of the trade date of such repurchases. On September 4, 2018, we issued a press release announcing that our Board of Directors approved a stock repurchase program that authorizes us to purchase, from time to time through June 30, 2021, up to $500 million of our outstanding common stock. Additionally, on August 6, 2020, we issued a press release announcing that our Board of Directors approved a stock repurchase program that authorizes us to purchase, from time to time through June 30, 2023, up to an additional $500 million of our outstanding common stock. Repurchases under these programs can be made in open market and privately negotiated transactions, at our discretion, based on market and business conditions, applicable contractual and legal requirements and other factors. These programs do not obligate us to acquire any specific amount of common stock and may be modified or terminated by our Board of Directors at any time at its sole discretion and without notice.
(2)Includes shares purchased from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock unit and performance stock unit awards or the settlement of previously vested but deferred restricted stock unit and performance stock unit awards.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6.Exhibits.

Exhibit No. |  | Description |
3.1 |  |  |  | Restated Certificate of Incorporation of Quanta Services, Inc. (previously filed as Exhibit 3.1 to the Company’s Form 8-K filed March 26, 2019 and incorporated herein by reference) |
3.2 |  |  |  | Bylaws of Quanta Services, Inc., as amended and restated December 6, 2018 (previously filed as Exhibit 3.1 to the Company’s Form 8-K filed December 11, 2018 and incorporated herein by reference) |
10.1 |  | ^ |  | Quanta Services, Inc. Term Sheet for 2021 Annual Incentive Plan – Corporate Employees, Quanta Services, Inc. Term Sheet for 2021 Senior Leadership Long-Term Incentive Plan and Quanta Services, Inc. Term Sheet for 2021 Discretionary Plan – All Employees (previously filed as Exhibit 10.1 to the Company’s Form 8-K filed March 30, 2021 and incorporated herein by reference) |
31.1 |  | * |  | Certification by Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
31.2 |  | * |  | Certification by Chief Financial Officer pursuant to Rule 13a -14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
32.1 |  | * |  | Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) |
101 |  | * |  | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Equity and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and with detailed tags |
104 |  | * |  | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL (included as Exhibit 101) |

_______________________________________

* | Filed or furnished herewith
^ | Management contracts or compensatory plans or arrangements

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Quanta Services, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
QUANTA SERVICES, INC.

| By: | /s/ DERRICK A. JENSEN
|  | Derrick A. Jensen Chief Financial Officer
|  | (Principal Financial Officer and Principal Accounting Officer)

Dated: May 7, 2021
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