Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS: The results of operations of the acquired businesses have been included in Quanta’s consolidated financial statements since the respective acquisition dates. On October 13, 2021, Quanta completed the acquisition of Blattner, a large and leading utility-scale renewable energy infrastructure solutions provider that is located in and primarily operates in North America. Consideration for this acquisition was $2.37 billion paid or payable in cash (subject to certain adjustments) and 3,326,955

shares of Quanta common stock, which had a fair value of $345.4 million as of the date of the acquisition. The final amount of consideration for the acquisition remains subject to certain post-closing adjustments, including with respect to net working capital (inclusive of cash) and certain assumed liabilities. Additionally, the former owners of Blattner are eligible to receive potential payment of up to $300.0 million of contingent consideration, payable to the extent the acquired business achieves certain financial performance targets over a three-year period beginning in January 2022. Based on the estimated fair value of the contingent consideration, Quanta recorded a $125.6 million liability as of the date of the acquisition. Contingent consideration is earned based on performance during each year of the three-year performance period, and amounts earned are payable in cash after the end of the applicable performance year. Quanta may defer payment of earned contingent consideration amounts, at its sole discretion, until after the end of the entire three-year performance period; however, any deferred amounts will accrue interest at five percent per annum until paid. Blattner’s results are included in the Renewable Energy Infrastructure Solutions segment.

During the year ended December 31, 2021, Quanta also acquired the following businesses: three businesses located in the United States that provide electric power construction and related services; a communications services business located in the United States that performs data center connection services; a business located in the United States that designs, develops and holds a certification for the manufacture of personal protective breathing equipment and related monitoring devices primarily used in the refining and petrochemical industries, including in connection with catalyst services; a business that provides turnaround and catalyst change-out services to the refining and petrochemical industries primarily in the United States and Canada; a business located in Canada that provides front-end land services for infrastructure development projects in Canada and the United States; a business located in the United States that primarily provides horizontal directional drilling services; and a communications services business located in the United States. The aggregate consideration for these acquisitions was $328.8 million paid or payable in cash (subject to certain adjustments) and 187,093 shares of Quanta common stock, which had a fair value of $16.9 million as of the applicable acquisition dates. The results of the manufacturing business and the turnaround and catalyst change-out business are generally included in the Underground Utility and Infrastructure Solutions segment and the results of the remaining businesses are generally included in the Electric Power Infrastructure Solutions segment.

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 $359.6 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 a $2.3 million liability as of the acquisition date. The results of the industrial services business and the business specializing in construction and maintenance of pipelines and metering stations are generally included in the Underground Utility and Infrastructure Solutions segment and the results of the remaining businesses are generally included in the Electric Power Infrastructure Solutions segment.

On August 30, 2019, Quanta acquired The Hallen Construction Co., Inc. (Hallen), an underground utility and infrastructure solutions business located in the United States that specializes in gas distribution and transmission services, and to a lesser extent, underground electric distribution and transmission services. During the year ended December 31, 2019, Quanta also acquired two specialty utility foundation and pole-setting contractors serving the southeast United States; an electric power specialty contracting business located in the United States that provides aerial power line and construction support services; a business located in the United States that provides technical training materials to electric utility workers; an electric power company specializing in project management and, to a lesser extent, water and wastewater projects located in the United States; and an electrical infrastructure solutions business located in Canada. The aggregate consideration for these acquisitions was $395.3 million paid or payable in cash, subject to certain adjustments, and 60,860 shares of Quanta common stock, which had a fair value of $1.8 million as of the respective acquisition date. A portion of the cash consideration in connection with the Hallen acquisition was placed in an escrow account, which, subject to certain conditions, could be utilized to reimburse Quanta for obligations associated with certain contingent liabilities assumed by Quanta in the transaction. See Legal Proceedings — Hallen Acquisition Assumed Liability in Note 16 for additional information related to these liabilities. The results of Hallen are generally included in the Underground Utility and Infrastructure Solutions segment and the results of the other acquired businesses are generally included in the Electric Power Infrastructure Solutions segment.

The following table summarizes the aggregate consideration paid or payable as of December 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 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 during 2021, and further adjustments to the purchase price allocations may occur. As of December 31, 2021, the estimated fair values of the net assets acquired were preliminary, with possible updates primarily related to tax estimates, certain intangible assets and the finalization of closing working capital adjustments. 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 for acquisitions completed in the years shown (in thousands).


	2021
	Blattner		All Others		2020
Consideration:
Cash paid or payable	$	2,372,528	$	328,846	$	359,624
Value of Quanta common stock issued	345,422		16,922		57,119
Contingent consideration	125,632		—		2,250
Fair value of total consideration transferred or estimated to be transferred	$	2,843,582	$	345,768	$	418,993

Cash and cash equivalents	$	171,950	$	9,910	$	29,221
Accounts receivable	411,835		63,032		74,492
Contract assets	13,622		8,322		8,919
Other current assets	57,803		6,334		23,877
Property and equipment	179,530		71,735		143,277
Other assets	191		229		14
Identifiable intangible assets	1,425,000		105,128		96,826
Current maturities of long-term debt and short-term debt	(2,304)		—		(3,307)
Accounts payable and accrued liabilities	(478,521)		(28,662)		(31,804)
Contract liabilities	(227,040)		(384)		(3,750)
Deferred tax liabilities, net	—		(2,063)		(3,178)
Other long-term liabilities	(7,764)		—		—

Total identifiable net assets	1,544,302		233,581		334,587
Goodwill	1,299,280		112,187		84,406
Fair value of net assets acquired	$	2,843,582	$	345,768	$	418,993

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, 2020 and 2019 strategically expanded Quanta’s domestic renewable energy infrastructure solutions, domestic and international electric power infrastructure solutions and communications service offerings, and domestic and international underground utility and infrastructure solutions, which Quanta believes contributes to the recognition of the goodwill. Approximately $1.4 billion, $72.6 million, and $82.1 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in 2021, 2020 and 2019.

The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in 2021 and 2020 as of the acquisition dates and the related weighted average amortization periods by type (in thousands, except for weighted average amortization periods, which are in years).


	2021
	Blattner			All Other			2020
	Estimated Fair Value		Weighted Average Amortization Period in Years	Estimated Fair Value		Weighted Average Amortization Period in Years	Estimated Fair Value		Weighted Average Amortization Period in Years
Customer relationships	$	1,045,000	7.0	$	77,293	6.7	$	81,154	6.1
Backlog	130,000		0.7	6,436		1.2	4,022		1.4
Trade names	250,000		15.0	5,698		14.9	7,654		14.4
Non-compete agreements	—		N/A	6,673		5.0	3,996		5.0
Patented rights, developed technology, and process certifications	—		N/A	9,028		3.5	—		N/A
Total intangible assets subject to amortization	$	1,425,000	7.8	$	105,128	6.5	$	96,826	6.5

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 includes the discount rates and customer attrition rates used to determine the fair value of customer relationship intangible assets for businesses acquired during the years ended December 31, 2021, 2020 and 2019 as of the respective acquisition dates:

2021

2020

Range

Weighted Average

Range

Weighted Average

Discount rates

18% to 26%

18%

19% to 25%

20%

Customer attrition rates

8% to 30%

10%

10% to 43%

13%

As described above, certain business acquisitions have contingent consideration liabilities associated with the transactions. Aggregate fair values of these outstanding contingent consideration liabilities and their classification in the accompanying consolidated balance sheets were as follows (in thousands):


	December 31, 2021		December 31, 2020
Accounts payable and accrued expenses	$	2,591	$	3,466
Insurance and other non-current liabilities	140,482		7,503
Total contingent consideration liabilities	$	143,073	$	10,969

The increase in contingent consideration liabilities from December 31, 2020 to December 31, 2021 was primarily due to the acquisition of Blattner. The majority of Quanta’s outstanding contingent consideration liabilities are subject to a maximum payment amount, which totaled $313.7 million as of December 31, 2021.

Quanta’s aggregate contingent consideration liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance in post-acquisition periods and accretion in present value. These changes are reflected in “Change in fair value of contingent consideration liabilities” in the accompanying consolidated statements of operations. Quanta settled certain contingent consideration liabilities with $76.0 million of cash payments and the issuance of 4,277 shares of Quanta common stock during the year ended December 31, 2020.

The following unaudited supplemental pro forma results of operations for Quanta, which incorporate the acquisitions completed in 2021, 2020 and 2019, 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).


	Year Ended December 31,
	2021		2020		2019
Revenues	$	15,503,994	$	14,082,275	$	12,844,508
Gross profit	$	2,511,503	$	2,226,703	$	1,761,317
Selling, general and administrative expenses	$	(1,353,780)	$	(1,208,909)	$	(1,027,254)
Amortization of intangible assets	$	(311,208)	$	(404,014)	$	(95,185)
Net income	$	624,506	$	421,105	$	434,593
Net income attributable to common stock	$	618,479	$	414,742	$	429,822

Earnings per share attributable to common stock:
Basic	$	4.31	$	2.85	$	2.92
Diluted	$	4.18	$	2.77	$	2.89

The pro forma combined results of operations were prepared by adjusting the historical results of Quanta to include the historical results of the acquisitions completed in 2021 as if they occurred January 1, 2020, the historical results of the acquisitions completed in 2020 as if they occurred January 1, 2019 and the historical results of the acquisitions completed in 2019 as if they occurred January 1, 2018. These pro forma combined historical results were adjusted for the following: a reduction of interest and other financing expenses as a result of the repayment of outstanding indebtedness of the acquired businesses; an increase in interest and other financing expenses as a result of the cash consideration paid; an increase in amortization expense due to the intangible assets recorded; elimination of inter-company sales; 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; reclassifications to conform the acquired businesses’ presentation to Quanta’s accounting policies; and elimination of certain transaction costs incurred by one of the acquired businesses and directly related to the acquisition of the business by Quanta. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs incurred by Quanta or any cost savings or other synergies that resulted or may result from the acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.

Revenues of $499.6 million and a loss before income taxes of $71.6 million, which included $80.3 million of amortization expense and $41.5 million of acquisition-related costs, related to acquisitions completed in 2021 are included in Quanta’s consolidated results of operations for the year ended December 31, 2021. Revenues of $133.5 million and a loss before income taxes of $1.3 million, which included $17.5 million of acquisition-related costs and $6.4 million of amortization expense, related to acquisitions completed in 2020 are included in Quanta’s consolidated results of operations for the year ended December 31, 2020. Revenues of $223.3 million and income before income taxes of $7.5 million, which included $22.1 million of acquisition-related costs and $14.6 million of amortization expense, related to the acquisitions completed in 2019 are included in Quanta’s consolidated results of operations for the year ended December 31, 2019.