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Acquisitions | 3 Months Ended
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Mar. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | 5. ACQUISITIONS: The results of operations of acquired businesses have been included in Quanta’s consolidated financial statements since their respective acquisition dates. In January 2023, Quanta acquired three businesses located in the United States including: a business that provides services related to high-voltage transmission lines, overhead and underground distribution, emergency restoration and industrial and commercial wiring and lighting (primarily included in the Electric Power segment); a business that procures parts, assembles kits for sale, manages logistics and installs solar tracking equipment for utility and development customers (primarily included in the Renewable Energy segment); and a business that provides concrete construction services (primarily included in the Electric Power and Renewable Energy segments). The consideration for these transactions consisted of approximately $463.5 million paid or payable in cash (subject to certain adjustments) and 1,018,946 shares of Quanta common stock, which had a fair value of $123.5 million as of the dates of the acquisitions. In July 2022, Quanta acquired a business located in the United States that provides construction contracting services to utilities, specializing in trenching and underground pipeline and electrical conduit installation. The consideration for this transaction included $22.3 million paid or payable in cash (subject to certain adjustments). Additionally, the former owners of this business are eligible to receive a potential payment of contingent consideration to the extent the acquired business achieves certain financial performance targets over a five-year post-acquisition period. The results of the acquired business are primarily included in the Electric Power segment. Purchase Price Allocation Quanta is finalizing its purchase price allocations related to businesses acquired subsequent to March 31, 2022, and further adjustments to the purchase price allocations may occur, with possible updates primarily related to property and equipment, identifiable intangible assets, tax estimates and the finalization of closing working capital adjustments. The aggregate consideration paid or payable for businesses acquired between March 31, 2022 and March 31, 2023 was allocated to acquired assets and assumed liabilities, which resulted in an allocation of $186.6 million to net tangible assets, $126.1 million to identifiable intangible assets and $299.2 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 as of their respective acquisition dates as of March 31, 2023 for acquisitions completed in the three months ended March 31, 2023 (in thousands):
|  | Three Months Ended |  |
|  | March 31, 2023 |  |
Consideration: |  |  |  |  |
Cash paid or payable |  | $ | 463,482 |  |  |  |
Value of Quanta common stock issued |  | 123,503 |  |  |  |
Fair value of total consideration transferred or estimated to be transferred |  | $ | 586,985 |  |  |  |
Cash and cash equivalents |  | $ | 14,832 |  |  |  |
Accounts receivable |  | 46,389 |  |  |  |
Contract assets |  | 195 |  |  |  |
Inventories |  | 56,960 |  |  |  |
Prepaid expenses and other current assets |  | 4,392 |  |  |  |
Property and equipment |  | 146,150 |  |  |  |
Operating lease assets |  | 14,189 |  |  |  |
Other assets |  | 4,553 |  |  |  |
Identifiable intangible assets |  | 113,020 |  |  |  |
Accounts payable and accrued liabilities |  | (61,872) |  |  |  |
Contract liabilities |  | (3,071) |  |  |  |
Operating lease liabilities, current |  | (2,552) |  |  |  |
Deferred tax liabilities, net |  | (20,556) |  |  |  |
Operating lease liabilities, non-current |  | (12,242) |  |  |  |
Total identifiable net assets |  | 300,387 |  |  |  |
Goodwill |  | 286,598 |  |  |  |
Fair value of net assets acquired |  | $ | 586,985 |  |  |  |
As of March 31, 2023, approximately $233.5 million of goodwill is expected to be deductible for income tax purposes related to acquisitions completed in the three months ended March 31, 2023. The following table summarizes the estimated fair values of identifiable intangible assets for the acquisitions completed in the three months ended March 31, 2023 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).
|  | Three Months Ended |  |  |
|  | March 31, 2023 |  |  |
|  | Estimated Fair Value |  | Weighted Average Amortization Period in Years |  |  |  |  |
Customer relationships |  | $ | 79,640 |  |  | 4.6 |  |  |  |  |
Backlog |  | 16,115 |  |  | 0.9 |  |  |  |  |
Trade names |  | 12,815 |  |  | 15.0 |  |  |  |  |
Non-compete agreements |  | 4,450 |  |  | 5.0 |  |  |  |  |
Total intangible assets subject to amortization |  | $ | 113,020 |  |  |  |  |  |  |  |
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 three months ended March 31, 2023 as of the respective acquisition dates:
|  | Three Months Ended |  |  |  |
|  | March 31, 2023 |  |  |  |
|  | Range |  | Weighted Average |  |  |  |
Discount rates |  | 15% to 19% |  | 17% |  |  |  |
Customer attrition rates |  | 15% to 20% |  | 19% |  |  |  |
Contingent Consideration As described above, certain business acquisitions have contingent consideration liabilities associated with the transactions. The aggregate fair value of these outstanding contingent consideration liabilities and their classification in the accompanying consolidated balance sheets is as follows (in thousands):
|  | March 31, 2023 |  | December 31, 2022
Accounts payable and accrued expenses |  | $ | — |  |  | $ | 5,000 |
Insurance and other non-current liabilities |  | 143,517 |  |  | 143,517 |
Total contingent consideration liabilities |  | $ | 143,517 |  |  | $ | 148,517 |
The fair value determinations of contingent consideration liabilities incorporate significant inputs not observable in the market. Accordingly, the level of inputs used for these fair value measurements is Level 3. The following table includes the volatility factors, weighted average costs of capital and discount rates used to determine the fair value of contingent consideration liabilities during the three months ended March 31, 2023:
|  | Three Months Ended |  |
|  | March 31, 2023 |  |
|  | Range |  | Weighted Average |  |  |  |
Volatility factors |  | 35.0% to 43.0% |  | 35.2% |  |  |  |
Weighted average cost of capital |  | 14.0% to 15.50% |  | 14.0% |  |  |  |
Discount rates |  | 4.06% to 6.20% |  | 6.2% |  |  |  |
The majority of Quanta’s outstanding contingent consideration liabilities are subject to a maximum payment amount, and the aggregate maximum payment amount of these liabilities totaled $321.7 million as of March 31, 2023. During the three months ended March 31, 2023 and 2022, Quanta settled certain contingent consideration liabilities with cash payments of $5.0 million and $1.6 million. Pro Forma Results of Operations The following unaudited supplemental pro forma results of operations for Quanta, which incorporate the acquisitions completed in the three months ended March 31, 2023 and the year ended December 31, 2022, have been provided for illustrative purposes only and may not 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 (in thousands).
|  | Three Months Ended |  |
|  | March 31, |  |
|  | 2023 |  | 2022 |  |  |  |
Revenues |  | $ | 4,428,826 |  |  | $ | 4,091,762 |  |  |  |  |
Net income attributable to common stock |  | $ | 95,046 |  |  | $ | 84,567 |  |  |  |  |
The pro forma combined results of operations for the three months ended March 31, 2023 and 2022 were prepared by adjusting the historical results of Quanta to include the historical results of the businesses acquired in 2023 as if such acquisitions had occurred January 1, 2022. The pro forma combined results of operations for the three months ended March 31, 2022 were prepared by adjusting the historical results of Quanta to include the historical results of the business acquired in 2022 as if such acquisition had occurred January 1, 2021. 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; and changes in depreciation expense to adjust acquired property and equipment to the acquisition date fair value and to conform with Quanta’s accounting policies. 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. Results of Operations Revenues of $93.5 million and a loss before income taxes of $16.1 million, which includes $8.6 million of amortization expense and $17.8 million of acquisition-related costs, related to the acquisitions completed in 2023 are included in Quanta’s condensed consolidated results of operations for the three months ended March 31, 2023.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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