The following discussion and analysis of our financial condition and results of
operations 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, 2019 (2019 Annual Report), which was filed with
the Securities and Exchange Commission (SEC) on February 28, 2020 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 Uncertainty of Forward-Looking
Statements and Information below, Item 1A. Risk Factors of Part II of this
Quarterly Report and Item 1A. Risk Factors of Part I of our 2019 Annual Report.
Overview
We are a leading provider of specialty contracting services, delivering
comprehensive infrastructure solutions for the electric and gas utility, energy
and communications 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, installation, upgrade, repair and maintenance of infrastructure within
each of the industries we serve, such as electric power transmission and
distribution networks; substation facilities; gas utility systems; refinery,
petrochemical and industrial facilities; pipeline transmission systems and
facilities; and telecommunications and cable multi-system operator networks. 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 installation contracts.
We report our results under two reportable segments: (1) Electric Power
Infrastructure Services and (2) Pipeline and Industrial Infrastructure Services.
This structure is generally focused on broad end-user markets for our services.
Included within the Electric Power Infrastructure Services segment are the
results related to our telecommunications infrastructure services.
Current Quarter Financial Results
Key financial results for the three months ended June 30, 2020 included:
•       Consolidated revenues decreased 11.7% to $2.51 billion, of which 71.5%

was attributable to the Electric Power Infrastructure Services segment

and 28.5% was attributable to the Pipeline and Industrial Infrastructure

Services segment, as compared to consolidated revenues of $2.84 billion

for the three months ended June 30, 2019;

• Operating income increased 43.7%, or $34.3 million, to $112.9 million as


        compared to $78.6 million for the three months ended June 30, 2019;


•       Net income attributable to common stock increased 170.4%, or $46.6
        million, to $73.9 million as compared to $27.3 million for the three
        months ended June 30, 2019;


•       Diluted earnings per share increased 177.7%, or $0.33, to $0.52 as
        compared to $0.19 for the three months ended June 30, 2019;

• Net cash provided by operating activities increased by $606.1 million to

$497.5 million, as compared to net cash used in operating activities of

$108.7 million for the three months ended June 30, 2019;

• Remaining performance obligations decreased 2.2%, or $117.9 million, to

$5.18 billion as of June 30, 2020 as compared to $5.30 billion as of
        December 31, 2019; and

• Total backlog (a non-GAAP measure) decreased 7.2%, or $1.08 billion, to

$13.93 billion as of June 30, 2020, as compared to $15.00 billion as of

December 31, 2019. For a reconciliation of backlog to remaining

performance obligations, its most comparable GAAP measure, see Remaining

Performance Obligations and Backlog below.




Key Segment Highlights and Significant Operational Trends and Events
During the three months ended June 30, 2020, we were impacted by the following
significant operational trends and events as compared to the three months ended
June 30, 2019:
Electric Power Infrastructure Services Segment
• Revenues increased by 3.4% to $1.79 billion, as compared to $1.73 billion.


•       Operating income increased by 97.9% to $183.9 million, as compared to
        $92.9 million.



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• Revenues increased primarily due to a $46 million increase associated

with growth in our North American communications operations; increased

customer spending on distribution services projects, which are services

we generally consider to be included within base business operations; and


        approximately $20 million of incremental revenues from acquired
        businesses.

• Revenues associated with grid modernization and fire hardening programs


        in the western United States decreased; however, we expect revenues
        related to these services to increase in the second half of 2020 but
        remain lower than our revenues associated with such services in the
        second half of 2019.

• Operating income increased due to improved performance across the segment

and increased Canadian revenues contributed to improved equipment

utilization and fixed cost absorption as compared to the three months

ended June 30, 2019, which had lower Canadian revenue levels and higher


        unabsorbed costs as crews and equipment were transitioned from a
        completed larger transmission project.


•       Operating income increased as well due to a reduction in losses
        associated with our Latin American operations.

Pipeline and Industrial Infrastructure Services Segment • Revenues decreased by 35.4% to $713.3 million, as compared to $1.10 billion.




•       Operating income decreased by 69.6% to $21.3 million, as compared to
        $69.9 million.

• Revenues decreased partially due to the impact of the COVID-19 pandemic,

which resulted in decreased capital spending by our customers on

industrial services due to the significant decline in demand for refined

petroleum products, restrictions on our ability to perform services in

certain downstream industrial locations and the suspension of gas utility


        services in certain metropolitan markets during a portion of the quarter.


•       Revenues associated with larger pipeline projects also decreased, as the

timing of such projects is highly variable due to, among other things,


        potential permitting, delays, worksite access limitations related to
        environmental regulations and seasonal weather patterns.


•       Partially offsetting the decrease in revenues was approximately $55
        million of incremental revenues from acquired businesses.

• Operating income decreased primarily due to the decrease in revenues.

Operating income for the three months ended June 30, 2019 was also

negatively impacted by the recognition of a $13.9 million loss associated

with continued rework and start-up delays on a processing facility

project in Texas.




See COVID-19 Pandemic - Response and Impact, Results of Operations and Liquidity
below for additional information and discussion related to consolidated and
segment results.
Recent LUMA Joint Venture Award
During the three months ended June 30, 2020, a joint venture in which we own 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 expected to begin following an
approximately one-year transition period, during which LUMA will complete
numerous steps necessary to transition operation and maintenance from the
current operator to LUMA. Pursuant to the agreement, during the transition
period LUMA receives a transition fee 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.
Recent Acquisitions
We continue to selectively evaluate acquisitions as part of our overall business
strategy and acquired two businesses in the six months ended June 30, 2020,
including an industrial services business located in Canada that performs
catalyst handling services, such as changeover and shutdown maintenance, for
customers in the refining and chemical industries and an electric power
infrastructure business located in the United States that primarily provides
underground conduit services. During the three and six months ended June 30,
2020, revenues were positively impacted by approximately $75 million and $190
million from acquired businesses. Additionally, in July 2020, we acquired 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. Beginning on the acquisition date, the results of the
acquired business will generally be included in our Electrical Power
Infrastructure Services segment.

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Our ownership interest and participation in LUMA is accounted for as an equity
method investment due to our equal ownership and management of LUMA with our
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. We anticipate our ownership interest in LUMA will
positively contribute to operating income and cash flow from operating
activities and be accretive to diluted earnings per share attributable to common
stock during 2020.
COVID-19 Pandemic - Response and Impact
During 2020, 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. These factors
had an adverse impact on portions of our operations, financial performance,
customers and suppliers during March 2020 and the three months ended June 30,
2020. However, we continue to operate substantially all of our activities as a
provider of essential services in our industries. Additionally, we are
continuing to collaborate with customers to minimize potential service
disruptions and anticipate how the COVID-19 pandemic may continue to impact our
operations, as the locations where we, our customers, our suppliers or our
third-party business partners operate continue to experience challenges as a
result of the pandemic. We have also taken proactive measures to protect the
health and safety of our employees, such as the adoption of specialized training
initiatives and the utilization of additional protective equipment for our
employees operating in the field and additional sanitation measures for our
offices, vehicles and equipment. We have also canceled non-essential business
travel, applied work-from-home policies where appropriate and developed other
human resource guidance to help employees.
During the three and six months ended June 30, 2020, our results have been
adversely impacted by the COVID-19 pandemic as a result of disruptions in our
operations created by shelter-in-place restrictions in certain service areas,
particularly major metropolitan markets that have been meaningfully impacted by
the pandemic such as New York City, Detroit and Seattle. The COVID-19 pandemic
has also compounded broader challenges in the energy market, resulting in a
decline in commodity prices and volatility with respect to commodity production
volumes that are affecting portions of our Pipeline and Industrial
Infrastructure Services segment. As expected, this dynamic had a materially
negative impact on segment results for the three and six months ended June 30,
2020. In particular, demand for our industrial services operations has declined
as customers are reducing and deferring regularly scheduled maintenance due to
lack of demand for refined products. Additionally, smaller pipeline and
industrial capital projects are expected to be negatively impacted for a
prolonged period due to the low commodity price environment and resulting
reductions in customer capital budgets. We are also experiencing some permitting
and regulatory delays for projects due to the COVID-19 pandemic and the COVID-19
pandemic has negatively impacted our Latin American operations due to
shelter-in-place restrictions and other work disruptions. While the significant
adverse impacts resulting from shelter-in-place restrictions in major
metropolitan markets are subsiding, we expect continued operational challenges
through the balance of the year as we operate during and adjust to an
unprecedented health and economic environment. Furthermore, while we are not
currently experiencing significant supply chain disruptions or workforce
availability concerns, we are continuing to monitor these areas for potential
issues.
Additionally, we are focused on maintaining a strong balance sheet to help us
navigate the challenges presented by the COVID-19 pandemic. As of June 30, 2020,
we had $530.7 million of cash and cash equivalents and $1.61 billion of
availability under our senior secured credit facility. We generated $497.5
million and $725.0 million of cash flow from operating activities in the three
and six months ended June 30, 2020 and $526.6 million in cash flow from
operations in the year ended December 31, 2019. We are managing our costs
through, among other things, reductions in discretionary spending, reductions in
workforce at operations experiencing challenges, hiring and compensation
increase deferrals, and deferrals of non-essential capital expenditures. Capital
expenditures for 2020 are expected to be $250 million, which is approximately
17% less than our original estimate at the beginning of 2020. We will continue
to maintain capital discipline and monitor rapidly changing market dynamics and
adjust our costs and financing strategies accordingly.
As a result of the currently challenged energy market and recent oil price
volatility, as well as the exacerbating effect of the COVID-19 pandemic, we
assessed the expected negative impacts related to goodwill, intangible assets,
long-lived assets, and investments as of June 30, 2020, and concluded that other
than $14.8 million and $18.0 million of impairments recognized during the three
and six months ended June 30, 2020 related to certain non-integral equity method
investments and a cost method investment, as described in Results of Operations
below, the impacts are not likely to result in any other impairments of such
assets at this time. However, the potential impacts are uncertain and may change
based on numerous factors. We will continue to monitor the impacts and should a
reporting unit or investment suffer additional significant declines in actual or
forecasted financial results, the risk of impairment would increase.
On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid,
Relief, and Economic Security Act (the CARES Act). The CARES Act provides for
various tax relief and tax incentive measures, which are not expected to have a
material impact on our results of operations. During the three months ended
June 30, 2020, under the CARES Act and related state actions, we deferred the
payment of $58.0 million of federal and state income taxes to July 2020 and
deferred the payment of $30.7 million of payroll taxes, 50% of which are due by
December 31, 2021 and the remainder of which are due by December 31, 2022.
Although

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there is currently no legislation that would permit further deferrals of income
taxes, the CARES Act permits deferral of payroll taxes through December 31,
2020, and we currently intend to continue to defer such payments,
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 therefore we cannot predict the full 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 at this time.
The ultimate impact will depend on future developments, including, among others,
the ongoing spread of COVID-19, the consequences of governmental and other
measures designed to prevent the spread of the virus, the development of
effective treatments, the duration and severity of the pandemic, actions taken
by governmental authorities, customers, suppliers and other third parties,
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
II of this Quarterly Report.
Business Environment
Despite the current challenging economic conditions, 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 Uncertainty of Forward-Looking Statements and
Information and included in Item 1A. Risk Factors, 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 Services 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 natural gas and renewables 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 are
also implementing system upgrades or hardening programs in response to recurring
severe weather events, such as hurricanes and wildfires. In particular, current
system resiliency initiatives in California and other regions in the western
U.S. are designed to prevent and manage the impact of wildfires. However, while
these resiliency initiatives provide opportunities for our services, 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. As demand for power
increases, we also expect an increase in new power generation facilities powered
by certain traditional energy sources (e.g., natural gas) and renewable energy
sources (e.g., solar and wind). To the extent this dynamic continues, we expect
continued demand for new or expanded transmission and substation infrastructure
to 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.
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 a wide range of
commercial applications. As a result of these industry trends, we believe there
will be meaningful demand for our services in that market. While we continue to
perform certain electric power and communications services in Latin America, we
have completed a strategic review of those operations, and due to circumstances
experienced in connection with the terminated telecommunications project in Peru
during 2019 and political volatility in other areas of the region, concluded to
pursue an orderly exit of our Latin American operations. While we have incurred
costs and expect to incur additional costs in the near-term related to exiting
these operations, our estimates for which have increased as a result of the
COVID-19 pandemic, we anticipate this decision will result in improved
profitability of our overall services offerings.
Pipeline and Industrial Infrastructure Services Segment. For several years we
have focused on increasing our pipeline and industrial services offerings
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
services include gas utility services, pipeline integrity services and
downstream industrial services, which we have expanded through organic growth,
geographic expansion initiatives and select acquisitions. This strategy is also
intended to mitigate the seasonality and cyclicality of our larger pipeline
project activities, which we are not strategically investing in but continue to
pursue to the extent they fit our margin and risk profiles and support the needs
of our customers.

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As discussed in COVID-19 Pandemic - Response and Impact, though we have
experienced short-term disruptions due to the impact of the COVID-19 pandemic in
certain metropolitan markets, in recent years demand has increased for our gas
utility distribution services as a result of lower natural gas prices,
increasing regulatory requirements and customer desire to upgrade and replace
aging infrastructure. In particular, natural gas utilities have implemented
multi-decade modernization programs to replace aging cast iron and bare steel
gas 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.
Regulatory requirements continue to encourage our customers to test, inspect,
repair, perform maintenance and replace pipeline infrastructure to ensure the
safe, reliable and environmentally friendly delivery of energy. Further,
permitting challenges associated with construction of new pipelines can make
existing pipeline infrastructure more valuable, increasing the desire of owners
to extend the useful life of existing pipeline assets through integrity
initiatives. Due to these dynamics, we expect demand to continue to grow for our
pipeline integrity services.
We provide critical path solutions and related specialty services to refinery
and chemical processing facilities, primarily along the Gulf Coast of the United
States and in other select markets in North America. Trends and estimates for
process facility utilization rates and overall refining capacity show North
America as the largest downstream maintenance market in the world over the next
several years, and we believe 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. While the COVID-19 pandemic has
resulted in an overall decline in global demand for refined products, we believe
there are significant long-term opportunities for our services, including our
high-pressure and critical-path turnaround services, as well as our capabilities
with respect to instrumentation, high-voltage and other electrical services,
piping, fabrication and storage, and other industrial services. However, these
processing facilities can be negatively impacted for short-term periods due to
severe weather events, such as hurricanes, tropical storms and floods.
Additionally, due to the COVID-19 pandemic and challenging overall energy market
conditions, we have recently experienced a decrease in demand for certain of
these services. While demand for our critical path catalyst solutions has
remained solid, in the second quarter of 2020 customers began restricting onsite
activity for our other services and have deferred maintenance and certain
turnaround projects to later 2020 or possibly 2021.
With respect large pipeline project opportunities, a number of such projects
from the North American shale formations and Canadian oil sands to power plants,
refineries, liquefied natural gas (LNG) export facilities and other demand
centers are in various stages of development. While we believe many of our
customers remain committed to these projects given the cost and time required to
move from conception to construction, the overall larger pipeline market is
cyclical and there is risk the projects will not move forward or be delayed or
canceled. For example, in July 2020, the project sponsors of an approximately
600-mile natural gas pipeline under construction in the eastern United States
that one of our subsidiaries has been contracted to construct a portion of
announced that they are no longer moving forward with the project. Furthermore,
our revenues related to larger pipeline projects have declined over the last few
years.
Due to its abundant supply and current low price, we also believe natural gas
will remain a fuel of choice for both primary power generation and backup power
generation for renewable-driven power plants in North America. The favorable
characteristics of natural gas also position the United States as a leading
competitor in the global LNG export market, which has the potential to continue
to grow over the coming years as approved and proposed LNG export facilities are
developed. In certain areas, the existing pipeline system infrastructure is
insufficient to support these expected future developments, which could provide
additional opportunities for our services.
Although portions of our pipeline and industrial infrastructure services are
influenced by hydrocarbon production volume rather than shorter-term changes in
commodity prices, the broader oil and gas industry is highly cyclical and
subject to price 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 challenging energy market conditions.
Regulatory Challenges and Opportunities. The regulatory environment creates both
challenges and opportunities for our business, and in recent years electric
power and pipeline infrastructure services margins have been impacted by
regulatory and permitting delays, 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 recently increased as the COVID-19
pandemic has impacted regulatory agency operations. Furthermore, the recent
ruling by the federal district court for the district of Montana vacating the
U.S. Army Corps of Engineers Clean Water Act Section 404 Nationwide Permit 12
may result in increased costs and project interruptions or delays if we or our
customers are forced to seek 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

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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. In addition to the health and safety measures we
are taking to ensure labor resource availability during the COVID-19 pandemic,
we continue to address the longer-term need for additional labor resources in
our markets. 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 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 and modernize 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 Uncertainty
of Forward-Looking Statements and Information below, Item 1A. Risk Factors of
Part II of this Quarterly Report and Item 1A. Risk Factors of Part I of our 2019
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. As referenced above in
COVID-19 Pandemic - Response and Impact, we expect portions of our operations
will continue to experience challenges due to the COVID-19 pandemic.
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 our financial results due to, among other things,
the termination, deferral or delay of projects, reduced productivity and
exposure to significant liabilities. See COVID-19 Pandemic - Response and Impact
above for further discussion regarding the current and expected 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.
Cyclicality and demand for services. Our volume of business may be adversely
affected by declines in demand for our services or delays in new and ongoing
projects due to cyclicality, which may vary by geographic region. 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. For example, the timing of obtaining permits and other approvals
on a larger project may be delayed, and we may need to maintain a portion of our
workforce and equipment in an underutilized capacity to ensure we are
strategically positioned to deliver on the project when it moves forward.
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 and their access to capital; economic and political conditions on a
regional, national or global scale, including interest rates, governmental
regulations affecting the

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sourcing of certain materials and equipment, and other changes in U.S. and
global trade relationships; our customers' capital spending, including on larger
pipeline and electrical infrastructure projects; commodity and material prices;
and project deferrals and cancellations. As described above in COVID 19 Pandemic
- Response and Impact, we have experienced reductions in demand for certain of
our 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
commodity production levels.
Revenue mix. 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. For example, installation work is often performed
on a fixed price basis, while maintenance work is often performed under
pre-established or negotiated prices or cost-plus pricing arrangements. Margins
for installation work varies by project but can be higher than maintenance work
due to higher risk. We have historically derived approximately 30% to 35% of our
annual revenues from maintenance work, but a higher portion of maintenance work
in any given period may affect our gross margins for that period. Additionally,
the areas in which we operate during a given period can impact margins. Some
areas offer the opportunity for higher margins due to their more difficult
geographic characteristics, such as urban settings or mountainous and other
difficult terrain. However, margins may also be negatively impacted by
unexpected difficulties that can arise due to those same characteristics, as
well as unexpected site conditions.
Size, scope and complexity of projects. Larger or more complex projects with
higher voltage capacities; larger-diameter throughput capacities; increased
engineering, design or construction complexities; more difficult terrain
requirements; or longer distance requirements typically yield opportunities for
higher margins as we assume a greater degree of performance risk and there is
greater utilization of our resources for longer construction timeframes.
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. Also, 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; 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.
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 we or our customers
procure, including as a result of changes in U.S. or global trade relationships,
governmental regulations affecting the sourcing 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.


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Results of Operations
The results of acquired businesses have been included in the following results
of operations beginning on their respective acquisition dates.
Consolidated Results
Three months ended June 30, 2020 compared to the three months ended June 30,
2019
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):
                                            Three Months Ended June 30,                       Change
                                          2020                       2019                  $            %
Revenues                        $ 2,506,231     100.0  %   $ 2,839,199     100.0  %   $ (332,968 )   (11.7 )%
Cost of services (including
depreciation)                     2,150,967      85.8        2,519,694      88.7        (368,727 )   (14.6 )%
Gross profit                        355,264      14.2          319,505      11.3          35,759      11.2  %
Equity in earnings of
integral unconsolidated
affiliates                            1,045         -                -         -           1,045         *
Selling, general and
administrative expenses            (227,852 )    (9.1 )       (223,944 )    (7.9 )        (3,908 )     1.7  %
Amortization of intangible
assets                              (17,779 )    (0.7 )        (12,610 )    (0.4 )        (5,169 )    41.0  %
Change in fair value of
contingent consideration
liabilities                           2,238       0.1           (4,371 )    (0.2 )         6,609         *
Operating income                    112,916       4.5           78,580       2.8          34,336      43.7  %
Interest expense                     (8,654 )    (0.3 )        (15,821 )    (0.6 )         7,167     (45.3 )%
Interest income                         275         -              267         -               8       3.0  %
Other income (expense), net           3,248       0.1            6,521       0.2          (3,273 )   (50.2 )%
Income before income taxes          107,785       4.3           69,547       2.4          38,238      55.0  %
Provision for income taxes           32,989       1.3           41,088       1.4          (8,099 )   (19.7 )%
Net income                           74,796       3.0           28,459       1.0          46,337     162.8  %
Less: Net income attributable
to non-controlling interests            849         -            1,115         -            (266 )   (23.9 )%
Net income attributable to
common stock                    $    73,947       3.0  %   $    27,344

1.0 % $ 46,603 170.4 %




* The percentage change is not meaningful.
Revenues. Contributing to the decrease were lower revenues of $391.6 million
from pipeline and industrial infrastructure services, partially offset by
incremental revenues of $58.6 million from electric power infrastructure
services. See Segment Results below for additional information and discussion
related to segment revenues.
Gross profit. The increase in gross profit was due to increased earnings from
electric power infrastructure services based on improved performance across the
segment, partially offset by decreased earnings from pipeline and industrial
services primarily attributable to the decrease in revenues. Contributing to the
increase in electric power infrastructure services gross profit was an
improvement related to our Latin American operations, which during the three
months ended June 30, 2019 included the $79.2 million charge associated with the
terminated telecommunications project in Peru, as compared to $12.2 million of
project losses in the three months ended June 30, 2020 primarily related to
accelerated project terminations and operational impacts of the COVID-19
pandemic. 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 June 30, 2020 primarily relates to the commencement of
transition services under the agreement recently awarded to LUMA for the
operation and maintenance of the electric transmission and distribution system
in Puerto Rico.
Selling, general and administrative expenses. The increase was primarily
attributable to a $6.4 million increase in the fair market value of deferred
compensation liabilities during the three months ended June 30, 2020, as
compared to a $1.6 million increase in the fair market value of deferred
compensation liabilities during the three months ended June 30, 2019. The fair
market value changes in deferred compensation liabilities were partially offset
by changes in the fair value of assets associated with the deferred compensation
plan, which are included in other income (expense), net. Also contributing to
the increase in selling, general and administrative expense was a $5.2 million
increase in expenses associated with acquired businesses and a $8.3 million
increase in compensation expense primarily due to an increase in non-cash
stock-based compensation expense. Partially offsetting these

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increases was a $7.9 million decrease in travel expenses, primarily related to
reductions in travel as a result of the COVID-19 pandemic, and a $4.6 million
decrease in legal and professional fees. Selling, general and administrative
expenses as a percentage of revenues increased to 9.1% for the three months
ended June 30, 2020 from 7.9% for the three months ended June 30, 2019,
primarily due to the decrease in revenues described above.
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 associated with previously
acquired intangible assets, as certain of those assets became fully amortized.
Change in fair value of contingent consideration liabilities. The overall change
was primarily due to changes in performance in post-acquisition 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, with a
significant portion of such obligations expected to be settled in late 2020 or
early 2021. See Contractual Obligations - Contingent Consideration Liabilities
for more information.
Interest expense. Interest expense decreased primarily due to the impact of a
lower weighted average interest rate, and to a lesser extent due to decreased
borrowing activity.
Other income (expense), net. The net other income for the three months ended
June 30, 2020 primarily relates to an $8.9 million legal settlement received and
a $6.5 million increase in the fair market value of assets associated with our
deferred compensation plan, as compared to a $1.5 million increase in the fair
market value of assets associated with our deferred compensation plan during the
three months ended June 30, 2019. This incremental increase in the fair market
value offsets the increase in selling, general, and administrative expenses
discussed above. Partially offsetting these items was a $9.3 million impairment
associated with an investment in a water and gas pipeline infrastructure
contractor located in Australia, which is accounted for under the cost method of
accounting, and $5.5 million of impairments associated with two non-integral
equity investments that have been negatively impacted by the decline in demand
for refined petroleum products.
Provision for income taxes. The effective tax rates for the three months ended
June 30, 2020 and June 30, 2019 were 30.6% and 59.1%. The decrease in the
effective tax rate was primarily due to the $79.2 million charge recognized in
the three months ended June 30, 2019 associated with a terminated
telecommunications project in Peru, for which no income tax benefit was
recognized. We do not expect any significant benefits to the income tax
provision as a result of the CARES Act.
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 June 30, 2020 was impacted by the weakening of the U.S. dollar
against both the Canadian and Australian dollars as of June 30, 2020 when
compared to March 31, 2020. The gain in the three months ended June 30, 2019 was
primarily impacted by the weakening of the U.S. dollar against the Canadian
dollar as of June 30, 2019 when compared to March 31, 2019.

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Six months ended June 30, 2020 compared to the six months ended June 30, 2019
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):
                                              Six Months Ended June 30,                        Change
                                           2020                       2019                  $            %
Revenues                         $ 5,270,326     100.0  %   $ 5,646,458     100.0  %   $ (376,132 )    (6.7 )%
Cost of services (including
depreciation)                      4,582,866      87.0        4,962,972      87.9        (380,106 )    (7.7 )%
Gross profit                         687,460      13.0          683,486      12.1           3,974       0.6  %
Equity in earnings of integral
unconsolidated affiliates              1,045         -                          -           1,045         *
Selling, general and
administrative expenses             (458,645 )    (8.7 )       (455,852 )    (8.1 )        (2,793 )     0.6  %
Amortization of intangible
assets                               (35,687 )    (0.6 )        (25,280 )    (0.4 )       (10,407 )    41.2  %
Change in fair value of
contingent consideration
liabilities                             (520 )       -           (4,287 )    (0.1 )         3,767     (87.9 )%
Operating income                     193,653       3.7          198,067       3.5          (4,414 )    (2.2 )%
Interest expense                     (22,660 )    (0.4 )        (29,697 )    (0.5 )         7,037     (23.7 )%
Interest income                        1,034         -              576         -             458      79.5  %
Other income (expense), net           (6,580 )    (0.2 )         65,480       1.2         (72,060 )       *
Income before income taxes           165,447       3.1          234,426       4.2         (68,979 )   (29.4 )%
Provision for income taxes            49,149       0.9           84,932       1.6         (35,783 )   (42.1 )%
Net income                           116,298       2.2          149,494       2.6         (33,196 )   (22.2 )%
Less: Net income attributable to
non-controlling interests              3,666       0.1            1,662         -           2,004     120.6  %
Net income attributable to
common stock                     $   112,632       2.1  %   $   147,832

2.6 % $ (35,200 ) (23.8 )%




* The percentage change is not meaningful.
Revenues. Contributing to the decrease were lower revenues of $537.7 million
from pipeline and industrial infrastructure services, partially offset by
increased revenues of $161.6 million from electric power infrastructure
services. See Segment Results below for additional information and discussion
related to segment revenues.
Gross profit. The increase in gross profit was primarily due to increased
earnings from electric power infrastructure services, partially offset by lower
earnings from pipeline and industrial services primarily due to the decrease in
revenues. Contributing to the increase in electric power infrastructure services
gross profit was an improvement related to our Latin American operations, which
during the six months ended June 30, 2019 included the $79.2 million charge
associated with the terminated telecommunications project in Peru, as compared
to $24.9 million of project losses in the six months ended June 30, 2020
primarily related to accelerated project terminations and operational impacts of
the COVID-19 pandemic. 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 June 30, 2020 primarily relates to the commencement of
transition services under the agreement recently awarded to LUMA for the
operation and maintenance of the electric transmission and distribution system
in Puerto Rico.
Selling, general and administrative expenses. This increase was primarily due to
a $13.2 million increase in expenses associated with acquired businesses and a
$11.5 million increase in compensation expenses, largely associated with higher
non-cash stock-based compensation expense. Partially offsetting these increases
was a $1.4 million decrease in the fair market value of deferred compensation
liabilities during the six months ended June 30, 2020, as compared to a $5.4
million increase in the fair market value of deferred compensation liabilities
during the six months ended June 30, 2019. The fair market value changes in
deferred compensation liabilities were offset by changes in the fair value of
assets associated with the deferred compensation plan which are included in
other income (expense), net below. Also partially offsetting the increases were
a $6.7 million decrease in travel expenses, primarily related to reductions in
travel as a result of the COVID-19 pandemic, and a $4.8 million decrease in
legal and other contracted services. Selling, general and administrative
expenses as a percentage of revenues increased to 8.7% for the six months ended
June 30, 2020 from 8.1% for the six months ended June 30, 2019, primarily due to
the decrease in revenues described above.
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 associated with previously
acquired intangible assets as certain of these assets became fully amortized.

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Change in fair value of contingent consideration liabilities. The overall change
was primarily due to changes in performance in post-acquisition 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, with a
significant portion of such obligations expected to be settled in late 2020 or
early 2021. See Contractual Obligations - Contingent Consideration Liabilities
for more information.
Interest expense. Interest expense decreased due to a lower weighted average
interest rate, partially offset by higher borrowing activity.
Other income (expense), net. The net other expense for the six months ended
June 30, 2020 was primarily related to a $9.3 million impairment associated with
an investment in a water and gas pipeline infrastructure contractor located in
Australia and $8.7 million of impairments associated with two non-integral
equity investments that have been negatively impacted by the decline in demand
for refined petroleum products, partially offset by an $8.9 million legal
settlement received. The net other income for the six months ended June 30, 2019
was primarily due to the deferral and subsequent recognition of earnings on a
large electric transmission project in Canada that was substantially completed
and placed into commercial operation during the three months ended March 31,
2019. As a result of the project completion, we recognized $60.3 million of
earnings that were deferred in prior periods.
Provision for income taxes. The effective tax rates for the six months ended
June 30, 2020 and June 30, 2019 were 29.7% and 36.2%. The higher effective tax
rate for the six months ended June 30, 2019 was primarily due to the $79.2
million charge in the period associated with the terminated telecommunications
project in Peru, for which no income tax benefit was recognized.
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 loss in the six months
ended June 30, 2020 was impacted by the strengthening of the U.S. dollar against
both the Canadian and Australian dollars as of June 30, 2020 when compared to
December 31, 2019. The gain in the six months ended June 30, 2019 was impacted
of the weakening of the U.S. dollar against the Canadian dollar as of June 30,
2019 when compared to December 31, 2018.
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 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.

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Three months ended June 30, 2020 compared to the three months ended June 30,
2019
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 June 30,                         Change
                                        2020                       2019                   $             %
Revenues:
Electric Power
Infrastructure Services
excluding Latin America       $ 1,790,469       71.4 %   $ 1,755,160       61.8  %   $   35,309        2.0  %
Latin America                       2,449        0.1         (20,824 )     (0.7 )        23,273          *
Electric Power
Infrastructure Services         1,792,918       71.5       1,734,336       61.1          58,582        3.4  %
Pipeline and Industrial
Infrastructure Services           713,313       28.5       1,104,863       38.9        (391,550 )    (35.4 )%
Consolidated revenues         $ 2,506,231      100.0 %   $ 2,839,199      100.0  %   $ (332,968 )    (11.7 )%
Operating income (loss):
Electric Power
Infrastructure Services
excluding Latin America       $   198,044       11.1 %   $   172,266        9.8  %   $   25,778       15.0  %
Latin America                     (15,194 )        *         (79,331 )        *          64,137          *
Equity in earnings of
integral unconsolidated
affiliates                          1,046        N/A               -        N/A           1,046          *
Electric Power
Infrastructure Services           183,896       10.3 %        92,935        5.4  %   $   90,961       97.9  %
Pipeline and Industrial
Infrastructure Services            21,250        3.0 %        69,943        6.3  %      (48,693 )    (69.6 )%
Corporate and non-allocated
costs                             (92,230 )      N/A         (84,298 )      N/A          (7,932 )      9.4  %
Consolidated operating
income                        $   112,916        4.5 %   $    78,580        2.8  %   $   34,336       43.7  %


* The percentage or percentage change is not meaningful.
Electric Power Infrastructure Services Segment Results
Revenues for the three months ended June 30, 2020 included a $46 million
increase in revenues attributable to our North American communications
operations, increased customer spending on distribution services, a $20 million
incremental increase in revenues attributable to acquired businesses and an $11
million increase in emergency restoration services. These increases were
partially offset by lower revenues associated with grid modernization and
accelerated fire hardening programs in the western United States. Additionally,
during the three months ended June 30, 2019, we recognized a $79.2 million
charge associated with the terminated telecommunications project in Peru, which
included a $48.8 million reversal of revenues and a $30.4 million increase in
cost of services. The charge 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, a reserve against a portion of
alleged liquidated damages and recognition of estimated costs to complete the
project turnover and close out the project. See Legal Proceedings in Note 11 of
the Notes to Condensed Consolidated Financial Statements in Item 1. Financial
Statements of Part I of this Quarterly Report for additional information
involving the termination of the telecommunications project in Peru.
As a result of the contract termination and other factors, we have concluded to
pursue an orderly exit of our operations in Latin America, and therefore have
separately provided our Latin American operating results above. We believe that
providing visibility into these results is beneficial to understanding the
performance of our ongoing operations. The operating loss attributable to our
Latin American operations in the three months ended June 30, 2020 was primarily
associated with early termination and project close out costs, cost adjustments
on certain remaining projects and disruptions caused by the COVID-19 pandemic.
For the full year of 2020, our Latin American operations are expected to
generate revenues of $20 million to $30 million and an operating loss of $40
million to $45 million.
Operating income and operating income as a percentage of revenues were
positively impacted by improved performance across the segment, including
increased Canadian revenues contributing to improved equipment utilization and
fixed cost absorption. The three months ended June 30, 2019 was impacted by
pronounced seasonal effects in Canada, which in addition to normal revenue
seasonality, included higher levels of unabsorbed costs as the crews and
equipment completing a large transmission project transitioned to new projects.
These positive factors were partially offset by a reduction in fire hardening
services in the western United States during the second quarter of 2020 as
compared to the three months ended June 30, 2019. We expect revenues

                                       58
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from fire hardening services in the western United States to increase in the
second half of 2020 as compared to the first half of 2020 but remain lower than
revenues recognized from such services during the second half of 2019. The
equity in earnings of integral unconsolidated affiliates primarily relates to
the commencement of transition services under the agreement recently awarded to
LUMA for the operation and maintenance of the electric transmission and
distribution system in Puerto Rico.
Pipeline and Industrial Infrastructure Services Segment Results
The decrease in revenues was primarily due to disruptions resulting from
shelter-in-place and worksite access restrictions related to the COVID-19
pandemic and the compounding impact on the challenged energy market, including
decreased capital spending by our customers on industrial services due to the
significant decline in demand for refined petroleum products. Revenues
associated with larger pipeline projects also decreased as compared to the three
months ended June 30, 2019, as the timing of such projects is highly variable
due to potential permitting delays, worksite access limitations related to
environmental regulations and seasonal weather patterns. The decrease was
partially offset by approximately $55 million in incremental revenues from
acquired businesses. As a result of the variability in timing for larger
pipeline transmission projects, we expect larger pipeline transmission revenues
for 2020 to be between $350 million and $400 million as compared to $1.2 billion
during 2019.
The decreases in operating income and operating income as a percentage of
revenues were primarily due to the decrease in revenues as discussed above. The
lower revenues associated with industrial services negatively impacted margins
and the ability to cover fixed and overhead costs. The reduction in larger
pipeline transmission projects, which generally yield higher margins, also
contributed to the decrease. The three months ended June 30, 2019 included a
$13.9 million loss associated with continued rework and start-up delays on a
processing facility project in Texas, which was approximately 99% complete at
June 30, 2020.
Corporate and Non-allocated Costs
The increase in corporate and non-allocated costs was partially due to a $5.2
million increase in intangible asset amortization, a $7.7 million increase in
non-cash stock-based compensation expense and a $4.7 million incremental
increase in the fair value of deferred compensation liabilities. Partially
offsetting these increases were a $2.2 million decrease in the fair value of
contingent consideration liabilities in the three months ended June 30, 2020, as
compared to a $4.4 million increase in the fair value of contingent
consideration liabilities recognized during the three months ended June 30,
2019. Also partially offsetting the increases were decreases in certain costs
related to cost containment measures associated with the current operating
environment.
Six months ended June 30, 2020 compared to the six months ended June 30, 2019
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 (dollars in thousands):
                                           Six Months Ended June 30,                         Change
                                        2020                       2019                  $             %
Revenues:
Electric Power
Infrastructure Services
excluding Latin America       $ 3,552,815       67.4 %   $ 3,391,348       60.1 %   $  161,467        4.8  %
Latin America                       7,130        0.1           7,011        0.1            119        1.7  %
Electric Power
Infrastructure Services       $ 3,559,945       67.5     $ 3,398,359       60.2     $  161,586        4.8  %
Pipeline and Industrial
Infrastructure Services         1,710,381       32.5       2,248,099       39.8       (537,718 )    (23.9 )%
Consolidated revenues         $ 5,270,326      100.0 %   $ 5,646,458      100.0 %   $ (376,132 )     (6.7 )%
Operating income (loss):
Electric Power
Infrastructure Services
excluding Latin America       $   343,117        9.7 %   $   334,495        9.9 %   $    8,622        2.6  %
Latin America                     (31,509 )        *         (79,943 )        *         48,434          *
Equity in earnings of
integral unconsolidated
affiliates                          1,046        N/A               -        N/A          1,046          *
Electric Power
Infrastructure Services       $   312,654        8.8 %   $   254,552        7.5 %   $   58,102       22.8  %
Pipeline and Industrial
Infrastructure Services            52,527        3.1 %       110,642        4.9 %      (58,115 )    (52.5 )%
Corporate and non-allocated
costs                            (171,528 )      N/A        (167,127 )      N/A         (4,401 )      2.6  %
Consolidated operating
income                        $   193,653        3.7 %   $   198,067

3.5 % $ (4,414 ) (2.2 )%

* The percentage change is not meaningful.


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Electric Power Infrastructure Services Segment Results
The increase in revenues was primarily due to increased customer spending on
distribution services. Segment revenues also increased due to a $76 million
increase in revenues in our North American communication operations and
approximately $35 million of incremental revenues attributable to acquired
businesses. These increases were partially offset by lower revenues on a larger
transmission project in Canada that was substantially completed during the three
months ended March 31, 2019, lower revenues associated with grid modernization
and accelerated fire hardening programs in the western United States; and a $21
million decrease in emergency restoration services revenues.
As discussed above, during the six months ended June 30, 2019, we recognized a
$79.2 million charge associated with the terminated telecommunications project
in Peru, which included a $48.8 million reversal of revenues and a $30.4 million
increase in cost of services. The operating loss associated with our Latin
American operations in the six months ended June 30, 2020 was primarily
associated with early termination and project close out costs, cost adjustments
on certain remaining projects and disruptions caused by the COVID-19 pandemic.
Operating income and operating income as a percentage of revenues were
positively impacted during the six months ended June 30, 2020 by increased
Canadian revenues contributing to improved equipment utilization and fixed cost
absorption. The six months ended June 30, 2019 was negatively impacted by
pronounced seasonal effects in Canada, which in addition to normal revenue
seasonality, had elevated levels of unabsorbed costs as the crews and equipment
completing a large transmission project transitioned to new projects. Partially
offsetting these increases between periods were the successful execution of the
larger transmission project in Canada described above; decreased revenues from
emergency restorations services, which typically yield higher margins due in
part to higher equipment utilization and absorption of fixed costs; and a
reduction in fire hardening services in the western United States during the
first six months of 2020. We expect revenues from fire hardening services in the
western United States to increase in the second half of 2020 as compared to the
first half of 2020 but remain lower than revenues recognized from such services
during the second half of 2019. The equity in earnings of integral
unconsolidated affiliates primarily relates to the commencement of transition
services under the operation and maintenance agreement recently awarded to LUMA
discussed above.
Pipeline and Industrial Infrastructure Services Segment Results
The decrease in revenues was primarily due to a decrease in services related to
pipeline transmission projects and industrial services, which resulted from
decreased capital spending by our customers primarily attributable to the
challenging overall energy market conditions, disruptions due to
shelter-in-place and worksite access restrictions related to the COVID-19
pandemic and the timing of construction for larger pipeline projects, which is
highly variable due to potential permitting delays, worksite access limitations
related to environmental regulations and seasonal weather patterns. This
decrease was partially offset by approximately $155 million in revenues from
acquired businesses.
The decreases in operating income and operating income as a percentage of
revenues were primarily due to the reduction in larger pipeline transmission
projects, which generally yield higher margins. Also contributing to this
decrease were adverse impacts related to the COVID-19 pandemic, including lower
revenues associated with industrial services, which negatively impacted margins
and the ability to cover fixed and overhead costs.  The six months ended
June 30, 2020 were also negatively impacted by adverse weather across our
Canadian pipeline operations, including a $14.1 million loss associated with
production issues and severe weather conditions on a larger gas transmission
project in Canada, which was approximately 97% complete at June 30, 2020. The
six months ended June 30, 2019 included a $21.5 million loss associated with
continued rework and start-up delays on a processing facility project in Texas,
which was approximately 99% complete at June 30, 2020. Additionally, segment
results were adversely impacted by the COVID-19 pandemic and the challenged
energy market as discussed further above in COVID-19 - Response and Impact.
Corporate and Non-allocated Costs
The increase in corporate and non-allocated costs was partially due to a $10.4
million increase in intangible asset amortization, a $9.6 million increase in
non-cash stock-based compensation and a $3.9 million increase in professional
fees. Partially offsetting these increases were a $1.6 million decline in the
fair value of deferred compensation liabilities in the six months ended June 30,
2020, as compared to a $5.2 million increase in the fair value of deferred
compensation liabilities in the six months ended June 30, 2019, and a $0.5
million increase in the fair value of contingent consideration liabilities in
the six months ended June 30, 2020, as compared to a $4.3 million increase in
the fair value of contingent consideration liabilities recognized during the six
months ended June 30, 2019. Also partially offsetting the increases were
decreases in certain costs related to cost containment measures associated with
the current operating environment.
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

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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 generally accepted accounting principles in
the United States (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 master service
agreements (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 June 30, 2020 and December 31, 2019, MSAs accounted for 54% and 53% of our
estimated 12-month backlog and 64% and 61% 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.
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):
                                                     June 30, 2020

December 31, 2019


                                               12 Month          Total          12 Month          Total
Electric Power Infrastructure Services
Remaining performance obligations            $ 2,490,774     $  3,812,768     $ 2,483,109     $  3,957,710
Estimated orders under MSAs and
short-term, non-fixed price contracts          2,847,235        5,871,440       2,873,446        5,864,527
Backlog                                        5,338,009        9,684,208   

5,356,555 9,822,237



Pipeline and Industrial Infrastructure
Services
Remaining performance obligations                670,290        1,371,816         670,707        1,344,741
Estimated orders under MSAs and
short-term, non-fixed price contracts          1,652,152        2,872,127       1,919,791        3,837,923
Backlog                                        2,322,442        4,243,943       2,590,498        5,182,664

Total
Remaining performance obligations              3,161,064        5,184,584       3,153,816        5,302,451
Estimated orders under MSAs and
short-term, non-fixed price contracts          4,499,387        8,743,567       4,793,237        9,702,450
Backlog                                      $ 7,660,451     $ 13,928,151     $ 7,947,053     $ 15,004,901


Subsequent to June 30, 2020, the project sponsors of an approximately 600-mile
natural gas pipeline under construction in the eastern United States announced
that they are no longer moving forward with the project. One of our subsidiaries
has been contracted, as part of a joint venture, to construct a portion of this
project. Although the joint venture has not received a notice of termination,
based on the announcement, we have concluded that the revenues related to the
remaining performance obligation and backlog associated with the project are no
longer probable. As a result, this project has been excluded from remaining
performance obligations and backlog as of June 30, 2020.
Liquidity and Capital Resources
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.

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The extent of the impact of the COVID-19 pandemic on our future operational and
financial performance will depend on future developments, all of which are
uncertain and cannot be predicted. However, based on our current business
forecast for 2020, including revenue and earnings prospects and other cost
management actions taken in response to market conditions, we anticipate that
our cash and cash equivalents on hand, existing borrowing capacity under our
senior secured credit facility, other available financing alternatives, and
future cash flows from operations will provide sufficient funds to enable us to
meet our debt repayment obligations, fund ongoing operating needs, facilitate
our ability to pay any future dividends we declare, fund acquisitions or
strategic investments that facilitate the long-term growth and sustainability of
our business, and fund essential capital expenditures during 2020. In addition,
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 and otherwise fund our capital needs. Our ability to
access the capital markets 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.
For additional information regarding the current impact and potential risks
related to the COVID-19 pandemic, see COVID-19 Pandemic - Response and Impact
above and Item 1A. Risk Factors of Part II of this Quarterly Report.
Cash Requirements
Our available commitments and cash and cash equivalents at June 30, 2020 were as
follows (in thousands):
                                                                       June 30, 2020
Total capacity available for revolving loans and letters of credit   $     2,135,000
Less:
Borrowings of revolving loans under our senior secured credit
facility                                                                    

152,622

Letters of credit outstanding under our senior secured credit facility

374,700

Available commitments under senior secured credit facility for issuing revolving loans or new letters of credit

1,607,678

Plus:


Cash and cash equivalents                                                   

530,670

Total available commitments under senior secured credit facility and cash and cash equivalents

                                        $     

2,138,348




We also had borrowings of term loans under our senior secured credit facility of
$1.21 billion as of June 30, 2020, and we are required to make quarterly
principal payments of $16.1 million with respect to these loans.
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, 2020 to
be approximately $250 million, which is $50 million less than our original
estimate at the beginning of 2020. We also continue to evaluate opportunities
for stock repurchases.
Refer to Contractual Obligations below for a summary of our future contractual
obligations as of June 30, 2020 and Off-Balance Sheet Transactions and
Contingencies below for a description of certain contingent obligations.
Although some of these contingent obligations could require the use of cash in
future periods, they are excluded from the Contractual Obligations table because
we are unable to accurately predict the timing and amount of any such
obligations as of June 30, 2020.

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Sources and Uses of Cash
In summary, our cash flows for each period were as follows (in thousands):
                                               Three Months Ended             Six Months Ended
                                                    June 30,                      June 30,
                                               2020           2019           2020           2019
Net cash provided by (used in) operating
activities                                 $  497,479     $ (108,664 )   $  725,028     $ (191,414 )
Net cash used in investing activities      $  (36,614 )   $  (68,171 )   $ (125,747 )   $ (215,327 )
Net cash provided by (used in) financing
activities                                 $ (310,636 )   $  165,378     $ (236,710 )   $  401,638


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.
Net cash provided by operating activities during the three months ended June 30,
2020 was favorably impacted by the decline in revenues during the three months
ended June 30, 2020 as compared to the three months ended March 31, 2020, which
decreased working capital requirements at quarter end. As discussed below,
improved billings and collections, as well as the timing and amounts of
retention balances, also contributed to the net cash provided by operating
activities in the three months ended June 30, 2020. Additionally, as permitted
under the CARES Act and related state actions, during the three months ended
June 30, 2020, we deferred the payment of $58.0 million of federal and state
income taxes, which were subsequently paid in July 2020, and payment of $30.7
million of payroll taxes, 50% of which are due by December 31, 2021 and the
remainder of which are due by December 31, 2022. Although there is currently no
legislation that would permit further deferrals of income taxes, the CARES Act
permits deferral of payroll taxes through December 31, 2020, and we currently
intend to continue such deferrals. Net cash provided by operating activities
during the six months ended June 30, 2020 also 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. Net cash provided by operating
activities during the three and six months ended June 30, 2019 included the
payment of $112 million as a result of the exercise of on-demand advance payment
and performance bonds in connection with the termination of the large
telecommunications project in Peru, which is described in further detail in Note
11 of the Notes to Condensed Consolidated Financial Statements in Item 1.
Financial Statements. Net cash used in operating activities for the three and
six months ended June 30, 2019 were also impacted by higher working capital
requirements, including mobilization and tooling costs, to support business
growth and due to extended billing and collection cycles for certain utility
customers. These items were partially offset by the collection of $109 million
of pre-petition receivables related to the PG&E bankruptcy proceedings during
the three months ended June 30, 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 June 30, 2020 was 82 days,
as compared to 91 days at June 30, 2019. The decrease in DSO was partially due
to collection of a large retainage balance outstanding at June 30, 2019
associated with a larger electric transmission project, as well as billing
process changes for certain customers that negatively impacted DSO throughout
2019.
Investing Activities
Net cash used in investing activities in the three months ended June 30, 2020
included $48.1 million of capital expenditures and $1.6 million used for
acquisitions. These items were partially offset by $7.8 million of proceeds from
the sale of property and equipment and $8.4 million of proceeds from the
disposition of businesses. Net cash used in investing activities in the three
months ended June 30, 2019 included $72.8 million of capital expenditures and
$3.8 million used for acquisitions. These items were partially offset by $8.6
million of proceeds from the sale of property and equipment. Net cash used in
investing activities in the six months ended June 30, 2020 included $116.3
million of capital expenditures, $24.4 million used for acquisitions and $8.8

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million of cash paid for investments in unconsolidated affiliates and other
entities. These items were partially offset by $12.6 million of proceeds from
the sale of property and equipment and $10.9 million of proceeds from the
disposition of businesses. Net cash used in investing activities in the six
months ended June 30, 2019 included $141.4 million used for capital
expenditures, $55.3 million used for acquisitions; and $37.9 million of cash
paid for investments in unconsolidated affiliates and other entities. These
items were partially offset by $19.4 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 contractual obligations
related to investments in unconsolidated affiliates and other capital
commitments that are detailed in Contractual Obligations 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 used in financing activities in the three months ended June 30, 2020
included $282.3 million of net repayments under our senior secured credit
facility, $9.4 million of payments to settle certain contingent consideration
liabilities, $7.7 million of payments to satisfy tax withholding obligations
associated with stock-based compensation and $7.2 million of cash dividends and
dividend equivalents. Net cash provided by financing activities in the three
months ended June 30, 2019 included $167.0 million of net borrowings under our
senior secured credit facility and $7.3 million of net short-term borrowings,
partially offset by $5.8 million of cash payments of dividends and cash dividend
equivalents. Net cash used in financing activities in the six months ended
June 30, 2020 included $200.0 million of cash payments for common stock
repurchases, $23.6 million of cash payments to satisfy tax withholding
obligations associated with stock-based compensation, $14.5 million of cash
payments of dividends and cash dividend equivalents and $10.4 million of
payments to settle certain contingent consideration liabilities, partially
offset by $21.1 million of net borrowings under our senior secured credit
facility. Net cash provided by financing activities in the six months ended
June 30, 2019 included $466.7 million of net borrowings under our senior secured
credit facility, partially offset by $20.1 million of cash payments for common
stock repurchases, $15.9 million of net short-term repayments, $15.3 million of
payments to satisfy tax withholding obligations associated with stock-based
compensation, and $11.6 million of cash payments of dividends and cash dividend
equivalents.
Contingent Consideration Liabilities
Certain of our acquisitions include the potential payment of contingent
consideration, payable in the event certain performance objectives are achieved
by the acquired businesses during designated post-acquisition periods. The
majority of these contingent consideration liabilities are subject to a maximum
outstanding payment amount, which totaled $148.5 million for liabilities with
measurement periods that end subsequent to June 30, 2020. The significant
majority of these liabilities would be paid at least 70% to 85% in cash. Cash
payments up to the amount recognized for these liabilities at the respective
acquisition dates, including measurement-period adjustments, will be classified
as financing activities in our consolidated statements of cash flows. Any cash
payments in excess of such amounts will be classified as operating activities in
our consolidated statements of cash flows.
The aggregate fair value of all of our contingent consideration liabilities was
$75.8 million as of June 30, 2020, of which $68.5 million is included in
"Accounts payable and accrued expenses" and $7.3 million is included in
"Insurance and other non-current liabilities." We made a $10.0 million interim
cash payment to partially settle certain contingent consideration liabilities
during the three months ended June 30, 2020 and $11.0 million of cash payments
and the issuance of 4,277 shares of Quanta common stock during the six months
ended June 30, 2020. The majority of cash payments have been classified as
financing activities in our condensed consolidated statements of cash flows for
the three and six months ended June 30, 2020.
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
June 30, 2020             -    $       -
March 31, 2020        5,960    $ 200,000
December 31, 2019         -    $       -
September 30, 2019        -    $       -
June 30, 2019             -    $       -
March 31, 2019          376    $  11,953


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 June 30, 2020 and 2019, cash payments
related to stock

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repurchases were none and $0.2 million, and during the six months ended June 30,
2020 and 2019, cash payments related to stock repurchases were $200.0 million
and $20.1 million.
As of June 30, 2020, $86.8 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 million in shares of our
outstanding common stock under a new stock repurchase program, for an aggregate
stock repurchase authorization of $586.8 million.
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 secured 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
2019 and the first six months of 2020 (in thousands, except per share amounts):
   Declaration          Record            Payment         Dividend      Dividends
      Date               Date               Date          Per Share      Declared
  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

December 11, 2019 January 2, 2020 January 16, 2020 $ 0.05 $

7,371

August 28, 2019 October 1, 2019 October 15, 2019 $ 0.04 $

5,564

May 24, 2019 July 1, 2019 July 15, 2019 $ 0.04 $

6,233

March 21, 2019 April 5, 2019 April 19, 2019 $ 0.04 $

5,896




A significant majority of dividends declared were paid on the corresponding
payment dates. Holders of restricted stock units (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 exchangeable shares of
certain Canadian subsidiaries of Quanta received a cash dividend per
exchangeable share equal to the cash dividend per share paid to Quanta common
stockholders. Holders of RSUs awarded under the Quanta Services, Inc. 2019
Omnibus Equity Incentive Plan (the 2019 Plan) and holders of unearned and
unvested performance stock units (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 us 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, cash
flows from operations; 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, Quanta's credit agreement restricts the payment of cash dividends unless
certain conditions are met.
Debt Instruments
Senior Secured Credit Facility
We have a credit agreement with various lenders that provides for (i) a $2.14
billion revolving credit facility and (ii) a term loan facility with term loans
in the aggregate initial principal amount of $1.29 billion. In addition, 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 credit facility, incremental 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

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were required to be delivered and that our Consolidated Leverage Ratio (as
defined below) does not exceed 2.5 to 1.0, subject to the conditions specified
in the credit agreement.
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. The maturity date for both the revolving
credit facility and the term loan facility is October 31, 2022; however, we may
voluntarily prepay the term loans from time to time in whole or in part, without
premium or penalty. We are required to make quarterly principal payments of
$16.1 million on the term loan facility. During the three months ended June 30,
2020 and 2019, our weighted average interest rates associated with our senior
secured credit facility were 1.65% and 3.88%, and during the six months ended
June 30, 2020 and 2019, our weighted average interest rates associated with our
senior secured credit facility were 2.37% and 3.90%.
We borrowed $600.0 million under the term loan facility in October 2018 and
borrowed an additional $687.5 million under the term loan facility in September
2019 and used the majority of such proceeds to repay outstanding revolving loans
under the credit agreement. As of June 30, 2020, we had $1.36 billion of
borrowings outstanding under the credit agreement, which included $1.21 billion
borrowed under the term loan facility and $152.6 million of outstanding
revolving loans. We also had $374.7 million of letters of credit issued under
our revolving credit facility as of such date. As of June 30, 2020, the
remaining $1.61 billion of available commitments under the revolving credit
facility was available for additional revolving loans or letters of credit in
U.S. dollars and certain alternative currencies.
The credit agreement contains certain covenants, including (i) a maximum
Consolidated Leverage Ratio of 3.0 to 1.0 (except that in connection with
certain permitted acquisitions in excess of $200.0 million, such ratio is 3.5 to
1.0 for the fiscal quarter in which the acquisition is completed and the two
subsequent fiscal quarters) and (ii) a minimum Consolidated Interest Coverage
Ratio of 3.0 to 1.0. As of June 30, 2020, we were in compliance with all of the
financial covenants under the credit agreement. Consolidated Leverage Ratio is
the ratio of our Consolidated Funded Indebtedness to Consolidated EBITDA (as
those terms are defined in the credit agreement). For purposes of calculating
our Consolidated Leverage Ratio, Consolidated Funded Indebtedness is reduced by
available cash and Cash Equivalents (as defined in the credit agreement) in
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 our behalf during such period).
The credit agreement provides for customary events of default and generally
contains cross-default provisions with other debt instruments exceeding $150.0
million in borrowings or availability. Additionally, subject to certain
exceptions, (i) all borrowings are secured by substantially all the assets of
Quanta and its wholly-owned U.S. subsidiaries and by a pledge of all of the
capital stock of Quanta's wholly-owned U.S. subsidiaries and 65% of the capital
stock of direct foreign subsidiaries of Quanta's wholly-owned U.S. subsidiaries
and (ii) Quanta's wholly-owned U.S. subsidiaries guarantee the repayment of all
amounts due 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 our 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 revolving credit facility and/or cash and cash
equivalents on hand.
To address the transition in financial markets away from the London Interest
Bank Offered Rate (LIBOR) by the end of 2021, our senior secured 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). 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 Secured Credit Facility within Note 7 of
the Notes to 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 June 30,
2020, excluding certain amounts discussed below (in thousands):
                                          Remainder of
                              Total           2020           2021           2022           2023         2024        Thereafter
Long-term debt -
principal (1)             $ 1,384,232     $    34,385     $  69,570     $ 1,269,160     $  3,881     $  3,881     $      3,355
Long-term debt - cash
interest (2)                    2,918             831           747             577          428          279               56
Short-term debt (3)             1,761           1,761             -               -            -            -                -
Operating lease
obligations (4)               309,507          53,636        86,556          61,429       41,816       25,036           41,034
Operating lease
obligations that have
not yet commenced (5)           9,114             688         1,700           1,705        1,237          914            2,870
Finance lease
obligations (6)                 1,511             330           469             343          247          122                -
Short-term lease
obligations (7)                21,948          18,874         3,074               -            -            -                -
Deferral of tax
payments (8)                   88,729          58,039        15,345          15,345            -            -                -
Equipment purchase
commitments (9)                34,103          34,103             -               -            -            -                -
Capital commitment
related to investments
in unconsolidated
affiliates (10)                   166             166             -               -            -            -                -
Total contractual
obligations               $ 1,853,989     $   202,813     $ 177,461     $ 1,348,559     $ 47,609     $ 30,232     $     47,315

_______________________________________

(1) We had $1.36 billion of outstanding borrowings under our senior secured

credit facility, which included $1.21 billion borrowed under the term loan

facility and $152.6 million of outstanding revolving loans, both of which

bear interest at variable market rates. Assuming the principal amount

outstanding at June 30, 2020 remained outstanding and the interest rate in

effect at June 30, 2020 remained the same, the annual cash interest expense

would be approximately $20.9 million, payable until October 31, 2022, the

maturity date of the facility. Additionally, in connection with the term loan

facility, we are required to make quarterly principal payments of $16.1

million and pay the remaining balance on the maturity date for the facility.

(2) Amount represents cash interest expense on the liabilities associated with

financing transactions from the exercise of our equipment rental purchase

options and on fixed-rate, long-term debt, which does not include borrowings

under our senior secured credit facility.

(3) Amount represents short-term borrowings recorded on our June 30, 2020

condensed consolidated balance sheet.

(4) Amounts represent undiscounted operating lease obligations at June 30, 2020.

The operating lease obligations recorded on our June 30, 2020 condensed

consolidated balance sheet represent the present value of these amounts.

(5) Amounts represent undiscounted operating leases obligations that have not

commenced as of June 30, 2020. The operating leases obligations will be

recorded on our consolidated balance sheet beginning on the commencement date

of each lease.

(6) Amounts represent undiscounted finance lease obligations at June 30, 2020.

The finance lease obligations recorded on our June 30, 2020 condensed

consolidated balance sheet represent the present value of these amounts.

(7) Amounts represent short-term lease obligations that are not recorded on our

June 30, 2020 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.

(8) Amounts represent deferral of $58.0 million of federal and state income tax

payments, which were paid in July 2020, and deferral of $30.7 million of

payroll tax payments, 50% of which are due by December 31, 2021 and the

remainder of which are due by December 31, 2022. Although there is currently

no legislation that would permit further deferrals of income taxes, the CARES

Act permits deferral of payroll taxes through December 31, 2020, and we

currently intend to continue such deferrals.

(9) 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.

(10) Amount represents outstanding capital commitments associated with


     investments in unconsolidated affiliates.



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As discussed below and in Notes 2 and 11 of the Notes to Condensed Consolidated
Financial Statements in Item 1. Financial Statements, we have various
contingencies and commitments that may require the use of cash in future
periods. 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.
Concentrations of Credit Risk
We are subject to concentrations of credit risk related primarily to our cash
and cash equivalents and our 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 cash and cash
equivalent investments, which consist primarily of interest-bearing demand
deposits, money market investments and money market mutual funds. Although we do
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 we receive from these investments. In addition, we
grant credit under normal payment terms, generally without collateral, to our
customers, which include electric power 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 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.
For example, on January 29, 2019, PG&E Corporation and its primary operating
subsidiary, Pacific Gas and Electric Company (collectively PG&E), one of our
largest customers, filed for bankruptcy protection under Chapter 11 of the U.S.
Bankruptcy Code, as amended. As of the bankruptcy filing date, we had $165
million of billed and unbilled receivables. During the bankruptcy case, the
bankruptcy court approved the assumption by PG&E of certain contracts with our
subsidiaries, pursuant to which PG&E had paid $128 million of our pre-petition
receivables as of June 30, 2020. PG&E subsequently assumed its remaining
contracts with our subsidiaries as part of its Chapter 11 plan of
reorganization, which was confirmed by the bankruptcy court in June 2020. We
also sold $36 million of our pre-petition receivables to a third party in 2019
in exchange for cash consideration of $34 million, subject to certain claim
disallowance provisions, the occurrence of which could result in our obligation
to repurchase some or all of the pre-petition receivables sold. We expect the
remaining $1 million of pre-petition receivables to be sold or ultimately
collected under the terms of the plan of reorganization.
At June 30, 2020 and December 31, 2019, no customer represented 10% or more of
our consolidated net receivable position. No customer represented 10% or more of
our consolidated revenues for the three and six months ended June 30, 2020.
PG&E, a customer within our Electric Power Infrastructure Services segment,
represented 13.3% and 11.5% of our consolidated revenues for the three and six
months ended June 30, 2019.
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,
breach of contract, negligence or gross negligence and/or property damages, wage
and hour claims and other employment-related damages, punitive and 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 for additional information regarding litigation, claims and other
legal proceedings.
Multiemployer Pension Plans
Certain of our operating units are parties to collective bargaining agreements
with unions that represent certain of their employees, which 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. Our multiemployer pension plan contribution rates
generally are made to the plans on a "pay-as-you-go" basis based on our union
employee payrolls. 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. Therefore, we
are unable to accurately predict our union employee payroll and the resulting
multiemployer pension plan contribution obligations for future periods.

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We may also be required to make additional contributions to our multiemployer
pension plans if they become underfunded, and these additional contributions
will be determined based on our union employee payrolls. Special funding and
operational rules are generally applicable to certain of these multiemployer
plans that are classified as "endangered," "seriously endangered" or "critical"
status based on multiple factors. The amount, if any, that we may be obligated
to contribute to these plans cannot be reasonably estimated and is not included
in the above table due to uncertainty regarding the amount of future work
involving covered union employees, future contribution levels and possible
surcharges on plan contributions.
Furthermore, we may be subject to additional liabilities imposed by law as a
result of our participation in multiemployer defined benefit pension plans,
including in connection with a withdrawal or deemed withdrawal from a plan or a
plan being terminated or experiencing 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
withdrawal liability. We are not currently aware of any material withdrawal
liabilities that have been incurred or asserted and that remain outstanding.
However, our future contribution obligations and potential withdrawal liability
exposure could vary based on the investment and actuarial performance of the
multiemployer pension plans to which we contribute 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. We have been subject to significant withdrawal
liabilities in the past, including in connection with our withdrawal from the
Central States, Southeast and Southwest Areas Pension Plan. To the extent we are
subject to material withdrawal liabilities in the future, such liability could
adversely affect our business, financial condition, results of operations or
cash flows.
Performance Bonds and Parent Guarantees
Many customers, particularly in connection with new construction, require us to
post performance and payment bonds. These bonds provide a guarantee that we will
perform under the terms of a contract and pay our subcontractors and vendors. If
we fail to perform, the customer may demand that the surety make payments or
provide services under the bond, and we must reimburse the surety for any
expenses or outlays it incurs. Under our underwriting, continuing indemnity and
security agreement with our sureties, we have granted security interests in
certain of our assets as collateral for our obligations to the sureties. We may
be required to post letters of credit or other collateral in favor of the
sureties or our customers in the future, which would reduce the borrowing
availability under our senior secured credit facility. We have not been required
to make any material reimbursements to our sureties for bond-related costs
except in connection with the exercise of approximately $112.0 million of
advance payment and performance bonds related to the terminated
telecommunications project in Peru, which is described further in Legal
Proceedings - Peru Project Dispute in Note 11 of the Notes to Condensed
Consolidated Financial Statements in Item 1. Financial Statements. To the extent
further reimbursements are required, the amounts could be material and could
adversely affect our consolidated business, financial condition, results of
operations or cash flows. As of June 30, 2020, we are 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 level of our
bonded operating activity. As of June 30, 2020, the total amount of the
outstanding performance bonds was estimated to be approximately $3.0 billion.
Our 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 our related contractual obligation. The
estimated cost to complete these bonded projects was approximately $1.1 billion
as of June 30, 2020.
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. 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. We are not aware of any claims under any of these
guarantees that are material, except as set forth in Legal Proceedings -
Maurepas Project Dispute within Note 11 of the Notes to Condensed Consolidated
Financial Statements in Item 1. Financial Statements. To the extent a subsidiary
incurs a material obligation or liability and we have 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 a guarantee could adversely affect our consolidated
business, financial condition, results of operations and cash flows.

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Insurance


Insurance Coverage. Losses under our insurance programs are accrued based upon
our 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 our 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. As of June 30, 2020
and December 31, 2019, the gross amount accrued for insurance claims totaled
$298.4 million and $287.6 million, with $220.1 million and $212.9 million
considered to be long-term and included in "Insurance and other non-current
liabilities." Related insurance recoveries/receivables as of June 30, 2020 and
December 31, 2019 were $31.6 million and $35.1 million, of which $0.3 million
and $0.3 million are included in "Prepaid expenses and other current assets" and
$31.3 million and $34.8 million are included in "Other assets, net."
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. In any such event, our overall risk exposure would increase, which could
negatively affect our 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, our level of
insurance coverage for wildfire events decreased, including in connection with
our annual insurance renewals in the spring of 2020 and 2019, and our levels of
coverage may not be sufficient to cover potential losses. Our third-party
insurers could also decide to further reduce or exclude coverage for wildfires
or other events in the future.
Hallen Acquisition Assumed Liability. As discussed in further detail in Legal
Proceedings within Note 11 of the Notes to Condensed Consolidated Financial
Statements in Item 1. Financial Statements, we assumed certain contingent
liabilities in connection with the acquisition of Hallen. Hallen's liabilities
associated with this matter are expected to be covered under applicable
insurance policies or contractual remedies negotiated by us with the former
owners of Hallen. As of June 30, 2020, we 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
our consolidated results of operations and cash flows.
Contingent Consideration Liabilities
The liabilities recorded represent the estimated fair values of future amounts
payable to the former owners of the acquired businesses and are estimated by
management based on entity-specific assumptions that are evaluated on an ongoing
basis. Because acquisition-related contingent consideration liabilities are
contingent upon future events, we include these liabilities in the contractual
obligations table when the contingencies are resolved. We expect a significant
portion of these liabilities to be settled by late 2020 or early 2021.
Aggregate fair values of these outstanding and unearned contingent consideration
liabilities and their classification in the Consolidated Balance Sheets in Item
1. Financial Statements were as follows (in thousands):
                                               June 30, 2020      December 31, 2019
Accounts payable and accrued expenses         $        68,466    $          

77,618


Insurance and other non-current liabilities             7,304               

6,542

Total contingent consideration liabilities $ 75,770 $

84,160




The fair values of these liabilities were primarily determined using a Monte
Carlo simulation valuation methodology based on probability-weighted performance
projections and other inputs, including a discount rate and an expected
volatility factor for each acquisition. The expected volatility factor ranged
from 20.4% to 30.0% and had a weighted average of 22.6% based on historical
asset volatility of selected guideline public companies. Depending on contingent
consideration payment terms, the present values of the estimated payments are
discounted based on a risk-free rate and/or our cost of debt, ranging from 0.2%
to 3.9% and had a weighted average of 2.1%. The fair value determinations
incorporate significant inputs not observable in the market. Accordingly, the
level of inputs used for these fair value measurements is the lowest level
(Level 3), as further described in Note 2 of the Notes to Condensed Consolidated
Financial Statements in Item 1. Financial Statements. Significant changes in any
of these assumptions could result in a significantly higher or lower potential
liability.

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The majority of our contingent consideration liabilities are subject to a
maximum outstanding payment amount, which aggregated to $148.5 million for those
liabilities whose measurement periods end subsequent to June 30, 2020. One
contingent consideration liability is not subject to a maximum payment amount,
and such liability had a fair value of $1.0 million as of June 30, 2020.
Our 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. During the three and six months ended June 30, 2020,
we recognized a net decrease of $2.2 million and a net increase of $0.5 million
in the fair value of our aggregate contingent consideration liabilities. During
the three and six months ended June 30, 2019 we recognized net increases of $4.4
million and $4.3 million in the fair value of our aggregate contingent
consideration liabilities. These changes are reflected in "Change in fair value
of contingent consideration liabilities" in our consolidated statements of
operations. We made a $10.0 million interim cash payment to partially settle
certain contingent consideration liabilities during the three months ended
June 30, 2020 and $11.0 million of cash payments and the issuance of 4,277
shares of Quanta common stock during the six months ended June 30, 2020. The
majority of the cash payments have been classified as a financing activity, with
the remainder classified as an operating activity, in our condensed consolidated
statements of cash flows for the three and six months ended June 30, 2020.
Undistributed Earnings of Foreign Subsidiaries and Unrecognized Tax Benefits
We generally do not provide for taxes related to undistributed earnings of our
foreign subsidiaries because such earnings either would not be taxable when
remitted or they are considered to be indefinitely reinvested. We could also be
subject to additional foreign withholding taxes if we were to repatriate cash
that is indefinitely reinvested outside the United States, but we do not expect
such amounts to be material.
Quanta and certain subsidiaries remain under examination by various U.S. state,
Canadian and other foreign tax authorities for multiple periods. We believe it
is reasonably possible that within the next 12 months unrecognized tax benefits
may decrease by up to $6.8 million as a result of settlement of these
examinations or the expiration of certain statute of limitations periods.
Letters of Credit Fees and Commitment Fees
The Contractual Obligations table excludes letters of credit and commitment fees
under our senior secured credit facility because the amount of outstanding
letters of credit, availability and applicable fees are all variable. Assuming
that the amount of letters of credit outstanding and the fees as of June 30,
2020 remained the same, the annual cash expense for our letters of credit would
be approximately $4.6 million. For additional information regarding our letters
of credit and the associated fees and our borrowings under our senior secured
credit facility, see Liquidity and Capital Resources - Debt Instruments above.
Off-Balance Sheet Transactions
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; letters of credit
obligations; surety guarantees related to performance bonds; committed
expenditures for the purchase of equipment; and certain multiemployer pension
plan liabilities. See Contractual Obligations 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 accounting estimates detailed in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations in Part
II of our 2019 Annual Report. Significant changes to our critical accounting
policies as a result of adopting new guidance related to credit losses effective
January 1, 2020 are referenced below:

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Revenue Recognition - See Current and Long-Term Accounts Receivable, Notes
Receivable and Allowance for Credit Losses in Note 2 of the Notes to Condensed
Consolidated Financial Statements in Item 1. Financial Statements of Part I of
this Quarterly Report for information on the new accounting standard related to
current expected credit losses.

Uncertainty of Forward-Looking Statements and Information
This Quarterly Report 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, trends and economic and regulatory

conditions in particular markets or industries;

• Expectations regarding the COVID-19 pandemic, including the 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, including plans, effects

and other matters relating to the COVID-19 pandemic and our exit, through


        potential sale or otherwise, from our Latin American operations;

• The business plans or financial condition of our customers, including

with respect to or as a result of the COVID-19 pandemic;

• The potential impact of commodity prices and commodity production volumes


        on our business, financial condition, results of operations and cash
        flows and demand for our services;


•       The potential benefits from, and future performance of, acquired
        businesses and our investments, including 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.



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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 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 (e.g., shelter-in-place and other mobility restrictions,
        business closures) on our operations, personnel and supply chains, and on

commercial activity and demand across our and our customers' businesses;

• Our inability to predict the extent to which the COVID-19 pandemic and

related impacts will adversely impact our business, financial

performance, results of operations, financial position, the prices of our

securities and the achievement of our strategic objectives, including

with respect to governmental restrictions on our ability to operate,

workforce and key personnel availability, regulatory and permitting

delays, and future demand for energy and the resulting impact on demand


        for our services;


•       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 and our


        ability to effect related transactions on acceptable terms, 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 (including

the recent court ruling vacating the U.S. Army Corps of Engineers'

Nationwide Permit 12), 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;



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• Our dependence on suppliers, subcontractors, equipment manufacturers and

other third-party contractors 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 and the
        impact of the COVID-19 pandemic on the availability and performance of
        our workforce and key personnel;

• Our dependence on fixed price contracts and the potential to incur losses

with respect to these contracts;

• 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;

• 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;

• 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;



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•       The adverse impact of impairments of goodwill, other intangible assets,

receivables, long-lived assets or investments;

• Our growth outpacing our decentralized management and infrastructure;

• Inability to enforce our intellectual property rights or the obsolescence

of such rights;

• 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 performance bonds and other project security;

• Our ability to meet the regulatory requirements applicable to us and our


        subsidiaries, including the Sarbanes-Oxley Act of 2002 and the U.S.
        Investment Advisers Act of 1940;

• Rapid technological and other structural changes that could reduce the

demand for our services;

• 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;




•       Legislative or regulatory changes that result in increased costs,
        including with respect of labor and healthcare costs;

• Significant fluctuations in foreign currency exchange rates; and

• The other risks and uncertainties described elsewhere herein and in Item


        1A. Risk Factors of Part II of this Quarterly Report, Item 1A. Risk
        Factors of Part I of our 2019 Annual Report and as may be detailed from
        time to time in our other public filings with the 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. In addition, we do not undertake and expressly disclaim
any obligation to update or revise any forward-looking statements to reflect
events or circumstances after the date of this report or otherwise.
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 2019 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. For example, in January 2019
one of our largest customers, PG&E, filed for bankruptcy protection under
Chapter 11 of the U.S. Bankruptcy Code, as amended. See Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Concentration of Credit Risk for additional information regarding this
bankruptcy matter. 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

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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.
Interest Rate Risk. As of June 30, 2020, 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
long-term obligations. As of June 30, 2020, the fair value of our variable rate
debt of $1.36 billion approximated book value. Our weighted average interest
rate on our variable rate debt for the three months ended June 30, 2020 was
1.65%. The annual effect on our pretax earnings of a hypothetical 50 basis point
increase or decrease in variable interest rates would be approximately $6.8
million based on our June 30, 2020 balance of variable rate debt.
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 and six months
ended June 30, 2020, revenues from our foreign operations accounted for 11.9%
and 15.1% of our consolidated revenues. Fluctuations in foreign exchange rates
during the three and six months ended June 30, 2020 caused decreases of
approximately $13 million and $22 million in foreign revenues compared to the
three and six months ended June 30, 2019.
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 June 30,
2020.
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 $50.5 million as of June 30, 2020, an assumed 5% adverse change to
foreign exchange rates would result in a fair value decline of $2.2 million.
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 June 30, 2020, 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 June 30, 2020 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

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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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