Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.21.2
Leases
 9 Months Ended
Sep. 30, 2021
Leases [Abstract]  
Leases LEASES:
Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):
Three Months Ended Nine Months Ended
  September 30, September 30,
Lease cost Classification 2021 2020 2021 2020
Finance lease cost:
Amortization of lease assets
Depreciation (1)
$ 231  $ 53  $ 705  $ 515 
Interest on lease liabilities Interest expense 18  16  68  50 
Operating lease cost Cost of services and Selling, general and administrative expenses 25,323  29,577  80,046  89,289 
Short-term and variable lease cost (2)
Cost of services and Selling, general and administrative expenses 176,605  160,365  494,846  478,683 
Total lease cost   $ 202,177  $ 190,011  $ 575,665  $ 568,537 
(1)    Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.
(2)    Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant and primarily relates to real estate leases and consists of common area maintenance charges, real estate taxes, insurance and other variable costs.
Quanta has entered into arrangements with certain related parties to lease certain real property and facilities. Typically, the parties are employees of Quanta who are also the former owners of businesses acquired by Quanta, and the real properties and facilities continue to be utilized by Quanta subsequent to the acquisitions. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to 10 years, subject to renewal options. Related party lease expense was $2.4 million and $4.5 million for the three months ended September 30, 2021 and 2020 and $10.4 million and $13.2 million for the nine months ended September 30, 2021 and 2020.
Future minimum lease payments for operating and finance leases were as follows (in thousands):
  As of September 30, 2021
  Operating Leases Finance Leases Total
Remainder of 2021 $ 23,964  $ 296  $ 24,260 
2022 80,516  872  81,388 
2023 58,265  666  58,931 
2024 36,341  409  36,750 
2025 24,449  126  24,575 
Thereafter 36,996  —  36,996 
Total future minimum operating and finance lease payments $ 260,531  $ 2,369  $ 262,900 
Less imputed interest (20,342) (116) (20,458)
Total lease liabilities $ 240,189  $ 2,253  $ 242,442 
Future minimum lease payments for short-term leases, which are not recorded in the condensed consolidated balance sheets due to Quanta’s accounting policy election, were $18.7 million as of September 30, 2021. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future rental amounts.
The weighted average remaining lease terms and discount rates were as follows:
  As of September 30, 2021
Weighted average remaining lease term (in years):
Operating leases 4.16
Finance leases 2.90
Weighted average discount rate:
Operating leases 3.9  %
Finance leases 3.7  %
Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of September 30, 2021, the maximum guaranteed residual value of this equipment was $886.9 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.
As of September 30, 2021, Quanta had additional operating lease obligations of $6.4 million for leases that had not yet commenced but that are expected to commence in 2021 and have lease terms of one to seven years.
Leases LEASES:
Quanta primarily leases land, buildings, vehicles, construction equipment and office equipment. The components of lease costs in the accompanying condensed consolidated statements of operations are as follows (in thousands):
Three Months Ended Nine Months Ended
  September 30, September 30,
Lease cost Classification 2021 2020 2021 2020
Finance lease cost:
Amortization of lease assets
Depreciation (1)
$ 231  $ 53  $ 705  $ 515 
Interest on lease liabilities Interest expense 18  16  68  50 
Operating lease cost Cost of services and Selling, general and administrative expenses 25,323  29,577  80,046  89,289 
Short-term and variable lease cost (2)
Cost of services and Selling, general and administrative expenses 176,605  160,365  494,846  478,683 
Total lease cost   $ 202,177  $ 190,011  $ 575,665  $ 568,537 
(1)    Depreciation is included within “Cost of services” and “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.
(2)    Short-term lease cost includes both leases and rentals with initial terms of one year or less. Variable lease cost is insignificant and primarily relates to real estate leases and consists of common area maintenance charges, real estate taxes, insurance and other variable costs.
Quanta has entered into arrangements with certain related parties to lease certain real property and facilities. Typically, the parties are employees of Quanta who are also the former owners of businesses acquired by Quanta, and the real properties and facilities continue to be utilized by Quanta subsequent to the acquisitions. Quanta utilizes third party market valuations to evaluate rental rates for these properties and facilities, and the lease agreements generally have remaining lease terms of up to 10 years, subject to renewal options. Related party lease expense was $2.4 million and $4.5 million for the three months ended September 30, 2021 and 2020 and $10.4 million and $13.2 million for the nine months ended September 30, 2021 and 2020.
Future minimum lease payments for operating and finance leases were as follows (in thousands):
  As of September 30, 2021
  Operating Leases Finance Leases Total
Remainder of 2021 $ 23,964  $ 296  $ 24,260 
2022 80,516  872  81,388 
2023 58,265  666  58,931 
2024 36,341  409  36,750 
2025 24,449  126  24,575 
Thereafter 36,996  —  36,996 
Total future minimum operating and finance lease payments $ 260,531  $ 2,369  $ 262,900 
Less imputed interest (20,342) (116) (20,458)
Total lease liabilities $ 240,189  $ 2,253  $ 242,442 
Future minimum lease payments for short-term leases, which are not recorded in the condensed consolidated balance sheets due to Quanta’s accounting policy election, were $18.7 million as of September 30, 2021. Month-to-month rental expense associated primarily with certain equipment rentals is excluded from these amounts because Quanta is unable to accurately predict future rental amounts.
The weighted average remaining lease terms and discount rates were as follows:
  As of September 30, 2021
Weighted average remaining lease term (in years):
Operating leases 4.16
Finance leases 2.90
Weighted average discount rate:
Operating leases 3.9  %
Finance leases 3.7  %
Quanta has also guaranteed the residual value under certain of its equipment operating leases, agreeing to pay any difference between this residual value and the fair market value of the underlying asset at the date of lease termination. As of September 30, 2021, the maximum guaranteed residual value of this equipment was $886.9 million. While Quanta believes that no significant payments will be made as a result of these residual value guarantees, there can be no assurance that significant payments will not be required in the future.
As of September 30, 2021, Quanta had additional operating lease obligations of $6.4 million for leases that had not yet commenced but that are expected to commence in 2021 and have lease terms of one to seven years.