# QUANTA SERVICES, INC. (PWR) FY 2021 MD&A Verbatim Item 7 Management's Discussion and Analysis from QUANTA SERVICES, INC.'s 10-K for fiscal year 2021. SEC filing source: https://www.sec.gov/Archives/edgar/data/1050915/000105091522000008/pwr-20211231.htm Accession: 0001050915-22-000008 Filing date: 2022-02-25 Report date: 2021-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/PWR/ All MD&A years: /company/PWR/mda/ Next year: /company/PWR/mda/fy2022/ (FY 2022) ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations of Quanta Services, Inc. (together with its subsidiaries, Quanta, we, us or our) should be read in conjunction with our consolidated financial statements and related notes in Item 8. Financial Statements and Supplementary Data of this Annual Report. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in Cautionary Statement About Forward-Looking Statements and Information above and Item 1A. Risk Factors of this Annual Report. Overview We are a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the utility, renewable energy, communications, pipeline and energy industries in the United States, Canada, Australia and select other international markets. The performance of our business generally depends on our ability to obtain contracts with customers and to effectively deliver the services provided under those contracts. The services we provide include design, engineering, procurement, new construction, upgrade and repair and maintenance services for infrastructure within each of the industries we serve, such as electric power transmission and distribution networks; substation facilities; wind and solar energy generation and transmission and battery storage facilities; communications and cable multi-system operator networks; gas utility systems; pipeline transmission systems and facilities; and downstream industrial facilities. Our customers include many of the leading companies in the industries we serve, and we endeavor to develop and maintain strategic alliances and preferred service provider status with our customers. Our services are typically provided pursuant to master service agreements, repair and maintenance contracts and fixed price and non-fixed price new construction contracts. Beginning with the three months ended December 31, 2021, we report our results under three reportable segments: (1) Electric Power Infrastructure Solutions, (2) Renewable Energy Infrastructure Solutions and (3) Underground Utility and Infrastructure Solutions, as further described in Item 1. Business – Reportable Segments of this Annual Report. This structure is generally focused on broad end-user markets for our services. Included within the Electric Power Infrastructure Solutions segment are the results related to our communications infrastructure services. Current Year Financial Results and Significant Operational Trends and Events Key consolidated financial results for the year ended December 31, 2021 included: •Revenues increased 15.9%, or $1.78 billion, to $12.98 billion as compared to revenues of $11.20 billion for the year ended December 31, 2020; •Operating income increased 8.5%, or $52.2 million, to $663.5 million as compared to $611.4 million for the year ended December 31, 2020; •Net income attributable to common stock increased 9.1%, or $40.4 million, to $486.0 million as compared to $445.6 million for the year ended December 31, 2020; •Diluted earnings per share increased 8.8%, or $0.27, to $3.34 as compared to $3.07 for the year ended December 31, 2020; •EBITDA (a non-GAAP financial measure) increased 22.0%, or $200.5 million, to $1.11 billion as compared to $912.7 million for the year ended December 31, 2020, and adjusted EBITDA (a non-GAAP financial measure) increased 19.9%, or $209.3 million, to $1.26 billion as compared to $1.05 billion for the year ended December 31, 2020; •Net cash provided by operating activities decreased 47.8%, or $533.6 million, to $582.4 million as compared to net cash provided by operating activities of $1.12 billion for the year ended December 31, 2020; •Remaining performance obligations increased 47.9%, or $1.91 billion, to $5.90 billion as of December 31, 2021 as compared to $3.99 billion as of December 31, 2020; and •Total backlog (a non-GAAP financial measure) increased 27.4%, or $4.14 billion, to $19.27 billion as of December 31, 2021 as compared to $15.13 billion as of December 31, 2020. For a reconciliation of EBITDA and adjusted EBITDA to net income attributable to common stock, the most comparable GAAP financial measure, and a reconciliation of backlog to remaining performance obligations, the most comparable GAAP financial measure, see Non-GAAP Financial Measures below. 41 As described below, during the year ended December 31, 2021, our results reflected certain significant operational trends and events as compared to the year ended December 31, 2020, with certain of our segment results of operations recast to conform to our current segment reporting structure. Electric Power Infrastructure Solutions Segment •Revenues increased by 17.9% to $7.62 billion, as compared to $6.47 billion. •Operating income increased by 33.5% to $865.4 million, as compared to $648.4 million, and operating income as a percentage of revenues increased to 11.4%, as compared to 10.0%. •Revenues increased primarily due to growth in spending by our utility customers on grid modernization, resulting in increased demand for our electric power services, as well as approximately $245 million of revenues attributable to acquired businesses and a $90 million positive impact related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate. •Operating income increased primarily due to higher revenues. The increase in operating income as a percentage of revenues was primarily attributable to improved performance across the segment, higher levels of fixed cost absorption, and favorable contributions associated with the timing of projects and project mix. Also positively impacting operating income was $44.1 million of equity in earnings in LUMA and other integral affiliates, which represented a $32.8 million increase from the year ended December 31, 2020. Additionally, although we had substantially completed our exit from Latin America as of December 31, 2020, Electric Power Infrastructure Solutions operating income for the year ended December 31, 2020 included $74.0 million of operating losses related to Latin American operations. Partially offsetting the positive impact of these items were losses associated with certain communications projects during the year ended December 31, 2021 due to various production issues, poor subcontractor performance, challenging site conditions, permitting delays, increased completion costs and weather and seasonal impacts. Renewable Energy Infrastructure Solutions Segment •Revenues increased by 39.9% to $1.83 billion, as compared to $1.31 billion. •Operating income increased by 2.2% to $181.9 million, as compared to $177.9 million, and operating income as a percentage of revenues decreased to 10.0%, as compared to 13.6%. •Revenues increased primarily due to a $450 million increase in revenues attributable to acquired businesses, primarily Blattner, the results of operations of which are included since the acquisition date of October 13, 2021. •The increase in operating income was primarily due to higher revenues associated with the acquisition of Blattner. Blattner’s results as a percentage of operating income were largely in line with results associated with the transmission and interconnection construction related to the renewable energy infrastructure. The decrease in operating income as a percentage of revenues for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the favorable close-out of certain projects in 2020. Underground Utility and Infrastructure Solutions Segment •Revenues increased by 3.0% to $3.53 billion, as compared to $3.43 billion. •Operating income decreased by 11.7% to $150.1 million, as compared to $170.1 million, and operating income as a percentage of revenues decreased to 4.3%, as compared to 5.0%. •Revenues increased primarily due to higher demand for our services from our gas utility and industrial customers; $25 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate; and approximately $20 million of revenues attributable to acquired businesses. •Operating income and operating income as a percentage of revenues decreased primarily due to the recognition of $31.7 million of provision for credit losses related to receivables owed from a customer that declared bankruptcy in July 2021, and its affiliate, which is described further in Accounts Receivable and Allowance for Credit Losses 42 within Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. See Business Environment, Results of Operations and Liquidity and Capital Resources below for additional information and discussion related to consolidated and segment results. Recent Significant Acquisition and Related Debt Financing On October 13, 2021, we completed the acquisition of Blattner, a large and leading utility-scale renewable energy infrastructure solutions provider that is located in and primarily operates in North America. Consideration for this acquisition was $2.37 billion paid or payable in cash (subject to certain adjustments) and 3,326,955 shares of Quanta common stock, which had a fair value of $345.4 million as of the date of the acquisition. The final amount of consideration for the acquisition remains subject to certain post-closing adjustments, including with respect to net working capital (inclusive of cash) and certain assumed liabilities. Additionally, the former owners of Blattner are eligible to receive the potential payment of up to $300.0 million of contingent consideration, payable to the extent the acquired business achieves certain financial performance targets over a three-year period beginning in January 2022. Based on the estimated fair value of the contingent consideration, we recorded a $125.6 million liability as of the date of the acquisition. Blattner’s results of operations have been included in our consolidated financial statements since the acquisition date, with its results included in the Renewable Energy Infrastructure Solutions segment. Additionally, we entered into certain debt financing arrangements in connection with our acquisition of Blattner. On September 23, 2021, we received net proceeds from the issuance of senior notes of $1.48 billion, net of the original issue discount and underwriting discounts and deferred financing costs, and on October 13, 2021, we borrowed $750.0 million from a term loan facility under our senior credit facility. We utilized these proceeds, together with approximately $50.9 million of revolving loans borrowed under our senior credit facility, to pay the cash consideration due at closing for the acquisition of Blattner. Business Environment We believe there are long-term growth opportunities across our industries, and we continue to have a positive long-term outlook. Although not without risks and challenges, including those discussed in Item 1A. Risk Factors of this Annual Report, we believe, with our full-service operations, broad geographic reach, financial position and technical expertise, we are well positioned to capitalize on opportunities and trends in our industries. Electric Power Infrastructure Solutions. Utilities are continuing to invest 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. While the COVID-19 pandemic resulted in a short-term overall decline in electricity usage in 2020, primarily related to commercial and industrial users, demand recovered and continued to increase in 2021, and we expect demand for electricity in North America to grow over the long term and believe that certain segments of the North American electric power grid are not adequate to efficiently serve the power needs of the future. Furthermore, to the extent that electrification trends increase, including through, among other things, electric vehicle (EV) adoption, demand for electricity could be greater than currently anticipated. To accommodate this growth, we expect continued demand for new or expanded transmission, substation and distribution infrastructure to reliably transport power to meet demand driven by electrification and the modification and reengineering of existing infrastructure as existing coal and nuclear generation facilities are retired or shut down. 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 to improve grid management and create efficiencies, and in preparation for emerging technologies, such as EVs. A number of utilities also continue to implement system upgrades and hardening programs in response to recurring severe weather events, such as hurricanes and wildfires. For example, utilities along the Eastern and Gulf Coasts of the United States are executing storm hardening programs to make their systems more resilient to hurricanes and other severe weather events, which we expect to continue for the foreseeable future. Additionally, there are significant system resiliency initiatives underway in California and other regions in the western United States that are designed to prevent and manage the impact of wildfires. While these resiliency initiatives provide additional opportunities for our services, they also increase our potential exposure to significant liabilities, as these events can be started by the failure of electric power and other infrastructure on which we have performed services. Utilities are also executing significant initiatives to underground critical infrastructure, including additional underground transmission and distribution initiatives by utilities in California, underground transmission projects in the northeast United States, underground distribution circuits along U.S. coastlines and underground transmission lines for offshore wind generation projects. 43 With respect to our communications service offerings, consumer and commercial demand for communication and data-intensive, high-bandwidth wireline and wireless services and applications is driving significant investment in infrastructure and the deployment of new technologies. In particular, communications providers in North America are in the early stages of developing new fifth generation wireless services (5G), which are intended to facilitate bandwidth-intensive services at high speeds for consumers and commercial applications. Additionally, recent legislative and regulatory initiatives, including the Rural Digital Opportunity Fund enacted by the Federal Communications Commission and the Infrastructure Investment and Jobs Act, have dedicated billions of dollars of funding to support broadband service to underserved markets. As a result of these industry trends, we believe there will be meaningful demand for our engineering and construction services. We also reoriented our communications service offerings to strategically focus on the North American market, substantially completing the exit of our Latin American communications operations during 2020, which we anticipate will result in improved profitability within our communications services operations. Renewable Energy Infrastructure Solutions. We believe the transition to a carbon-neutral economy, which is being driven by consumer and investor preferences, increasing electrification trends, supportive public policy actions and declining levelized costs of renewable energy, will require sizeable long-term investment in renewable generation and related infrastructure, including meaningful repowering and modernization of existing assets. To that end, renewable energy developers are expected to continue to increase investments in wind and solar projects, as well as energy storage projects. Utilities have increased the percentage of renewable electricity bought through power purchase agreements (PPAs) with renewable energy developers, and we believe are in the early stages of investing directly in renewable generation facilities, which could expand significantly over time as they pursue clean energy strategies and emissions-reduction initiatives. Also, a growing number of corporate enterprises, particularly technology companies, are entering into PPAs with renewable energy developers to source renewable electricity to power their facilities and achieve their own carbon reduction initiatives. We believe increased battery storage can support increased renewable energy development by providing shorter-term storage of electricity from renewable energy generation, particularly from solar facilities, which helps to manage the amount and timing of intermittent power placed on the grid from renewable generation. Though the current capacity of installed battery storage is much smaller than the amount of wind and solar capacity installed in North America, utility-scale battery storage capacity is expected to grow significantly and at higher rates over the longer term, which we believe will provide significant growth opportunities for us. We believe these dynamics will generate significant demand in the near- and longer-term for our renewable energy infrastructure services, including our generation construction services and engineering expertise in utility-scale solar, wind and battery storage projects, as well as our services related to the development and construction of related infrastructure, including high-voltage electric transmission and substation infrastructure and battery storage facilities, which are necessary to interconnect and transmit electricity from new renewable energy generation facilities into the existing electric power grid and enhance grid reliability. While the demand for certain renewable energy services could fluctuate in the short term due to, among other things, supply chain and other logistical difficulties that could delay projects, the availability of production tax credits, sourcing restrictions on materials and components necessary for certain projects (e.g., solar panels) or permitting delays, we believe we are well positioned, through our recent acquisition of Blattner and our existing renewable energy and transmission services offerings, to capitalize on the longer term growth trends with respect to the development of renewable energy generation and related infrastructure. Underground Utility and Infrastructure Solutions. For several years we have focused on increasing our underground utility and infrastructure solutions related to specialty services and industries that we believe are driven by regulated utility spending, regulation, replacement and rehabilitation of aging infrastructure and safety and environmental initiatives, which we believe provide a greater level of business sustainability and predictability. These service offerings include gas utility services, pipeline integrity services and downstream industrial services. We believe focusing on these services helps to offset the seasonality and cyclicality of our larger pipeline project business, and although our strategic focus on larger pipeline projects has decreased, we continue to pursue project opportunities to the extent they satisfy our margin and risk profiles and support the needs of our customers. Though we experienced short-term disruptions in 2020 and to a lesser extent in 2021 due to the COVID-19 pandemic, we believe demand for our gas utility distribution services will increase as a result of customer desire to upgrade and replace aging infrastructure and increasing regulatory requirements. In particular, natural gas utilities have implemented multi-decade modernization programs to replace aging cast iron, bare steel and plastic system infrastructure with modern materials for safety, reliability and environmental purposes. We believe there are also growth opportunities for our pipeline integrity, rehabilitation and replacement services, as regulatory measures have increased the frequency and stringency of pipeline integrity testing requirements that require our customers to test, inspect, repair, maintain and replace pipeline infrastructure to ensure that it operates in a safe, reliable and environmentally conscious manner. Further, permitting challenges associated with construction of new pipelines can make existing pipeline infrastructure more valuable, motivating owners to extend the useful life of existing pipeline assets through integrity initiatives. 44 Broader challenges and uncertainties in the energy market, which have been compounded by the COVID-19 pandemic, have materially impacted, and may continue to materially impact, our Underground Utility and Infrastructure Solutions segment. The extent to which these challenges continue depends on the pace of recovery of the global economy and our end market conditions. In particular, demand for our midstream and industrial services operations has declined as customers reduced and deferred regularly scheduled maintenance and capital projects due to lack of demand for refined products. Our services to downstream industrial energy customers, which are primarily located along the Gulf Coast of the United States and in other select markets in North America, have been negatively impacted by an overall decline in global demand for refined products during 2020 and 2021. While demand for our critical path catalyst services has remained solid, in the second half of 2020 customers began reducing onsite activity for our other services and have deferred maintenance and certain turnaround projects to 2022. However, to the extent commodity prices continue to strengthen and the global economy continues to recover, we believe the outlook for services with respect to these customers will continue to improve. We also believe there are significant long-term opportunities for these services, including our high-pressure and critical-path turnaround services, as well as our capabilities with respect to instrumentation and electrical services, piping, fabrication and storage tanks services, and other industrial services, and that processing facilities located along the U.S. Gulf Coast region should have certain long-term strategic advantages due to their proximity to affordable hydrocarbon resources. However, these processing facilities can also be negatively impacted for short-term periods due to severe weather events, such as hurricanes, tropical storms and floods. Furthermore, the broader oil and gas industry is highly cyclical and subject to price and production volume volatility, 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 uncertainties and challenges in the energy market and overall economy caused by the COVID-19 pandemic. As a result of these dynamics, our revenues related to larger pipeline projects have declined significantly over the last few years. This dynamic is supportive of our increased focus on specialty services and industries that are driven by regulated utility spending, regulation, replacement and rehabilitation of aging infrastructure and safety and environmental initiatives, which we believe provide a greater level of business sustainability and predictability. Lastly, we believe there are also longer-term opportunities that may arise in this segment. For example, we believe natural gas, due to its expected abundant supply and attractive price over the long-term, will remain a fuel of choice for both primary power generation and backup power generation for renewable power plants in North America. We believe the favorable characteristics of natural gas could also position North America as a leading competitor in the global LNG export market. In certain areas, the existing pipeline system infrastructure is insufficient to support any future LNG export facilities, which could provide additional opportunities for our business. We also believe that customers in this segment are implementing strategies to reduce carbon emissions produced from their operations, which are providing incremental opportunities for our services, including developing infrastructure for blending hydrogen into natural gas flow to customers, carbon capture projects, which could include building or repurposing pipeline infrastructure. While certain customers are in various stages of evaluating or implementing these types of strategies, certain near-term opportunities exist and we believe more meaningful opportunities could occur over the longer term to the extent these strategies and opportunities progress and mature. COVID-19 Pandemic Impact. The effects of the COVID-19 pandemic continue to significantly impact global economies due to, among other things, workforce and travel restrictions and supply chain, production and other logistical disruptions. While we have continued to operate substantially all of our activities as a provider of essential services, during the course of the pandemic our operations and financial results have been adversely impacted by reduced customer spending and demand for certain of our services (including as described above), as well as governmental responses to the COVID-19 pandemic, including shut-down orders and limitations on work site practices implemented by governments, which have negatively impacted (i) our Canadian operations and financial results during 2020 and 2021; (ii) our Australian operations and financial results during 2020 and 2021; (iii) our operations in certain major U.S. metropolitan markets that were meaningfully impacted by the pandemic during the first and second quarters of 2020; and (iv) our Latin American operations during 2020. Additionally, governmental vaccination and testing requirements related to COVID-19, as well as certain standards and guidance as to preventing the spread of COVID-19, have impacted and may continue to impact our business in the future. These include vaccination or testing standards and requirements issued by federal, state and local governmental entities that require employers to ensure their workforce is fully vaccinated or to require testing for unvaccinated workers. In addition, many of our customers have established vaccination requirements that could apply to our employees performing work on their premises, or in proximity of their employees. The implementation of vaccination and testing requirements could have a material adverse effect on our business in the event that, among other things, a significant portion of our workforce does not choose to become vaccinated, as such employees may not be able to perform work for certain customers that require vaccination. Moreover, the costs related to mandatory testing for unvaccinated employees are significant, and time away from work for testing is disruptive to our operations. The broader and longer-term implications of the COVID-19 pandemic on our results of operations and overall financial performance and position remain highly uncertain and variable, and we expect continued operational challenges for portions of 45 our operations in the future. The future impact that the pandemic, or any resulting market disruption and volatility, will have on our business, cash flows, liquidity, financial condition and results of operations will depend on future developments, including, among others, the duration and severity of the pandemic; the actions taken by governmental authorities, customers, suppliers and other third parties in response to the pandemic and the consequences of those actions; our workforce availability; and the timing and extent to which normal economic and operating conditions resume and continue. Regulatory Challenges and Opportunities. The regulatory environment creates both challenges and opportunities for our business, and in recent years our margins have been impacted by regulatory and permitting delays, as well as private legal challenges related to regulatory requirements, particularly with respect to large transmission and large pipeline projects. As a result, regulatory and environmental permitting processes continue to create uncertainty for projects and negatively impact customer spending. However, we believe that there are also several existing, pending or proposed legislative or regulatory actions that may alleviate certain regulatory and permitting issues and positively impact long-term demand, particularly in connection with electric power infrastructure and renewable energy spending. For example, regulatory changes affecting siting and right-of-way processes could potentially accelerate construction for transmission projects, and state and federal reliability standards are creating incentives for system investment and maintenance. Additionally, as described above, we consider renewable energy, including solar and wind generation facilities, to be an ongoing opportunity; however, policy and economic incentives designed to support and encourage such projects, as well as limitations on the availability or sourcing of materials or components for such projects, can create variability of project timing. Labor Resource Availability and Cost. We continue to address the longer-term need for additional labor resources in our markets, as our customers continue to seek additional specialized labor resources to address an aging utility workforce and longer-term labor availability issues, increasing pressure to reduce costs and improve reliability, and increasing duration and complexity of their capital programs. We believe these trends will continue, possibly to such a degree that demand for labor resources will outpace supply. Furthermore, the increased demand for our services based on the dynamics described above can create shortages of qualified labor in our markets. Our ability to capitalize on available opportunities is limited by our ability to employ, train and retain the necessary skilled personnel, and therefore we are taking proactive steps to develop our workforce, including through strategic relationships with universities, the military and unions and the expansion and development of our training facility and postsecondary educational institution. Although we believe these initiatives will help address workforce needs, meeting our customers’ demand for labor resources could prove challenging. Additionally, we continue to monitor our labor markets and expect labor costs to increase based on increased demand for our services. Our labor costs are passed through in certain of our contracts, and the portion of our workforce that is represented by labor unions typically operate under multi-year collective bargaining agreements, which provide some visibility into future labor costs. While we do not currently believe this environment will materially impact our profitability and would expect to be able to adjust contract pricing with certain customers to the extent wages and other labor costs increase, whether due to renegotiation of collective bargaining agreements or market conditions, meaningful increases in our labor costs could have a material adverse effect on our business, financial condition, results of operations or cash flows to the extent we cannot do so. Materials and Equipment Procurement. We continue to monitor supply chain and other logistical challenges, global trade relationships (e.g., tariffs, sourcing restrictions) and other general market and political conditions (e.g., inflation) with respect to availability and costs of certain materials and equipment necessary for the performance of our business and for materials necessary for our customers’ projects, including, among other things, steel, copper, aluminum, and components for renewable energy projects. For example, we believe some participants in the renewable energy market are experiencing supply chain challenges, resulting in delays and shortages of, and increased costs for, materials necessary for the construction of certain renewable energy projects in the near term, including as a result of sourcing restrictions related to solar panels manufactured in China. While we believe many of our renewable energy customers are generally better equipped to manage near-term supply chain disruptions than their smaller competitors, these challenges could delay our customers’ ongoing projects or impact their future project schedules, which in turn could impact the timing of or demand for our renewable energy services. While these delays are not anticipated to result in exposure to liquidated damages or commodity risks, such delays could cause customers to cancel projects as higher than expected costs impact project profitability projections. Additionally, based on, among other things, the significant worldwide shortage of semiconductors, vehicle manufacturers are experiencing production delays with respect to new vehicles for our fleet (both on-road and specialty vehicles) and vehicle parts (e.g., tires), all of which we utilize in our operations, and certain of our vehicle delivery orders scheduled for delivery in 2022 have been delayed or cancelled. While we believe we have taken steps to secure delivery of a sufficient amount of vehicles in the near term and do not anticipate any significant disruptions with respect to our fleet, to the extent the production issues become worse than expected or become longer-term in nature, our operations could be negatively impacted. Delays impacting construction schedules resulting from supply chain disruption impacting project materials could result in risks. In addition, as a result of the recent inflationary pressure, our results of operations could be negatively impacted by price inflation related to costs of materials and equipment to the extent we are not able to pass such costs through to our contracts. 46 Acquisitions and Investments. We believe potential acquisition and investment opportunities exist in our industries and adjacent industries, primarily due to the highly fragmented and evolving nature of those industries and inability of many companies to expand due to capital or liquidity constraints. While the desirability of certain of these opportunities could be impacted by the recent inflationary pressure in the short term, 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, profit, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Business Environment above, Results of Operations below and Item 1A. Risk Factors of this 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. 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, post-wildfire floods and debris flows, 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 Business Environment above for further discussion regarding the impact of the COVID-19 pandemic. However, 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, and we had a significant amount of emergency restoration services revenues in 2020 and 2021. Demand for services. We perform the majority of our services under existing contracts, including master service agreements (MSAs) and similar agreements pursuant to which our customers are not committed to specific volumes of our services. Therefore, our volume of business can be positively or negatively affected by fluctuations in the amount of work our customers assign us in a given period, which may vary by geographic region. For example, to the extent our customers accelerate grid modernization or hardening programs or face deadlines to meet regulatory requirements for rehabilitation, reliability or efficiency, our volume of work could increase under existing agreements. Also, as described above in Business Environment, we have experienced reductions in demand for certain services as a result of the uncertainties and challenges in the energy market and overall economy caused by the COVID-19 pandemic. Examples of other items that may cause demand for our services to fluctuate materially from quarter to quarter include: the financial condition of our customers, their capital spending and their access to capital; economic and political conditions on a regional, national or global scale, including availability of renewable energy tax credits; interest rates; governmental regulations affecting the sourcing of materials and equipment; other changes in U.S. and global trade relationships; and project deferrals and cancellations. Revenue mix and impact on margins. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Our larger or more complex projects typically include, among others, transmission projects with higher voltage capacities; pipeline projects with larger-diameter throughput capacities; large-scale renewable generation projects, which we expect to increase subsequent to our acquisition of Blattner; and projects with increased engineering, design or construction complexities, more difficult terrain or geographical requirements, or longer distance requirements. These projects typically yield opportunities for higher margins than our recurring services under MSAs described above, as we assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. However, larger projects are subject to additional risk of regulatory delay and cyclicality. For example, our revenues with respect to large pipeline projects have declined significantly in 47 recent years, and a significant number of larger projects have been delayed or cancelled during that same period. Project schedules also fluctuate, particularly in connection with larger, more complex or longer-term projects, which can affect the amount of work performed in a given period. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a greater number of smaller projects versus continuous production on fewer larger projects. As a result, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward. Project variability and performance. Margins for a single project may fluctuate period to period due to changes in the volume or type of work performed, the pricing structure under the project contract or job productivity. Additionally, our productivity and performance on a project can vary period to period based on a number of factors, including unexpected project difficulties or site conditions (including in connection with difficult geographic characteristics); project location, including locations with challenging operating conditions; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; protests, other political activity or legal challenges related to a project; the performance of third parties; and the impact of the COVID-19 pandemic. Moreover, we currently generate a significant portion of our revenues under fixed price contracts, and fixed price contracts are more common in connection with our larger and more complex projects that typically involve greater performance risk. Furthermore, subsequent to our acquisition of Blattner, we expect the portion of our revenues generated under fixed price contracts to increase significantly. Under these contracts, we assume risks related to project estimates and execution, and project revenues can vary, sometimes substantially, from our original projections due to a variety of factors, including the additional complexity, timing uncertainty or extended bidding, regulatory and permitting processes associated with these projects. These variations can result in a reduction in expected profit or the incurrence of losses on a project or the issuance of change orders or assertion of contract claims against customers. See Revenue Recognition - Contract Estimates in Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report for further information regarding changes in estimated contract revenues and/or project costs, including any significant project gains or losses in connection with fixed price contracts that have impacted our results, and determinations with respect to the recognition of change orders and claims as contract price adjustments. 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 20% of our work to other service providers. Our customers are usually responsible for supplying the materials for their projects. However, under some contracts, including contracts for projects where we provide engineering, procurement and construction (EPC) services, 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, as our markup on materials is generally lower than our markup on labor costs, and in a given period an increase in the percentage of work with greater materials procurement requirements may decrease our overall margins. Furthermore, as discussed further in Overview - Business Environment, fluctuations in the price or availability of materials and equipment we or our customers utilize could impact demand for our services or costs to complete projects. 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 dollars and Australian dollars, can materially impact our results of operations and impact comparability between periods. Results of Operations A discussion of the changes in our consolidated results of operations between the years December 31, 2021 and December 31, 2020 and the changes in our segment results of operations between the years ended December 31, 2021, 2020 and 2019 is included below, with certain of our segment results of operations recast to conform to our current segment reporting structure. A discussion of the changes in our consolidated results of operations between the years ended December 31, 2020 and 2019 is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 1, 2021. The results of acquired businesses have been included in the following results of operations since their respective acquisition dates. 48 The following table sets forth selected statements of operations data, such data as a percentage of revenues for the years indicated as well as the dollar and percentage change from the prior year (dollars in thousands): Consolidated Results [[GREPCENT_TABLE]] [["","","Year Ended December 31,","","Change"],["","","2021","","2020","","$","","%"],["Revenues","","$","12,980,213","","","100.0","%","","$","11,202,672","","","100.0","%","","$","1,777,541","","","15.9","%"],["Cost of services (including depreciation)","","11,026,954","","","85.0","","","9,541,825","","","85.2","","","1,485,129","","","15.6","%"],["Gross profit","","1,953,259","","","15.0","","","1,660,847","","","14.8","","","292,412","","","17.6","%"],["Equity in earnings of integral unconsolidated affiliates","","44,061","","","0.3","","","11,303","","","0.1","","","32,758","","","289.8","%"],["Selling, general and administrative expenses","","(1,155,956)","","","(8.9)","","","(975,074)","","","(8.7)","","","(180,882)","","","18.6","%"],["Amortization of intangible assets","","(165,366)","","","(1.2)","","","(76,704)","","","(0.6)","","","(88,662)","","","115.6","%"],["Asset impairment charges","","(5,743)","","","\u2014","","","(8,282)","","","(0.1)","","","2,539","","","(30.7)","%"],["Change in fair value of contingent consideration liabilities","","(6,734)","","","(0.1)","","","(719)","","","\u2014","","","(6,015)","","","836.6","%"],["Operating income","","663,521","","","5.1","","","611,371","","","5.5","","","52,150","","","8.5","%"],["Interest and other financing expenses","","(68,899)","","","(0.5)","","","(45,013)","","","(0.4)","","","(23,886)","","","53.1","%"],["Interest income","","3,194","","","\u2014","","","2,449","","","\u2014","","","745","","","30.4","%"],["Other income, net","","25,085","","","0.2","","","2,539","","","\u2014","","","22,546","","","888.0","%"],["Income before income taxes","","622,901","","","4.8","","","571,346","","","5.1","","","51,555","","","9.0","%"],["Provision for income taxes","","130,918","","","1.0","","","119,387","","","1.1","","","11,531","","","9.7","%"],["Net income","","491,983","","","3.8","","","451,959","","","4.0","","","40,024","","","8.9","%"],["Less: Net income attributable to non-controlling interests","","6,027","","","0.1","","","6,363","","","\u2014","","","(336)","","","(5.3)","%"],["Net income attributable to common stock","","$","485,956","","","3.7","%","","$","445,596","","","4.0","%","","$","40,360","","","9.1","%"]] [[/GREPCENT_TABLE]] ` Revenues. Revenues increased primarily due to a $1.16 billion increase in revenues from our Electric Power Infrastructure Solutions segment, largely due to growth in spending by our utility customers on grid modernization resulting in increased demand for our electric power services and approximately $245 million of revenues attributable to acquired businesses. Also contributing to the increase was a $520.1 million increase in revenues from our Renewable Energy Infrastructure Solutions segment, primarily due to our acquisition of Blattner in the fourth quarter of 2021, as well as a $101.4 million increase in revenues from our Underground Utility and Infrastructure Solutions segment, primarily due to increased demand from our gas utility and industrial customers. See Segment Results below for additional information and discussion related to segment revenues. Gross profit. Gross profit increased primarily due to an increase in revenues across all segments. Gross profit as a percentage of revenues increased due to improved utilization and fixed cost absorption from our Electric Power Infrastructure Solutions and Renewable Energy Infrastructure Solutions segments. Gross profit was positively impacted in 2020 by the favorable close-out of certain projects in the Renewable Energy Infrastructure Solutions segment. Gross profit for the Underground Utility and Infrastructure Solutions segment in 2021 was adversely impacted by the recognition of a $31.7 million provision for credit loss related to receivables owed by a customer that declared bankruptcy in July 2021 and its affiliate, which is described further in Accounts Receivable and Allowance for Credit Losses within Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. Additionally, gross profit for the Underground Utility and Infrastructure Solutions segment was adversely impacted during the years ended December 31, 2021 and 2020 by uncertainties and challenges in the energy market and overall economy caused by the COVID-19 pandemic, which negatively impacted our margins and ability to cover fixed and overhead costs. See Segment Results below for additional information and discussion related to segment operating income (loss). Equity in earnings of integral unconsolidated affiliates. The amounts include our portion of amounts earned by integral unconsolidated affiliates and primarily relate to our portion of amounts earned by LUMA. The increase with respect to LUMA is mostly related to the completion of the steps necessary to transition operation and maintenance of the Puerto Rican electric transmission and distribution system from the owner to LUMA in mid-2021 and the entry into an interim services agreement that covers the interim services period for the project. See Note 9 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report for further information on LUMA. During the interim services period, LUMA receives a fixed annual management fee, payable in monthly installments, and is reimbursed for costs 49 and expenses. Additionally, we acquired a 44% interest in an entity that provides right-of-way solutions, including site preparation and clearing, materials delivery and installation and management of permitting requirements and traffic control at the beginning of the fourth quarter of 2021, and our portion of the amounts earned by this investment are included beginning as of that investment date. Selling, general and administrative expenses. The increase in selling, general and administrative expenses was primarily attributable to a $95.6 million increase in expenses associated with acquired businesses and a $31.2 million increase in the provision for credit losses, the majority of which related to the recognition of the provision for credit loss related to a receivable from a customer that declared bankruptcy in July 2021, and its affiliate, which is described further in Accounts Receivable and Allowance for Credit Losses within Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. Also contributing to the increase was a $31.2 million increase in compensation expense, largely associated with increased incentive compensation expense as a result of higher levels of operating performance and an increase in salaries and benefits due to increased personnel to support business growth. Compensation expense for the year ended December 31, 2020 included a $14.0 million correction of prior period amounts related to the valuation of and accounting for certain performance-based equity awards that were awarded during the years 2017 to 2019. Also contributing to the 2021 increase were a $11.4 million increase in travel and related expenses, which were below historical levels in 2020 as a result of reduced travel due to the COVID-19 pandemic, and a $2.9 million increase in expense related to deferred compensation liabilities. The fair market value changes in deferred compensation liabilities were largely offset by changes in the fair value of the company-owned life insurance (COLI) policies associated with the deferred compensation plan, which are included in other income, net as discussed below. Partially offsetting these increases were $6.3 million of incremental gains on sales of property and equipment. Amortization of intangible assets. The increase was primarily due to amortization of intangible assets associated with recently acquired businesses, including the recent acquisition of Blattner, partially offset by reduced amortization expense associated with older acquired intangible assets, as certain of these assets became fully amortized. Asset impairment charges. During the year ended December 31, 2021, we recognized a $5.7 million asset impairment charge related to certain equipment not utilized in our core operations, some of which was sold in October 2021 and the remainder of which was classified as assets held for sale as of December 31, 2021. Management reviews long-lived assets for potential impairment whenever events or changes in circumstances indicate the carrying amount may not be realizable, which may arise in connection with regular evaluations as to whether business operations have the ability to contribute long-term strategic value. As part of such evaluations during the fourth quarter of 2020, we recognized $8.3 million of asset impairment charges, $7.0 million of which related to our Latin American operations and $1.3 million of which related to the planned sale of certain equipment. Change in fair value of contingent consideration liabilities. Contingent consideration liabilities are payable in the event certain performance objectives are achieved by an acquired business during designated post-acquisition periods. The change in fair value associated with these liabilities was primarily due to the effect of present value accretion on fair value calculations and, to a lesser extent, changes in performance in post-acquisition measurement periods by certain acquired businesses. Further changes in fair value are expected to be recorded periodically until the contingent consideration liabilities are settled, including potentially significant changes associated with the potential payment of up to $300.0 million of contingent consideration in connection with our acquisition of Blattner, the amount for which will be determined during a three-year post-acquisition period that began in January 2022. See Notes 6 and 17 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report for additional information related to these liabilities. Interest and other financing expenses. Interest and other financing expenses increased primarily due to higher levels of debt and, to a lesser extent, a higher weighted average interest rate during the year ended December 31, 2021 compared to 2020. Our long-term debt increased significantly during the year ended December 31, 2021 in connection with our acquisition of Blattner, as described in further detail in Liquidity and Capital Resources below, and we expect that our interest expense will increase during the year ending December 31, 2022 as a result of this higher level of debt. Additionally, we paid $4.4 million of fees to the lenders related to a bridge facility commitment entered into but not utilized in connection with our acquisition of Blattner, all of which was amortized to interest and other financing expenses in the year ended December 31, 2021. For additional information on our debt instruments, including our senior notes, senior credit facility, the bridge facility commitment and interest requirements related to our debt instruments, see Note 10 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. Interest income. Interest income increased primarily due to interest received related to a settlement with a customer. Other income, net. Other income, net increased primarily due to unfavorable results in the year ended December 31, 2020 primarily due to a $9.3 million impairment charge associated with an investment in a water and gas pipeline infrastructure contractor located in Australia that is accounted for using the cost method of accounting and $8.7 million of impairment charges associated with two non-integral equity investments that were negatively impacted by the decline in demand for refined 50 petroleum products. Higher income related to investments in unconsolidated affiliates and COLI policies associated with our deferred compensation plan positively impacted results for the year-ended December 31, 2021, while an $8.9 million legal settlement favorably impacted results for the year ended December 31, 2020. Provision for income taxes. The effective tax rates for the years ended December 31, 2021 and 2020 were 21.0% and 20.9%. The rate for the year ended December 31, 2021 was favorably impacted by the recognition of a $21.3 million tax benefit that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair market value, as compared to the recognition of $3.1 million associated with this tax benefit for the year ended December 31, 2020, which was due to a smaller difference between the vest date fair market value and grant date fair market value of vested equity incentive awards. The effective tax rate for the year ended December 31, 2021 was also favorably impacted by $6.7 million of tax benefits related to a decrease in reserves for uncertain tax positions as a result of the expiration of certain U.S. federal and state statutes of limitations periods, a $7.8 million benefit related to a favorable clarification by the Internal Revenue Service regarding deductions for certain per diem amounts, a $7.0 million benefit related to certain COLI policies, and a $2.4 million reduction in our deferred tax asset valuation allowance related to U.S. state net operating losses. The effective tax rate for the year ended December 31, 2020 was also favorably impacted by a $45.1 million reduction in our deferred tax asset valuation allowance related to foreign tax credits and $8.2 million of tax benefits related to a decrease in reserves for uncertain tax positions, which resulted from the expiration of certain federal and state statutes of limitations periods. The effective tax rates for the years ended December 31, 2021 and 2020 include the impact of taxable losses of $9.6 million and $60.8 million associated with our Latin American operations, for which no income tax benefit was recognized. Absent the items described above, the effective tax rates for December 31, 2021 and 2020 would have been 27.8% in each period. We expect our effective tax rate to be approximately 25.0% to 25.5% for 2022.  Other comprehensive income (loss), net of taxes. Other comprehensive income (loss) results from translation of the balance sheets of our foreign operating companies, 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 year ended December 31, 2021 was impacted primarily by the strengthening of the U.S. dollar against the Australian dollar as of December 31, 2021 when compared to December 31, 2020. The gain in the year ended December 31, 2020 was impacted primarily by the weakening of the U.S. dollar against both the Australian and Canadian dollars as of December 31, 2020. Segment Results Reportable segment information, including revenues and operating income by type of work, is gathered from each of our operating companies for the purpose of evaluating segment performance. Classification of our operating company revenues by type of work for segment reporting purposes can at times require judgment on the part of management. Our operating companies 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. Integrated operations and common administrative support for operating companies require that certain allocations be made to determine segment profitability, including allocations of corporate shared and indirect operating costs, as well as general and administrative costs. Certain corporate costs are not allocated, including facility costs, acquisition and integration 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. Year ended December 31, 2021 compared to the year ended December 31, 2020 The following tables set 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 51 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. [[GREPCENT_TABLE]] [["","","Year Ended December 31,","","Change"],["","","2021","","2020","","$","","%"],["Revenues:"],["Electric Power Infrastructure Solutions","","$","7,624,240","","","58.7","%","","$","6,468,192","","","57.7","%","","$","1,156,048","","","17.9","%"],["Renewable Energy Infrastructure Solutions","","1,825,259","","","14.1","","","1,305,151","","","11.7","","","520,108","","","39.9","%"],["Underground Utility and Infrastructure Solutions","","3,530,714","","","27.2","","","3,429,329","","","30.6","","","101,385","","","3.0","%"],["Consolidated revenues","","$","12,980,213","","","100.0","%","","$","11,202,672","","","100.0","%","","$","1,777,541","","","15.9","%"],["Operating income (loss):"],["Electric Power Infrastructure Solutions","","$","865,409","","","11.4","%","","$","648,405","","","10.0","%","","$","217,004","","","33.5","%"],["Renewable Energy Infrastructure Solutions","","181,908","","","10.0","%","","177,920","","","13.6","%","","3,988","","","2.2","%"],["Underground Utility and Infrastructure Solutions","","150,147","","","4.3","%","","170,074","","","5.0","%","","(19,927)","","","(11.7)","%"],["Corporate and Non-Allocated costs","","(533,943)","","","(4.1)","%","","(385,028)","","","(3.4)","%","","(148,915)","","","38.7","%"],["Consolidated operating income","","$","663,521","","","5.1","%","","$","611,371","","","5.5","%","","$","52,150","","","8.5","%"]] [[/GREPCENT_TABLE]] Electric Power Infrastructure Solutions Segment Results The increase in revenues for the year ended December 31, 2021 was primarily due to growth in spending by our utility customers on grid modernization, resulting in increased demand for our electric power services, as well as approximately $245 million of revenues attributable to acquired businesses. Additionally, revenues for the year ended December 31, 2021 were positively impacted by $90 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate. Operating income increased for the year ended December 31, 2021 primarily due to the increase in revenues explained above. The increase in operating income as a percentage of revenues was primarily attributable to improved performance across the segment, and the higher revenues contributed to higher levels of fixed cost absorption and favorable contributions associated with the timing of projects and project mix. Also positively impacting operating income and operating income as a percentage of revenues during the year ended December 31, 2021 was the $44.1 million impact of our equity interests in LUMA and other integral affiliates, which represented a $32.8 million increase from the year ended December 31, 2020. Partially offsetting the positive impact of these items were losses associated with certain communications projects resulting from various production issues, poor subcontractor performance, challenging site conditions, permitting delays, increased completion costs and weather and seasonal impacts. In addition, in early 2020, we decided to pursue an exit of our operations in Latin America and substantially completed such exit as of December 31, 2020. For the year ended December 31, 2020, Electric Power Infrastructure Solutions operating income included $74.0 million of operating losses related to Latin American operations, which negatively impacted operating margin by 120 basis points. These operating losses included $7.0 million of asset impairment charges and $2.7 million of regulatory required severance payments. Renewable Energy Infrastructure Solutions Segment Results The increase in revenues for the year ended December 31, 2021 was primarily due to a $450 million increase in revenues attributable to acquired businesses, primarily Blattner, the results of operations of which were included since the acquisition date of October 13, 2021. The remaining increase is due to an overall increase in transmission and interconnection construction services related to the renewable energy infrastructure. The increase in operating income was primarily due to higher revenues associated with the acquisition of Blattner. Blattner’s results as a percentage of operating income was largely in line with our results attributable to transmission and interconnection construction services related to the renewable energy infrastructure The decrease in operating income as a percentage of revenues for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the favorable close-out of certain projects in 2020. 52 Underground Utility and Infrastructure Solutions Segment Results The increase in revenues for the year ended December 31, 2021 was primarily due to increased revenues associated with higher demand from our gas utility and industrial customers; $25 million related to more favorable foreign currency exchange rates, primarily the Canadian dollar and U.S. dollar exchange rate; and approximately $20 million in revenues from acquired businesses. The decreases in operating income and operating margin for the year ended December 31, 2021 were primarily due to the recognition of a $31.7 million provision for credit loss related to receivables from a customer that declared bankruptcy in July 2021 and its affiliate, which is described further in Accounts Receivable and Allowance for Credit Losses within Note 4 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. Operating income was also adversely impacted during the years ended December 31, 2021 and 2020 by the uncertainties and challenges in the energy market and overall economy caused by the COVID-19 pandemic, which negatively impacted our margins and ability to cover fixed and overhead costs. Corporate and Non-Allocated Costs The increase in corporate and non-allocated costs during the year ended December 31, 2021 included an $88.7 million increase in intangible asset amortization primarily related to the acquisition of Blattner; a $27.6 million increase in acquisition and integration costs; and a $15.6 million increase in cash incentive compensation as a result of higher levels of operating performance relative to incentive compensation targets. Also contributing to the increase was a $6.7 million increase in the fair value of contingent consideration liabilities recognized during the year ended December 31, 2021 as compared to a $0.7 million increase in fair value recognized during the year ended December 31, 2020. Additionally, there was a $4.9 million increase in travel-related costs, which were below historical levels in 2020 as a result of reduced travel due to the COVID-19 pandemic; a $4.6 million increase in salaries and benefits expense due to increased personnel to support business growth; and a $2.8 million increase in expense related to deferred compensation liabilities. The changes in fair market value of deferred compensation liabilities were largely offset by corresponding changes in the fair market value of the COLI policies associated with the deferred compensation plan, which are recorded in other income, net. Partially offsetting these increases was a $3.4 million decrease in stock-based compensation. Non-cash stock-based compensation for the year ended December 31, 2020 included a $14.0 million correction of prior period amounts related to the valuation of and accounting for certain performance-based equity awards that were awarded during the years 2017 to 2019. Year ended December 31, 2020 compared to the year ended December 31, 2019 As described above, certain amounts in the following table have been recast to reflect the new Renewable Energy Infrastructure Solutions segment. The following table sets forth segment revenues, segment operating income (loss) and 53 operating margins for the periods indicated, as well as the dollar and percentage change from the prior period (dollars in thousands): [[GREPCENT_TABLE]] [["","","Year Ended December 31,","","Change"],["","","2020","","2019","","$","","%"],["Revenues:"],["Electric Power Infrastructure Solutions","","$","6,468,192","","","57.7","%","","$","6,346,837","","","52.4","%","","$","121,355","","","1.9","%"],["Renewable Energy Infrastructure Solutions","","1,305,151","","","11.7","","","775,000","","","6.4","","","530,151","","","68.4","%"],["Underground Utility and Infrastructure Solutions","","3,429,329","","","30.6","","","4,990,316","","","41.2","","","(1,560,987)","","","(31.3)","%"],["Consolidated revenues","","$","11,202,672","","","100.0","%","","$","12,112,153","","","100.0","%","","$","(909,481)","","","(7.5)","%"],["Operating income (loss):"],["Electric Power Infrastructure Solutions","","$","648,405","","","10.0","%","","$","554,824","","","8.7","%","","$","93,581","","","16.9","%"],["Renewable Energy Infrastructure Solutions","","177,920","","","13.6","%","","36,353","","","4.7","%","","141,567","","","389.4","%"],["Underground Utility and Infrastructure Solutions","","170,074","","","5.0","%","","332,011","","","6.7","%","","(161,937)","","","(48.8)","%"],["Corporate and Non-Allocated costs","","(385,028)","","","(3.4)","%","","(368,314)","","","(3.0)","%","","(16,714)","","","4.5","%"],["Consolidated operating income","","$","611,371","","","5.5","%","","$","554,874","","","4.6","%","","$","56,497","","","10.2","%"]] [[/GREPCENT_TABLE]] Electric Power Infrastructure Solutions Segment Results Overall, revenues increased as a result of growth in spending from our utility customers on grid modernization, resulting in increased demand for our electric power services, including a $220 million increase in emergency restoration services revenues, a $125 million increase in revenues from our North American communication operations and approximately $175 million of incremental revenues attributable to acquired businesses. These increases were partially offset by decreased revenues associated with fire hardening programs in the western United States as compared to the year ended December 31, 2019 as the projects were successfully completed. We had substantially completed the exit of our Latin American operations as of December 31, 2020. These operations were adversely impacted by the COVID-19 pandemic due to shelter-in-place restrictions and other work disruptions that resulted in our acceleration of various contract terminations and other activities during 2020 in order to expedite cessation of operations in the region. As a result of these factors, during the year ended December 31, 2020, our Latin American operations generated an operating loss of $74.0 million, including $7.0 million of asset impairment charges and $2.7 million of regulatory required severance payments. During the year ended December 31, 2019, our Latin American operations generated an operating loss of $85.7 million, which included a $79.2 million charge associated with the termination of a telecommunications project in Peru, composed of 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 16 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplemental Data of this Annual Report for additional information regarding this project. Operating income increased for the year ended December 31, 2020 due to the increase in revenues explained above. Operating income as a percentage of revenues was positively impacted during the year ended December 31, 2020 by increased revenues from emergency restoration services revenues, which typically yield higher margins due in part to higher equipment utilization and absorption of fixed costs. The year ended December 31, 2019 was also negatively impacted by severe weather and other project delays in Canada that resulted in elevated levels of unabsorbed costs. However, partially offsetting these increases was a reduction in fire hardening services in the western United States during the year ended December 31, 2020, as well as the negative impact associated with our Latin American operations described above. Included in operating income is the equity in earnings of integral unconsolidated affiliates, which primarily relates to the commencement of transition services under the operation and maintenance agreement awarded to LUMA in June 2020. 54 Renewable Energy Infrastructure Solutions Segment Results Revenues increased as a result of growing market demand for electricity generated from renewable sources, which resulted in increased demand from our customers for our construction and engineering services. Operating income and operating income as a percentage of revenues were higher for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily due to favorable close-out of certain transmission projects related to reduced contingencies as the projects neared completion in 2020. The year ended December 31, 2019 was negatively impacted by severe weather and other project delays in Canada that resulted in elevated levels of unabsorbed costs. Underground Utility and Infrastructure Solutions Segment Results During the year ended December 31, 2020, reduced revenues associated with larger pipeline projects of approximately $830 million significantly contributed to the overall decrease in segment revenues. Revenues associated with larger pipeline projects declined as a result of the industry entering the late-stage of a construction cycle, with the next cycle of projects being delayed due to various factors, including among other things, permitting delays and worksite access limitations related to environmental regulations. Revenues also declined due to lower demand for our services in end-markets where the price of oil is influential. The COVID-19 pandemic also resulted in reduced capital spending and deferred regularly scheduled maintenance by our midstream and industrial customers and shelter-in-place and worksite access restrictions in major metropolitan areas that caused short-term disruptions for our gas distribution customers. These decreases were partially offset by approximately $230 million in incremental revenues from acquired businesses during 2020. The decreases in operating income and operating income as a percentage of revenues were primarily due to the reduction of revenues, including revenues related to larger pipeline projects, which generally yield higher margins. Additionally, adverse weather conditions across our Canadian larger pipeline projects negatively impacted operating income during the year ended December 31, 2020. However, the negative impact on these projects was offset by favorable factors on certain larger pipeline projects in the United States, including a contract termination that resulted in the recognition of previously deferred suspension and milestone payments. Also contributing to the decrease in operating income during the year ended December 31, 2020 were adverse impacts related to the COVID-19 pandemic and the overall challenged energy market, including lower revenues associated with industrial services, which negatively impacted margins and the ability to cover fixed and overhead costs, as discussed further above in Overview - Business Environment. Partially offsetting these adverse impacts were proactive cost management activities across the impacted operations. Operating income and operating income as a percentage of segment revenues in 2020 were also negatively impacted by $4.1 million of severance and restructuring charges related to the exit of certain ancillary pipeline operations and $1.3 million of asset impairment charges related to the planned sale of certain equipment. The year ended December 31, 2019 was negatively impacted by $28.3 million of project losses associated with engineering and production delays on a processing facility project, as well as $10.2 million of asset impairment charges from the winding down and exit of certain oil-influenced operations and assets. Corporate and Non-allocated Costs The increase in corporate and non-allocated costs was primarily due to a $40.2 million increase in non-cash stock-based compensation, including a $14.0 million correction of prior period amounts related to the valuation of and accounting for certain performance-based equity awards that were awarded during the years 2017 to 2019. Included in the correction was $7.2 million of non-cash stock-based compensation related to 2019. Also contributing to higher non-cash stock-based compensation in 2020 was higher achievement under performance-based equity awards, as well as an increase in the amount of equity-based awards due to acquisitions and business growth. Additionally, the increase in corporate and non-allocated costs included a $14.6 million increase in intangible asset amortization. Partially offsetting these increases were decreases in certain expenses related to the cost containment measures implemented for operations impacted by the COVID-19 pandemic and the overall challenged energy market, including a $6.3 million decrease in travel and related expenses and a $6.1 million decrease in costs associated with legal and other contracted services. Also partially offsetting the increases were a $5.0 million decrease in acquisition and integration costs and, with respect to contingent consideration liabilities, a $0.7 million increase in the fair value recognized during the year ended December 31, 2020 as compared to a $13.4 million increase in fair value recognized during the year ended December 31, 2019. 55 Non-GAAP Financial Measures EBITDA and Adjusted EBITDA EBITDA and adjusted EBITDA, financial measures not recognized under GAAP, when used in connection with net income attributable to common stock, are intended to provide useful information to investors and analysts as they evaluate our performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA is defined as EBITDA adjusted for certain other items as described below. These measures should not be considered as an alternative to net income attributable to common stock or other financial measures of performance that are derived in accordance with GAAP. Management believes that the exclusion of these items from net income attributable to common stock enables it and our investors to more effectively evaluate our operations period over period and to identify operating trends that might not be apparent when including the excluded items. As to certain of the items below, (i) non-cash stock-based compensation expense varies from period to period due to acquisition activity, changes in the estimated fair value of performance-based awards, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition and integration costs vary from period to period depending on the level of our acquisition activity; (iii) equity in (earnings) losses of non-integral unconsolidated affiliates varies from period to period depending on the activity and financial performance of non-integral unconsolidated affiliates, including gain or loss on sales of investments accounted for using the equity method of accounting; (iv) asset impairment charges can vary from period to period depending on economic and other factors; (v) restructuring and severance charges vary from period to period depending on restructuring activities; and (vi) change in fair value of contingent consideration liabilities varies from period to period depending on the performance in post-acquisition periods of certain acquired businesses and the effect of present value accretion on fair value calculations. Because EBITDA and adjusted EBITDA, as defined, exclude some, but not all, items that affect net income attributable to common stock, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, net income attributable to common stock, and information reconciling the GAAP and non-GAAP financial measures, are included below. The following table shows dollars in thousands. [[GREPCENT_TABLE]] [["","","Year Ended"],["","","December 31,"],["","","2021","","2020"],["Net income attributable to common stock (GAAP as reported)","","$","485,956","","","$","445,596"],["Interest and other financing expenses","","68,899","","","45,013"],["Interest income","","(3,194)","","","(2,449)"],["Provision for income taxes","","130,918","","","119,387"],["Depreciation expense","","255,529","","","225,256"],["Amortization of intangible assets","","165,366","","","76,704"],["Interest, income taxes and depreciation included in equity in earnings of integral unconsolidated affiliates","","9,728","","","3,174"],["EBITDA (a)","","1,113,202","","","912,681"],["Non-cash stock-based compensation (b)","","88,259","","","91,641"],["Acquisition and integration costs (c)","","47,368","","","19,809"],["Equity in (earnings) losses of unconsolidated affiliates","","(2,121)","","","9,994"],["Asset impairment charges (d)","","5,743","","","8,282"],["Severance and restructuring charges (e)","","\u2014","","","6,808"],["Change in fair value of contingent consideration liabilities","","6,734","","","719"],["Adjusted EBITDA","","$","1,259,185","","","$","1,049,934"]] [[/GREPCENT_TABLE]] (a) The calculation of EBITDA for the year ended December 31, 2020 has been amended to conform to the current period calculation of EBITDA. (b) The amount for the year ended December 31, 2020 includes the recognition of $14.0 million of non-cash stock-based compensation related to the correction of prior period amounts associated with the valuation of and accounting for certain performance-based equity awards that were awarded during the years 2017 to 2019. (c) The amount for the year ended December 31, 2021 includes, among other things, $10.0 million of expenses that are associated with change of control payments as a result of the Blattner acquisition. 56 (d) The amount for the year ended December 31, 2021 represents asset impairment charges related to certain equipment that was not utilized in our core operations, some of which was sold in October 2021 and the remainder of which was classified as assets held for sale as of December 31, 2021. The amount for the year ended December 31, 2020 represents asset impairment charges related to the exit of our Latin American operations and the planned sale of certain equipment that was not utilized in our core operations. (e) The amount for the year ended December 31, 2020 represents severance and restructuring charges associated with the exit of certain ancillary pipeline operations and our Latin American operations. Remaining Performance Obligations and Backlog A performance obligation is a promise in a contract with a customer to transfer a distinct good or service. Our remaining performance obligations represent management’s estimate of consolidated revenues that are expected to be realized from the remaining portion of firm orders under fixed price contracts not yet completed or for which work has not yet begun, which includes estimated revenues attributable to consolidated joint ventures and variable interest entities (VIEs), revenues from funded and unfunded portions of government contracts to the extent they are reasonably expected to be realized, and revenues from change orders and claims to the extent management believes they will be earned and are probable of collection. We have also historically disclosed our backlog, a measure commonly used in our industry but not recognized under GAAP. We believe this measure enables management to more effectively forecast our future capital needs and results and better identify future operating trends that may not otherwise be apparent. We believe this measure is also useful for investors in forecasting our future results and comparing us to our competitors. Our remaining performance obligations are a component of backlog, which also includes estimated orders under MSAs, including estimated renewals, and non-fixed price contracts expected to be completed within one year. Our methodology for determining backlog may not be comparable to the methodologies used by other companies. As of December 31, 2021 and 2020, MSAs accounted for 55% and 63% of our estimated 12-month backlog and 67% and 70% of total backlog. MSAs account for a lower percentage of our backlog as compared to December 31, 2020 primarily due to backlog associated with Blattner, which was acquired in October 2021 and does not have a significant amount of backlog attributable to MSAs. 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. 57 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): [[GREPCENT_TABLE]] [["","","December 31, 2021","","December 31, 2020"],["","","12 Month","","Total","","12 Month","","Total"],["Electric Power Infrastructure Solutions"],["Remaining performance obligations","","$","2,002,862","","","$","2,769,106","","","$","1,791,040","","","$","2,356,262"],["Estimated orders under MSAs and short-term, non-fixed price contracts","","4,492,038","","","9,447,765","","","3,466,443","","","7,310,809"],["Backlog","","$","6,494,900","","","$","12,216,871","","","$","5,257,483","","","$","9,667,071"],["Renewable Energy Infrastructure Solutions"],["Remaining performance obligations","","$","2,178,846","","","$","2,428,408","","","$","720,118","","","$","1,191,578"],["Estimated orders under MSAs and short-term, non-fixed price contracts","","65,618","","","120,237","","","92,999","","","122,634"],["Backlog","","$","2,244,464","","","$","2,548,645","","","$","813,117","","","$","1,314,212"],["Underground Utility and Infrastructure Solutions"],["Remaining performance obligations","","$","637,843","","","$","697,881","","","$","327,205","","","$","437,544"],["Estimated orders under MSAs and short-term, non-fixed price contracts","","1,934,826","","","3,810,829","","","1,868,820","","","3,713,607"],["Backlog","","$","2,572,669","","","$","4,508,710","","","$","2,196,025","","","$","4,151,151"],["Total"],["Remaining performance obligations","","$","4,819,551","","","$","5,895,395","","","$","2,838,363","","","$","3,985,384"],["Estimated orders under MSAs and short-term, non-fixed price contracts","","6,492,482","","","13,378,831","","","5,428,262","","","11,147,050"],["Backlog","","$","11,312,033","","","$","19,274,226","","","$","8,266,625","","","$","15,132,434"]] [[/GREPCENT_TABLE]] The increase in remaining performance obligations from December 31, 2020 to December 31, 2021 was primarily due to the acquisition of Blattner, which we acquired in 2021. The increase in backlog was primarily due to the acquisition of Blattner and additional multi-year MSA programs entered into with North American utility companies. Additionally, we began reporting results under a new Renewable Energy Infrastructure Solutions segment during the three months ended December 31, 2021, primarily due to our acquisition of Blattner. In conjunction with this change, certain prior period amounts have been recast to conform to this new segment reporting structure. Liquidity and Capital Resources Management monitors financial markets and national and global economic conditions for factors that may affect our liquidity and capital resources. As set forth below, we have various short-term and long-term cash requirements and capital allocation priorities, and we intend to fund these requirements primarily with cash flow from operating activities and debt financing. 58 Cash Requirements and Capital Allocation Cash Requirements. The following table summarizes, as of December 31, 2021, our cash requirements from contractual obligations that are due within the twelve months subsequent to December 31, 2021 and those due beyond that, excluding certain amounts discussed below (in thousands): [[GREPCENT_TABLE]] [["","","2022","","Thereafter","","Total"],["Long-term debt, including current portion - principal","","$","12,267","","","$","3,739,177","","","$","3,751,444"],["Long-term debt - cash interest (1)","","57,518","","","651,121","","","708,639"],["Short-term debt","","15,748","","","\u2014","","","15,748"],["Operating lease obligations (2)","","85,427","","","183,109","","","268,536"],["Finance lease obligations (2)","","1,185","","","1,467","","","2,652"],["Short-term lease obligations (3)","","13,976","","","\u2014","","","13,976"],["Deferral of employer portion of payroll tax payments","","54,435","","","\u2014","","","54,435"],["Equipment purchase commitments (4)","","96,020","","","\u2014","","","96,020"],["Total cash requirements from contractual obligations","","$","336,576","","","$","4,574,874","","","$","4,911,450"]] [[/GREPCENT_TABLE]] (1)    Amounts represents cash interest and other financing expenses associated with our fixed-rate, long-term debt, which primarily includes our senior notes and financing transactions arising from the exercise of our equipment rental purchase options. However, our $750.0 million term loan and $449.8 million of outstanding revolving loans under our senior credit facility bear interest at variable market rates. Assuming the principal amount outstanding and interest rate in effect at December 31, 2021 with respect to this variable rate debt remained the same, the annual cash interest expense would be approximately $18.6 million, payable until October 8, 2026, the maturity date of our senior credit facility. Such amount has not been included above due to its variability. Additionally, as discussed further in Significant Sources of Cash below, our cash interest expense may be impacted in future periods due to the transition in financial markets away from LIBOR, which is expected to be complete by mid-2023. (2)    Amounts represent undiscounted obligations at December 31, 2021. The corresponding amounts recorded on our December 31, 2021 consolidated balance sheet represent the present value of these amounts. (3)    Amounts represent short-term lease obligations that are not recorded on our December 31, 2021 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. (4)    Amount represents capital committed for the expansion of our vehicle fleet. Although we have committed to the purchase of these vehicles/equipment 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. Contingent Obligations. We have various contingent obligations that could require the use of cash or impact the collection of cash in future periods; however, we are unable to accurately predict the timing and estimate the amount of such contingent obligations as of December 31, 2021. These contingent obligations generally include, among other things: •contingent consideration liabilities and changes to consideration related to acquisitions and purchase price allocations, including liabilities assumed related to change of control provisions, which are described further in Note 6 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report; •undistributed earnings of foreign subsidiaries and unrecognized tax benefits, which are described further in Note 12 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report; •collective bargaining agreements and multiemployer pension plan liabilities, as well as liabilities related to our deferred compensation and other employee benefit plans, which are described further in Notes 15 and 16 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report; and •obligations relating to our investments in affiliates and other entities, lawsuits and other legal proceedings, uncollectible accounts receivable, insurance liabilities, obligations relating to letters of credit, bonds and parent guarantees, obligations relating to employment agreements, indemnities and assumed liabilities, and residual value 59 guarantees, which are described further in Note 16 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. Capital Allocation. Our capital deployment priorities that require the use of cash include: (i) working capital to fund ongoing operating needs, (ii) capital expenditures to meet anticipated demand for our services, (iii) acquisitions and investments to facilitate the long-term growth and sustainability of our business, and (iv) return of capital to stockholders, including through the payment of dividends and repurchases of our outstanding common stock. Our industry is capital intensive, and we expect substantial capital expenditures and commitments for purchases and 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, 2022 to be approximately $400 million. In line with our past practices, and as set forth in further detail below, we also expect to continue to allocate significant capital to strategic acquisitions and investments, as well as to pay dividends and to repurchase our outstanding common stock. Significant Sources of Cash We anticipate that our future cash flows from operating activities, cash and cash equivalents on hand, existing borrowing capacity under our senior credit facility and ability to access capital markets for additional capital will provide sufficient funds to enable us to meet our cash requirements described above for the next twelve months and over the longer term. Cash flow from operating activities is primarily influenced by demand for our services and operating margins but is also influenced by the timing of working capital needs associated with the various types of services that we provide. Our working capital needs may increase when we commence large volumes of work under circumstances where project costs are required to be paid before the associated receivables are billed and collected. Additionally, operating cash flows may be negatively impacted as a result of unpaid change orders and claims. Additionally, changes in project timing due to delays or accelerations and other economic factors that may affect customer spending, including the potential continued impact of the COVID-19 pandemic, could also impact cash flow from operating activities. Further information with respect to our cash flow from operating activities is set forth below and in Note 19 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. Our available commitments under our senior credit facility and cash and cash equivalents at December 31, 2021 were as follows (in thousands): [[GREPCENT_TABLE]] [["","","December 31, 2021"],["Total capacity available for revolving loans and letters of credit","","$","2,640,000"],["Less:"],["Borrowings of revolving loans","","449,841"],["Letters of credit outstanding","","318,159"],["Available commitments for issuing revolving loans or new letters of credit","","1,872,000"],["Plus:"],["Cash and cash equivalents","","229,097"],["Total available commitments under senior credit facility and cash and cash equivalents","","$","2,101,097"]] [[/GREPCENT_TABLE]] We consider our investment policies related to cash and cash equivalents to be conservative, as we maintain a diverse portfolio of what we believe to be high-quality cash and cash equivalent investments with short-term maturities. Further information with respect to our cash and cash equivalents is set forth in Note 18 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. Additionally, subject to the conditions specified in the credit agreement for our senior credit facility, we have the option to increase the capacity of our senior credit facility, in the form of an increase in the revolving commitments, term loans or a combination thereof, from time to time, upon receipt of additional commitments from new or existing lenders by up to an additional (i) $400.0 million plus (ii) additional amounts so long as the Incremental Leverage Ratio Requirement (as defined in the credit agreement) is satisfied at the time of such increase. The Incremental Leverage Ratio Requirement requires, among other things, after giving pro forma effect to such increase and the use of proceeds therefrom, compliance with the credit agreement’s financial covenants as of the most recent fiscal quarter end for which financial statements were required to be delivered. Further information with respect to our debt obligations is set forth in Note 10 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Annual Report. We may also 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, fund acquisitions or otherwise fund our capital needs. For example, as described further in Financing Activities below and Note 10 of the Notes to Consolidated Financial Statements in 60