QUANTA SERVICES INC, QUANTA SERVICES MANAGEMENT ...

The projected cash flows and estimated levels of EBITDA by reporting unit were used to determine fair
value under the three approaches discussed herein. The following table presents the significant estimates used by
management in determining the fair values of our reporting units at December 31, 2011, 2010 and 2009:
Operating Units
Providing
Predominantly
Electric Power and
Natural Gas
and Pipeline
Services
Operating Units
Providing
Predominantly
Telecommunications
Services
Operating Unit
Providing
Fiber Optic Licensing
2011 2010 2009 2011 2010 2009 2011 2010 2009
Years of cash flows before
terminal value ............. 5 5 5 5 5 5 15 15 15
Discount rates ............... 13% 15% 15% 13% 14%to15%14%to15% 14% 14% 14%
EBITDA multiples ...........4.5to8.04.5to8.05.0to7.54.5to5.5 Weighting of three approaches:
4.5to5.53.5to5.59.5 9.5 9.5
Discounted cash flows ...... 70% 70% 70% 70% 70% 70% 90% 90% 90%
Market multiple ........... 15% 15% 15% 15% 15% 15% 5% 5% 5%
Market capitalization ....... 15% 15% 15% 15% 15% 15% 5% 5% 5%
For recently acquired reporting units, a step one impairment test may indicate an implied fair value that is
substantially similar to the reporting unit’s carrying value. Such similarities in value are generally an indication
that management’s estimates of future cash flows associated with the recently acquired reporting unit remain
relatively consistent with the assumptions that were used to derive its initial fair value. During the fourth quarter
of 2011, a goodwill impairment analysis was performed for each of our operating units, which indicated that the
implied fair value of each of our operating units was substantially in excess of carrying value. Following the
analysis, management concluded that no impairment was indicated at any operating unit. As discussed generally
above, when evaluating the 2011 step one impairment test results, management considered many factors in
determining whether or not an impairment of goodwill for any reporting unit was reasonably likely to occur in
future periods, including future market conditions and the economic environment in which our reporting units
were operating. Circumstances such as continued market declines, the loss of a major customer or other factors
could impact the valuation of goodwill in future periods.
The goodwill analysis performed for each operating unit was based on estimates and industry comparables
obtained from the electric power, natural gas and pipeline, telecommunications and fiber optic licensing
industries, and no impairment was indicated. The 15-year discounted cash flow model used for fiber optic
licensing was based on the long-term nature of the underlying fiber network licensing agreements.
We assigned a higher weighting to the discounted cash flow approach in all periods to reflect increased
expectations of market value being determined from a “held and used” model. Discount rates for the 2011
analysis were decreased for the operating units providing predominately electric power, natural gas and pipeline
and telecommunications infrastructure services due to generally more favorable market conditions for these
operating units from 2010. At December 31, 2010, certain EBITDA multiples were increased slightly from 2009
to reflect more favorable market conditions as the effects of the economic recession had lessened.
As stated previously, cash flows are derived from budgeted amounts and operating forecasts that have been
evaluated by management. In connection with the 2011 assessment, projected annual growth rates by reporting
unit varied widely with ranges from 0% to 39% for operating units in the electric power and the natural gas and
pipeline divisions, 0% to 30% for operating units in telecommunications and 0% to 20% for the operating unit in
fiber optic licensing.
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