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Goodwill and Other Intangible Assets | 12 Months Ended
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Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Other Intangible Assets | Note 3 – Goodwill and Other Intangible Assets The following table provides a reconciliation of changes in goodwill by reportable segment for the periods indicated (in millions):
| Communications |  | Clean Energy and Infrastructure |  | Oil and Gas |  | Electrical Transmission |  | Total Goodwill
Goodwill, gross, as of December 31, 2018 | $ | 467.8 |  |  | $ | 143.1 |  |  | $ | 455.6 |  |  | $ | 149.9 |  |  | $ | 1,216.4 |
Accumulated impairment loss (a) | — |  |  | — |  |  | (116.0) |  |  | — |  |  | (116.0) |
Goodwill, net, as of December 31, 2018 | $ | 467.8 |  |  | $ | 143.1 |  |  | $ | 339.6 |  |  | $ | 149.9 |  |  | $ | 1,100.4 |
Additions from new business combinations | 73.2 |  |  | 9.5 |  |  | 37.7 |  |  | — |  |  | 120.4 |
Measurement period adjustments, net (b) | 0.3 |  |  | — |  |  | (0.4) |  |  | — |  |  | (0.1) |
Currency translation adjustments | — |  |  | — |  |  | 0.7 |  |  | — |  |  | 0.7 |
Goodwill, net, as of December 31, 2019 | $ | 541.3 |  |  | $ | 152.6 |  |  | $ | 377.6 |  |  | $ | 149.9 |  |  | $ | 1,221.4 |
Additions from new business combinations | 14.9 |  |  | — |  |  | — |  |  | 0.2 |  |  | 15.1 |
Measurement period adjustments, net (b) | 5.9 |  |  | 0.1 |  |  | 0.1 |  |  | — |  |  | 6.1 |
Currency translation adjustments | — |  |  | — |  |  | 0.4 |  |  | — |  |  | 0.4 |
Goodwill, net, as of December 31, 2020 | $ | 562.1 |  |  | $ | 152.7 |  |  | $ | 378.1 |  |  | $ | 150.1 |  |  | $ | 1,243.0 |
Accumulated impairment loss (a) | — |  |  | — |  |  | (123.8) |  |  | — |  |  | (123.8) |
Goodwill, gross, as of December 31, 2020 | $ | 562.1 |  |  | $ | 152.7 |  |  | $ | 501.9 |  |  | $ | 150.1 |  |  | $ | 1,366.8 |
(a) Accumulated impairment losses include the effects of currency translation gains and/or losses. (b) Represents adjustments to preliminary estimates of fair value within the measurement period of up to one year from the date of acquisition. The following table provides a reconciliation of changes in other intangible assets, net, for the periods indicated (in millions):
| Other Intangible Assets
| Non-Amortizing |  | Amortizing |  |
| Trade Names |  | Pre-Qualifications |  | Customer Relationships and Backlog |  | Pre-Qualifications |  | Other (a) |  | Total
Other intangible assets, gross, as of December 31, 2018 | $ | 34.5 |  |  | $ | 74.0 |  |  | $ | 224.4 |  |  | $ | — |  |  | $ | 21.1 |  |  | $ | 354.0 |
Accumulated amortization |  |  |  |  | (170.0) |  |  | — |  |  | (14.6) |  |  | (184.6) |
Other intangible assets, net, as of December 31, 2018 | $ | 34.5 |  |  | $ | 74.0 |  |  | $ | 54.4 |  |  | $ | — |  |  | $ | 6.5 |  |  | $ | 169.4 |
Additions from new business combinations | — |  |  | 0.2 |  |  | 67.7 |  |  | — |  |  | 5.2 |  |  | 73.1 |
Measurement period adjustments (b) | — |  |  | — |  |  | (6.7) |  |  | — |  |  | (0.2) |  |  | (6.9) |
Intangible asset impairment | — |  |  | (3.3) |  |  | — |  |  | — |  |  | — |  |  | (3.3) |
Currency translation adjustments | — |  |  | 2.0 |  |  | 0.1 |  |  | — |  |  | 0.1 |  |  | 2.2 |
Amortization expense |  |  |  |  | (20.2) |  |  | — |  |  | (2.8) |  |  | (23.0) |
Other intangible assets, net, as of December 31, 2019 | $ | 34.5 |  |  | $ | 72.9 |  |  | $ | 95.3 |  |  | $ | — |  |  | $ | 8.8 |  |  | $ | 211.5 |
Additions from new business combinations | — |  |  | — |  |  | 11.0 |  |  | — |  |  | 0.1 |  |  | 11.1 |
Classification changes (c) | — |  |  | (69.8) |  |  | — |  |  | 69.8 |  |  | — |  |  | — |
Measurement period adjustments (b) | — |  |  | — |  |  | (0.2) |  |  | — |  |  | — |  |  | (0.2) |
Currency translation adjustments | — |  |  | (3.1) |  |  | — |  |  | 3.6 |  |  | — |  |  | 0.5 |
Amortization expense |  |  |  |  | (26.7) |  |  | (10.2) |  |  | (2.0) |  |  | (38.9) |
Other intangible assets, net, as of December 31, 2020 | $ | 34.5 |  |  | $ | — |  |  | $ | 79.4 |  |  | $ | 63.2 |  |  | $ | 6.9 |  |  | $ | 184.0 |
Remaining weighted average amortization period (in years) |  |  |  |  | 9 |  | 11 |  | 6 |  | 10
(a) Consists principally of trade names and non-compete agreements. (b) Represents adjustments to preliminary estimates of fair value within the measurement period of up to one year from the date of acquisition. (c) In connection with its first quarter 2020 assessment of goodwill and indefinite-lived intangible assets, management reassessed the indefinite-life classification of its two pre-qualification intangible assets. Management determined that, based on changes in the assets’ characteristics, including current and expected changes in the customer mix of the associated reporting units, a finite-life classification for these assets was more appropriate. As a result, the Company changed the classification of these intangible assets from indefinite-lived to finite-lived and began amortizing them on an accelerated basis in the first quarter of 2020, at which time their estimated remaining weighted average useful life was approximately 12 years. Expected future amortization expense as of December 31, 2020 is summarized in the following table (in millions):
| Amortization Expense
2021 | $ | 31.7 |
2022 | 25.4 |
2023 | 19.7 |
2024 | 15.3 |
2025 | 11.7 |
Thereafter | 45.7 |
Total | $ | 149.5 |
2020 Acquisitions. During 2020, MasTec completed five acquisitions. These acquisitions included the equity interests of two entities. Through a consolidated subsidiary, the Company acquired all of the equity interests in a heavy civil infrastructure construction company that is included within the Company’s Clean Energy and Infrastructure segment. As of the date of acquisition, the Company’s ownership interest in the consolidated subsidiary was 96%, and as of December 31, 2020, was 91%, with a portion of the non-controlling interests owned by members of subsidiary management. The Company also acquired all of the equity interests in a utility service and telecommunications construction contractor that is included within the Company’s Communications segment. The Company also acquired the assets of three entities, one that specializes in wireless telecommunications and one that specializes in install-to-the-home services, both of which are included within the Company’s Communications segment and one that specializes in electrical transmission services that is included within the Company’s Electrical transmission segment. The aggregate purchase price for these entities was composed of approximately $23.5 million in cash, net of cash acquired, with an additional $3.2 million due through 2023, subject to certain indemnification provisions, and a five-year earn-out liability valued at approximately $8.3 million. Earn-outs are generally payable annually and are recorded within other current and other long-term liabilities in the consolidated balance sheets. As of December 31, 2020, the range of remaining potential undiscounted earn-out liabilities for the 2020 acquisitions was estimated to be between $1 million and $13 million; however, there is no maximum payment amount. Determination of the estimated fair values of the net assets acquired and the estimated earn-out liabilities for these acquisitions was preliminary as of December 31, 2020; as a result, further adjustments to these estimates may occur. 2019 Acquisitions. During 2019, MasTec completed six acquisitions, one of which specializes in water infrastructure for pipeline companies and is included within the Company’s Oil and Gas segment, four o f which are included within the Company’s Communications segment, including a wireline/fiber deployment construction contractor and a telecommunications company specializing in a broad range of end-to-end wireless telecommunications solutions, and one of which specializes in construction projects in the power industry and is included in the Company’s Clean Energy and Infrastructure segment. For all but one of these acquisitions, the Company acquired all of the equity interests in the related entities. For the telecommunications company specializing in wireless telecommunications solutions, the Company acquired 96% of the entity’s equity interests, with the obligation to acquire the balance over time. The following table summarizes the fair values of consideration paid and net assets acquired for the 2019 acquisitions as of the respective dates of acquisition, as adjusted (in millions):
Acquisition consideration: | 2019
Cash, net of cash acquired and other | $ | 176.4 |
Estimated fair value of contingent consideration and other liabilities | 40.1 |
Total consideration transferred | $ | 216.5 |
Identifiable assets acquired and liabilities assumed: |
Current assets, primarily composed of accounts receivable | $ | 92.6 |
Property and equipment, including finance leases and other long-term assets | 56.1 |
Amortizing intangible assets | 65.9 |
Current liabilities, including current portion of finance lease obligations and long-term debt | (89.0) |
Long-term debt, including finance lease obligations | (2.4) |
Deferred income taxes and other long-term liabilities | (27.5) |
Total identifiable net assets | $ | 95.7 |
Goodwill | $ | 120.8 |
Total net assets acquired, including goodwill | $ | 216.5 |
Amortizing intangible assets related to the 2019 acquisitions are primarily composed of customer relationships, backlog and certain other intangible assets, which had weighted average lives, as adjusted, of approximately 12 years, 3 years and 5 years, respectively, and a weighted average life of 11 years in total. Amortizing intangible assets are amortized in a manner consistent with the pattern in which the related benefits are expected to be consumed. The goodwill balances for the respective acquisitions represent the estimated value of each acquired company’s geographic presence in key markets, its assembled workforce and management team’s industry-specific project management expertise, as well as synergies expected to be achieved from the combined operations of the acquired companies and MasTec. Approximately $8 million of the goodwill balance related to the 2019 acquisitions is expected to be tax deductible as of December 31, 2020. Additionally, current liabilities in the table above include amounts due to former owners, who, subsequent to acquisition, are members of subsidiary management, of approximately $11 million, of which $2 million was subsequently paid during 2019 pursuant to the terms of the related purchase agreement. The contingent consideration and other liabilities included in the table above is composed of $22.3 million of earn-out liabilities, which equal a portion of the acquired companies’ earnings before interest, taxes, depreciation and amortization (“EBITDA”) in excess of thresholds agreed upon with the sellers, if applicable, and a mandatorily redeemable non-controlling interest, subject to a repurchase formula (collectively, “Earn-outs”), totaling $17.8 million, which is calculated in a manner consistent with the Company’s traditional earn-out arrangements. Earn-outs are generally payable annually for a period of five years, as set forth in the respective purchase agreements. The fair values of the Earn-outs were estimated using income approaches such as discounted cash flows or option pricing models and incorporate significant inputs not observable in the market. Key assumptions in the estimated valuations include the discount rate and probability-weighted EBITDA projections. Significant changes in any of these assumptions could result in significantly higher or lower potential Earn-out liabilities. As of December 31, 2020, the range of remaining potential undiscounted Earn-out liabilities for the 2019 acquisitions was estimated to be between $4 million and $51 million; however, there is no maximum payment amount. 2018 Acquisitions. During 2018, MasTec acquired all of the equity interests in a construction management firm specializing in steel building systems and acquired a wind turbine services company, both of which are included in the Company’s Clean Energy and Infrastructure segment. The aggregate purchase price for these entities, as adjusted, was composed of approximately $5.1 million in cash, net of cash acquired, and estimated earn-out liabilities, net, totaling $1.5 million. As of December 31, 2020, the range of remaining potential undiscounted earn-out liabilities, net, for the 2018 acquisitions was estimated to be up to $4 million; however, there is no maximum payment amount. Pro Forma Financial Information and Acquisition Results. For the years ended December 31, 2020, 2019 and 2018, unaudited supplemental pro forma revenue totaled approximately $6.4 billion, $7.6 billion and $7.4 billion, respectively, and unaudited supplemental pro forma net income totaled approximately $334.5 million, $406.6 million and $258.7 million, respectively. These unaudited pro forma financial results include the results of operations of acquired companies as if those companies had been consolidated as of the beginning of the year prior to their acquisition, and are provided for illustrative purposes only. These unaudited pro forma financial results do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods indicated, or of the results that may be achieved by the combined companies in the future. The Company’s unaudited pro forma financial results were prepared by adding the unaudited historical results of acquired businesses to the historical results of MasTec, and then adjusting those combined results for (i) acquisition costs; (ii) amortization expense from acquired intangible assets; (iii) interest expense from cash consideration paid; (iv) interest expense from debt repaid upon acquisition; and (iv) other purchase accounting related adjustments. These unaudited pro forma financial results do not include adjustments to reflect other cost savings or synergies that may have resulted from these acquisitions. Future results may vary significantly due to future events and other factors, many of which are beyond the Company’s control. For the years ended December 31, 2020, 2019 and 2018, the Company’s consolidated results of operations included acquisition-related revenue of approximately $229.9 million, $188.3 million and $154.4 million, respectively, and included acquisition-related net losses of approximately $6.7 million and $1.4 million for the years ended December 31, 2020 and 2019, respectively, and acquisition-related net income of approximately $1.4 million for the year ended December 31, 2018, based on the Company’s consolidated effective tax rates. These acquisition-related results do not include the effects of acquisition costs or interest expense associated with consideration paid for the related acquisitions.

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