Acquisitions and Other Investments

Allocations of purchase prices for acquisitions are based on estimates of the fair value of consideration paid and of the net assets acquired and are subject to adjustment upon finalization of these fair value estimates. In the second quarter of 2013 and in December 2012, the Company acquired certain businesses, as discussed below and in Note 3 - Acquisitions and Other Investments of the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012. As of June 30, 2013, the allocations of purchase prices to the fair values of tangible and intangible assets and liabilities, including the estimated values of contingent earn-out obligations and the estimated useful lives of acquired assets for these acquisitions, are provisional and remain preliminary as management continues to assess the valuation of these items and any ultimate purchase price adjustments that may result based on the final net assets and net working capital of the acquired businesses, as prescribed in the corresponding purchase agreements.

During the three and six months ended June 30, 2013, the Company revised its preliminary allocations for certain of the 2012 acquisitions based on new information about the facts and circumstances existing as of the respective dates of such acquisitions, or, for purchase price adjustments, based on the final net assets and net working capital of the businesses acquired, as prescribed in the relevant purchase agreements. These adjustments resulted in the recognition of, or adjusted the fair values of, certain acquired assets and assumed liabilities, which resulted in the revision of comparative prior period financial information. Such measurement period adjustments are presented as if the adjustments had been taken into account as of the dates of the respective acquisitions. All changes that do not qualify as measurement period adjustments are included in current period earnings.

2013 Acquisitions

Big Country

Effective May 1, 2013, MasTec acquired all of the issued and outstanding interests of Big Country Energy Services, Inc. and its affiliated operating companies (collectively, "Big Country") for an aggregate purchase price composed of approximately $103.5 million in cash, a five year contingent earn-out, valued at $22.8 million as of the date of acquisition, and the assumption of $24.4 million in debt. The earn-out is equal to 25% of the excess, if any, of Big Country’s annual earnings before interest, taxes, depreciation and amortization, over certain thresholds set forth in the purchase agreement, payable annually in cash.

Big Country is a North American oil and gas pipeline and facility construction services company, headquartered in Calgary, Alberta, Canada. Big Country also has construction offices in Alberta, British Columbia and Saskatchewan, as well as in Wyoming and North Dakota. Big Country's services include oil, natural gas and natural gas liquids gathering systems and pipeline construction; pipeline modification and replacement services; compressor and pumping station construction; and other related services supporting the oil and gas production, processing and transportation industries. Big Country is expected to significantly expand MasTec's ability to take advantage of the rapidly expanding opportunities anticipated for energy infrastructure work in North America in the coming years.

The following table summarizes the preliminary estimated fair value of consideration paid and the allocation of purchase price as of the date of acquisition:



	May 1, 2013
	(in millions)
Purchase price consideration:
Cash	$	103.5
Fair value of contingent consideration (earn-out liability)	22.8
Total consideration transferred	$	126.3
Purchase price allocation to identifiable assets acquired and liabilities assumed:
Current assets	$	69.0
Property and equipment	42.6
Pre-qualifications	29.6
Finite-lived intangible assets	10.1
Current liabilities	(21.9		)
Long-term debt	(24.4		)
Deferred income taxes	(10.1		)
Total identifiable net assets	$	94.9
Goodwill	$	31.4
Total consideration allocated	$	126.3

The fair values and weighted average useful lives of Big Country's acquired finite-lived intangible assets were assigned as follows as of the date of acquisition:



	Fair Value		Weighted Average Useful Life
	(in millions)		(in years)
Backlog	$	1.8	1
Non-compete agreements	1.8		8
Customer relationships	6.5		6
Total acquired amortizing intangibles	$	10.1	5

Finite-lived intangible assets will be amortized in a manner consistent with the pattern in which the related benefits are expected to be consumed. The intangible asset related to Big Country's pre-qualifications with companies in the oil and gas industry has been assigned an indefinite life as the pre-qualifications do not expire or diminish in value, and the companies to which they relate have extremely long operating histories. Goodwill arising from the acquisition represents the estimated value of Big Country's geographic presence in key high growth Canadian markets, its assembled workforce, its management team's industry-specific project management expertise and synergies expected to be achieved from the combined operations of Big Country and MasTec. As of the date of acquisition, the total amount of goodwill expected to be deductible for tax purposes was $4.1 million.

The fair value of the earn-out obligation was estimated using an income approach and incorporates significant inputs not observable in the market. Key assumptions in the estimated valuation include the discount rate and probability-weighted EBITDA projections. The range of potential undiscounted payments that MasTec could be required to make under the earn-out arrangement was estimated to be between $0.3 million and $55.3 million; however, there is no maximum earn-out payment amount.

Big Country is reported within the Company's oil and gas segment.

Other 2013 Acquisitions

Effective April 1, 2013, MasTec acquired all of the issued and outstanding interests of Data Cell Systems, Inc. ("Data Cell"). Data Cell was formerly a subcontractor to MasTec's wireless business and will provide self-perform communications tower construction, installation, maintenance and other services in support of telecommunications infrastructure construction in the Company's communications segment.

Unaudited Pro Forma Information - 2013 Acquisitions

The following unaudited supplemental pro forma results of operations include the results of operations of each of the companies acquired in 2013 as if each had been consolidated as of January 1, 2012 and have been provided for illustrative purposes only. These unaudited pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented, or of the results that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following unaudited pro forma financial information because of future events and transactions, as well as other factors, many of which are beyond MasTec’s control.

The unaudited pro forma combined results of operations presented below for three and six month periods ended June 30, 2013 and 2012, respectively, have been prepared by adjusting the historical results of MasTec to include the historical results of the acquisitions described above as if they occurred on January 1, 2012. These unaudited pro forma combined historical results were then adjusted for an increase in amortization expense due to the incremental intangible assets recorded related to the acquisitions, a reduction in interest income resulting from the cash consideration paid and a reduction in interest expense relating to the repayment of acquired debt. The unaudited pro forma results of operations do not include any adjustments to eliminate the impact of acquisition related costs or any cost savings or other synergies that may result from these acquisitions. As noted above, the unaudited pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012		2013		2012
	(unaudited, in millions)				(unaudited, in millions)
Revenue	$	995.1	$	1,039.5	$	1,987.9	$	1,849.8
Net income	$	34.7	$	29.6	$	57.9	$	47.2

Results of Acquired Businesses 2013

Revenues and net income resulting from the year over year incremental impact of the Company's 2013 acquisitions are included in MasTec's consolidated results of operations as follows (in millions):



	For the Three and Six Months Ended June 30, 2013
Revenue	$	39.6
Net income	$	1.5

Acquisition costs incurred in connection with these acquisitions of $0.9 million and $1.4 million were included in general and administrative costs for the three and six month periods ended June 30, 2013, respectively.

2012 Acquisitions

Bottom Line Services

Effective December 1, 2012, MasTec acquired all of the issued and outstanding interests of Bottom Line Services, LLC ("BLS") for an aggregate purchase price composed of approximately $67.6 million in cash and a five year earn-out, valued at $11.1 million as of the date of acquisition. BLS is engaged in providing natural gas and petroleum pipeline infrastructure services, primarily in eastern Texas. Its services include pipeline and facilities construction, painting and maintenance services.

The following table summarizes the estimated fair value of consideration paid and the allocation of purchase price for BLS, as revised, as of the date of acquisition:



	December 1, 2012
	(in millions)
Purchase price consideration:
Cash	$	67.6
Fair value of contingent consideration (earn-out liability)	11.1
Total consideration transferred	$	78.7
Purchase price allocation to identifiable assets acquired and liabilities assumed:
Current assets	$	36.3
Property and equipment	12.6
Trade name	2.6
Non-compete agreements	0.5
Customer relationships	24.4
Current liabilities	(12.8		)
Total identifiable net assets	$	63.6
Goodwill	$	15.1
Total consideration allocated	$	78.7

BLS is reported within the Company's oil and gas segment.

During the second quarter of 2013, $2.3 million of additional pre-acquisition project cost liabilities were recorded as a result of the ongoing review of the acquired net working capital of BLS. In addition, accounts receivable were reduced by $0.1 million. These adjustments resulted in an increase to the previously recorded amount of BLS goodwill of $2.4 million.

Other 2012 Acquisitions

Effective December 1, 2012, MasTec acquired all of the issued and outstanding interests of Go Green Services, LLC and all of the issued and outstanding shares of Dynamic Tower Services, Inc. ("DTS"). Go Green was formerly a subcontractor to MasTec's oil and gas business and provides self-perform clearing and trenching services for natural gas and petroleum pipeline infrastructure construction in the Company's oil and gas segment. DTS was formerly a subcontractor to MasTec's wireless business and provides self-perform communications tower construction, installation, maintenance and other services in support of telecommunications infrastructure construction in the Company's communications segment.

Results of Acquired Businesses 2012

Revenues and net income resulting from the year over year incremental impact of the Company's 2012 acquisitions are included in MasTec's consolidated results of operations as follows (in millions):



	For the Three Months Ended June 30, 2013		For the Six Months Ended June 30, 2013
Revenue	$	47.0	$	90.0
Net income	$	2.0	$	3.8

There were no acquisition costs incurred in connection with the 2012 acquisitions for the three and six month periods ended June 30, 2012, respectively.

2011 Acquisitions

In the second quarter of 2011, the Company acquired certain businesses, as discussed in Note 3 - Acquisitions and Other Investments of the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012. During the first quarter of 2013, the Company remeasured the contingent consideration liability for EC Source Services LLC ("EC Source") using currently available facts and circumstances, including recent and expected future performance, which resulted in an increase in EC Source's expected future earn-out liability. EC Source is reported within the Company's electrical transmission segment. In addition, the contingent consideration liability for Optima Network Services, Inc. ("Optima") was remeasured and settled in full during the first quarter of 2013 as a result of an amendment to the Optima purchase agreement effective February 28, 2013. Optima is reported within the Company's communications segment. The adjustments to the EC Source and Optima earn-out liabilities were recorded within other expense and other income, respectively, during the six month period ended June 30, 2013.

Other Investments

Through a 60%-owned consolidated subsidiary, MasTec owns a 34% interest in a rock extraction business in Panama (for a net beneficial ownership interest of 20.4%). This investment, which is a component of the Company's discontinued Globetec operation, is accounted for under the equity method of accounting, and is reflected within long-term assets of discontinued operations in the condensed unaudited consolidated financial statements. MasTec has performed construction services for this investee. No revenues were recognized for the three and six months ended June 30, 2013. Revenues of approximately $0.4 million and $1.2 million are included within the Company's results from discontinued operations for the three and six month periods ended June 30, 2012, respectively. Receivables from this investee, which are reflected within assets held for sale in the condensed unaudited consolidated financial statements, were approximately $3.7 million as of both June 30, 2013 and December 31, 2012.

The Company has certain other cost and equity method investments. None of these investments was material individually or in the aggregate for any period presented. No impairment charges related to the Company's cost method investments nor the Company's equity method investments were recorded during the three or six month periods ended June 30, 2013 or 2012.