Note 3 – Acquisitions

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. The Company acquired several businesses during 2013 and 2014, as discussed below and in Note 3 - Acquisitions in the notes to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2013. As of September 30, 2014, the allocations of purchase price 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 the Company's 2014 acquisitions are provisional and remain preliminary. 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.

The Company will revise its preliminary allocations for acquired businesses if new information is obtained about the facts and circumstances existing as of the date of acquisition, or for purchase price adjustments, based on the final net assets and net working capital of the acquired businesses, as prescribed in the applicable purchase agreement. Such adjustments result in the recognition of, or adjust the fair values of, acquired assets and assumed liabilities, and are presented as if the adjustments had been taken into account as of the date of acquisition, which results in the revision of comparative prior period financial information. All changes that do not qualify as measurement period adjustments are included in current period results. See table below for measurement period adjustments relating to balances as previously disclosed.

2014 Acquisitions

Pacer

Effective June 1, 2014, MasTec acquired all of the issued and outstanding equity interests of Pacer Construction Holdings Corporation and its affiliated operating companies (collectively, "Pacer"). Pacer is a western Canadian civil construction services company, headquartered in Calgary, Alberta, Canada. Pacer’s services include infrastructure construction primarily in support of oil and gas production, processing, mining and transportation. Pacer, a leading contractor in the Canadian oil sands, is expected to significantly enhance MasTec's ability to lead the development of energy infrastructure work in western Canada and take advantage of the associated rapidly expanding opportunities anticipated for energy infrastructure work in North America in the coming years. Pacer is reported within the Company's Oil and Gas segment.

The following table summarizes the preliminary estimated fair values of consideration paid and identifiable assets acquired and liabilities assumed, as adjusted, as of the date of acquisition (in millions):



Acquisition consideration:	June 1, 2014
Cash	$	126.5
Fair value of contingent consideration (earn-out liability)	25.7
Total consideration transferred	$	152.2
Identifiable assets acquired and liabilities assumed:
Current assets	$	118.4
Equity method investments	2.3
Other long-term assets	0.1
Property and equipment	72.8
Pre-qualifications	41.2
Finite-lived intangible assets	20.3
Current liabilities	(55.8		)
Long-term debt	(87.0		)
Deferred income taxes	(29.6		)
Total identifiable net assets	$	82.7
Goodwill	$	69.5
Total net assets acquired, including goodwill	$	152.2

As a result of the ongoing review of the acquired net working capital and acquired net assets of Pacer, in the third quarter of 2014, the Company recorded a $9.8 million reduction of certain long-term assets, a $7.8 million increase in pre-acquisition liabilities, a $2.7 million increase in intangible assets and a $1.4 million increase to the contingent earn-out liability. These adjustments resulted in a $16.6 million increase to the previously recorded amount of goodwill associated with the Pacer acquisition.

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



	Fair Value		Weighted Average Useful Life
Finite-lived intangible assets:	(in millions)		(in years)
Backlog	$	6.1	2
Non-compete agreements	2.3		8
Customer relationships	11.9		8
Total acquired finite-lived intangible assets	$	20.3	6

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 Pacer's pre-qualifications with selected customer companies has been assigned an indefinite life as the pre-qualifications are not expected to 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 Pacer'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 Pacer and MasTec. The goodwill balance is not tax deductible.

The values of certain of the assets acquired and liabilities assumed include the proportionate values of Pacer’s undivided interest in an unincorporated contractual joint venture, which provides civil construction services and is accounted for on a proportional basis. The equity method investments identified in the table above represent investments in entities that provide heavy civil construction services. For the three and nine month periods ended September 30, 2014, revenue recognized by the Company for infrastructure construction services on behalf of these business entities totaled $2.0 million and $3.0 million, respectively. As of September 30, 2014, receivables from infrastructure construction services provided by Pacer, including acquired receivables, totaled $2.5 million. Other amounts due Pacer from its equity method investees and contractual joint venture as of September 30, 2014 included aggregate financing receivables of $14.8 million, which is included in other current assets. In connection with these business entities, there are performance guarantees, for which Pacer is obligated on a joint and several basis with its other joint venture partners or other shareholders in such entities, of a gross amount of approximately $219.0 million ($92.0 million based on ownership percentage) on the full contract value of certain projects. These projects are in varying stages of completion as of September 30, 2014. There are also approximately $31.0 million of other financial guarantees associated with these entities for which Pacer is obligated on a joint and several basis. The Company believes these receivables and guarantees represent variable interests; however, Pacer does not have the power to control the primary activities of, nor is it the primary beneficiary of, these business entities. The Company may provide financial support to these business entities in the future.

The contingent consideration included in the table above is equal to 25% of the excess, if any, of Pacer’s earnings from continuing operations before interest, taxes, depreciation and amortization (“EBITDA”) above certain thresholds for a five-year period, as set forth in the purchase agreement, and is payable annually in Canadian dollars. The fair value of the earn-out liability 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 is estimated to be between $0 and $69 million U.S. dollars; however, there is no maximum earn-out payment amount.

Other 2014 Acquisitions

Effective April 1, 2014, MasTec acquired 100% of a telecommunications services firm that specializes in the installation of in-home security systems for an aggregate purchase price composed of approximately $17.2 million in cash and a five year earn-out, valued at $0.6 million as of the date of acquisition. Additionally, effective January 1, 2014, MasTec acquired 100% of a telecommunications services firm that specializes in the engineering, installation, furnishing and integration of telecommunications equipment for an aggregate purchase price composed of approximately $23.8 million in cash and a five year earn-out, valued at $8.7 million as of the date of acquisition. These companies are included in MasTec's Communications segment.

2013 Acquisitions

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"). Big Country, which is included in the Company's Oil and Gas segment, is a North American oil and gas pipeline and facility construction services company, headquartered in Calgary, Alberta, Canada. In addition, effective April 1, 2013, MasTec acquired a former subcontractor to its wireless business, which provides self-perform communications tower construction, installation, maintenance and other services in support of telecommunications infrastructure construction in the Company's Communications segment. MasTec also acquired, effective August 1, 2013, an electrical transmission services company that provides substation construction activities. This company is included within the Company's Electrical Transmission segment.

Measurement Period Adjustments

Measurement period adjustments associated with the Company's 2013 acquisitions have been reflected as follows (in millions):



As of December 31, 2013:	As Previously Reported		Measurement Period Adjustments			As Revised
Current assets	$	1,306.0	$	1.0		$	1,307.0
Goodwill	$	899.4	$	2.6		$	902.0
Current liabilities	$	825.5	$	3.7		$	829.2
Long-term deferred tax liabilities, net	$	154.9	$	(0.1	)	$	154.8

Unaudited Pro Forma Information

The following unaudited supplemental pro forma financial information includes the results of operations of each of the companies acquired in 2014 and 2013 and is presented as if the acquired companies had been consolidated as of the beginning of the year immediately preceding the year in which the company was acquired. The unaudited supplemental pro forma financial information has been provided for illustrative purposes only. The unaudited supplemental pro forma financial information does 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 supplemental 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 supplemental pro forma financial information presented below has been prepared by adjusting the historical results of MasTec to include the historical results of the acquired businesses described above. The unaudited supplemental pro forma combined historical results were then adjusted (i) to remove one-time acquisition costs; (ii) to increase amortization expense resulting from the incremental intangible assets acquired in such acquisitions; (iii) to increase interest expense as a result of the cash consideration paid; and (iv) to reduce interest expense from the repayment of acquired debt. The unaudited supplemental pro forma financial information does not include any adjustments to reflect the impact of cost savings or other synergies that may result from these acquisitions. As noted above, the unaudited supplemental pro forma financial information does not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future.



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2014		2013		2014		2013
Pro forma financial information:	(unaudited, in millions)				(unaudited, in millions)
Revenue	$	1,309.6	$	1,417.5	$	3,496.0	$	3,667.3
Net income from continuing operations	$	46.0	$	52.4	$	96.5	$	118.0

Results of Businesses Acquired

Revenues and net income resulting from the year over year incremental impact of acquired businesses, which are included within the Company's consolidated results of operations for the periods indicated, were as follows:



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2014		2013		2014		2013
Actual of acquiree (year over year impact):	(unaudited, in millions)				(unaudited, in millions)
Revenue	$	133.2	$	141.6	$	342.5	$	270.4
Net income from continuing operations ^(a)	$	2.3	$	7.5	$	4.5	$	12.8

(a)

The above results do not include acquisition costs totaling $0.4 million and $0.3 million for the three month periods ended September 30, 2014 and 2013, respectively, and $2.0 million and $1.6 million for the nine month periods ended September 30, 2014 and 2013, respectively. Acquisition costs are included within general and administrative costs in the Company's consolidated unaudited statements of operations. The above results also do not include interest expense associated with consideration paid for these acquisitions.