XML 29 R12.htm IDEA: XBRL DOCUMENT v3.3.1.900
Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2015
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
Note 5 - Fair Value of Financial Instruments
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of December 31, 2015 and 2014, financial instruments required to be measured at fair value on a recurring basis consisted primarily of acquisition-related contingent consideration liabilities, which represent the estimated fair value of additional future earn-outs payable for acquisitions of businesses (“ASC 805 contingent consideration), in accordance with U.S. GAAP. The fair value of ASC 805 contingent consideration is based on management estimates and entity-specific assumptions, which are Level 3 inputs, and is evaluated on an ongoing basis. As of December 31, 2015 and 2014, the fair value of the Company’s ASC 805 contingent consideration totaled $58.4 million and $146.1 million, respectively.
There were no additions to ASC 805 contingent consideration from new business combinations for the year ended December 31, 2015. Additions to ASC 805 contingent consideration from new business combinations for the years ended December 31, 2014 and 2013 totaled $33.6 million and $32.5 million, respectively. The Company paid approximately $40.5 million, $48.4 million and $8.5 million of ASC 805 contingent consideration for the years December 31, 2015, 2014 and 2013, respectively. For the year ended December 31, 2015, the Company recognized a net reduction of $39.2 million of ASC 805 contingent consideration in the Oil and Gas, Electrical Transmission and Communications segments, of which $20.1 million related to finalization of earn-out arrangements and adjustments to the expected future earn-out obligations of certain other acquisitions based on the expected future performance of the acquisitions for the earn-out period and was recorded within other income, net, in the consolidated statements of operations. The remaining reduction of $19.1 million was offset with a corresponding receivable amount.
Foreign currency translation gains associated with ASC 805 contingent consideration, which are included within other comprehensive income, totaled $8.0 million, $4.5 million and $2.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Assets and liabilities recognized or disclosed at fair value on a non-recurring basis, for which remeasurement occurs in the event of an impairment or other measurement event, if applicable, include items such as cost and equity method investments, life insurance assets, long-lived assets, goodwill, other intangible assets and liabilities, including off-market contracts and debt. In the fourth quarter of 2015, the Company recorded a goodwill and intangible asset impairment. For additional details, see Note 1 - Business, Basis of Presentation and Significant Accounting Policies.
As of both December 31, 2015 and 2014, the carrying amount of the Company’s 4.875% Senior Notes totaled $400 million. As of December 31, 2015 and 2014, the estimated fair value of the 4.875% Senior Notes, based on quoted market prices in active markets, a Level 1 input, totaled $344.0 million and $375.0 million, respectively.

Cost and Equity Method Investments. The aggregate carrying value of the Company’s cost and equity method investment assets totaled approximately $16.7 million and $17.7 million as of December 31, 2015 and 2014, respectively. In addition, as of December 31, 2014, the Company had approximately $32.4 million recorded within other current liabilities relating to one of its equity method investments, as discussed in Note 3 - Acquisitions. Included in the Company’s cost and equity method investments are: (i) a $15 million cost investment in Cross Country Pipeline Supply, Inc. (“CCP”), which is a related party, as discussed in Note 16 - Related Party Transactions; (ii) two joint ventures acquired in connection with the Company’s acquisition of Pacer, as described in Note 3 - Acquisitions and; (iii) the Company’s equity interests in Trans-Pecos Pipeline, LLC (“TPP”) and Comanche Trail Pipeline, LLC (“CTP,” and together with TPP, the “Waha JVs”).
In June 2015, MasTec acquired 33% equity interests in the Waha JVs for an aggregate initial investment of $6 million and commitments of future equity contributions and/or loan guarantees of up to an additional $78 million. The joint ventures were formed to design, build, own and operate a header system and two pipelines that will transport natural gas. A subsidiary of MasTec will construct the pipelines, with construction expected to commence in 2016. Each pipeline is planned to interconnect at the United States/Mexico border with pipelines currently under development and construction in Mexico. In the fourth quarter of 2015, TPP and CTP entered into separate non-recourse financing facilities, which are each secured by pledges of the equity interests in the respective entities, as well as a first lien security interest over virtually all of TPP’s and CTP’s assets. To moderate exposure to interest rate fluctuations on the financing facilities, TPP and CTP each entered into interest rate swaps. Until TPP and CTP obtain the required regulatory approval for the projects, the swaps are guaranteed by TPP and CTP’s equity investors, including MasTec, for their proportionate share of any potential losses associated with early termination of the swaps. The Company is also subject to its proportionate share of any recognized unrealized fair market value gains or losses from fluctuations in interest rates associated with these swaps. For the year ended December 31, 2015, the Company’s proportionate share of unrealized fair market value losses on these interest rate swaps was approximately $4 million, which was reflected within other long-term liabilities in the consolidated balance sheets.
The Company made equity contributions of approximately $56 million, inclusive of the initial $6 million, to these joint ventures in 2015, which were repaid to the Company in the fourth quarter of 2015 through borrowings under the financing facilities. As required by the financing facilities, MasTec issued letters of credit as collateral for its equity commitments to the joint ventures totaling $78 million (the “Equity LC Amount”). Until TPP and CTP obtain the required regulatory approval for the projects, borrowings under the financing facilities must be guaranteed or collateralized by TPP and CTP’s equity investors, including MasTec, for their proportionate share of the borrowings. Accordingly, to collateralize its share of the borrowings, MasTec increased the face amount of the letters of credit by $8 million to $86 million as of December 31, 2015, and in the first quarter of 2016, by another $45 million to $131 million. The Company expects the face amount of the letters of credit to be reduced in the first half of 2016 after obtaining the required regulatory approval for the projects, leaving only the Equity LC Amount outstanding.
The fair values of the Company’s cost and equity method investments are not readily available. The Company is not aware of events or changes in circumstances that would have a significant adverse effect on the carrying values of its cost and/or equity method investments as of December 31, 2015 or 2014.