Note 4 - Fair Value of Financial Instruments

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of December 31, 2016 and 2015, financial instruments required to be measured at fair value on a recurring basis consisted primarily of acquisition-related contingent consideration, which represents the estimated fair value of future earn-outs payable for acquisitions of businesses (“ASC 805 contingent consideration”), and 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, 2016 and 2015, the fair value of the Company’s ASC 805 contingent consideration totaled $45.8 million and $58.4 million, respectively, of which $21.8 million and $16.7 million, respectively, was included within other current liabilities. The fair value of the Company’s ASC 805 contingent consideration is estimated using an income approach and incorporates significant inputs not observable in the market. These assumptions include the discount rate and probability-weighted EBITDA projections. Significant changes in any of these assumptions could result in a significantly higher or lower potential earn-out liability. The range of potential undiscounted earn-out liabilities was estimated to be between $21.8 million and $52.7 million as of December 31, 2016; however, there is no maximum payment amount.

There were no additions to ASC 805 contingent consideration from new business combinations for the years ended December 31, 2016 and 2015, and in 2014, additions from new business combinations totaled approximately $33.6 million. Payments for ASC 805 contingent considerations totaled approximately $15.8 million, $40.5 million and $48.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Foreign currency translation gains or losses associated with ASC 805 contingent consideration are included within other comprehensive income (loss). Foreign currency translation activity in 2016, net, was de minimis. For the years ended December 31, 2015 and 2014, foreign currency translation gains totaled $8.0 million and $4.5 million, respectively. Adjustments to ASC 805 contingent consideration resulting from changes to the expected future performance of acquired businesses for the earn-out period, or from the finalization of completed earn-out arrangements, are recorded within other income or expense, as appropriate. In 2016, ASC 805 contingent consideration increased, net, by $2.7 million due to an increase in the expected future earn-out obligations for certain acquired businesses in the Company’s Oil and Gas segment, partially offset by a reduction for certain other acquired businesses in the Oil and Gas and Communications segments upon finalization of the related earn-out arrangements. In 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 acquired businesses, and of which $19.1 million was offset with a corresponding receivable amount.

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 cost and equity method investments, life insurance assets, long-lived assets, goodwill, other intangible assets and liabilities, including off-market contracts and debt.

As of both December 31, 2016 and 2015, the gross carrying amount of the Company’s 4.875% Senior Notes totaled $400 million. As of December 31, 2016 and 2015, the estimated fair value of the 4.875% Senior Notes, based on quoted market prices in active markets, a Level 1 input, totaled $388.0 million and $344.0 million, respectively.

Cost and Equity Investees. The Company’s cost and equity investees as of December 31, 2016 are primarily composed of: (i) the Company’s equity interests in Trans-Pecos Pipeline, LLC (“TPP”) and Comanche Trail Pipeline, LLC (“CTP,” and together with TPP, the “Waha JVs”); (ii) the Company’s equity interests in a pre-acquisition investment of Pacer Construction Holdings Corporation and its affiliated operating companies (collectively, “Pacer”); (iii) a $15 million cost investment in Cross Country Pipeline Supply, Inc. (“CCP”), and the Company’s interests in certain proportionately consolidated non-controlled contractual joint ventures, as discussed in Note 15 - Related Party Transactions;

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. 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 is providing pipeline construction services to the joint ventures, for which construction commenced in 2016. The pipelines and header system are expected to commence operations in 2017. Each pipeline will 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. The Waha JVs are party to certain interest rate swaps. The Company reflects its proportionate share of any unrealized fair market value gains or losses from fluctuations in interest rates associated with these swaps in its financial statements. Beginning in 2016, the Waha JVs have accounted for these swaps as qualifying cash flow hedges. For the year ended December 31, 2016 the Company’s proportionate share of unrecognized unrealized fair market value gains on these interest rate swaps totaled approximately $6.4 million, or $4.0 million, net of tax, which amount was included within other comprehensive loss. For the year ended December 31, 2015, the Company’s proportionate share of unrealized losses totaling $4.4 million was included within equity in losses (earnings) of unconsolidated affiliates.

In 2016, the Company made equity and other contributions of approximately $27 million to these joint ventures, and in 2015, the Company made no net contributions. As collateral for its equity commitments in the Waha JVs, the Company has issued letters of credit (the “Equity LC Amount”). As of December 31 2016 and 2015, $91 million and $78 million of Equity LC Amounts, respectively, were outstanding. For the year ended December 31, 2016, revenue recognized in connection with work performed for the Waha JVs, net of intercompany eliminations, totaled $245.0 million, and as of December 31, 2016, related receivables, including retainage, net of BIEC, totaled $71.2 million. As of December 31, 2016, the Company’s net investment in the Waha JVs represented an asset totaling approximately $6 million, and as of December 31, 2015, the Company’s net investment in the Waha JVs represented a liability of approximately $4 million. The Company’s net investment in the Waha JVs differs from its proportionate share of the net assets of the Waha JVs due to certain items which, as of December 31, 2016, included capitalized investment costs as well as intercompany eliminations, net.

Other equity investees. In connection with the 2014 acquisition of Pacer, the Company acquired equity interests in two joint ventures. One of these entities was liquidated in 2016, and the second, which is in the final stages of liquidation, is being managed by a receiver to assist with the orderly wind-down of its operations. During the first quarter of 2016, the Company recorded $3.6 million of earnings related to increases in expected recoveries from these investments. The aggregate net carrying value of these investments, including project and financing receivables, totaled $31.4 million and $28.8 million as of December 31, 2016 and 2015, which amounts were substantially recorded within other current assets. There are no remaining amounts expected to be advanced to these entities, and all related project work was complete as of December 31, 2016. In January 2017, the Company received approximately $12 million of proceeds related to the ongoing liquidation of this investment.

The fair values of the Company’s cost and equity method investments are not readily observable. 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, 2016 or 2015.

Summarized Financial Information of Equity Investees

The following presents summarized financial information for the Company’s significant equity investees (in millions):



	December 31,
	2016		2015
Current assets	$	89.5	$	71.1
Long-term assets	1,126.5		234.7
Total assets	$	1,216.0	$	305.8

Current liabilities	$	153.6	$	119.5
Long-term liabilities	986.0		199.6
Total liabilities	$	1,139.6	$	319.1

	For the Years Ended December 31,
	2016		2015
Net losses	$	0.2	$	13.3