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Related Party Transactions
12 Months Ended
Dec. 31, 2017
Related Party Transactions [Abstract]  
Related Party Transactions
Note 15 - Related Party Transactions
In connection with a 2017 acquisition, the Company acquired a 40% interest in an entity, which is valued at $0.4 million and is accounted for as an equity method investment. The Company has a subcontracting arrangement with this entity. For the year ended December 31, 2017, the Company incurred $0.2 million of expenses under this subcontracting arrangement, and there were no amounts outstanding as of December 31, 2017. For the year ended December 31, 2017, the Company advanced $0.3 million on behalf of this entity, net, which was outstanding as of December 31, 2017. The acquired business also had a vendor financing arrangement with an entity that was owned by a member of subsidiary management, which arrangement was completed in 2017. Payments made under this arrangement for the year ended December 31, 2017 totaled $5.3 million, and no amounts were outstanding as of December 31, 2017.
MasTec purchases, rents and leases equipment used in its business from a number of different vendors on a non-exclusive basis, including CCI, in which the Company has a cost method investment. Juan Carlos Mas, who is the brother of Jorge Mas, Chairman of MasTec’s Board of Directors, and José R. Mas, MasTec’s Chief Executive Officer, serves as the chairman of CCI, and a member of management of a MasTec subsidiary is a minority owner. For the years ended December 31, 2017 and 2016, MasTec paid CCI approximately $54.9 million and $24.5 million, net of rebates, for equipment supplies, rentals, leases and servicing, and for the year ended December 31, 2015, paid approximately $10.6 million. As of December 31, 2017 and 2016, related payables totaled approximately $2.7 million and $1.5 million, respectively.
MasTec entered into a subcontracting arrangement in 2016 with an entity for the performance of construction services, the minority owners of which include an entity controlled by Jorge Mas and José R. Mas, along with two members of management of a MasTec subsidiary. For the years ended December 31, 2017 and 2016, MasTec incurred $78.0 million and $12.9 million, respectively, of expenses under this subcontracting arrangement, and during 2016, sold equipment totaling $0.3 million to this entity. As of December 31, 2017 and 2016, related amounts payable totaled $2.0 million and $0.1 million, respectively.
MasTec leases employees to a customer in which Jorge Mas and José R. Mas own a majority interest. For each of the years ended December 31, 2017, 2016 and 2015, MasTec charged approximately $0.8 million to this customer. As of both December 31, 2017 and 2016, outstanding receivables from employee leasing arrangements with this customer totaled $0.2 million. MasTec also provides satellite communication services to this customer. For the year ended December 31, 2017, revenue from satellite communication services provided to this customer totaled approximately $0.8 million and for each of the years ended December 31, 2016 and 2015, totaled approximately $0.9 million. As of December 31, 2017 and 2016, receivables totaled approximately $0.3 million and $0.4 million, respectively.
MasTec leases a property located in Florida from Irma S. Mas, the mother of Jorge Mas and José R. Mas. For each of the years ended December 31, 2017, 2016 and 2015, lease payments associated with this property totaled approximately $48,000.
MasTec entered into a leasing arrangement in 2015 with an independent third party that leases an aircraft from a Company owned by Jorge Mas. For the years ended December 31, 2017 and 2016, MasTec paid $2.0 million and $2.6 million, respectively, under this leasing arrangement. As of December 31, 2017 and 2016, related amounts payable were de minimis. Activity in 2015 was de minimis.
For the years ended December 31, 2017, 2016 and 2015, related party lease payments to entities that are associated with members of subsidiary management for operational facilities and equipment totaled approximately $46.8 million, $43.3 million and $22.1 million, respectively. Payables associated with related party leases totaled approximately $0.1 million and $0.3 million as of December 31, 2017 and 2016, respectively. Additionally, payments to entities that are associated with members of subsidiary management for various types of supplies and services, including ancillary construction services, project-related site restoration and marketing and business development activities totaled approximately $63.9 million, $27.7 million and $10.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017 and 2016, related payables totaled approximately $5.2 million and $3.7 million, respectively. In addition, in 2017, MasTec entered into an arrangement to perform construction services for an entity, of which a member of subsidiary management is a minority owner. Revenue from this arrangement totaled $2.6 million for the year ended December 31, 2017, and related receivables totaled $0.6 million as of December 31, 2017. In 2017, MasTec acquired an oil and gas pipeline equipment company that was formerly owned by a member of subsidiary management for $40.6 million in cash and an estimated earn-out liability of $57.2 million. MasTec previously leased equipment from this company. In February 2018, MasTec acquired a construction management firm specializing in steel building systems, of which Juan Carlos Mas was a minority owner, for approximately $5 million in cash plus contingent earn-out consideration.
For the years ended December 31, 2017, 2016 and 2015 revenue recognized by the Company’s Pacer subsidiary for work performed for a contractual joint venture in which it holds a 35% undivided interest totaled $1.5 million, $1.0 million and $2.1 million, respectively. As of December 31, 2017 and 2016, receivables, net of BIEC, from this contractual joint venture totaled $0.8 million and $0.7 million, respectively. Related performance guarantees, which are based on the original full contract value, as of both December 31, 2017 and 2016 totaled Canadian $132.1 million (or approximately $105.1 million and $98.3 million, respectively), which was approximately 90% complete as of December 31, 2017. In connection with this contractual joint venture, the Company provided project-related financing of $7.2 million and $6.8 million, respectively, for the years ended December 31, 2017 and 2016. As of December 31, 2017, there were no material amounts committed to this entity.
Non-controlling interests in entities consolidated by the Company represent ownership interests held by members of management of certain of the Company’s subsidiaries, primarily in the Company’s Oil and Gas segment. During the years ended December 31, 2017 and 2016, the Company had a subcontracting arrangement with one of these entities for the performance of ancillary oil and gas construction services, which transactions were eliminated in consolidation. In October 2017, the Company acquired the remaining non-controlling interests of one of these entities for $21.4 million in cash and an earn-out liability of $9.0 million. During the year ended December 31, 2017, the Company made distributions of earnings of $1.3 million to holders of these non-controlling interests, and a remaining distribution of $0.6 million will be made to the former holders in the first quarter of 2018. Cash paid to acquire the remaining interests of this entity is included within payments to non-controlling interests in the consolidated statements of cash flows, and the earn-out liability is reflected within other current and other long-term liabilities, as appropriate, in the consolidated balance sheets.
Split Dollar Agreements
As of December 31, 2017, MasTec had a split dollar agreement with Jorge Mas, and José R. Mas and Juan Carlos Mas, as trustees of the Jorge Mas Irrevocable Trust, dated June 1, 2012 (the “Jorge Mas trust”), under which MasTec was the sole owner of the policies subject to the agreement. The Company made the premium payments under each of the policies. Upon the death of Jorge Mas or the survivor of Jorge Mas and his wife under the applicable policy, MasTec was entitled to receive a portion of the death benefit under the policy equal to the greater of (i) premiums paid by the Company on the policy and (ii) the then cash value of the policy (excluding surrender charges or other similar charges or reductions) immediately before the triggering death. The balance of the death benefit was payable to the Jorge Mas trust or other beneficiary designated by the trustees. In the event of the Company’s bankruptcy or dissolution, the Jorge Mas trust had the assignable option to purchase the policies subject to the split dollar agreement from the Company. The purchase price for each policy was the greater of either the total premiums paid by the Company for the policy, or the then cash value of the policy, excluding surrender charges or other similar charges or reductions. The total maximum face amount of the insurance policies subject to the split dollar agreement was capped at $200 million. The Company was designated as the named fiduciary under the split dollar agreement, and the policy could not have been surrendered without the express written consent of the Jorge Mas trust.
In addition, as of December 31, 2017, MasTec had a split dollar agreement with José R. Mas, and Jorge Mas, Juan Carlos Mas and Patricia Mas, as trustees of the José Ramon Mas Irrevocable Trust, dated December 7, 2012 (the “José R. Mas trust”), under which MasTec was the sole owner of each of the policies subject to the agreement. The Company made the premium payments under each of the policies. Upon the death of José R. Mas or the survivor of José R. Mas and his wife under the applicable policy, MasTec was entitled to receive a portion of the death benefit under the policy equal to the greater of (i) premiums paid by the Company on the policy and (ii) the then cash value of the policy (excluding surrender charges or other similar charges or reductions) immediately before the triggering death. The balance of the death benefit was payable to the José R. Mas trust or other beneficiary designated by the trustees. In the event of the Company’s bankruptcy or dissolution, the José R. Mas trust had the assignable option to purchase the policies subject to the split dollar agreement from the Company. The purchase price for each policy was the greater of either the total premiums paid by the Company for the policy, or the then cash value of the policy, excluding surrender charges or other similar charges or reductions. The total maximum face amount of the insurance policies subject to the split dollar agreement was capped at $75 million. The Company was designated as the named fiduciary under the split dollar agreement, and the policy could not have been surrendered without the express written consent of the José R. Mas trust.
In connection with the split dollar agreement for Jorge Mas, the Company paid approximately $1.1 million in each of the years ended December 31, 2017, 2016 and 2015. In connection with the split dollar agreement for José R. Mas, the Company paid approximately $0.7 million in each of the years ended December 31, 2017, 2016 and 2015. As of December 31, 2017 and 2016, life insurance assets associated with these agreements, which amounts are included within other long-term assets, totaled $16.6 million and $14.8 million, respectively.
In February 2018, Jorge Mas, the Company and José R. Mas and Juan Carlos Mas, as trustees of the Jorge Mas trust, entered into an amended and restated split dollar life insurance agreement that replaces the prior split dollar agreement with Jorge Mas. Additionally, in February 2018, José R. Mas, the Company and Jorge Mas, Juan Carlos Mas and Patricia Mas, as trustees of the José R. Mas trust, entered into an amended and restated split dollar life insurance agreement that replaces the prior split dollar life insurance agreement with José R. Mas. Details of the amended and restated split dollar life insurance agreements with each of Jorge and José R. Mas (each a “Covered Executive”) are summarized below.
The Company is the sole owner of each of the policies subject to the applicable amended and restated split dollar agreement. The Company makes the premium payments under each of the policies. Upon the death of the applicable Covered Executive or the survivor thereof and his wife under the applicable policy, the Company is entitled to receive a portion of the death benefit under the policy equal to the greater of (i) premiums paid by the Company on the policy and (ii) the then cash value of the policy (excluding surrender charges or other similar charges or reductions) immediately before the triggering death. The balance of the death benefit is payable to the Jorge Mas trust or the José R. Mas trust, as applicable, or other beneficiary designated by the applicable trustees. In the event of (i) the Company’s bankruptcy or dissolution that does not qualify as a “change in control” of the Company, (ii) the death of the applicable Covered Executive, (iii) the death of the wife of the Covered Executive, or (iv) a “change in control” of the Company, the applicable trust shall have the assignable option to purchase the policies subject to the applicable split dollar agreement from the Company. The purchase price for each policy shall be the greatest of (i) the total premiums paid by the Company for the policy, (ii) the then cash value of the policy, excluding surrender charges or other similar charges or reductions, or (iii) only in the case of any purchase that is not as a result of the first to occur of an event described in the foregoing clauses (ii) and (iv), the fair market value of the policy. The purchase price for each policy shall be payable in cash or a promissory note, if and to the extent that the Company determines that payment with a promissory note could not violate applicable law. In the event of a “change in control” of the Company, the Company shall make all the then unpaid premium payments under the policies subject to the split dollar agreements and any other payments to the insurer necessary to cause the policies subject to the split dollar agreements to be fully paid. In addition, if any policies subject to the split dollar agreements are purchased from the Company, the Company shall make all the then unpaid premium payments under the purchased policies and any other payments to the insurer necessary to cause the purchased policies to be fully paid. The total maximum face amount of the insurance policies subject to the split dollar agreements is capped at $200 million in the case of Jorge Mas and $75 million in the case of Jose R. Mas. The Company is designated as the named fiduciary under each split dollar agreement, and the policies subject to the split dollar agreement may not be surrendered without the express written consent of the applicable trust.