Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Note 3 – Goodwill and Other Intangible Assets

The following table provides balances for goodwill by reportable segment as of June 30, 2019 (in millions):

	Communications		Oil and Gas			Electrical Transmission		Power Generation and Industrial		Total Goodwill
Goodwill, gross	$	472.8	$	499.0		$	149.9	$	143.1	$	1,264.8
Accumulated impairment loss	—		(120.6		)	—		—		(120.6		)
Goodwill, net	$	472.8	$	378.4		$	149.9	$	143.1	$	1,144.2

For the six month period ended June 30, 2019, goodwill included additions of $40.3 million from new business combinations and a net increase of $2.9 million from measurement period adjustments. For the six month period ended June 30, 2019, currency translation effects related to goodwill and accumulated impairment losses totaled approximately $5.1 million of gains and $4.5 million of losses, respectively.

The following table provides a reconciliation of changes in other intangible assets, net, for the period indicated (in millions):

	Other Intangible Assets
	Non-Amortizing				Amortizing
	Trade Names		Pre-Qualifications		Customer Relationships and Backlog			Other (a)			Total
Other intangible assets, gross, as of December 31, 2018	$	34.5	$	74.0	$	224.4		$	21.1		$	354.0
Accumulated amortization					(170.0		)	(14.6		)	(184.6		)
Other intangible assets, net, as of December 31, 2018	$	34.5	$	74.0	$	54.4		$	6.5		$	169.4
Additions from new business combinations	—		—		27.0			1.6			28.6
Measurement period adjustments (b)	—		—		(0.3		)	—			(0.3		)
Amortization expense					(8.6		)	(0.9		)	(9.5		)
Currency translation adjustments	—		1.8		0.1			0.0			1.9
Other intangible assets, net, as of June 30, 2019	$	34.5	$	75.8	$	72.6		$	7.2		$	190.1

(a) Consists principally of trade names and non-compete agreements.

(b) Represents adjustments to preliminary estimates of fair value within the measurement period of up to one year from the date of acquisition.

Amortization expense associated with intangible assets for the three month periods ended June 30, 2019 and 2018 totaled $4.7 million and $5.4 million, respectively, and for the six month periods ended June 30, 2019 and 2018, totaled $9.5 million and $10.3 million, respectively.

2019 Acquisitions. During the first half of 2019, MasTec completed three acquisitions, one of which is in the Company’s Oil and Gas segment, and two of which are included within the Company’s Communications segment. The aggregate purchase price for these entities was composed of approximately $117 million in cash plus earn-out liabilities valued at approximately $16 million as of June 30, 2019, for which the earn-out periods range from three to five years. As of June 30, 2019, the range of remaining potential undiscounted earn-out liabilities for the 2019 acquisitions was estimated to be up to $40 million; however, there is no maximum payment amount. Determination of the estimated fair values of the net assets acquired and the estimated earn-out liabilities for these acquisitions was preliminary as of June 30, 2019; as a result, further adjustments to these estimates may occur.

2018 Acquisitions. During the first quarter of 2018, MasTec acquired all of the equity interests in a construction management firm specializing in steel building systems and acquired a wind turbine services company, both of which are included in the Company’s Power Generation and Industrial segment. The aggregate purchase price for these entities was composed of approximately $6.8 million in cash and estimated earn-out liabilities, net, totaling $1.5 million as of June 30, 2019. As of June 30, 2019, the range of remaining potential undiscounted earn-out liabilities, net, for the 2018 acquisitions was estimated to be up to $6 million; however, there is no maximum payment amount.

Pro Forma Financial Information and Acquisition Results. For the three month periods ended June 30, 2019 and 2018, unaudited supplemental pro forma revenue totaled approximately $1,939.0 million and $1,663.7 million, respectively, and unaudited supplemental pro forma net income totaled approximately $120.3 million and $84.3 million, respectively. For the six month periods ended June 30, 2019 and 2018, unaudited supplemental pro forma revenue totaled approximately $3,457.3 million and $3,109.3 million, respectively, and unaudited supplemental pro forma net income totaled approximately $163.6 million and $112.8 million, respectively.

These unaudited pro forma financial results include the results of operations of acquired companies as if those companies had been consolidated as of the beginning of the year prior to their acquisition and are provided for illustrative purposes only. These unaudited pro forma financial results do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods indicated, or of the results that may be achieved by the combined companies in the future. The Company’s unaudited pro forma financial results were prepared by adjusting the historical results of MasTec to include the unaudited historical results of acquired businesses, and then were adjusted for (i) acquisition costs; (ii) amortization expense from acquired intangible assets; (iii) interest expense from cash consideration paid; (iv) interest expense from debt repaid upon acquisition; and (iv) other purchase accounting related adjustments. These unaudited pro forma financial results do not include adjustments to reflect other cost savings or synergies that may have resulted from these acquisitions. Future results may vary significantly due to future events and transactions, as well as other factors, many of which are beyond the Company’s control.

For the three and six month periods ended June 30, 2019, the Company’s consolidated results of operations included acquisition-related revenue of approximately $35.5 million and $75.1 million, respectively, and included acquisition-related net losses of approximately $1.4 million and $7.4 million, respectively, based on the Company’s consolidated effective tax rates. For the three and six month periods ended June 30, 2018, the Company’s consolidated results of operations included acquisition-related revenue of approximately $45.7 million and $122.6 million, respectively, and acquisition-related net income of approximately $0.5 million and $2.5 million, respectively, based on the Company’s consolidated effective tax rates.