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Goodwill and Other Intangible Assets
 12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
Note 3 – Goodwill and Other Intangible Assets
The following table provides a reconciliation of changes in goodwill by reportable segment for the periods indicated (in millions):
 
Communications
 
Oil and Gas
 
Electrical Transmission
 
Power Generation and Industrial
 
Total Goodwill
Goodwill, gross, as of December 31, 2017
$
466.4

 
$
460.4

 
$
149.9

 
$
135.8

 
$
1,212.5

Accumulated impairment loss (a)
—

 
(74.8
)
 
—

 
—

 
(74.8
)
Goodwill, net, as of December 31, 2017
$
466.4

 
$
385.6

 
$
149.9

 
$
135.8

 
$
1,137.7

Additions from new business combinations
—

 
—

 
—

 
9.8

 
9.8

Measurement period adjustments, net (b)
1.4

 
5.7

 
—

 
(2.5
)
 
4.6

Goodwill impairment
—

 
(47.7
)
 
—

 
—

 
(47.7
)
Currency translation adjustments
—

 
(4.0
)
 
—

 
—

 
(4.0
)
Goodwill, net, as of December 31, 2018
$
467.8

 
$
339.6

 
$
149.9

 
$
143.1

 
$
1,100.4

Additions from new business combinations
73.2

 
37.7

 
—

 
9.5

 
120.4

Measurement period adjustments, net (b)
0.3

 
(0.4
)
 
—

 
—

 
(0.1
)
Currency translation adjustments
—

 
0.7

 
—

 
—

 
0.7

Goodwill, net, as of December 31, 2019
$
541.3

 
$
377.6

 
$
149.9

 
$
152.6

 
$
1,221.4

Accumulated impairment loss (a)
—

 
(121.5
)
 
—

 
—

 
(121.5
)
Goodwill, gross, as of December 31, 2019
$
541.3

 
$
499.1

 
$
149.9

 
$
152.6

 
$
1,342.9

(a)
Accumulated impairment losses include the effects of currency translation gains and/or losses.
(b)
Represents adjustments to preliminary estimates of fair value within the measurement period of up to one year from the date of acquisition.
The following table provides a reconciliation of changes in other intangible assets, net, for the periods 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, 2017
$
34.5

 
$
77.6

 
$
223.0

 
$
21.8

 
$
356.9

Accumulated amortization
 
 
 
 
(152.4
)
 
(13.4
)
 
(165.8
)
Other intangible assets, net, as of December 31, 2017
$
34.5

 
$
77.6

 
$
70.6

 
$
8.4

 
$
191.1

Additions from new business combinations
—

 
—

 
3.3

 
0.3

 
3.6

Measurement period adjustments (b)
—

 
—

 
—

 
(0.7
)
 
(0.7
)
Amortization expense
 
 
 
 
(19.2
)
 
(1.4
)
 
(20.6
)
Currency translation adjustments
—

 
(3.6
)
 
(0.3
)
 
(0.1
)
 
(4.0
)
Other intangible assets, net, as of December 31, 2018
$
34.5

 
$
74.0

 
$
54.4

 
$
6.5

 
$
169.4

Additions from new business combinations
—

 
0.2

 
67.7

 
5.2

 
73.1

Measurement period adjustments (b)
—

 
—

 
(6.7
)
 
(0.2
)
 
(6.9
)
Intangible asset impairment
—

 
(3.3
)
 
—

 
—

 
(3.3
)
Amortization expense
 
 
 
 
(20.2
)
 
(2.8
)
 
(23.0
)
Currency translation adjustments
—

 
2.0

 
0.1

 
0.1

 
2.2

Other intangible assets, net, as of December 31, 2019
$
34.5

 
$
72.9

 
$
95.3

 
$
8.8

 
$
211.5

Remaining weighted average amortization period (in years)


 
 
 
9
 
6
 
9
(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 years ended December 31, 2019, 2018 and 2017 totaled $23.0 million, $20.6 million and $20.9 million, respectively. Expected future amortization expense as of December 31, 2019 is summarized in the following table (in millions):
 
Amortization Expense
2020
$
24.5

2021
18.9

2022
15.5

2023
11.6

2024
8.5

Thereafter
25.1

Total
$
104.1


2019 Acquisitions. During 2019, MasTec completed six acquisitions, one of which specializes in water infrastructure for pipeline companies and is included within the Company’s Oil and Gas segment, four of which are included within the Company’s Communications segment, including a wireline/fiber deployment construction contractor and a telecommunications company specializing in a broad range of end-to-end wireless telecommunications solutions, and one of which specializes in construction projects in the power industry and is included in the Company’s Power Generation and Industrial segment. For all but one of these acquisitions, the Company acquired all of the equity interests in the related entities. For the telecommunications company specializing in wireless telecommunications solutions, the Company acquired 96% of the entity’s equity interests, with the obligation to acquire the balance over time.
The following table summarizes the fair values of consideration paid and net assets acquired for the 2019 acquisitions as of the respective dates of acquisition, as adjusted (in millions). Determination of the estimated fair values of the net assets acquired and the estimated contingent consideration and other liabilities for these acquisitions was preliminary as of December 31, 2019; as a result, further adjustments to these estimates may occur.
Acquisition consideration:
2019
Cash, net of cash acquired and other
$
175.0

Estimated fair value of contingent consideration and other liabilities
38.9

Total consideration transferred
$
213.9

Identifiable assets acquired and liabilities assumed:
 
Current assets, primarily composed of accounts receivable
$
90.0

Property and equipment, including finance leases and other long-term assets
55.2

Amortizing intangible assets
66.1

Current liabilities, including current portion of finance lease obligations and long-term debt
(94.1
)
Long-term debt, including finance lease obligations
(2.4
)
Deferred income taxes and other long-term liabilities
(21.3
)
Total identifiable net assets
$
93.5

Goodwill
$
120.4

Total net assets acquired, including goodwill
$
213.9


Amortizing intangible assets related to the 2019 acquisitions are primarily composed of customer relationships, backlog and certain other intangible assets, which had weighted average lives, as adjusted, of approximately 11 years, 2 years and 5 years, respectively, and a weighted average life of 11 years in total. Amortizing intangible assets are amortized in a manner consistent with the pattern in which the related benefits are expected to be consumed. The goodwill balances for the respective acquisitions represent the estimated value of each acquired company’s geographic presence in key markets, its assembled workforce and management team’s industry-specific project management expertise, as well as synergies expected to be achieved from the combined operations of the acquired companies and MasTec. Approximately $12 million of the goodwill balance related to the 2019 acquisitions is expected to be tax deductible as of December 31, 2019. Additionally, current liabilities in the table above include amounts due to former owners, who, subsequent to acquisition, are members of subsidiary management, of approximately $11 million, of which $2 million was subsequently paid pursuant to the terms of the related purchase agreement.
The contingent consideration and other liabilities included in the table above is composed of $22.2 million of earn-out liabilities, which equal a portion of the acquired companies’ earnings before interest, taxes, depreciation and amortization (“EBITDA”) in excess of thresholds agreed upon with the sellers, if applicable and a mandatorily redeemable non-controlling interest, subject to a repurchase formula, totaling $16.7 million, which is calculated in a manner consistent with the Company’s traditional earn-out arrangements. The Company refers to its traditional earn-out arrangements and the mandatorily redeemable non-controlling interest collectively as “Earn-outs,” both of which are recorded within other current and other long-term liabilities in the consolidated balance sheets. Earn-outs are generally payable annually for a period of five years, as set forth in the respective purchase agreements. The fair values of the Earn-outs were estimated using income approaches such as discounted cash flows or option pricing models and incorporate significant inputs not observable in the market. Key assumptions in the estimated valuations include the discount rate and probability-weighted EBITDA projections. Significant changes in any of these assumptions could result in significantly higher or lower potential Earn-out liabilities. As of December 31, 2019, the range of remaining potential undiscounted Earn-out liabilities for the 2019 acquisitions was estimated to be between $2 million and $82 million; however, there is no maximum payment amount.
2018 Acquisitions. During 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, as adjusted, was composed of approximately $5.1 million in cash, net of cash acquired, and estimated earn-out liabilities, net, totaling $1.5 million. As of December 31, 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.
2017 Acquisitions. During 2017, MasTec completed three acquisitions, which included all of the equity interests in: (i) a wireline/fiber deployment construction contractor, which is included in the Company’s Communications segment; (ii) a heavy civil construction services company, which is included in the Company’s Power Generation and Industrial segment; and (iii) an oil and gas pipeline equipment company, which is included in the Company’s Oil and Gas segment. The aggregate purchase price for these entities, as adjusted, was composed of approximately $117.6 million in cash, net of cash acquired, and estimated earn-out liabilities, net, totaling $98.5 million. As of December 31, 2019, the range of remaining potential undiscounted earn-out liabilities, net, for the 2017 acquisitions was estimated to be between $52 million and $187 million; however, there is no maximum payment amount.
Pro Forma Financial Information and Acquisition Results. For the years ended December 31, 2019, 2018 and 2017, unaudited supplemental pro forma revenue totaled approximately $7,417.9 million, $7,407.8 million and $6,724.8 million, respectively, and unaudited supplemental pro forma net income totaled approximately $405.8 million, $258.7 million and $351.3 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 adding the unaudited historical results of acquired businesses to the historical results of MasTec, and then adjusting those combined results 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 other factors, many of which are beyond the Company’s control.
For the years ended December 31, 2019, 2018 and 2017, the Company’s consolidated results of operations included acquisition-related revenue of approximately $188.3 million, $154.4 million and $160.1 million, respectively. For the year ended December 31, 2019, acquisition-related net loss totaled approximately $1.4 million, and for the years ended December 31, 2018 and 2017, acquisition-related net income totaled approximately $1.4 million and $10.2 million, respectively, based on the Company’s consolidated effective tax rates. These acquisition-related results do not include the effects of acquisition costs or interest expense associated with consideration paid for the related acquisitions.