Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2021

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 March 31, 2021 (in millions):

	Communications		Clean Energy and Infrastructure		Oil and Gas		Electrical Transmission		Total Goodwill
Goodwill, gross	$	561.9	$	166.4	$	509.7	$	150.1	$	1,388.1
Accumulated impairment loss	—		—		(125.4)		—		(125.4)
Goodwill, net	$	561.9	$	166.4	$	384.3	$	150.1	$	1,262.7

For the three month period ended March 31, 2021, goodwill included additions of $19.7 million from new business combinations and a decrease of $0.2 million from measurement period adjustments. Currency translation effects related to goodwill and accumulated impairment losses for the three month period ended March 31, 2021 totaled approximately $1.8 million of gains and $1.6 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		Customer Relationships and Backlog		Pre-Qualifications		Other (a)		Total
Other intangible assets, gross, as of December 31, 2020	$	34.5	$	297.9	$	73.8	$	26.4	$	432.6
Accumulated amortization			(218.5)		(10.6)		(19.5)		(248.6)
Other intangible assets, net, as of December 31, 2020	$	34.5	$	79.4	$	63.2	$	6.9	$	184.0
Additions from new business combinations	—		48.0		—		4.3		52.3
Currency translation adjustments	—		—		0.5		—		0.5
Amortization expense			(7.9)		(2.7)		(0.6)		(11.2)
Other intangible assets, net, as of March 31, 2021	$	34.5	$	119.5	$	61.0	$	10.6	$	225.6

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

Quarterly Assessment for Indicators of Impairment. During the first quarter of 2021, in conjunction with the Company’s quarterly review for indicators of impairment, management performed a quantitative assessment of the goodwill associated with one reporting unit within the Oil and Gas segment. Based on the results of this assessment, management determined that the estimated fair value of the reporting unit substantially exceeded its carrying value. Significant changes in the assumptions or estimates used in management’s assessment, such as a reduction in profitability and/or cash flows, could result in non-cash impairment charges to goodwill and indefinite-lived intangible assets in the future.

Recent Acquisitions

The Company seeks to grow and diversify its business both organically and through acquisitions and/or other strategic arrangements in order to deepen its market presence, broaden its geographic reach and expand its service offerings.

2021 Acquisitions. For the three month period ended March 31, 2021, MasTec completed two acquisitions, including all of the equity interests in a heavy civil infrastructure construction company that is included within the Company’s Clean Energy and Infrastructure segment, and all of the equity interests in a pipeline integrity and gas distribution contractor that is included within the Company’s Oil and Gas segment. The aggregate purchase price for these entities was composed of approximately $90 million in cash, net of cash acquired. Determination of the estimated fair values of net assets acquired for these acquisitions was preliminary as of March 31, 2021; as a result, further adjustments to these estimates may occur.

2020 Acquisitions. During the year ended December 31, 2020, MasTec completed five acquisitions. These acquisitions included the

equity interests of two entities. Through a consolidated subsidiary, the Company acquired all of the equity interests in a heavy civil infrastructure construction company that is included within the Company’s Clean Energy and Infrastructure segment. As of the date of acquisition, the Company’s ownership interest in the consolidated subsidiary was 96%, and as of both March 31, 2021 and December 31, 2020, was 91%, with the non-controlling interests owned by members of subsidiary management. The Company also acquired all of the equity interests in a utility service and telecommunications construction contractor that is included within the Company’s Communications segment. Additionally, the Company acquired the assets of three entities in 2020, one that specializes in wireless telecommunications and one that specializes in install-to-the-home services, both of which are included within the Company’s Communications segment, and one that specializes in electrical transmission services that is included within the Company’s Electrical Transmission segment.

The aggregate purchase price for these entities was composed of approximately $23.5 million in cash, net of cash acquired, with an additional $3.2 million due through 2023, subject to certain indemnification provisions, and earn-out liabilities with five-year terms valued at approximately $8.3 million. Earn-outs are generally payable annually and are recorded within other current and other long-term liabilities in the consolidated balance sheets. As of March 31, 2021, the range of remaining potential undiscounted earn-out liabilities for the 2020 acquisitions was estimated to be between $1 million and $13 million; however, there is no maximum payment amount. Determination of the estimated fair values of net assets acquired and earn-out liabilities for these acquisitions was preliminary as of March 31, 2021; as a result, further adjustments to these estimates may occur.

Pro Forma Financial Information and Acquisition Results. For the three month periods ended March 31, 2021 and 2020, unaudited supplemental pro forma revenue totaled approximately $1.8 billion and $1.6 billion, respectively, and unaudited supplemental pro forma net income totaled approximately $68.6 million and $46.7 million, respectively.

For the three month periods ended March 31, 2021 and 2020, the Company’s consolidated results of operations included acquisition-related revenue of approximately $86.8 million and $49.5 million, respectively, and included acquisition-related net income of approximately $1.2 million and acquisition-related net losses of approximately $1.2 million, respectively, based on the Company’s consolidated effective tax rates. These acquisition-related results include amortization of intangible assets and exclude the effects of acquisition costs and interest expense associated with consideration paid for the related acquisitions.

Q2 2021 Acquisitions. In the second quarter of 2021, MasTec completed the acquisition of INTREN, LLC (“INTREN”), a premier specialty utility contractor primarily providing electrical distribution network services under various multi-year master services agreements to the nation’s largest utilities, municipalities and cooperatives. This entity will be included within the Company’s Electrical Transmission segment. MasTec acquired all of INTREN’s equity interests for approximately $420 million in cash plus an Earn-out, which is contingent upon INTREN’s results for the year ended December 31, 2021. The acquisition of INTREN was funded with cash on hand and borrowings under the Company’s senior secured credit facility and is subject to customary purchase price adjustments. MasTec also completed two additional immaterial acquisitions, which included all of the equity interests of a telecommunications and utility engineering services company and a heavy industrial general contractor that will be included within our Communications and Clean Energy and Infrastructure segments, respectively. Due to the limited amount of time since these acquisitions, the initial purchase accounting is incomplete. The Company will complete an initial allocation of purchase price to total net assets acquired for these acquisitions in the second quarter of 2021.