Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments are primarily composed of cash and cash equivalents, accounts receivable and contract assets, notes receivable, cash collateral deposited with insurance carriers, life insurance assets, equity investments, certain other assets and investments, deferred compensation plan assets and liabilities, accounts payable and other current liabilities, acquisition-related contingent consideration and other liabilities, and debt obligations.

Fair value is the price that would be received to sell an asset or the amount paid to transfer a liability, also referred to as the “exit price,” in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs that may be used are: (i) Level 1 - quoted market prices in active markets for identical assets or liabilities; (ii) Level 2 - observable market-based inputs or other observable inputs, including quoted market prices for identical or similar assets or liabilities in markets that are not active; and (iii) Level 3 - significant unobservable inputs that cannot be corroborated by observable market data, which are generally determined using valuation models incorporating management estimates of market participant assumptions.

Acquisition-Related Contingent Consideration

Acquisition-related contingent consideration is composed of earn-outs, which represent the estimated fair value of future amounts payable for businesses, which the Company refers to as “Earn-outs,” that are contingent upon the acquired businesses achieving certain levels of earnings in the future. As of September 30, 2024 and December 31, 2023, the estimated fair value of the Company’s Earn-out liabilities totaled $82.2 million and $77.4 million, respectively. Earn-out liabilities included within other current liabilities totaled approximately $22.6 million and $29.8 million as of September 30, 2024 and December 31, 2023, respectively. The fair values of the Company’s Earn-out liabilities are estimated using income approaches such as discounted cash flows or option pricing models, both of which incorporate significant inputs not observable in the market (Level 3 inputs), including management’s estimates and entity-specific assumptions, and are evaluated on an ongoing basis. Key assumptions include the discount rate, which, as of September 30, 2024, ranged from 13.0% to 21.0%, with a weighted average rate of 16.3% based on the relative fair value of the respective Earn-out liabilities, and probability-weighted projections of EBITDA. Significant changes in any of these assumptions could result in significantly higher or lower estimated Earn-out liabilities. The ultimate payment amounts for the Company’s Earn-out liabilities will be determined based on the actual results achieved by the acquired businesses. As of September 30, 2024, the range of potential undiscounted Earn-out liabilities was estimated to be between $12 million and $101 million; however, there is no maximum payment amount.

Earn-out activity consists primarily of additions from new business combinations; changes in the expected fair value of future payment obligations; and payments. For both the three and nine month periods ended September 30, 2024, additions from new business combinations totaled approximately $30.3 million, and for both the three and nine month periods ended September 30, 2023, such additions totaled approximately $1.4

million. There were no measurement period adjustments in any of the three or nine month periods ended September 30, 2024 or 2023. Fair value adjustments totaled an increase, net, of approximately $2.3 million for the three month period ended September 30, 2024 and related primarily to acquisitions within the Company’s Oil and Gas and Power Delivery segments, and for the nine month period ended September 30, 2024, totaled an increase, net, of approximately $0.5 million and related to increases primarily within the Company’s Oil and Gas and Clean Energy and Infrastructure segments, which were largely offset by decreases related to acquisitions within the Company’s Communications segment. For the three month period ended September 30, 2023, fair value adjustments totaled a decrease, net, of approximately $4.9 million and related primarily to acquisitions within the Company’s Communications and Oil and Gas segments. For the nine month period ended September 30, 2023, fair value adjustments totaled a decrease, net, of approximately $7.0 million and related to decreases in the Company’s Communications segment, which were largely offset by increases related to acquisitions primarily within the Company’s Clean Energy and Infrastructure and Oil and Gas segments. For the three and nine month periods ended September 30, 2024, Earn-out payments totaled approximately $21.4 million and $26.0 million, respectively, and for the three and nine month periods ended September 30, 2023, such payments totaled approximately $12.7 million and $38.8 million, respectively.

Equity Investments

The Company’s equity investments as of September 30, 2024 include: (i) the Company’s 33% equity interests in Trans-Pecos Pipeline, LLC (“TPP”) and Comanche Trail Pipeline, LLC (“CTP,” and together with TPP, the “Waha JVs”); (ii) a 15% equity interest in Cross Country Infrastructure Services, Inc. (“CCI”); (iii) the Company’s 50% equity interests in each of FM Technology Holdings, LLC, FM USA Holdings, LLC and All Communications Solutions Holdings, LLC, collectively “FM Tech”; (iv) the Company’s interests in certain proportionately consolidated non-controlled contractual joint ventures; and (v) certain other equity investments.

As of both September 30, 2024 and December 31, 2023, the aggregate carrying value of the Company’s equity investments totaled approximately $319 million. Except for one investment for which the Company recorded an impairment loss totaling approximately $3 million in the third quarter of 2023, there were no impairments related to these investments in any of the three or nine month periods ended September 30, 2024 or 2023.

The Waha JVs. The Waha JVs own and operate certain pipeline infrastructure that transports natural gas to the Mexican border for export. The Company’s investments in the Waha JVs are accounted for as equity method investments. Equity in earnings related to the Company’s proportionate share of income from the Waha JVs, which is included within the Company’s Other segment, totaled approximately $7.6 million and $21.7 million for the three and nine month periods ended September 30, 2024, respectively, and totaled approximately $7.7 million and $23.1 million for the three and nine month periods ended September 30, 2023, respectively. Distributions of earnings from the Waha JVs, which are included within operating cash flows, totaled approximately $4.7 million and $14.0 million for the three and nine month periods ended September 30, 2024, respectively, and totaled approximately $4.7 million and $10.5 million for the three and nine month periods ended September 30, 2023, respectively. Cumulative undistributed earnings from the Waha JVs, which represents cumulative equity in earnings for the Waha JVs less distributions of earnings, totaled $133.2 million as of September 30, 2024. The Company’s net investment in the Waha JVs, which differs from its proportionate share of the net assets of the Waha JVs due primarily to equity method goodwill associated with capitalized investment costs, totaled approximately $275 million and $274 million as of September 30, 2024 and December 31, 2023, respectively.

Other Investments. The Company has equity interests in certain other entities that are accounted for as equity method investments. For both the nine month periods ended September 30, 2024 and 2023, the Company made equity contributions of approximately $0.2 million to these entities. Distributions from these entities totaled approximately $1.9 million for the nine month period ended September 30, 2024. The Company has subcontracting arrangements with certain of these entities for the performance of construction services, and expenses recognized in connection with these arrangements totaled approximately $1.9 million and $4.2 million for the three and nine month periods ended September 30, 2024, respectively, and totaled approximately $0.6 million and $2.1 million for the three and nine month periods ended September 30, 2023, respectively. As of September 30, 2024 and December 31, 2023, related amounts payable to these entities totaled approximately $0.5 million and $0.1 million, respectively. In addition, the Company has advanced amounts to certain of these entities, which for the nine month periods ended September 30, 2024 and 2023, totaled approximately $0.1 million and $0.7 million, respectively. As of September 30, 2024 and December 31, 2023, receivables related to these arrangements totaled approximately $4.2 million and $4.0 million, respectively.

Variable Interest Entities. The Company has determined that certain of its investment arrangements are variable interest entities (“VIEs”). Management assesses its VIEs on an ongoing basis to determine if the Company is the primary beneficiary and if consolidation is required. As of September 30, 2024, management determined that the Company is the primary beneficiary of two of its VIEs, and accordingly, has consolidated these entities within the Company’s financial statements, with the other parties’ interests accounted for as non-controlling interests.

The Company’s consolidated VIEs include an electric utility contractor in which the Company acquired a 49% interest in the first quarter of 2024. As of September 30, 2024 and December 31, 2023, the carrying values of assets associated with the Company’s consolidated VIEs totaled approximately $100.1 million and $1.7 million, respectively, which amounts consisted primarily of accounts receivable, net of allowance and contract assets. The carrying values of liabilities associated with the Company’s consolidated VIEs totaled approximately $97.9 million and $1.6 million as of September 30, 2024 and December 31, 2023, respectively, which amounts consisted primarily of accounts payable. The Company has not provided, nor is it obligated to provide, any financial support to any of its consolidated VIEs.

The carrying values of the Company’s VIEs that are not consolidated totaled approximately $23 million as of both September 30, 2024 and December 31, 2023, which amounts are recorded within other long-term assets in the consolidated balance sheets. Management believes that the Company’s maximum exposure to loss for its non-consolidated VIEs, inclusive of additional financing commitments, approximated $35 million as of both September 30, 2024 and December 31, 2023.

Senior Notes

As of both September 30, 2024 and December 31, 2023, the gross carrying amount of the Company’s 4.500% senior notes due August 15, 2028 (the “4.500% Senior Notes”) totaled $600.0 million, and their estimated fair value totaled approximately $589.2 million and $565.2 million for the respective periods. As of September 30, 2024, the gross carrying amount of the Company’s 5.900% senior notes due June 15, 2029 (the “5.900%

Senior Notes”) totaled $550.0 million, and their estimated fair value totaled approximately $574.2 million. As of September 30, 2024, the estimated fair values of the Company’s senior notes were determined based on an exit price approach using Level 2 inputs. In the first quarter of 2024, management reevaluated its fair value hierarchy determination for its senior notes to better align with the valuation hierarchy of the fair value guidance, which resulted in an update of the Level determination from Level 1 inputs to Level 2 inputs. The update had no effect on the reported fair values of the related senior notes.