Acquisitions

Allocations of purchase prices for acquisitions are based on estimates of the fair value of consideration paid and of the net assets acquired and are subject to adjustment upon finalization of these fair value estimates. For the year ended December 31, 2013, the Company acquired several businesses, as discussed below, for which the allocations of purchase price to the fair values of tangible and intangible assets and liabilities, including the estimated values of contingent earn-out obligations and the estimated useful lives of acquired assets for these acquisitions, are provisional and remain preliminary as of December 31, 2013. Management continues to assess the valuation of these items and any ultimate purchase price adjustments that may result based on the final net assets and net working capital of the acquired businesses, as prescribed in the corresponding purchase agreements.

The Company will revise its preliminary allocations for acquired businesses if new information is obtained about the facts and circumstances existing as of the date of acquisition, or for purchase price adjustments, based on the final net assets and net working capital of the acquired business, as prescribed in the applicable purchase agreement. Such adjustments result in the recognition of, or adjust the fair values of, acquired assets and assumed liabilities, which results in the revision of comparative prior period financial information. These measurement period adjustments are presented as if the adjustments had been taken into account as of the date of acquisition. All changes that do not qualify as measurement period adjustments are included in current period results. See discussion below pertaining to measurement period adjustments associated with the Company's 2012 acquisitions.

2013 Acquisitions

Big Country

Effective May 1, 2013, MasTec acquired all of the issued and outstanding equity interests of Big Country Energy Services, Inc. and its affiliated operating companies (collectively, "Big Country"). Big Country is a North American oil and gas pipeline and facility construction services company, headquartered in Calgary, Alberta, Canada. Big Country also has construction offices in Alberta, British Columbia and Saskatchewan, Canada, as well as in Wyoming and North Dakota. Big Country's services include oil, natural gas and natural gas liquids gathering systems and pipeline construction; pipeline modification and replacement services; compressor and pumping station construction; and other related services supporting the oil and gas production, processing and transportation industries. Big Country is expected to significantly expand MasTec's ability to take advantage of the rapidly expanding opportunities anticipated for energy infrastructure work in North America in the coming years. Big Country is reported within the Company's Oil and Gas segment.

The following table summarizes the preliminary estimated fair values of consideration paid and the identifiable assets acquired and liabilities assumed, as adjusted, as of the date of acquisition (in millions):



Purchase price consideration:	May 1, 2013
Cash	$	103.5
Fair value of contingent consideration (earn-out liability)	22.8
Total consideration transferred	$	126.3
Identifiable assets acquired and liabilities assumed:
Current assets	$	69.0
Property and equipment	43.5
Pre-qualifications	29.6
Finite-lived intangible assets	10.7
Current liabilities	(23.0		)
Long-term debt	(24.4		)
Deferred income taxes	(14.3		)
Total identifiable net assets	$	91.1
Goodwill	$	35.2
Total net assets acquired, including goodwill	$	126.3

The fair values and weighted average useful lives of Big Country's acquired finite-lived intangible assets, as adjusted, as of the date of acquisition were assigned as follows:



	Fair Value		Weighted Average Useful Life
Amortizing intangible assets:	(in millions)		(in years)
Backlog	$	1.9	1
Non-compete agreements	1.8		8
Customer relationships	7.0		6
Total acquired amortizing intangibles	$	10.7	5

Finite-lived intangible assets will be amortized in a manner consistent with the pattern in which the related benefits are expected to be consumed. The intangible asset related to Big Country's pre-qualifications with companies in the oil and gas industry has been assigned an indefinite life as the pre-qualifications are not expected to expire or diminish in value, and the companies to which they relate have extremely long operating histories. Goodwill arising from the acquisition represents the estimated value of Big Country's geographic presence in key high growth Canadian markets, its assembled workforce, its management team's industry-specific project management expertise and synergies expected to be achieved from the combined operations of Big Country and MasTec. As of the date of acquisition, the total amount of goodwill expected to be deductible for tax purposes was $4.0 million.

The contingent earn-out obligation is equal to 25% of the excess, if any, of Big Country’s EBITDA above certain thresholds for a five-year period, as set forth in the purchase agreement, and is payable annually in cash. The fair value of the earn-out liability was estimated using an income approach and incorporates significant inputs not observable in the market. Key assumptions in the estimated valuation include the discount rate and probability-weighted EBITDA projections. The range of potential undiscounted payments that MasTec could be required to make under the earn-out arrangement is estimated to be between $1 million and $110 million; however, there is no maximum earn-out payment amount.

Other 2013 Acquisitions

Effective April 1, 2013, MasTec acquired a former subcontractor to its wireless business, which will provide self-perform communications tower construction, installation, maintenance and other services in support of telecommunications infrastructure construction in the Company's Communications segment. In addition, effective August 1, 2013, MasTec acquired an electrical transmission services company, which focuses primarily on substation construction activities within the Company's Electrical Transmission segment.

Subsequent Event

Effective January 1, 2014, MasTec acquired a telecommunications services firm that specializes in the engineering, installation, furnishing and integration of telecommunications equipment. This company will be included in the Company’s Communications segment.

2012 Acquisitions

Effective December 1, 2012, MasTec acquired all of the issued and outstanding interests of Bottom Line Services, LLC ("BLS"), a natural gas and petroleum pipeline infrastructure services company for an aggregate purchase price composed of approximately $67.6 million in cash, and a five year earn-out, valued at $11.1 million as of the date of acquisition. BLS, which is included in the Company's Oil and Gas segment, provides pipeline and facilities construction, painting and maintenance services, primarily in eastern Texas. Additionally, effective December 1, 2012, MasTec acquired a former subcontractor to MasTec's oil and gas business, which provides self-perform clearing and trenching services for natural gas and petroleum pipeline infrastructure construction and is included in the Company's Oil and Gas segment. MasTec also acquired a former subcontractor to MasTec's wireless business, which provides self-perform communications tower construction, installation, maintenance and other services in support of telecommunications infrastructure construction and is included in the Company's Communications segment.

Measurement Period Adjustments

Measurement period adjustments associated with the Company's 2012 acquisitions have been reflected in the Company's December 31, 2012 consolidated balance sheet as follows (in millions):



As of December 31, 2012	As Previously Reported		Measurement Period Adjustments/Reclassifications			As Revised
Current assets	$	1,047.1	$	2.5		$	1,049.6
Property and equipment, net	$	350.4	$	(1.5	)	$	348.9
Goodwill	$	820.3	$	6.3		$	826.6
Other long-term assets, including discontinued operations	$	53.1	$	1.1		$	54.2
Current liabilities	$	705.7	$	8.4		$	714.1

2011 Acquisitions

EC Source

In November 2010, the Company acquired 33% of EC Source Services LLC ("EC Source"), a nationally recognized full-service engineering, procurement and construction services company that installs extra high voltage (“EHV”) electrical transmission systems throughout North America, and, effective May 2, 2011, the Company acquired the remaining 67% membership interest in EC Source for a total ownership percentage of 100%, for an aggregate purchase price composed of 5,129,642 shares of MasTec common stock, valued at $94.2 million, $0.3 million in cash and a five year earn-out, valued at $25.0 million as of the date of acquisition. The earn-out is equal to 20% of the excess, if any, of EC Source’s EBITDA, as defined in the purchase agreement, over $15 million, payable annually at MasTec’s election in common stock, cash or a combination thereof. The MasTec shares issued on the effective date are subject to transfer restrictions, 25% of which lapsed on May 2, 2012, 25% of which lapsed on May 2, 2013, and 50% of which will lapse on May 2, 2014. In addition, the Company assumed $8.6 million of debt, which relates primarily to equipment loans payable to the former owner of EC Source, $2.6 million of which remains outstanding as of December 31, 2013. EC Source is reported within the Company's Electrical Transmission segment.

The fair value of the shares transferred was based on MasTec’s quoted market price on the closing date, discounted by 10%, 15% and 20% for the estimated effect of the first, second and third year transfer restrictions, respectively. The fair value of the Company's existing 33% equity investment in EC Source was estimated to be $39.6 million immediately before the closing of the merger, resulting in a gain on remeasurement of $29.0 million, which was reflected as a component of other income in the Company’s consolidated statement of operations during the second quarter of 2011. The fair value of the equity investment was determined based on the implied consideration transferred as of the date of the business combination, discounted for the Company’s lack of control as a minority shareholder. The fair value of both the shares transferred and the equity investment were based on Level 2 fair value inputs. Prior to the effective date of the acquisition, the Company’s investment in EC Source was accounted for under the equity method of accounting.

The following table summarizes the fair value of consideration paid and the identifiable assets acquired and liabilities assumed, as adjusted, as of date of acquisition (in millions):



Purchase price consideration:	May 2, 2011
Shares transferred	$	94.2
Cash	0.3
Fair value of contingent consideration (earn-out liability)	25.0
Total consideration transferred	$	119.5
Fair value of equity investment	$	39.6
Fair value of total consideration	$	159.1
Net assets acquired:
Total identifiable net assets	$	38.4
Goodwill	$	120.7
Total net assets acquired, including goodwill	$	159.1

Total identifiable net assets acquired include $12.5 million of amortizing intangible assets and $31.3 million of non-amortizing intangible assets. Finite-lived intangible assets will be amortized in a manner consistent with the pattern in which the related benefits are expected to be consumed. The amortizing intangible assets, which relate to backlog and non-compete agreements, are being amortized over weighted average useful lives of 3 years and 7 years, respectively. The non-amortizing intangible asset relates to EC Source's pre-qualifications with companies in the utilities industry and has been assigned an indefinite life as the pre-qualifications are not expected to expire or diminish in value, and the companies to which they relate have extremely long operating histories. Goodwill arising from the acquisition represents the estimated value of EC Source's geographic presence in key high growth markets, its assembled workforce, its management team's industry-specific project management expertise and synergies expected to be achieved from the combined operations of EC Source and MasTec. The goodwill balance is not tax deductible.

The fair value of the earn-out obligation was estimated using an income approach and incorporates significant inputs not observable in the market. Key assumptions in the estimated valuation include the discount rate and probability-adjusted EBITDA projections. The range of potential undiscounted payments that MasTec could be required to make under the earn-out arrangement was estimated to be between $0 and approximately $55 million; however, there is no maximum earn-out payment amount. To date, the Company has paid $7.8 million of this earn-out liability, and $19.5 million is accrued as of December 31, 2013.

Other 2011 Acquisitions

Effective April 1, 2011, MasTec acquired a company based in western Canada that provides natural gas and petroleum pipeline infrastructure construction services, which is included in the Company's Oil and Gas segment. MasTec also purchased a company that provides telephone, cabling, engineering, construction, equipment integration, testing, wiring and computer network services to telecommunications carriers effective April 1, 2011, which is included in the Company's Communications segment. In addition, effective June 1, 2011, MasTec acquired a self-perform wireless infrastructure services company headquartered in California, which is included in the Company's communications segment. Effective June 30, 2011, MasTec also acquired an install-to-the-home contractor, which is included in the Company's Communications segment, that operates primarily in portions of New York, Pennsylvania and New England, and whose primary customer is DIRECTV®.

Unaudited Pro Forma Information

The following unaudited supplemental pro forma financial information includes the results of operations of each of the companies acquired in 2013, 2012 and 2011 and is presented as if the acquired companies had been consolidated as of the beginning of the year immediately preceding the date of acquisition. The unaudited supplemental pro forma financial information has been provided for illustrative purposes only. The unaudited pro forma financial information does not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented, or of the results that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following unaudited pro forma financial information because of future events and transactions, as well as other factors, many of which are beyond MasTec’s control.

The unaudited pro forma combined financial information presented below has been prepared by adjusting the historical results of MasTec to include the historical results of the acquisitions described above. The unaudited pro forma combined historical results were then adjusted (i) to remove one-time acquisition costs; (ii) to increase amortization expense resulting from the incremental intangible assets acquired in such acquisitions; (iii) to increase interest expense as a result of the cash consideration paid; and (iv) to reduce interest expense from the repayment of acquired debt. The unaudited pro forma financial information does not include any adjustments to reflect the impact of cost savings or other synergies that may result from these acquisitions. As noted above, the unaudited pro forma financial information does not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined company in the future.



	Years Ended December 31,
	2013		2012		2011
Pro forma financial information:	(unaudited, in millions)
Revenue	$	4,444.0	$	4,201.4	$	3,037.8
Net income from continuing operations	$	156.4	$	137.5	$	104.2

Results of Businesses Acquired

Revenues and net income resulting from the year over year incremental impact of businesses acquired in 2013, 2012 and 2011 included within the Company's consolidated results of operations for the years indicated are as follows (in millions):



	Years Ended December 31,
Year over year impact of acquired businesses:	2013		2012		2011
Revenue	$	406.6	$	170.8	$	258.9
Net income from continuing operations	$	20.0	$	11.8	$	10.7

The above results do not include acquisition costs of $1.6 million, $0.7 million and $1.6 million for the years ended December 31, 2013, 2012 and 2011, respectively. The above results also do not include interest expense associated with consideration paid for these acquisitions.