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 as of December 31, 2014	$	417.7		$	397.3		$	149.9	$	117.6	$	1,082.5
Accruals of acquisition-related contingent consideration, net^(a)	0.8			—			—		—		0.8
Currency translation adjustments	—			(22.7		)	—		—		(22.7		)
Measurement period adjustments ^(b)	(3.6		)	—			—		—		(3.6		)
Goodwill impairment ^(c)	—			(68.5		)	—		—		(68.5		)
Goodwill, net, as of December 31, 2015	$	414.9		$	306.1		$	149.9	$	117.6	$	988.5
Accruals of acquisition-related contingent consideration, net^(a)	5.8			—			—		—		5.8
Currency translation adjustments	—			1.6			—		—		1.6
Goodwill, net, as of December 31, 2016	$	420.7		$	307.7		$	149.9	$	117.6	$	995.9
Accumulated impairment loss, goodwill, as of December 31, 2016 ^(d)	$	—		$	(69.9	)	$	—	$	—	$	(69.9	)
Goodwill, gross, as of December 31, 2016	$	420.7		$	377.6		$	149.9	$	117.6	$	1,065.8


(a)	Represents contingent consideration for acquisitions prior to January 1, 2009, which is accrued as incurred, in accordance with U.S. GAAP.


(b)	Represent adjustments to preliminary estimates of the fair values of net assets acquired within the measurement period for the WesTower acquisition.


(c)	Represents a non-cash goodwill impairment charge related to a reporting unit in western Canada.


(d)	Accumulated impairment losses include the effect of currency translation gains and/or losses.

The following table provides a reconciliation of changes in other intangible assets 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, 2014	$	34.8		$	93.3		$	199.8		$	26.3		$	354.2
Accumulated amortization							(90.3		)	(13.5		)	(103.8		)
Other intangible assets, net, as of December 31, 2014	$	34.8		$	93.3		$	109.5		$	12.8		$	250.4
Amortization expense							(26.5		)	(1.9		)	(28.4		)
Currency translation adjustments	—			(9.8		)	(2.2		)	(0.5		)	(12.5		)
Intangible asset impairment ^(b)	—			(10.1		)	—			—			(10.1		)
Other intangible assets, net, as of December 31, 2015	$	34.8		$	73.4		$	80.8		$	10.4		$	199.4
Amortization expense							(17.9		)	(3.4		)	(21.3		)
Currency translation adjustments	—			1.2			0.3			0.1			1.6
Other activity	(0.3		)	—			—			0.3			—
Other intangible assets, net, as of December 31, 2016	$	34.5		$	74.6		$	63.2		$	7.4		$	179.7
Remaining weighted average amortization period (in years)							9			9			9


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


(b)	Represents a non-cash impairment charge related to intangible assets associated with a reporting unit in western Canada.

Amortization expense associated with intangible assets for the years ended December 31, 2016, 2015 and 2014 totaled $21.3 million, $28.4 million and $25.1 million, respectively. Expected future amortization expense as of December 31, 2016 is summarized in the following table (in millions):



	Amortization Expense
2017	$	16.3
2018	12.7
2019	8.5
2020	7.3
2021	5.7
Thereafter	20.1
Total	$	70.6

Prior Year Acquisitions

WesTower

Effective October 1, 2014, MasTec acquired all of the issued and outstanding equity interests of WesTower Communications Inc. (“WesTower”), a telecommunications services firm focused on communications infrastructure for wireless networks throughout the Eastern, Central and Western United States for approximately $198.0 million in cash. WesTower, which was integrated into the Company’s existing wireless operations, is reported within the Company’s Communications segment. The acquisition of WesTower expanded the Company’s geographical presence for its wireless operations. The Company incurred acquisition integration costs of $17.8 million and $5.3 million for the years ended December 31, 2015 and 2014, respectively, to complete the integration of WesTower. These acquisition integration costs were included within general and administrative expenses within the consolidated statements of operations, and consisted primarily of employee termination costs, including employee compensation relating to the elimination of certain positions that were determined to be redundant, and other integration-type costs, including facility consolidation expenses, system migration expenses and training costs.

Pacer

Effective June 1, 2014, MasTec acquired all of the issued and outstanding equity interests of Pacer Construction Holdings Corporation and its affiliated operating companies (collectively, “Pacer”) for a purchase price of approximately $126.5 million in cash. Pacer, a western Canadian civil construction services company that provides infrastructure construction services in support of oil and gas production, processing, mining and transportation, is expected to enhance MasTec’s ability to develop energy infrastructure and is primarily reported within the Company’s Oil and Gas segment. Pacer’s proportionate share of its undivided interest in a proportionately consolidated non-controlled contractual joint venture, which is managed by a third party and automatically terminates upon completion of the related civil construction project, is reported within the Other segment. This project incurred losses of $5.1 million and $16.3 million for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016, this project was approximately 80% complete.

In the fourth quarter of 2015, the Company recorded a $78.6 million impairment of Pacer’s goodwill and indefinite-lived intangible assets due to volatility in oil and gas prices, which negatively impacted Pacer’s financial performance, expectations and future cash flow projections.

Other 2014 Acquisitions

Effective April 1, 2014, MasTec acquired 100% of a telecommunications services firm, specializing in the installation of in-home security systems. Additionally, effective January 1, 2014, MasTec acquired 100% of a telecommunications services firm, specializing in the engineering, installation, furnishing and integration of telecommunications equipment. The aggregate purchase price for these acquisitions, which are included in MasTec’s Communications segment, was approximately $40.1 million, including cash and earn-out obligations, as adjusted, as of December 31, 2016.

Unaudited Supplemental Pro Forma Information

The following unaudited supplemental pro forma financial information includes the results of operations of the companies acquired in 2014 and is presented as if each acquired company had been consolidated as of January 1, 2013. The unaudited supplemental pro forma financial information has been provided for illustrative purposes only and 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 supplemental 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 supplemental pro forma financial information presented below has been prepared by adjusting the historical results of MasTec to include the historical results of the acquired businesses described above, and was then adjusted (i) to remove acquisition costs, including certain acquisition integration costs; (ii) to increase amortization expense resulting from the incremental intangible assets acquired; (iii) to increase interest expense as a result of the cash consideration paid; (iv) to remove integration-related employee redundancy costs; and (v) to reduce interest expense from debt repaid upon acquisition of the respective businesses. The unaudited supplemental pro forma financial information does not include adjustments to reflect the impact of other cost savings or synergies that may have resulted from these acquisitions.



	For the Year Ended December 31, 2014
Unaudited supplemental pro forma financial information (in millions):	For the Year Ended December 31, 2014
Revenue	$	5,085.2
Net income from continuing operations	$	130.3

Results of Businesses Acquired

Revenue and net (loss) income from continuing operations resulting from the year-over-year incremental impact of acquired businesses, which are included within the Company’s consolidated results of operations for the years indicated, were as follows (in millions):



	For the Years Ended December 31,
Actual of acquirees (year-over-year impact):	2015			2014
Revenue	$	301.5		$	565.4
Net (loss) income from continuing operations ^(a)	$	(13.4	)	$	0.7

(a)

Acquiree net (loss) income from continuing operations for the years ended December 31, 2015 and 2014 includes approximately $9.3 million and $5.0 million, respectively, of pre-tax acquisition integration costs incurred in connection with the WesTower acquisition and, for the year ended December 31, 2015, includes project losses of $16.3 million associated with the Company’s proportionate interest in a non-controlled Canadian joint venture. Other acquisition-related costs, including certain acquisition integration costs totaling $11.2 million and $2.7 million for the years ended December 31, 2015 and 2014, respectively, which are included within general and administrative expenses in the Company’s consolidated statements of operations, are not included in the above presented acquiree results for the respective periods. The above results also do not include interest expense associated with consideration paid for these acquisitions.