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Goodwill and Other Intangible Assets
 6 Months Ended
Jun. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets
The following table provides balances for goodwill by reportable segment as of June 30, 2021 (in millions):
CommunicationsClean Energy and InfrastructureOil and GasElectrical TransmissionTotal Goodwill
Goodwill, gross$584.7 $164.4 $513.2 $196.4 $1,458.7 
Accumulated impairment loss— — (127.0)— (127.0)
Goodwill, net$584.7 $164.4 $386.2 $196.4 $1,331.7 
For the six month period ended June 30, 2021, goodwill included additions of $88.1 million from new business combinations and a net increase of $0.1 million from measurement period adjustments. Currency translation effects related to goodwill and accumulated impairment losses for the six month period ended June 30, 2021 totaled approximately $3.6 million of gains and $3.2 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-AmortizingAmortizing
Trade NamesCustomer Relationships and BacklogPre-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— 311.8 — 55.4 367.2 
Currency translation adjustments— — 1.0 — 1.0 
Amortization expense(23.4)(5.4)(2.4)(31.2)
Other intangible assets, net, as of June 30, 2021$34.5 $367.8 $58.8 $59.9 $521.0 
(a)Consists principally of trade names and non-compete agreements.
Quarterly Assessment for Indicators of Impairment. During the second 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 its Oil and Gas segment and one reporting unit within its Clean Energy and Infrastructure segment. Based on the results of this assessment, management determined that the estimated fair values of both reporting units substantially exceeded their carrying values. 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 strategic arrangements in order to deepen its market presence, broaden its geographic reach and expand its service offerings.
2021 Acquisitions. For the six month period ended June 30, 2021, MasTec completed seven acquisitions, which included all of the equity interests in: (i) a premier specialty utility contractor primarily providing electrical distribution network services under various multi-year master service agreements to some of the nation’s largest utilities, municipalities and cooperatives, which acquisition was effective in May and is included within the Company’s Electrical Transmission segment, and for which acquisition consideration, including estimated earn-out liabilities, totaled approximately $450 million; (ii) a heavy civil infrastructure construction company focusing on transportation projects; and a heavy industrial general
contractor with concrete, piping and electrical capabilities, which acquisitions were effective in February and April, respectively, and both of which are included within the Company’s Clean Energy and Infrastructure segment; (iii) a telecommunications and utility technical services company focusing on outside plant telecommunications engineering; a telecommunications and cable services provider; and a utilities infrastructure company, providing power line construction and repair services, all of which acquisitions were effective in May and are included within the Company’s Communications segment; and (iv) a pipeline contractor focusing on integrity and maintenance work related to gas distribution infrastructure, which acquisition was effective in February and is included within the Company’s Oil and Gas segment. These acquisitions were funded with cash on hand and borrowings under the Company’s senior secured credit facility and are subject to customary purchase price adjustments.
The following table summarizes the estimated fair values of consideration paid and net assets acquired for the 2021 acquisitions (in millions):
Acquisition consideration: 2021
Cash, net of cash acquired$589.0 
Estimated fair value of contingent consideration40.1 
Total consideration transferred$629.1 
Identifiable assets acquired and liabilities assumed:
Current assets, primarily accounts receivable$216.2 
Long-term assets, primarily property and equipment and operating lease assets182.0 
Amortizing intangible assets367.2 
Current liabilities, including current portion of operating lease liabilities(147.3)
Long-term liabilities, primarily operating lease liabilities and deferred income taxes(77.1)
Total identifiable net assets$541.0 
Goodwill$88.1 
Total net assets acquired, including goodwill$629.1 
Amortizing intangible assets related to the 2021 acquisitions are primarily composed of customer relationships and trade names, which had weighted average lives of approximately 18 years and 17 years, respectively. The weighted average life of amortizing intangible assets for the 2021 acquisitions in the aggregate was 17 years. The acquired intangible assets included a customer relationship and a trade name intangible asset representing $282 million in the aggregate, having asset lives of approximately 20 years each, based on the acquired entity’s operational history and established relationships with, and the nature of its customers, which are primarily in the utilities industry. 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 each of the respective acquisitions, including approximately $46 million for the acquisition in our Electrical Transmission segment, 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 each of the acquired companies and MasTec. Approximately $74 million of the goodwill balance related to the 2021 acquisitions is expected to be tax deductible as of June 30, 2021.
The contingent consideration included in the table above is composed 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. The earn-out arrangements for the 2021 acquisitions range from one to five-year terms, as set forth in the respective purchase agreements, and are valued at approximately $40 million in the aggregate, of which approximately $26 million is included within current liabilities as of June 30, 2021. Earn-outs are generally payable annually and are recorded within other current and other long-term liabilities in the consolidated balance sheets. See Note 4 - Fair Value of Financial Instruments for details pertaining to fair value estimates for the Company’s earn-out arrangements. As of June 30, 2021, the range of remaining potential undiscounted earn-out liabilities for the 2021 acquisitions was estimated to be up to $86 million; however, there is no maximum payment amount. Determination of the estimated fair values of the net assets acquired and the estimated earn-out liabilities for these acquisitions was preliminary as of June 30, 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 June 30, 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 $23.6 million in cash, net of cash acquired, with an additional $3.1 million due through 2023, subject to certain indemnification provisions, and earn-out liabilities with five-year terms valued at approximately $8.3 million. As of June 30, 2021, the range of remaining potential undiscounted earn-out liabilities for the 2020 acquisitions was estimated to be up to $12 million; however, there is no maximum payment amount. Determination of the estimated fair values of net assets acquired and earn-out liabilities for certain of these acquisitions was preliminary as of June 30, 2021; as a result, further adjustments to these estimates may occur.
Pro Forma Financial Information and Acquisition Results. For the three month periods ended June 30, 2021 and 2020, unaudited supplemental pro forma revenue totaled approximately $2.0 billion and $1.9 billion, respectively, and unaudited supplemental pro forma net income totaled approximately $81.6 million and $58.6 million, respectively. For the six month periods ended June 30, 2021 and 2020, unaudited supplemental pro forma revenue totaled approximately $4.0 billion and $3.6 billion, respectively, and unaudited supplemental pro forma net income totaled approximately $151.2 million and $95.5 million, respectively.
For the three and six month periods ended June 30, 2021, the Company’s consolidated results of operations included acquisition-related revenue of approximately $271.4 million and $358.2 million, respectively, and included acquisition-related net income of approximately $3.5 million and $4.7 million, respectively, based on the Company’s consolidated effective tax rates. For the three and six month periods ended June 30, 2020, the Company’s consolidated results of operations included acquisition-related revenue of approximately $63.5 million and $113.0 million, respectively, and included acquisition-related net income of approximately $0.4 million and acquisition-related net losses of approximately $0.5 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.