Note 3 - Acquisitions and Other Investments

Allocations of purchase price for acquisitions are based on estimates of the fair value of consideration paid and the net assets acquired and are subject to adjustment upon finalization of the purchase price allocation. Accounting for business combinations requires estimates and judgments as to expectations of future cash flows for acquired businesses and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair values of assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets and liabilities, including contingent consideration, are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Contingent consideration is measured at its estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in earnings as a component of other (income) expense, net. If actual results differ from the estimates and judgments used in determining the estimated fair values of assets and liabilities recorded as of the date of acquisition, these differences could result in a possible impairment of recorded assets, including intangible assets and goodwill, or require acceleration of amortization expense of finite-lived intangible assets.

As of June 30, 2011, the purchase price, including the estimated fair value of contingent consideration and related allocations for businesses acquired by the Company during the second quarter of 2011 were preliminary. The preliminary allocations may be revised as a result of additional information relating to assets acquired and liabilities assumed or revisions to the preliminary estimates of fair value as of the date of purchase. For these acquisitions, the Company will recognize additional assets or liabilities if new information is obtained about the facts and circumstances existing as of the date of acquisition, that, if known, would have resulted in the recognition of those assets and liabilities as of that date. Adjustments to the initial allocation of purchase price during the measurement period requires the revision of comparative prior period financial information when reissued in subsequent financial statements. The effect of measurement period adjustments to the allocation of purchase price would be as if the adjustments had been taken into account on the date of acquisition. The effects of measurement period adjustments may cause changes in depreciation, amortization, or other income or expense recognized in prior periods. All changes that do not qualify as measurement period adjustments are included in current period earnings.

EC Source

In November 2010, MasTec entered into a membership interest purchase agreement and invested $10 million in exchange for a 33% voting interest in EC Source Services LLC ("EC Source") and a two-year option (the "EC Source Merger Option") that granted MasTec the right, but not the obligation, to acquire the entirety of EC Source's outstanding equity pursuant to the terms of a merger agreement. EC Source is a nationally recognized full-service engineering, procurement and construction program management entity, focused on deploying extra high voltage ("EHV") electrical transmission systems throughout North America. On April 29, 2011, the Company exercised its EC Source Merger Option and, effective May 2, 2011, acquired the remaining 67% membership interest in EC Source for an aggregate purchase price composed of 5,129,644 shares of MasTec common stock, the assumption of $8.6 million of debt and a five year earn-out, equal to 20% of the excess, if any, of EC Source's annual earnings before interest, taxes, depreciation and amortization ("EBITDA") 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, which will lapse 25% on the first and second anniversaries of the closing and 50% on the third anniversary of the closing.

The following table summarizes the estimated fair value of consideration paid and the preliminary allocation of purchase price to the fair value of assets acquired and liabilities assumed as of date of acquisition (in millions). 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, which is a Level 2 fair value input. See Note 6 - Fair Value of Financial Instruments. The fair value of the 33% equity investment in EC Source was estimated at $39.6 million immediately before the closing of the merger, resulting in a gain of $29.0 million, which was reflected as a component of other income within MasTec's results of operations during the second quarter of 2011. The fair value of the Company's 33% 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, which is a Level 2 fair value input. The allocation of purchase price to the fair value of tangible and intangible assets and liabilities, including the estimated value of the earn-out obligation and the estimated useful lives of acquired assets, is provisional and remains preliminary as management continues to assess the valuation of these items and any ultimate purchase price adjustments based on the final assets and net working capital, as prescribed by the purchase agreement.


Preliminary Purchase Price Consideration:
Shares transferred	$	94.2
Cash		0.3
Debt assumed		8.6
Fair value of contingent consideration (earn-out liability)		25.0

Total consideration	$	128.1

Fair value of equity investment		39.6

Amount to be allocated to net assets acquired	$	167.7

Preliminary Purchase Price Allocation:
Current assets	$	21.0
Property and equipment		10.1
Pre-qualifications		31.2
Non-compete agreements		1.3
Backlog		12.2
Goodwill		122.3

Total assets acquired	$	198.1

Current liabilities		(14.0	)
Debt		(8.6	)
Deferred income taxes		(17.0	)
Liability arising from contingent consideration arrangement		(25.0	)

Total liabilities assumed	$	(64.6	)

Net assets acquired	$	133.5

The intangible asset related to backlog will be amortized over the expected remaining 3 year term of these contracts, consistent with the pattern in which the related benefits are expected to be consumed. The intangible asset related to the non-compete agreements will be amortized over their 7 year term. The intangible asset related to EC Source's pre-qualifications with companies in the utilities industry has been assigned an indefinite life, due to the fact that the pre-qualifications do not expire or diminish in value, and the companies to which they relate have extremely long operating histories.

Goodwill of approximately $122.3 million arising from the acquisition represents the expected 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 estimated goodwill balance of $122.3 million is not tax deductible.

The fair value of the earn-out obligation of $25.0 million was estimated using an income approach and incorporates significant inputs not observable in the market, which are Level 3 fair value inputs. See Note 6 - Fair Value of Financial Instruments. Key assumptions in the estimated valuation included 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.

EC Source's earnings have been consolidated as of the effective date of the acquisition, May 2, 2011.

Fabcor

Effective April 1, 2011, MasTec acquired all of the issued and outstanding shares of Fabcor TargetCo Ltd. ("Fabcor Parent" and, together with its wholly-owned Canadian subsidiaries, Fabcor 2001, Inc. and Fabcor Pipelines B.C. Inc., ("Fabcor") for an aggregate purchase price composed of approximately $22.8 million in cash, the assumption of approximately $7.0 million of debt, which was repaid immediately, and a five year earn-out equal to 30% of the excess, if any, of Fabcor's annual EBITDA over 3.6 million Canadian dollars (approximately U.S. $3.7 million as of June 30, 2011), payable annually to the seller in cash in Canadian dollars. Fabcor is engaged in providing natural gas and petroleum pipeline infrastructure construction services in Alberta and British Columbia. Its services include: new pipeline construction; pipeline modification and replacement; river crossing construction and replacement; integrity excavation programs; well-site construction; compressor construction; gas plant construction; compressor and gas plant modifications; and plant commissioning support services. Fabcor provides MasTec the ability to expand its energy infrastructure services within the Canadian market and participate in the significant opportunities anticipated in that market in the future.

The following table summarizes the estimated fair value of consideration paid and the preliminary allocation of the purchase price as of date of acquisition (in millions). The allocation of purchase price to the fair value of tangible and intangible assets and liabilities, including the estimated value of the earn-out obligation and the estimated useful lives of acquired assets, is provisional and remains preliminary as management continues to assess the valuation of these items and any ultimate purchase price adjustments based on the final assets, net working capital and tangible net worth, as prescribed by the purchase agreement.


Preliminary Purchase Price Consideration:
Cash	$	22.8
Debt assumed		7.0
Fair value of contingent consideration (earn-out liability)		16.9

Total consideration	$	46.7

Preliminary Purchase Price Allocation:
Current assets	$	24.5
Trade names		0.7
Non-compete agreements		0.1
Customer relationships and backlog		3.5
Goodwill		22.4
Property and equipment		12.8
Other assets		0.4

Total assets acquired	$	64.4

Current liabilities		(23.1	)
Deferred income taxes and other liabilities		(1.6	)
Liability arising from contingent consideration arrangement		(16.9	)

Total liabilities assumed	$	(41.6	)

Net assets acquired	$	22.8

Intangible assets will be amortized consistent with the pattern in which the related benefits are expected to be consumed. The intangible asset related to backlog will be amortized over the remainder of 2011. Customer relationships will be amortized over a 12 year life, and the non-compete agreements will be amortized over their 7 year terms. Goodwill of approximately $22.4 million arising from the acquisition represents the estimated value of Fabcor'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 Fabcor and MasTec. The estimated goodwill balance of $22.4 million is not tax deductible.

The fair value of the earn-out obligation of $16.9 million was estimated using an income approach and incorporates significant inputs not observable in the market, which are Level 3 fair value inputs. See Note 6 - Fair Value of Financial Instruments. Key assumptions in the estimated valuation included 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 $25 million; however, there is no maximum earn-out payment amount.

Fabcor's earnings have been consolidated as of the effective date of the acquisition, April 1, 2011.

Cam Com

Effective April 1, 2011, MasTec purchased 100% of the capital stock of Cam Communications Inc. ("Cam Com"), a Maryland company that provides telephone, cabling, engineering, construction, equipment integration, testing, wiring and computer network services to telecommunications carriers for approximately $4.4 million in cash, the assumption of $0.3 million of capital leases and a five year earn-out equal to 20% of the excess, if any, of Cam Com's annual EBITDA over $2.25 million, plus an additional one time cash payment of up to $1.5 million if Cam Com's EBITDA exceeds $1.5 million for the first twelve months following the acquisition.

The purchase price for Cam Com has been allocated to the estimated fair value of the assets acquired and liabilities assumed as of the date of acquisition, including net working capital of $1.8 million, property and equipment of $0.4 million and goodwill and intangible assets of $4.0 million. Estimated goodwill of $2.2 million represents the expected value of synergies between Cam Com and MasTec's existing telecommunications service offerings. The allocation of purchase price to the fair value of tangible and intangible assets and liabilities, and the useful lives of those assets, as well as the estimated fair value of the earn-out obligation, is provisional and remains preliminary as management continues to assess the valuation of these items and any ultimate purchase price adjustments based on the final net working capital and tangible net worth, as prescribed by the purchase agreement. The estimated goodwill balance of $2.2 million is fully tax deductible.

Halsted

Effective June 30, 2011, MasTec acquired all of the issued and outstanding capital stock of Halsted Communications, Ltd. ("Halsted"), an install-to-the-home contractor operating primarily in portions of New York, Pennsylvania and New England for $4.0 million in cash, plus $13.5 million of assumed net liabilities. Halsted's primary customer is DIRECTV^®.

The purchase price has been allocated to the estimated fair value of assets acquired and liabilities assumed as of the date of acquisition, including negative net working capital of $6.1 million, property and equipment of $0.4 million, intangible assets related to Halsted's relationship with DIRECTV^® and covenants not to compete of $2.3 million, debt of $7.9 million and residual goodwill of $15.2 million. Estimated goodwill of $15.2 million represents the expected value of synergies between Halsted and MasTec's existing install-to-the-home service offering. The allocation of purchase price to the fair value of tangible and intangible assets and liabilities, and the estimated useful lives of those assets, is provisional and remains preliminary as management continues to assess the valuation of these items and any ultimate purchase price adjustments based on the final net working capital and tangible net worth, as prescribed by the purchase agreement. The estimated goodwill balance of $15.2 million is fully tax deductible.

Optima

Effective June 1, 2011, MasTec acquired all of the issued and outstanding shares of Optima Network Services, Inc. ("Optima"), a wireless infrastructure services company headquartered in California, for $5.1 million in cash, plus the assumption of $2.2 million in debt, $0.8 million of which was repaid immediately. In addition, the purchase price for Optima includes a five year earn-out, equal to 20% of the excess, if any, of Optima's annual EBITDA over $3.0 million, plus an additional one-time payment of up to approximately $5.0 million if Optima's EBITDA exceeds $3.0 million in the first twelve months following the acquisition. The potential one-time payment is payable in cash, and the earn-out is payable, at MasTec's election, in common stock, cash, or a combination thereof.

The purchase price has been allocated to the estimated fair value of assets acquired and liabilities assumed as of the date of acquisition, including net working capital of $2.3 million, property and equipment of $2.1 million, goodwill and intangible assets of $9.3 million and debt of $2.2 million. Estimated goodwill of $8.7 million represents the value of Optima's geographic presence in key western U.S. markets, its assembled work force and its project management expertise. The fair value of the earn-out obligation is approximately $6.2 million as of the date of acquisition. The allocation of purchase price to the fair value of tangible and intangible assets and liabilities, including the estimated value of the earn-out obligation, and the estimated useful lives of acquired assets, is provisional and remains preliminary as management continues to assess the valuation of these items and any ultimate purchase price adjustments based on the final net working capital and tangible net worth, as prescribed by the purchase agreement. The estimated goodwill balance of $8.7 million is fully tax deductible.

Pro forma Information

The following unaudited supplemental pro forma results of operations include the results of operations of each of the acquired companies described above as if each had been consolidated as of January 1, 2010, and have been provided for illustrative purposes only and do 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 companies in the future (in millions). Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors, many of which are beyond MasTec's control:

The pro forma combined results of operations for the six months ended June 30, 2011 and 2010 have been prepared by adjusting the historical results of MasTec to include the historical results of the acquisitions described above as if they occurred January 1, 2010. These pro forma combined historical results were then adjusted for an increase in amortization expense due to the incremental intangible assets recorded related to the acquisitions and the reduction of interest income as a result of the cash consideration paid. The pro forma results of operations do not include any adjustments to eliminate the impact of acquisition related costs or any cost savings or other synergies that may result from these acquisitions. As noted above, the pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.


	Six Months Ended June 30,
	2010		2011
Revenue	$	1,035.0	$	1,476.0
Net income	$	21.3	$	64.2

Revenues of $37.8 million and net income of $2.0 million resulting from the Company's 2011 acquisitions are included in MasTec's consolidated results of operations for the three and six months ended June 30, 2011. Acquisition costs related to these acquisitions of $0.7 million and $1.2 million are included in general and administrative costs for the three and six months ended June 30, 2011, respectively.

DirectStar/Funraisers - Amendment of Purchase Option Agreement

In February 2011, the Company amended its purchase option agreement with Red Ventures LLC ("Red Ventures"), which sold to MasTec both DirectStar TV LLC ("DirectStar") and 100% of the membership interests of Funraisers PR, LLC ("Funraisers"). DirectStar, together with its subsidiaries, including Funraisers, is referred to as the "DirectStar Business." The amended and restated purchase option agreement grants to Red Ventures an option to purchase the DirectStar Business from MasTec at any time from March 1, 2012 to November 30, 2012 for an amount equal to the sum of: (i) the shareholders' equity of the DirectStar Business as of May 31, 2010, (ii) five percent (5%) of adjusted net income (generally, the net income (loss) before provision for income taxes) of the DirectStar Business from January 1, 2010 until the last day of the month immediately prior to the date of the sale, and (iii) $25,600,000. The purchase option also allows Red Ventures to pay up to 35% of the option purchase price in the form of a secured note with a one year term. In connection with the amendment to the purchase option, MasTec agreed to increase certain commissions that DirectStar presently pays to Red Ventures for managing the DirectStar Business. DirectStar, in support of the DIRECTV^® installation business, provides marketing and sales services on behalf of DIRECTV^®. Should Red Ventures execute its purchase option, the Company's revenues and profits from DIRECTV^® would be materially reduced.

As of June 30, 2011 and December 31, 2010, the estimated fair value of the purchase option was $0, determined using a probability-weighted market-based approach, including Level 3 inputs such as projected EBITDA and EBITDA multiples. (See Note 6 - Fair Value of Financial Instruments).

Other Investments

Through a 60%-owned consolidated subsidiary, MasTec has a 34% interest in a rock extraction business in Panama (for a net beneficial ownership interest of 20.4%), for which the Company invested $1.6 million. This investment is accounted for under the equity method of accounting. MasTec performed construction services for this investee and recognized revenue of approximately $0.9 million and $1.7 million during the three and six months ended June 30, 2011, respectively, and $0.8 million and $1.2 million during the three and six months ended June 30, 2010, respectively. As of June 30, 2011 and December 31, 2010, approximately $4.4 million and $2.2 million, respectively, is included in accounts receivable and costs and earnings in excess of billings related to this customer.

The Company has certain other cost and equity method investments, which are not material individually or in the aggregate as of June 30, 2011.