Company: MTZ
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000015615-25-000021
Chunk: 1377

Company: MASTEC INC
Filing Date: 2025-02-28
Form: 10-K
Item: Item 1C
Chunk 1377
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 to revenue, typically on a cumulative catch-up basis, as such variable consideration, which typically pertains to changed conditions and scope, is generally for services encompassed under the existing contract.  To the extent unapproved change orders, claims and other variable consideration reflected in transaction prices are not resolved in our favor, or to the extent incentives reflected in transaction prices are not earned, there could be reductions in, or reversals of, previously recognized revenue.

As of December 31, 2024, our contract transaction prices included approximately $139 million of change orders and/or claims for certain contracts that were in the process of being resolved in the ordinary course of our business, including through negotiation, arbitration and other proceedings.  These transaction price adjustments, when earned, are included within contract assets or accounts receivable, net of allowance, as appropriate.  As of December 31, 2024, these change orders and/or claims primarily related to certain projects in our Clean Energy and Infrastructure and Power Delivery segments.  We actively engage with our customers to complete the final approval process for such amounts and generally expect these processes to be completed within one year.  Amounts ultimately realized upon final agreement by customers could be higher or lower than such estimated amounts.

Business Combinations

The determination of the fair value of net assets acquired in a business combination requires estimates and judgments of future cash flow expectations for the acquired business and the related identifiable tangible and intangible assets.  Fair values of net assets acquired are calculated using expected cash flows and industry-standard valuation techniques.  Consideration paid generally consists of cash and, from time to time, shares of our common stock, and potential future payments that are contingent upon the acquired business achieving certain levels of earnings in the future, also referred to as “acquisition-related contingent consideration” or “earn-outs.”

We estimate the fair values of our earn-out liabilities 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, which inputs are evaluated on an ongoing basis.  Key assumptions in estimating the fair values of our earn-out liabilities include the discount rate, which, as of December 31, 2024, ranged from 14.0% to 14.5%, with a weighted average rate of 14.2%, and probability-weighted projections of EBITDA.  Significant changes in any of these assumptions could result in significantly higher or lower estimated earn-out liabilities.

Due to the