Company: MTZ
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000015615-25-000021
Chunk: 1932

Company: MASTEC INC
Filing Date: 2025-02-28
Form: 10-K
Item: Item 3
Chunk 1932
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 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 time required to gather and analyze the necessary data for each acquisition, U.S. GAAP provides a “measurement period” of up to one year from the date of acquisition in which to finalize these fair value determinations.  During the measurement period, preliminary fair value estimates may be revised if new information is obtained about the facts and circumstances existing as of the date of acquisition, or based on the final net assets and working capital of the acquired business, as prescribed in the applicable purchase agreement.  Such adjustments may result in the recognition of, or an adjustment to the fair values of, acquisition-related assets and liabilities and/or consideration paid, and are referred