Company: MTZ
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0000015615-25-000079
Chunk: 19

Company: MASTEC INC
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 1
Chunk 19
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-out liabilities for the 2024 acquisitions was estimated to be between $25 million and $55 million; however, there is no maximum payment amount.  See Note 4 – Fair Value of Financial Instruments for fair value estimates and other details related to the Company’s earn-out arrangements.  Approximately $47 million of the goodwill balance related to the 2024 acquisitions is expected to be tax deductible as of June 30, 2025.

Note 4 – Fair Value of Financial Instruments

The Company’s financial instruments are primarily composed of cash and cash equivalents, accounts receivable and contract assets, notes receivable, cash collateral deposited with insurance carriers, life insurance assets, equity investments, certain other assets and investments, deferred compensation plan assets and liabilities, accounts payable and other current liabilities, acquisition-related contingent consideration and other liabilities, and debt obligations.Fair value is the price that would be received to sell an asset or the amount paid to transfer a liability, also referred to as the “exit price,” in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value.  The three levels of inputs that may be used are: (i) Level 1 - quoted market prices in active markets for identical assets or liabilities; (ii) Level 2 - observable market-based inputs or other observable inputs, including quoted market prices for identical or similar assets or liabilities in markets that are not active; and (iii) Level 3 - significant unobservable inputs that cannot be corroborated by observable market data, which are generally determined using valuation models incorporating management estimates of market participant assumptions.Acquisition-Related Contingent ConsiderationAcquisition-related contingent consideration is composed of earn-outs, which represent the estimated fair value of future amounts payable for businesses, which the Company refers to as “Earn-outs,” that are contingent upon the acquired businesses achieving certain levels of earnings in the future.  The fair values of the Company’s Earn-out liabilities are estimated 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, and are evaluated on an ongoing basis.  Key assumptions include the discount rate, which was 10.5% as of June 30, 2025, and probability-weighted projections of EBITDA.  Significant changes in any of these assumptions could