Company: MTZ
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000015615-25-000021
Chunk: 1275

Company: MASTEC INC
Filing Date: 2025-02-28
Form: 10-K
Item: Item 1A
Chunk 1275
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 both equipment and facility leases.  Certain lease agreements may also contain options to purchase the leased property and/or options to terminate the lease.  In addition, lease agreements may include periodic adjustments to payment amounts for inflation or other variables, or may require payments for taxes, insurance, maintenance or other expenses, which are generally referred to as non-lease components.  The Company accounts for non-lease components together with the related lease components for all classes of leased assets.  The Company’s lease agreements do not contain significant residual value guarantees or material restrictive covenants.Lease term, discount rate, variable lease costs and future minimum lease payment determinations require the use of judgment, and are based on the facts and circumstances of each lease.  Economic incentives, intent, past history and business needs are among the factors considered to determine if renewal and/or purchase options are reasonably certain to be exercised.  The majority of the Company’s lease agreements do not explicitly state the discount rate implicit in the lease, therefore, the Company generally uses an incremental borrowing rate to determine the value of its lease obligations.  The incremental borrowing rate represents the rate of interest that would be paid to borrow on a collateralized basis over a similar term.  The Company determines its incremental borrowing rate using a portfolio approach based on information available as of the lease commencement date, including applicable lease terms and the current economic environment.Finance Leases Finance lease assets are recorded within property and equipment, with a corresponding amount recorded within the Company’s debt obligations.  Finance lease expense is composed of depreciation expense on the leased asset and interest on the lease liability.  Additions to finance leases are included within the supplemental disclosures of non-cash information in the consolidated statements of cash flows.  Many of the Company’s finance leases contain a purchase option which the Company is reasonably certain to exercise at the end of the lease term, given that the purchase option prices are typically below the estimated fair market values of the related assets.Operating LeasesOperating lease right-of-use assets and liabilities are recorded on the consolidated balance sheets, with the related lease expense recognized over the term of the lease on a straight-line basis.  Operating lease expense is recorded as rent expense, primarily within costs of revenue, excluding depreciation and amortization.  Fixed costs for operating leases are composed of initial base rent amounts plus any fixed annual increases.  Variable costs for operating leases consist primarily of common area maintenance expenses and taxes for facility leases.  Certain of the Company’s operating 

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leases contain purchase options, for which the purchase option price