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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
Form 10-Q
_____________________________________________
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020
 
OR
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission File Number 001-08106
_____________________________________________

image0a15.jpg
MasTec, Inc.
(Exact name of registrant as specified in its charter)
Florida
65-0829355
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
800 S. Douglas Road, 12th Floor
 
Coral Gables,
Florida
33134
(Address of principal executive offices)
(Zip Code)
(305) 599-1800
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.10 Par Value
MTZ
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)    Yes    No 
As of July 27, 2020, MasTec, Inc. had 73,818,180 shares of common stock outstanding.




MASTEC, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2020

TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 

2



PART I.     FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS

MASTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited - in thousands, except per share amounts)

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Revenue
$
1,569,297

 
$
1,939,006

 
$
2,985,901

 
$
3,457,346

Costs of revenue, excluding depreciation and amortization
1,341,825

 
1,633,400

 
2,568,122

 
2,945,448

Depreciation
57,687

 
55,279

 
110,776

 
109,504

Amortization of intangible assets
9,793

 
4,665

 
17,184

 
9,471

General and administrative expenses
84,959

 
70,819

 
170,473

 
143,436

Interest expense, net
14,808

 
16,623

 
31,812

 
38,881

Equity in earnings of unconsolidated affiliates
(6,813
)
 
(6,551
)
 
(14,647
)
 
(12,811
)
Other (income) expense, net
(10,527
)
 
4,812

 
(11,869
)
 
8,317

Income before income taxes
$
77,565

 
$
159,959

 
$
114,050

 
$
215,100

Provision for income taxes
(20,738
)
 
(39,736
)
 
(21,161
)
 
(51,770
)
Net income
$
56,827

 
$
120,223

 
$
92,889

 
$
163,330

Net (loss) income attributable to non-controlling interests
(178
)
 
513

 
(346
)
 
507

Net income attributable to MasTec, Inc.
$
57,005


$
119,710

 
$
93,235

 
$
162,823

 
 
 
 
 
 
 
 
Earnings per share (Note 2):
 
 
 
 
 
 
 
Basic earnings per share
$
0.79

 
$
1.59

 
$
1.27

 
$
2.17

Basic weighted average common shares outstanding
72,045

 
75,183

 
73,392

 
75,088

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.78

 
$
1.58

 
$
1.26

 
$
2.15

Diluted weighted average common shares outstanding
72,777

 
75,747

 
74,135

 
75,661


The accompanying notes are an integral part of these consolidated financial statements.


3



MASTEC, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited - in thousands)

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Net income
$
56,827

 
$
120,223

 
$
92,889

 
$
163,330

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation (losses) gains, net of tax
(840
)
 
113

 
(1,137
)
 
13

Unrealized losses on equity investee activity, net of tax
(1,325
)
 
(8,732
)
 
(24,286
)
 
(14,194
)
Comprehensive income
$
54,662

 
$
111,604

 
$
67,466

 
$
149,149

Comprehensive (loss) income attributable to non-controlling interests
(178
)
 
513

 
(346
)
 
507

Comprehensive income attributable to MasTec, Inc.
$
54,840

 
$
111,091

 
$
67,812

 
$
148,642


The accompanying notes are an integral part of these consolidated financial statements.

4



MASTEC, INC.
CONSOLIDATED BALANCE SHEETS
 (unaudited - in thousands, except share information)
 
June 30,
2020
 
December 31,
2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
48,638

 
$
71,427

Accounts receivable, net of allowance
927,764

 
850,326

Contract assets
965,887

 
1,024,568

Inventories, net
104,893

 
100,069

Prepaid expenses
44,138

 
52,000

Other current assets
45,728

 
75,169

Total current assets
$
2,137,048

 
$
2,173,559

Property and equipment, net
972,177

 
905,835

Operating lease assets
198,844

 
229,903

Goodwill, net
1,227,405

 
1,221,440

Other intangible assets, net
202,165

 
211,528

Other long-term assets
252,346

 
254,741

Total assets
$
4,989,985

 
$
4,997,006

Liabilities and equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt, including finance leases
$
126,697

 
$
118,429

Current portion of operating lease liabilities
78,044

 
81,561

Accounts payable
630,456

 
535,029

Accrued salaries and wages
118,068

 
87,562

Other accrued expenses
163,629

 
115,581

Contract liabilities
338,230

 
206,180

Other current liabilities
68,267

 
74,784

Total current liabilities
$
1,523,391

 
$
1,219,126

Long-term debt, including finance leases
1,115,839

 
1,314,030

Long-term operating lease liabilities
133,535

 
154,553

Deferred income taxes
267,525

 
296,326

Other long-term liabilities
198,859

 
221,280

Total liabilities
$
3,239,149

 
$
3,205,315

Commitments and contingencies (Note 14)


 


Equity
 
 
 
Preferred stock, $1.00 par value: authorized shares - 5,000,000; issued and outstanding shares – none
$

 
$

Common stock, $0.10 par value: authorized shares - 145,000,000; issued shares - 92,665,097 and 91,909,430 (including 1,734,554 and 1,221,593 of unvested stock awards) as of June 30, 2020 and December 31, 2019, respectively
9,267

 
9,191

Capital surplus
821,584

 
809,753

Retained earnings
1,603,944

 
1,510,709

Accumulated other comprehensive loss
(101,129
)
 
(75,706
)
Treasury stock, at cost: 18,941,926 shares and 15,344,917 shares as of June 30, 2020 and December 31, 2019, respectively
(586,955
)
 
(466,727
)
Total MasTec, Inc. shareholders’ equity
$
1,746,711

 
$
1,787,220

Non-controlling interests
$
4,125

 
$
4,471

Total equity
$
1,750,836

 
$
1,791,691

Total liabilities and equity
$
4,989,985

 
$
4,997,006


The accompanying notes are an integral part of these consolidated financial statements.

5



MASTEC, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited - in thousands, except shares) 

 
Common Stock
 
Treasury Stock
 
Capital Surplus
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
MasTec, Inc. Shareholders’ Equity
 
Non-Controlling Interests
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
For the Three Months Ended June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of March 31, 2020
92,618,032

 
$
9,262

 
(18,914,841
)
 
$
(586,153
)
 
$
814,425

 
$
1,546,939

 
$
(98,963
)
 
$
1,685,510

 
$
4,303

 
$
1,689,813

Net income (loss)
 
 
 
 
 
 
 
 
 
 
57,005

 
 
 
57,005

 
(178
)
 
56,827

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
(2,166
)
 
(2,166
)
 
 
 
(2,166
)
Non-cash stock-based compensation
 
 
 
 
 
 
 
 
5,850

 
 
 
 
 
5,850

 
 
 
5,850

Forfeiture of restricted shares, net
(1,424
)
 

 
 
 
 
 

 
 
 
 
 

 
 
 

Other stock issuances, net of shares withheld for taxes
48,489

 
5

 
 
 
 
 
1,309

 
 
 
 
 
1,314

 
 
 
1,314

Acquisition of treasury stock, at cost
 
 
 
 
(27,085
)
 
(802
)
 
 
 
 
 
 
 
(802
)
 
 
 
(802
)
Balance as of June 30, 2020
92,665,097

 
$
9,267

 
(18,941,926
)
 
$
(586,955
)
 
$
821,584

 
$
1,603,944

 
$
(101,129
)
 
$
1,746,711

 
$
4,125

 
$
1,750,836

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of March 31, 2019
91,591,398

 
$
9,159

 
(15,344,917
)
 
$
(466,727
)
 
$
793,748

 
$
1,161,487

 
$
(66,056
)
 
$
1,431,611

 
$
2,121

 
$
1,433,732

Net income
 
 
 
 
 
 
 
 
 
 
119,710

 
 
 
119,710

 
513

 
120,223

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
(8,619
)
 
(8,619
)
 
 
 
(8,619
)
Non-cash stock-based compensation
 
 
 
 
 
 
 
 
4,220

 
 
 
 
 
4,220

 
 
 
4,220

Issuance of restricted shares, net
57

 

 
 
 
 
 

 
 
 
 
 

 
 
 

Other stock issuances, net of shares withheld for taxes
35,531

 
4

 
 
 
 
 
1,194

 
 
 
 
 
1,198

 
 
 
1,198

Contributions from non-controlling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
584

 
584

Balance as of June 30, 2019
91,626,986

 
$
9,163

 
(15,344,917
)
 
$
(466,727
)
 
$
799,162

 
$
1,281,198

 
$
(74,675
)
 
$
1,548,121

 
$
3,217

 
$
1,551,338


The accompanying notes are an integral part of these consolidated financial statements.



6



MASTEC, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited - in thousands, except shares) 

 
Common Stock
 
Treasury Stock
 
Capital Surplus
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
MasTec, Inc. Shareholders’ Equity
 
Non-Controlling Interests
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
For the Six Months Ended June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2019
91,909,430

 
$
9,191

 
(15,344,917
)
 
$
(466,727
)
 
$
809,753

 
$
1,510,709

 
$
(75,706
)
 
$
1,787,220

 
$
4,471

 
$
1,791,691

Net income (loss)
 
 
 
 
 
 
 
 
 
 
93,235

 
 
 
93,235

 
(346
)
 
92,889

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
(25,423
)
 
(25,423
)
 
 
 
(25,423
)
Non-cash stock-based compensation
 
 
 
 
 
 
 
 
9,899

 
 
 
 
 
9,899

 
 
 
9,899

Issuance of restricted shares, net
693,355

 
69

 
 
 
 
 
(69
)
 
 
 
 
 

 
 
 

Other stock issuances, net of shares withheld for taxes
62,312

 
7

 
 
 
 
 
2,001

 
 
 
 
 
2,008

 
 
 
2,008

Acquisition of treasury stock, at cost
 
 
 
 
(3,597,009
)
 
(120,228
)
 
 
 
 
 
 
 
(120,228
)
 
 
 
(120,228
)
Balance as of June 30, 2020
92,665,097

 
$
9,267

 
(18,941,926
)
 
$
(586,955
)
 
$
821,584

 
$
1,603,944

 
$
(101,129
)
 
$
1,746,711

 
$
4,125

 
$
1,750,836

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
91,327,009

 
$
9,133

 
(15,329,817
)
 
$
(466,125
)
 
$
789,009

 
$
1,118,375

 
$
(60,494
)
 
$
1,389,898

 
$
2,126

 
$
1,392,024

Net income
 
 
 
 
 
 
 
 
 
 
162,823

 
 
 
162,823

 
507

 
163,330

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
(14,181
)
 
(14,181
)
 
 
 
(14,181
)
Non-cash stock-based compensation
 
 
 
 
 
 
 
 
7,940

 
 
 
 
 
7,940

 
 
 
7,940

Issuance of restricted shares, net
233,419

 
23

 
 
 
 
 
(23
)
 
 
 
 
 

 
 
 

Other stock issuances, net of shares withheld for taxes
66,558

 
7

 
 
 
 
 
2,236

 
 
 
 
 
2,243

 
 
 
2,243

Acquisition of treasury stock, at cost
 
 
 
 
(15,100
)
 
(602
)
 
 
 
 
 
 
 
(602
)
 
 
 
(602
)
Contributions from non-controlling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
584

 
584

Balance as of June 30, 2019
91,626,986

 
$
9,163

 
(15,344,917
)
 
$
(466,727
)
 
$
799,162

 
$
1,281,198

 
$
(74,675
)
 
$
1,548,121

 
$
3,217

 
$
1,551,338


The accompanying notes are an integral part of these consolidated financial statements.


7



MASTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited - in thousands)

 
For the Six Months Ended June 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
92,889

 
$
163,330

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
110,776

 
109,504

Amortization of intangible assets
17,184

 
9,471

Non-cash interest expense, net
1,451

 
737

Non-cash stock-based compensation expense
9,899

 
7,940

Benefit from deferred income taxes
(20,575
)
 
(14,190
)
Equity in earnings of unconsolidated affiliates
(14,647
)
 
(12,811
)
Gains on sales of assets, net
(8,334
)
 
(6,074
)
Other non-cash items, net
12,297

 
(2,899
)
Changes in assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable, net of allowance
(60,246
)
 
3,196

Contract assets
64,321

 
113,827

Inventories
(4,629
)
 
(265
)
Other assets, current and long-term portion
31,234

 
6,187

Accounts payable and accrued expenses
164,297

 
(26,355
)
Contract liabilities
130,784

 
(12,278
)
Other liabilities, current and long-term portion
(30,199
)
 
12,141

Net cash provided by operating activities
$
496,502

 
$
351,461

Cash flows from investing activities:
 
 
 
Cash paid for acquisitions, net of cash acquired
(10,493
)
 
(94,647
)
Capital expenditures
(132,755
)
 
(57,455
)
Proceeds from sale of property and equipment
17,861

 
19,567

Payments for other investments
(16,777
)
 
(4,972
)
Proceeds from other investments
648

 
14,705

Other investing activities, net
4,843

 

Net cash used in investing activities
$
(136,673
)
 
$
(122,802
)
Cash flows from financing activities:
 
 
 
Proceeds from credit facilities
1,235,935

 
1,627,909

Repayments of credit facilities
(1,401,899
)
 
(1,754,043
)
(Repayments of) proceeds from other borrowings, net
(17
)
 
1

Payments of finance lease obligations
(61,587
)
 
(38,646
)
Payments of acquisition-related contingent consideration
(39,379
)
 
(29,267
)
Proceeds from non-controlling interests

 
584

Proceeds from stock-based awards
3,936

 
2,311

Payments for stock-based awards
(593
)
 
(22
)
Repurchases of common stock
(120,228
)
 
(5,652
)
Net cash used in financing activities
$
(383,832
)
 
$
(196,825
)
Effect of currency translation on cash
1,214

 
(80
)
Net (decrease) increase in cash and cash equivalents
$
(22,789
)
 
$
31,754

Cash and cash equivalents - beginning of period
$
71,427

 
$
27,422

Cash and cash equivalents - end of period
$
48,638

 
$
59,176

Supplemental cash flow information:
 
 
 
Interest paid
$
33,046

 
$
43,102

Income tax payments, net of refunds
$
1,469

 
$
39,417

Supplemental disclosure of non-cash information:
 
 
 
Additions to property and equipment from finance leases
$
44,987

 
$
110,164


The accompanying notes are an integral part of these consolidated financial statements.

8



MASTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1Business, Basis of Presentation and Significant Accounting Policies
Nature of the Business
MasTec, Inc. (collectively with its subsidiaries, “MasTec” or the “Company”) is a leading infrastructure construction company operating mainly throughout North America across a range of industries. The Company’s primary activities include the engineering, building, installation, maintenance and upgrade of communications, energy, utility and other infrastructure, such as: wireless, wireline/fiber and customer fulfillment activities; petroleum and natural gas pipeline infrastructure; electrical utility transmission and distribution; power generation, including from renewable sources; heavy civil; and industrial infrastructure. MasTec’s customers are primarily in these industries. MasTec reports its results under five reportable segments: (1) Communications; (2) Oil and Gas; (3) Electrical Transmission; (4) Clean Energy and Infrastructure; and (5) Other. During the second quarter of 2020, the Company renamed its Power Generation and Industrial segment as the Clean Energy and Infrastructure segment to better represent the nature of the segment’s operations, end markets and customer characteristics. There was no change to the composition of the segment or its historical results.
Basis of Presentation
The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying consolidated balance sheet as of December 31, 2019 is derived from the Company’s audited financial statements as of that date. Because certain information and footnote disclosures have been condensed or omitted, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019 contained in the Company’s 2019 Annual Report on Form 10-K (the “2019 Form 10-K”). In management’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. When necessary, certain prior year amounts have been reclassified to conform to the current period presentation. Interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. The Company believes that the disclosures made in these consolidated financial statements are adequate to make the information not misleading.
Principles of Consolidation
The accompanying consolidated financial statements include MasTec, Inc. and its subsidiaries and include the accounts of all majority owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation. Other parties’ interests in entities that MasTec consolidates are reported as non-controlling interests within equity, except for mandatorily redeemable non-controlling interests, which are recorded within liabilities. Net income or loss attributable to non-controlling interests is reported as a separate line item below net income or loss. The Company’s investments in entities for which the Company does not have a controlling interest, but over which it has the ability to exert significant influence, are accounted for using the equity method of accounting. For equity investees in which the Company has an undivided interest in the assets, liabilities and profits or losses of an unincorporated entity, but does not exercise control over the entity, the Company consolidates its proportional interest in the accounts of the entity.
Translation of Foreign Currencies
The assets and liabilities of foreign subsidiaries with a functional currency other than the U.S. dollar are translated into U.S. dollars at period-end exchange rates, with resulting translation gains or losses included within other comprehensive income or loss. Revenue and expenses are translated into U.S. dollars at average rates of exchange during the applicable period. Substantially all of the Company’s foreign operations use their local currency as their functional currency. Currency gains or losses resulting from transactions executed in currencies other than the functional currency are included in other income or expense, net. In these consolidated financial statements, “$” means U.S. dollars unless otherwise noted.
Management Estimates
The preparation of consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on historical experience and various other assumptions, including the potential future effects of the COVID-19 pandemic and other relevant global events. These estimates form the basis for making judgments about the Company’s operating results and the carrying values of assets and liabilities that are not readily apparent from other sources. While management believes that such estimates are reasonable when considered in conjunction with the Company’s consolidated financial position and results of operations taken as a whole, actual results could differ materially from those estimates.
Key estimates include: the recognition of revenue and project profit or loss, which the Company defines as project revenue, less project costs of revenue, including project-related depreciation, in particular, on construction contracts accounted for under the cost-to-cost method, for which the recorded amounts require estimates of costs to complete and the amount and probability of variable consideration included in the contract transaction price; fair value estimates, including those related to acquisitions, valuations of goodwill and intangible assets, acquisition-related contingent consideration and other liabilities, equity investments and other long-lived assets; allowances for credit losses; asset lives used in computing depreciation and amortization; fair values of financial instruments; self-insurance liabilities; other accruals and allowances; income taxes; and the estimated effects of litigation and other contingencies.



9



Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue from contracts with customers under Accounting Standards Codification (“ASC”) Topic 606 (“Topic 606”). Under Topic 606, revenue is recognized when, or as, control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. Revenue is primarily recognized by the Company over time utilizing the cost-to-cost measure of progress, which best depicts the continuous transfer of control of goods or services to the customer, and correspondingly, when performance obligations are satisfied for the related contracts.
Contracts. The Company derives revenue primarily from construction projects performed under: (i) master and other service agreements, which provide a menu of available services in a specific geographic territory that are utilized on an as-needed basis, and are typically priced using either a time and materials, or a fixed price per unit basis; and (ii) contracts for specific projects requiring the construction and installation of an entire infrastructure system, or specified units within an infrastructure system, which are subject to multiple pricing options, including fixed price, unit price, time and materials, or cost plus a markup. Revenue derived from projects performed under master service and other service agreements totaled 36% and 33% of consolidated revenue for the three month periods ended June 30, 2020 and 2019, respectively, and totaled 39% and 36% for the six month periods ended June 30, 2020 and 2019, respectively.
For certain master service and other service agreements under which the Company performs installation and maintenance services, primarily for install-to-the-home service providers in its Communications segment, revenue is recognized at a point in time. This is generally when the work order has been fulfilled, which is typically the same day the work is initiated. For each of the three and six month periods ended June 30, 2020 and 2019, point in time revenue accounted for approximately 5% of consolidated revenue. Substantially all of the Company’s other revenue is recognized over time.
The total contract transaction price and cost estimation processes used for recognizing revenue over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s profit recognition. Changes in these factors could result in revisions to revenue in the period in which the revisions are determined, which could materially affect the Company’s consolidated results of operations for that period. Provisions for losses on uncompleted contracts are recorded in the period in which such losses are determined. For both the six month periods ended June 30, 2020 and 2019, project profit was affected by less than 5% as a result of changes in contract estimates included in projects that were in process as of December 31, 2019 and 2018. Revenue recognized for the three month periods ended June 30, 2020 and 2019 as a result of changes in total contract transaction price estimates, including for variable consideration, from performance obligations satisfied or partially satisfied in prior periods, totaled approximately $5.4 million and $22.6 million, respectively, and totaled $15.8 million and $28.9 million for the six month periods ended June 30, 2020 and 2019, respectively.
The Company may incur certain costs that can be capitalized, such as initial set-up or mobilization costs. Such costs, which are amortized over the life of the respective projects, were not material for the three or six month periods ended June 30, 2020 or 2019.
Performance Obligations. A performance obligation is a contractual promise to transfer a distinct good or service to a customer, and is the unit of account under Topic 606. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. The vast majority of the Company’s performance obligations are completed within one year.
Remaining performance obligations represent the amount of unearned transaction prices under contracts for which work is wholly or partially unperformed, including the Company’s share of unearned transaction prices from its proportionately consolidated non-controlled joint ventures. As of June 30, 2020, the amount of the Company’s remaining performance obligations was $5.3 billion. Based on current expectations, the Company expects to recognize approximately $2.8 billion of its remaining performance obligations as revenue during 2020, with the remainder to be recognized primarily in 2021.
Variable Consideration. Transaction prices for the Company’s contracts may include variable consideration, which comprises items such as change orders, claims and incentives. Management estimates variable consideration for a performance obligation utilizing estimation methods that it believes best predict the amount of consideration to which the Company will be entitled. Management’s estimates of variable consideration and the determination of whether to include estimated amounts in transaction prices are based largely on engineering studies and legal opinions, past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer and all other relevant information that is reasonably available at the time of the estimate. To the extent unapproved change orders, claims and other variable consideration reflected in transaction prices are not resolved in the Company’s 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 June 30, 2020 and December 31, 2019, the Company included approximately $40 million and $27 million, respectively, of change orders and/or claims in transaction prices for certain contracts that were in the process of being resolved in the ordinary course of 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 both June 30, 2020 and December 31, 2019, these change orders and/or claims were primarily related to certain projects in the Company’s Oil and Gas and Electrical Transmission segments. The Company actively engages with its customers to complete the final approval process, and generally expects 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.
Recently Issued Accounting Pronouncements
See the recent accounting pronouncements discussion below for information pertaining to the effects of recently adopted and other recent accounting pronouncements, as updated from the discussion in the Company’s 2019 Form 10-K.

10



Accounting Pronouncements Adopted in 2020
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) to reduce diversity in practice in accounting for the costs of implementing cloud computing arrangements that are service contracts. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for internal-use software. Accounting for the service element of the cloud computing arrangement is not affected by the new guidance. Under ASU 2018-15, amortization expense, payments for and asset balances related to such capitalized implementation costs are to be presented within the same line items of the entity’s statements of operations, cash flows and balance sheets, respectively, as the related service fee activity and balances would be presented. ASU 2018-15, which the Company adopted on a prospective basis during the first quarter of 2020, did not have a material effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13, which is intended to improve the effectiveness of fair value measurement disclosures, modifies the disclosure requirements for certain estimates and assumptions used in determining the fair value of assets and liabilities. ASU 2018-13, which the Company adopted during the first quarter of 2020, did not have a material effect on the Company’s consolidated financial statements. See Note 4 - Fair Value of Financial Instruments for disclosure updates pertaining to significant unobservable inputs used to develop fair value estimates for certain of the Company’s Level 3 financial instruments.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This ASU, together with its related clarifying ASUs (collectively, “ASU 2016-13”), introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial assets, including financial assets arising from revenue transactions, such as accounts receivable and contract assets. The new expected credit loss methodology, which is based on historical experience, current conditions and reasonable and supportable forecasts, replaced the incurred loss model for measuring and recognizing expected credit losses. The Company adopted this ASU in the first quarter of 2020 and incorporated this guidance into its methodology for estimating its accounts receivable allowances. Based on historical trends, the financial condition of the Company’s customers and management’s expectations of economic and industry factors affecting the Company’s customers, ASU 2016-13 did not have a material effect on the Company’s consolidated financial statements upon adoption. Future credit loss expectations could be affected by changes in estimates or developing trends, including from changes in credit quality of the Company’s customers, changes in specific risks associated with the Company’s financial assets, or from changes in management’s expectations of future economic and industry conditions or other factors. Management actively monitors the economic environment, including any potential effects from the COVID-19 pandemic and/or volatility in the oil and gas markets on the credit quality of the Company’s customers and/or its financial assets. For additional information about the Company’s accounts receivable and related allowances, see Note 5 - Accounts Receivable, Net of Allowance, and Contract Assets and Liabilities.
In March 2020, the Securities and Exchange Commission (the “SEC”) issued a final rule, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, that simplifies the disclosure requirements related to registered debt securities under Rule 3-10 of Regulation S-X. Among other updates, the final rule replaces the requirement to provide condensed consolidating financial information with a requirement to provide summarized financial information of the issuers and guarantors, reduces the periods for which summarized financial information is required to the most recent annual period and year-to-date interim period, and permits the disclosures to be located outside the financial statements. The Company early adopted the reporting requirements of the final rule in the second quarter of 2020, and the disclosure required thereby is included within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations for related disclosures.
Other Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Reform Rate (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) to provide temporary optional expedients and exceptions to the contract modifications, hedge relationships and other transactions affected by reference rate reform if certain criteria are met. This ASU, which was effective upon issuance and may be applied through December 31, 2022, is applicable to all contracts and hedging relationships that reference the London Interbank Offered Rate or any other reference rate expected to be discontinued. The guidance in ASU 2020-04 may be implemented over time as reference rate reform activities occur. The Company is currently evaluating the impact of reference rate reform and the potential application of this guidance.
Note 2Earnings Per Share
Basic earnings or loss per share is computed by dividing net income attributable to MasTec by the weighted average number of common shares outstanding for the period, which excludes non-participating unvested restricted share awards. Diluted earnings per share is computed by dividing net income attributable to MasTec by the weighted average number of fully diluted shares, as calculated under the treasury stock method, which includes the potential effect of dilutive common stock equivalents, such as issued but unvested restricted shares. If the Company reports a loss, rather than income, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, as their effect would be anti-dilutive.

11



The following table provides details underlying the Company’s earnings per share calculations for the periods indicated (in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Net income attributable to MasTec:
 
 
 
 
 
 
 
Net income - basic and diluted (a)
$
57,005

 
$
119,710

 
$
93,235

 
$
162,823

Weighted average shares outstanding:
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
72,045

 
75,183

 
73,392

 
75,088

Dilutive common stock equivalents (b)
732

 
564

 
743

 
573

Weighted average shares outstanding - diluted
72,777

 
75,747

 
74,135

 
75,661


(a)
Calculated as total net income less amounts attributable to non-controlling interests.
(b)
For the six month period ended June 30, 2020, there were 88,462 anti-dilutive common stock equivalents.
The Company repurchased approximately 3.6 million shares of its common stock during the six month period ended June 30, 2020, as discussed in Note 11 - Equity. The effect of these repurchases on the Company’s weighted average shares outstanding for the six month period ended June 30, 2020 was a reduction of 2.2 million shares, due to the timing of the repurchases.
Note 3Goodwill and Other Intangible Assets
The following table provides balances for goodwill by reportable segment as of June 30, 2020 (in millions):
 
Communications
 
Oil and Gas
 
Electrical
Transmission
 
Clean Energy and Infrastructure
 
Total Goodwill
Goodwill, gross
$
547.5

 
$
493.6

 
$
150.1

 
$
152.7

 
$
1,343.9

Accumulated impairment loss

 
(116.5
)
 

 

 
(116.5
)
Goodwill, net
$
547.5

 
$
377.1

 
$
150.1

 
$
152.7

 
$
1,227.4


For the six month period ended June 30, 2020, goodwill included additions of $5.2 million from new business combinations and a net increase of $1.4 million from measurement period adjustments. Currency translation effects related to goodwill and accumulated impairment losses for the six