MASTEC : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following is a discussion and analysis of our business, financial condition
and results of operations as of and for the three and six month periods ended
June 30, 2021 and 2020. This discussion and analysis should be read in
conjunction with our consolidated financial statements and notes thereto in
Item 1 of this Quarterly Report on Form 10-Q (this "Form 10-Q"), and the audited
consolidated financial statements, accompanying notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") contained in our 2020 Form 10-K. In this MD&A, "$" means U.S. dollars
unless specified otherwise.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic disrupted business activities and significantly affected
global economic conditions at the beginning of 2020 and continuing into 2021 as
federal, state and local governments imposed restrictions and mitigation
measures to contain COVID-19 or slow its spread, resulting in workforce, supply
chain and production disruptions and creating significant uncertainties in the
U.S. and global economies. While the adverse effects of these restrictions and
mitigation measures partially subsided in the United States beginning in the
second half of 2020, the COVID-19 pandemic varies by region and the possibility
of future restrictions remains, particularly as a new Delta variant of COVID-19
appears to be causing an increase in COVID-19 cases. The extent to which the
COVID-19 pandemic could affect our business, operations and financial results
will depend upon numerous evolving factors that we may not be able to accurately
predict, including the availability, acceptance, administration and
effectiveness (and the duration of such effectiveness) of treatments and
vaccines, along with the length and extent of any continuing economic and market
disruptions.
As a provider of essential services, all of our business segments continued to
operate throughout the pandemic, and where safe and possible, our customers
generally directed us to maintain normal work schedules. Our business model has,
thus far, proven resilient, and we continue to adapt to the changing operational
and economic environment that has resulted from the COVID-19 pandemic. Our top
priority has been to take appropriate actions to protect the health and safety
of our employees, customers and business partners. We adjusted our standard
operating procedures within our business operations to ensure employee and
customer safety and continually monitor evolving health guidelines and respond
to changes as appropriate. These procedures have included implementation of
specialized training programs, appropriate social distancing procedures and
required use of personal protective equipment for our crew operations, as well
as appropriate sanitation measures for key equipment and facilities, along with
limiting non-essential business travel and incorporating work-at-home programs
as appropriate for our administrative offices. In the first half of 2021, we
began to reduce certain business travel restrictions and implement a phased-in
return to our offices where COVID-related restrictions have eased, though
certain work-at-home programs are still in place. For in-office operations,
appropriate safety and social distancing measures have been incorporated. We
have also developed human resource guidance to assist our employees. In certain
locations where our operations experienced challenges as a result of the
pandemic, we have actively collaborated with our customers to minimize potential
service disruptions and operational impacts.
The COVID-19 pandemic has had a negative impact on our operations since 2020 and
may continue to affect our business activities throughout 2021. These impacts
include lost productivity from governmental permitting approval delays, reduced
crew productivity due to social distancing and other mitigation measures, the
health and availability of work crews or other key personnel, including
subcontractors or supply chain disruptions, and/or delayed project start dates,
project shutdowns or cancellations that may be mandated or requested by
governmental authorities or others, all of which could result in lower revenue
or higher operating costs and/or create lower levels of overhead cost
absorption. We continue to actively monitor the effects of the COVID-19 pandemic
on our operations and may take further actions, as necessary, that we determine
to be in the best interests of our employees, customers, business partners and
stakeholders, or as required by federal, state, or local authorities.
Additionally, disruptions in economic activity as a result of the COVID-19
pandemic have had, and may continue to have, adverse effects across our end
markets, particularly in the oil and gas sector. To the extent that future
business activities are adversely affected by the pandemic, we intend to take
appropriate actions to mitigate any such impacts.
Several relief measures have been enacted in response to the effects of the
COVID-19 pandemic, including the CARES Act and the Coronavirus Relief Act.  We
have deferred approximately $59 million of payroll taxes under the CARES Act,
half of which are due by December 31, 2021, with the remainder due by December
31, 2022. We will continue to monitor and evaluate the potential effects,
usefulness of, and qualification
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for, additional COVID-19 relief measures on our financial position, results of
operations and cash flows.
Notwithstanding moderation of the COVID-19 pandemic and easing of governmental
and other restrictions, we may continue to experience negative effects on our
business and operations from possible longer-term changes in consumer and
customer behavior, and/or from continuing negative economic conditions. We
believe that we have taken appropriate steps to mitigate the impacts of the
COVID-19 pandemic on our business; however, the potential effects of the
COVID-19 pandemic are uncertain, as they depend upon numerous evolving factors
that we may not be able to accurately predict, and therefore, any future impacts
on our business, financial condition and/or results of operations cannot be
quantified or predicted with specificity.
As of June 30, 2021, we maintained a strong balance sheet, have strong
relationships with our banking partners and had ample liquidity totaling
approximately $1.2 billion, comprising $1.0 billion of availability under our
Credit Facility and $237 million of cash, notwithstanding substantial strategic
business acquisition activity in the first half of 2021. We believe that our
financial position, strong cash flows and operational strengths will enable us
to manage the current challenges and uncertainties resulting from the COVID-19
pandemic. Our business operations typically generate significant cash flow,
affording us the flexibility to invest strategically in our efforts to maximize
shareholder value through acquisitions and other strategic arrangements, share
repurchases and capital expenditures. We are carefully managing liquidity and
are monitoring any potential effects from the pandemic on our financial results,
cash flows and/or working capital, and intend to take appropriate actions in
efforts to mitigate any impacts.
Business Overview
We are a leading infrastructure construction company operating mainly throughout
North America across a range of industries. Our 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; power generation, primarily from clean energy
and renewable sources; pipeline infrastructure; electrical utility transmission
and distribution; heavy civil; and industrial infrastructure. Our customers are
primarily in these industries. Including our predecessor companies, we have been
in business for over 90 years. For the twelve month period ended June 30, 2021,
we had an average of approximately 500 locations and 21,000 employees, and, as
of June 30, 2021, we had approximately 26,000 employees. We offer our services
primarily under the MasTec service mark. We have been consistently ranked among
the top specialty contractors by Engineering News-Record for the past several
years.
We provide our services to a diversified base of customers. We often provide
services under master service and other service agreements, which are generally
multi-year agreements. The remainder of our work is generated pursuant to
contracts for specific projects or jobs that require the construction or
installation of an entire infrastructure system or specified units within an
infrastructure system.
We manage our operations under five operating segments, which represent our five
reportable segments: (1) Communications; (2) Clean Energy and Infrastructure;
(3) Oil and Gas; (4) Electrical Transmission and (5) Other. This structure is
generally focused on broad end-user markets for our labor-based construction
services. See Note 13 - Segments and Related Information and Note 14 -
Commitments and Contingencies in the notes to the consolidated financial
statements, which are incorporated by reference, for segment results and
information and significant customer concentrations.
Backlog
Estimated backlog represents the amount of revenue we expect to realize over the
next 18 months from future work on uncompleted construction contracts, including
new contracts under which work has not begun, as well as revenue from change
orders and renewal options. Our estimated backlog also includes amounts under
master service and other service agreements and includes our proportionate share
of estimated revenue from proportionately consolidated non-controlled
contractual joint ventures. Estimated backlog for work under master service and
other service agreements is determined based on historical trends, anticipated
seasonal impacts, experience from similar projects and estimates of customer
demand based on communications with our customers. Based on current expectations
of our customers' requirements, we anticipate we will realize approximately 43%
of our estimated June 30, 2021 backlog in 2021. The following table presents
18-month estimated backlog by reportable segment as of the dates indicated:
                                     June 30,      March 31,       June 30,
Reportable Segment (in millions):      2021           2021           2020
Communications                      $  4,240      $    3,751      $  3,915
Clean Energy and Infrastructure        1,705           1,386         1,042
Oil and Gas                            1,933           2,211         2,659
Electrical Transmission                1,330             516           551
Other                                      -               -             1
Estimated 18-month backlog          $  9,208      $    7,864      $  8,168


As of June 30, 2021, 53% of our backlog is attributable to amounts under master
service or other service agreements, pursuant to which our customers are not
contractually committed to purchase a minimum amount of services. Most of these
agreements can be canceled on short or no advance notice. Timing of revenue for
construction and installation projects included in our backlog can be subject to
change as a result of customer, regulatory or other delays or cancellations,
including from the potential adverse effects of the COVID-19 pandemic on
economic activity, and/or other project-related factors. These changes could
cause estimated revenue to be realized in periods later than originally
expected, or not at all. We occasionally experience postponements, cancellations
and reductions in expected future work from master service agreements and/or
construction projects due to changes in our customers' spending plans, market
volatility, changes in governmental permitting, regulatory delays and/or other
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factors. There can be no assurance as to our customers' requirements or if
actual results will be consistent with the estimates included in our forecasts.
As a result, our backlog as of any particular date is an uncertain indicator of
future revenue and earnings.
Backlog is a common measurement used in our industry. Our methodology for
determining backlog may not, however, be comparable to the methodologies used by
others. Backlog differs from the amount of our remaining performance
obligations, which are described in Note 1 - Business, Basis of Presentation and
Significant Accounting Policies in the notes to the consolidated financial
statements, which is incorporated by reference. As of June 30, 2021, total
18-month backlog differed from the amount of our remaining performance
obligations due primarily to the inclusion of $4.9 billion of estimated future
revenue under master service and other service agreements within our backlog
estimates, as described above, and the exclusion of approximately $0.9 billion
of remaining performance obligations and estimated future revenue under master
service and other service agreements in excess of 18 months, which amount is not
included in the backlog estimates above. Backlog expected to be realized in 2021
differed from the amount of remaining performance obligations expected to be
recognized for the same period due primarily to the inclusion of approximately
$1.0 billion of estimated future revenue under master service and other service
agreements that is included within the related backlog estimate.
Economic, Industry and Market Factors
In addition to the effects of the pandemic noted above, we closely monitor the
effects of changes in economic and market conditions on our customers. Changes
in general economic and market conditions can negatively affect demand for our
customers' products and services, which can affect our customers' planned
capital and maintenance budgets in certain end-markets. Market, regulatory and
industry factors could affect demand for our services, or the cost to provide
such services, including (i) changes to our customers' capital spending plans,
including any potential effects from public health issues, such as the recent
COVID-19 pandemic; (ii) new or changing regulatory requirements, governmental
policy changes, and customer or industry initiatives, including with respect to
climate change, sustainability and related environmental concerns, and/or from
changes in governmental permitting; (iii) economic, political or other market
developments or uncertainty, including access to capital for customers in the
industries we serve; (iv) changes in technology, tax and other incentives; and
(v) mergers and acquisitions among the customers we serve. Changes in demand
for, and/or fluctuations in market prices for oil, gas and other fuel sources,
and availability of transportation and transmission capacity can also affect
demand for our services, in particular, on pipeline and energy generation
construction projects. These fluctuations, as well as the highly competitive
nature of our industry, can result in lower levels of activity and profit on the
services we provide. In the face of increased pricing pressure or other market
developments, we strive to maintain our profit margins through productivity
improvements, cost reduction programs and/or business streamlining efforts.
While we actively monitor economic, industry and market factors that could
affect our business, we cannot predict the effect that changes in such factors
may have on our future results of operations, liquidity and cash flows, and we
may be unable to fully mitigate, or benefit from, such changes.
Effect of Seasonality and Cyclical Nature of Business
Our revenue and results of operations can be subject to seasonal and other
variations. These variations are influenced by weather, customer spending
patterns, bidding seasons, project schedules, public health matters, such as the
COVID-19 pandemic, holidays and/or timing, in particular, for large
non-recurring projects. Typically, our revenue is lowest at the beginning of the
year and during the winter months because cold, snowy or wet conditions cause
project delays. Revenue is generally higher during the summer and fall months
due to increased demand for our services when favorable weather conditions exist
in many of the regions in which we operate, but continued cold and wet weather
can often affect second quarter productivity. In the fourth quarter, many
projects tend to be completed by customers seeking to spend their capital
budgets before the end of the year, which generally has a positive effect on our
revenue. However, the holiday season and inclement weather can cause delays,
which can reduce revenue and increase costs on affected projects. Any quarter
may be positively or negatively affected by adverse or unusual weather patterns,
including warm winter weather, excessive rainfall, flooding or natural
catastrophes such as hurricanes or other severe weather, making it difficult to
predict quarterly revenue and margin variations.
Additionally, our industry can be highly cyclical. Fluctuations in end-user
demand within the industries we serve, or in the supply of services within those
industries, can affect demand for our services. As a result, our business may be
adversely affected by industry declines or by delays in new projects. Variations
in project schedules or unanticipated changes in project schedules, in
particular, in connection with large construction and installation projects, can
create fluctuations in revenue, which may adversely affect us in a given
quarter, even if not for the full year. In addition, revenue from master service
and other service agreements, while generally predictable, can be subject to
volatility. The financial condition of our customers and their access to
capital; variations in project margins; regional, national and global economic,
political and market conditions; regulatory or environmental influences; and
acquisitions, dispositions or strategic investments/other arrangements can also
materially affect quarterly results in a given period. Accordingly, our
operating results in any particular period may not be indicative of the results
that can be expected for any other period. The effects of the COVID-19 pandemic
could also result in greater seasonal and cyclical volatility than would
otherwise exist under normal conditions.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of our consolidated
financial statements requires the use of estimates and assumptions that affect
the amounts reported in our consolidated financial statements and the
accompanying notes. We base our estimates on historical experience and various
other assumptions that we believe to be reasonable under the circumstances,
including the potential effects of the COVID-19 pandemic, climate change, and
other relevant global and/or macroeconomic trends and events. These estimates
form the basis for making judgments about our operating results, including the
results of construction contracts accounted for under the cost-to-cost method,
and the carrying values of assets and liabilities, that are not readily apparent
from other sources. Given that management estimates, by their nature, involve
judgments regarding future uncertainties, actual results could differ materially
from these estimates if conditions change or if certain key assumptions used in
making these estimates ultimately prove to be inaccurate. Our accounting
policies and critical accounting estimates are reviewed periodically by the
Audit Committee of the Board of Directors.
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  We believe that our accounting estimates pertaining to: the recognition of
revenue and project profit or loss, which we define 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, indefinite-lived intangible assets and acquisition-related
contingent consideration; equity investments; income taxes; self-insurance
liabilities; and litigation and other contingencies, are the most critical in
the preparation of our consolidated financial statements as they are important
to the portrayal of our financial condition and require significant or complex
judgment and estimates on the part of management. Actual results could, however,
vary materially from these accounting estimates.
Refer to Note 1 - Business, Basis of Presentation and Significant Accounting
Policies in the notes to the consolidated financial statements, which is
incorporated by reference, and to our 2020 Form 10-K for discussion of our
significant accounting policies, and refer to Note 3 - Goodwill and Other
Intangible Assets in the notes to the consolidated financial statements, which
is incorporated by reference, for details of our second quarter 2021 quarterly
review of goodwill and indefinite-lived intangible assets for indicators of
impairment.
Results of Operations
Comparison of Quarterly Results
The following table, which may contain slight summation differences due to
rounding, reflects our consolidated results of operations in dollar and
percentage of revenue terms for the periods indicated (dollar amounts in
millions). Our consolidated results of operations are not necessarily comparable
from period to period due to the effect of recent acquisitions and certain other
items, which are described in the comparison of results section below. In this
discussion, "acquisition" results are defined as results from acquired
businesses for the first twelve months following the dates of the respective
acquisitions, with the balance of results for a particular item attributed to
"organic" activity.
                                                   For the Three Months Ended June 30,                                     For the Six Months Ended June 30,
                                                 2021                                2020                               2021                                2020
Revenue                              $  1,962.7           100.0  %       $ 1,569.3           100.0  %       $  3,738.1           100.0  %       $ 2,985.9           100.0  %
Costs of revenue, excluding
depreciation and amortization           1,675.2            85.4  %         1,341.8            85.5  %          3,189.1            85.3  %         2,568.1            86.0  %
Depreciation                               87.5             4.5  %            57.7             3.7  %            166.8             4.5  %           110.8             3.7  %
Amortization of intangible assets          19.9             1.0  %             9.8             0.6  %             31.2             0.8  %            17.2             0.6  %
General and administrative expenses        85.0             4.3  %            85.0             5.4  %            158.1             4.2  %           170.5             5.7  %
Interest expense, net                      13.8             0.7  %            14.8             0.9  %             26.3             0.7  %            31.8             1.1  %
Equity in earnings of unconsolidated
affiliates                                 (7.5)           (0.4) %            (6.8)           (0.4) %            (14.9)           (0.4) %           (14.6)           (0.5) %

Other income, net                         (14.1)           (0.7) %           (10.5)           (0.7) %            (16.7)           (0.4) %           (11.9)           (0.4) %
Income before income taxes           $    102.8             5.2  %       $    77.6             4.9  %       $    198.3             5.3  %       $   114.1             3.8  %
Provision for income taxes                (27.1)           (1.4) %           (20.7)           (1.3) %            (56.4)           (1.5) %           (21.2)           (0.7) %
Net income                           $     75.8             3.9  %       $    56.8             3.6  %       $    141.9             3.8  %       $    92.9             3.1  %
Net income (loss) attributable to
non-controlling interests                   0.3             0.0  %            (0.2)           (0.0) %              0.8             0.0  %            (0.3)           (0.0) %
Net income attributable to MasTec,
Inc.                                 $     75.5             3.8  %       $    57.0             3.6  %       $    141.1             3.8  %       $    93.2             3.1  %


We review our operating results by reportable segment. See Note 13 - Segments
and Related Information in the notes to the consolidated financial statements,
which is incorporated by reference. Our reportable segments are: (1)
Communications; (2) Clean Energy and Infrastructure; (3) Oil and Gas; (4)
Electrical Transmission; and (5) Other. Management's review of reportable
segment results includes analyses of trends in revenue, EBITDA and EBITDA
margin. EBITDA for segment reporting purposes is calculated consistently with
our consolidated EBITDA calculation. See the discussion of our non-U.S. GAAP
financial measures, including certain adjusted non-U.S. GAAP measures, as
described, following the comparison of results discussion below. The following
table presents revenue, EBITDA and EBITDA margin by reportable segment for the
periods indicated (dollar amounts in millions):
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                                                           Revenue                                                                                      

EBITDA and EBITDA Margin

                          For the Three Months Ended June                   For the Six                                         For the Three Months                                                   For the Six Months
                                        30,                            Months Ended June 30,                                       Ended June 30,                                                        Ended June 30,
Reportable Segment:           2021                2020                2021                 2020                         2021                                2020                              2021                              2020
Communications            $    630.4          $   654.3          $    1,199.0          $ 1,298.4          $     72.7               11.5  %       $  76.4            11.7  %       $   121.5            10.1  %       $ 127.2             9.8  %
Clean Energy and
Infrastructure                 481.5              426.1                 831.9              712.4                15.6                3.2  %          30.1             7.1  %            26.4             3.2  %          35.0             4.9  %
Oil and Gas                    621.4              368.5               1,346.9              727.6               138.1               22.2  %          80.1            21.7  %           305.7            22.7  %         154.5            21.2  %
Electrical Transmission        232.5              124.1                 366.0              252.2                 9.3                4.0  %          (3.2)           (2.6) %            12.9             3.5  %           5.1             2.0  %
Other                            0.0                0.1                   0.0                0.1                 8.3                    NM           7.5                 NM            15.8                 NM          14.9                 NM
Eliminations                    (3.1)              (3.8)                 (5.7)              (4.8)                  -                  -                -               -                  -               -                -               -
Corporate                          -                  -                     -                  -               (19.9)                 -            (31.0)              -              (59.8)              -            (62.9)              -
Consolidated Results      $  1,962.7          $ 1,569.3          $    3,738.1          $ 2,985.9          $    224.1               11.4  %       $ 159.9            10.2  %       $   422.5            11.3  %       $ 273.8             9.2  %


NM - Percentage is not meaningful
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
Revenue. For the three month period ended June 30, 2021, consolidated revenue
totaled $1,963 million as compared with $1,569 million for the same period in
2020, an increase of $393 million, or 25%. Revenue increases in our Oil and Gas
segment of $253 million, or 69%, our Electrical Transmission segment of $108
million, or 87%, and our Clean Energy and Infrastructure segment of $55 million,
or 13%, were partially offset by a decrease in revenue in our Communications
segment of $24 million, or 4%. Acquisitions contributed $271 million of revenue
for the three month period ended June 30, 2021, and organic revenue increased by
approximately $122 million, or 8%, as compared with the same period in 2020.
Communications Segment. Communications revenue was $630 million for the three
month period ended June 30, 2021, as compared with $654 million for the same
period in 2020, a decrease of $24 million, or 4%. Acquisitions contributed $43
million of revenue for the three month period ended June 30, 2021, and organic
revenue decreased by approximately $67 million, or 10%, as compared with the
same period in 2020. The decrease in organic revenue was primarily driven by
lower levels of wireless services, including from the effects of temporary
project timing delays related to recently completed 5G spectrum auctions, for
which deployment is expected to begin in the latter part of 2021.
Clean Energy and Infrastructure Segment. Clean Energy and Infrastructure revenue
was $482 million for the three month period ended June 30, 2021 as compared with
$426 million for the same period in 2020, an increase of $55 million, or 13%.
Acquisitions contributed $96 million of revenue for the three month period ended
June 30, 2021, and organic revenue decreased by $40 million, or 9%, as compared
with the same period in 2020, due primarily to timing of project activity,
including project start-up and weather-related delays.
Oil and Gas Segment. Oil and Gas revenue was $621 million for three month period
ended June 30, 2021, as compared with $369 million for the same period in 2020,
an increase of $253 million, or 69%. For the three month period ended June 30,
2021, acquisitions contributed $30 million of revenue, and organic revenue
increased by $223 million, or 60%, as compared with the same period in 2020. The
expected increase was primarily due to higher levels of large diameter project
activity, which initiated during 2021 and is expected to continue throughout the
balance of the year, partially offset by the effects of timing of other
projects.
Electrical Transmission Segment. Electrical Transmission revenue was $233
million for the three month period ended June 30, 2021 as compared with $124
million for the same period in 2020, an increase of $108 million, or 87%. For
the three month period ended June 30, 2021, acquisitions contributed $103
million of revenue, and organic revenue increased by $6 million, or 5%, as
compared with the same period in 2020, primarily due to timing and higher levels
of project activity.
Costs of revenue, excluding depreciation and amortization. Costs of revenue,
excluding depreciation and amortization, increased by approximately $333
million, or 25%, to $1,675 million for the three month period ended June 30,
2021 from $1,342 million for the same period in 2020. Higher levels of revenue
contributed an increase of $336 million in costs of revenue, excluding
depreciation and amortization, and improved productivity contributed a decrease
of approximately $3 million. Costs of revenue, excluding depreciation and
amortization, as a percentage of revenue decreased by approximately 10 basis
points, from 85.5% of revenue for the three month period ended June 30, 2020 to
85.4% of revenue for the same period in 2021, due, in part, to higher levels of
revenue, as well as from the effects of project efficiencies, close-outs and mix
in certain of our segments, offset, in part, by reduced productivity in certain
other segments.
Depreciation. Depreciation was $88 million, or 4.5% of revenue, for the three
month period ended June 30, 2021, as compared with $58 million, or 3.7% of
revenue, for the same period in 2020, an increase of $30 million, or 52%.
Acquisitions contributed $6 million of depreciation for the three month period
ended June 30, 2021, and organic depreciation increased by $24 million, or 41%,
due primarily to the impact of capital investments to support expected increased
levels of large diameter pipeline project activity in 2021. As a percentage of
revenue, depreciation increased by approximately 80 basis points.
Amortization of intangible assets. Amortization of intangible assets was $20
million, or 1.0% of revenue, for the three month period ended June 30, 2021, as
compared with $10 million, or 0.6% of revenue, for the same period in 2020, an
increase of approximately $10 million, or 103%. Acquisitions contributed $12
million of amortization for the three month period ended June 30, 2021, and
organic amortization decreased by approximately $1 million, or 9% due to the
effects of timing for amortization of certain intangible assets. As a percentage
of revenue, amortization of intangible assets increased by approximately 40
basis points.
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General and administrative expenses. General and administrative expenses totaled
$85 million, or 4.3% of revenue, for the three month period ended June 30, 2021,
and totaled $85 million, or 5.4% of revenue, for the same period in 2020.
Acquisitions contributed $9 million of general and administrative expenses for
the three month period ended June 30, 2021. Excluding the effects of
acquisitions, general and administrative expenses for the three month period
ended June 30, 2021 decreased by $9 million, or approximately 11%, as compared
with the same period in the prior year, primarily due to recovery of provisions
for credit losses and the effects of legal and settlement matter timing, offset,
in part, by increases in compensation, travel and information technology
expenses. Overall, general and administrative expenses as a percentage of
revenue decreased by approximately 110 basis points for the three month period
ended June 30, 2021 as compared with the same period in 2020, due to higher
levels of revenue.
Interest expense, net. Interest expense, net of interest income, was
approximately $14 million, or approximately 0.7% of revenue, for the three month
period ended June 30, 2021, as compared with $15 million, or 0.9% of revenue,
for the same period in 2020. The decrease in interest expense, net, related
primarily to a reduction in interest expense from credit facility activity as
well as a decrease in discount charges on financing arrangements for trade
receivables. Interest expense from credit facility activity decreased by
approximately $2 million for the three month period ended June 30, 2021 as
compared with the same period in the prior year due to a combination of lower
average balances and lower interest rates. The reduction in interest expense on
credit facility activity and financing arrangements was offset, in part, by an
increase in interest expense on senior notes. In August 2020, we issued $600
million aggregate principal amount of 4.50% Senior Notes and redeemed $400
million aggregate principal amount of our 4.875% Senior Notes.
Equity in earnings of unconsolidated affiliates, net. Equity in earnings or
losses of unconsolidated affiliates includes our share of income or losses from
equity investees. For the three month periods ended June 30, 2021 and 2020,
equity in earnings from unconsolidated affiliates, net, totaled approximately $8
million and $7 million, respectively, and related primarily to our investments
in the Waha JVs, and, to a lesser extent, to investments in certain
telecommunications and other entities.
Other income, net. Other income, net, consists primarily of gains or losses from
sales of, or changes in estimated recoveries from, assets and investments and
gains or losses from changes to estimated earn-out accruals. Other income, net,
was $14 million for the three month period ended June 30, 2021, as compared with
$11 million of other income, net, for the same period in 2020. For the three
month period ended June 30, 2021, other income, net, included approximately $4
million of gains on sales of equipment, net, $9 million of income, net, from
changes to estimated Earn-out accruals and $1 million, net, of income from
changes in the fair value of certain investments and income from strategic
arrangements. For the three month period ended June 30, 2020, other income, net,
included approximately $6 million of gains on sales of equipment, net, and $4
million, net, of income from changes in the fair value of certain investments.
Provision for income taxes. Income tax expense was $27 million for the three
month period ended June 30, 2021. Income tax expense for the three month period
ended June 30, 2020 was $21 million. Pre-tax income increased to $103 million
for the three month period ended June 30, 2021 as compared with $78 million for
the same period in 2020. For the three month period ended June 30, 2021, our
effective tax rate decreased to 26.3% from 26.7% for the same period in 2020.
Analysis of EBITDA by Segment
Communications Segment. EBITDA for our Communications segment was $73 million,
or 11.5% of revenue, for the three month period ended June 30, 2021, as compared
with $76 million, or 11.7% of revenue, for the same period in 2020, a decrease
of approximately $4 million, or 5%. Lower levels of revenue contributed to a
decrease in EBITDA of $3 million. As a percentage of revenue, EBITDA decreased
by approximately 20 basis points, or approximately $1 million, due primarily to
reduced project efficiencies and mix.
Clean Energy and Infrastructure Segment. EBITDA for our Clean Energy and
Infrastructure segment was $16 million, or 3.2% of revenue, for the three month
period ended June 30, 2021, as compared with EBITDA of $30 million, or 7.1% of
revenue, for the same period in 2020, a decrease in EBITDA of approximately $14
million, or 48%. Higher levels of revenue contributed an increase in EBITDA of
approximately $4 million. As a percentage of revenue, EBITDA decreased by
approximately 380 basis points, or $18 million, due to project start-up delays,
reduced project efficiencies, including weather-related inefficiencies and mix.
Oil and Gas Segment. EBITDA for our Oil and Gas segment was $138 million, or
22.2% of revenue, for the three month period ended June 30, 2021, as compared
with $80 million, or 21.7% of revenue, for the same period in 2020, an increase
of $58 million, or 72%. Higher levels of revenue contributed an increase in
EBITDA of $55 million, and improved productivity contributed an increase in
EBITDA of approximately $3 million. EBITDA margins increased by approximately 50
basis points due primarily to improved project efficiencies, close-outs and mix.
Electrical Transmission Segment. EBITDA for our Electrical Transmission segment
was $9 million, or 4.0% of revenue, for the three month period ended June 30,
2021, as compared with EBITDA of negative $3 million, or negative 2.6% of
revenue, for the same period in 2020, an increase in EBITDA of approximately $13
million, or 391%. As a percentage of revenue, EBITDA increased by approximately
660 basis points, due primarily to mix, as well as improved project efficiencies
and close-outs.
Other Segment. EBITDA from Other businesses was approximately $8 million for
both the three month periods ended June 30, 2021 and 2020 and related primarily
to equity in earnings from our investments in the Waha JVs.
Corporate. Corporate EBITDA was negative $20 million for the three month period
ended June 30, 2021, as compared with EBITDA of negative $31 million for the
same period in 2020, for an increase in EBITDA of approximately $11 million.
Corporate EBITDA included income, net, from changes in the fair value of certain
investments and income from strategic arrangements of approximately $1 million
and $4 million for the three month periods ended June 30, 2021 and 2020,
respectively, and included income, net, from changes to estimated Earn-out
accruals, net, of $9 million for the three month period ended June 30, 2021.
Excluding the effects of these items, other corporate expenses for the three
month period ended June 30, 2021 decreased by approximately $5 million as
compared with the same period in the prior year, due primarily to the effects of
timing of legal and settlement matters.
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Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Revenue. For the six month period ended June 30, 2021, consolidated revenue
totaled $3,738 million as compared with $2,986 million for the same period in
2020, an increase of $752 million, or 25%. Revenue increases in our Oil and Gas
segment of $619 million, or 85%, our Clean Energy and Infrastructure segment of
$119 million, or 17%, and in our Electrical Transmission segment of $114
million, or 45%, were partially offset by a decrease in revenue in our
Communications segment of $99 million, or 8%. Acquisitions contributed $358
million of revenue for the six month period ended June 30, 2021, and organic
revenue increased $394 million, or 13%, as compared with the same period in
2020.
Communications Segment. Communications revenue was $1,199 million for the six
month period ended June 30, 2021, as compared with $1,298 million for the same
period in 2020, a decrease of $99 million, or 8%. Acquisitions contributed $76
million of revenue for the six month period ended June 30, 2021, and organic
revenue decreased by approximately $175 million, or 13%, as compared with the
same period in 2020. The decrease in organic revenue was primarily driven by
lower levels of wireless services, including from the effects of temporary
project timing delays related to recently completed 5G spectrum auctions, for
which deployment is expected to begin in the latter part of 2021, and from the
effects of the COVID-19 pandemic.
Clean Energy and Infrastructure Segment. Clean Energy and Infrastructure revenue
was $832 million for the six month period ended June 30, 2021 as compared with
$712 million for the same period in 2020, an increase of $119 million, or 17%.
For the six month period ended June 30, 2021, acquisitions contributed $145
million of revenue, and organic revenue decreased by $26 million, or 4%, as
compared with the same period in 2020, due primarily to timing of project
activity, including project start-up and weather-related delays.
Oil and Gas Segment. Oil and Gas revenue was $1,347 million for the six month
period ended June 30, 2021, as compared with $728 million for the same period in
2020, an increase of $619 million, or 85%. For the six month period ended
June 30, 2021, acquisitions contributed $35 million of revenue, and organic
revenue increased by $584 million, or 80%, as compared with the same period in
2020. The expected increase was primarily due to higher levels of large diameter
project activity, which initiated during 2021 and is expected to continue
throughout the balance of the year, partially offset by the effects of timing of
other projects.
Electrical Transmission Segment. Electrical Transmission revenue was $366
million for the six month period ended June 30, 2021 as compared with $252
million for the same period in 2020, an increase of $114 million, or 45%. For
the six month period ended June 30, 2021, acquisitions contributed $103 million
of revenue, and organic revenue increased by $11 million, or 5%, as compared
with the same period in 2020, primarily due to timing and higher levels of
project activity.
Costs of revenue, excluding depreciation and amortization. Costs of revenue,
excluding depreciation and amortization, increased by approximately $621
million, or 24%, to $3,189 million for the six month period ended June 30, 2021
from $2,568 million for the same period in 2020. Higher levels of revenue
contributed an increase of $647 million in costs of revenue, excluding
depreciation and amortization, and improved productivity contributed a decrease
of approximately $26 million. Costs of revenue, excluding depreciation and
amortization, as a percentage of revenue decreased by approximately 70 basis
points, from 86.0% of revenue for the six month period ended June 30, 2020 to
85.3% of revenue for the same period in 2021, due, in part, to higher levels of
revenue, as well as from the effects of project efficiencies, close-outs and mix
in certain of our segments, offset, in part, by reduced productivity in certain
other segments.
Depreciation. Depreciation was $167 million, or 4.5% of revenue, for the six
month period ended June 30, 2021, as compared with $111 million, or 3.7% of
revenue, for the same period in 2020, an increase of $56 million, or 51%.
Acquisitions contributed $8 million of depreciation for the six month period
ended June 30, 2021, and organic depreciation increased by $48 million, or 43%,
due primarily to the impact of capital investments to support expected increased
levels of large diameter pipeline project activity in 2021. As a percentage of
revenue, depreciation increased by approximately 80 basis points.
Amortization of intangible assets. Amortization of intangible assets was $31
million, or 0.8% of revenue, for the six month period ended June 30, 2021, as
compared with $17 million, or 0.6% of revenue, for the same period in 2020, an
increase of approximately $14 million, or 81%. Acquisitions contributed $16
million of amortization for the three month period ended June 30, 2021, and
organic amortization decreased by approximately $2 million, or 12% due to the
effects of timing for amortization of certain intangible assets. As a percentage
of revenue, amortization of intangible assets increased by approximately 30
basis points, primarily related to acquisitions.
General and administrative expenses. General and administrative expenses were
$158 million, or 4.2% of revenue, for the six month period ended June 30, 2021,
as compared with $170 million, or 5.7% of revenue, for the same period in 2020,
a decrease of $12 million, or 7%. Acquisitions contributed $13 million of
general and administrative expenses for the six month period ended June 30,
2021. Excluding the effects of acquisitions, general and administrative expenses
for the six month period ended June 30, 2021 decreased by $25 million, or
approximately 15%, as compared with the same period in the prior year, primarily
due to recovery of provisions for credit losses, resulting from successful
collection efforts for previously reserved amounts, and reductions in travel and
professional fee expense, offset, in part, by the effects of legal and
settlement matter timing. Overall, general and administrative expenses as a
percentage of revenue decreased by approximately 150 basis points for the six
month period ended June 30, 2021 as compared with the same period in 2020, due,
in part, to higher levels of revenue.
Interest expense, net. Interest expense, net of interest income, was $26
million, or 0.7% of revenue, for the six month period ended June 30, 2021, as
compared with $32 million, or 1.1% of revenue, for the same period in 2020, a
decrease of $6 million, or 17%. The decrease in interest expense, net, related
primarily to a reduction in interest expense from credit facility activity as
well as a decrease in discount charges on financing arrangements for trade
receivables. Interest expense from credit facility activity decreased by
approximately $6 million as compared with the same period in the prior year due
to a combination of lower average balances and lower interest rates. The
reduction in interest expense on credit facility activity and financing
arrangements was offset, in part, by an increase in interest expense on senior
notes, as described above.
Equity in earnings of unconsolidated affiliates, net. For both the six month
periods ended June 30, 2021 and 2020, equity in earnings from unconsolidated
affiliates, net, totaled approximately $15 million, and related primarily to our
investments in the Waha JVs, and, to a lesser extent, to investments in certain
telecommunications and other entities.
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Other income, net. Other income, net, was $17 million for the six month period
ended June 30, 2021, as compared with $12 million of other income, net, for the
same period in 2020. For the six month period ended June 30, 2021, other income,
net, included approximately $9 million of income from changes to estimated
Earn-out accruals, net, $6 million of gains on sales of equipment, net. For the
six month period ended June 30, 2020, other income, net, included approximately
$8 million of gains on sales of equipment, net, and $4 million, net, of income,
from changes in the fair value of certain investments, offset, in part, by
approximately $2 million of expense from changes to estimated Earn-out accruals,
net.
Provision for income taxes. Income tax expense was $56 million for the six month
period ended June 30, 2021. Income tax expense for the six month period ended
June 30, 2020 was $21 million. Pre-tax income increased to $198 million for the
six month period ended June 30, 2021 as compared with $114 million for the same
period in 2020. For the six month period ended June 30, 2021, our effective tax
rate increased to 28.4% from 18.6% for the same period in 2020. Our effective
tax rate in the first half of 2021 included the negative effect of $2 million
related to non-deductible share-based compensation, whereas in the first half of
2020, our effective tax rate included a benefit of approximately $10 million
related to the release of certain valuation allowances on Canadian deferred tax
assets that were no longer necessary.
Analysis of EBITDA by Segment
Communications Segment. EBITDA for our Communications segment was $122 million,
or 10.1% of revenue, for the six month period ended June 30, 2021, as compared
with $127 million, or 9.8% of revenue, for the same period in 2020, a decrease
of $6 million, or approximately 4%. Lower levels of revenue contributed to a
decrease in EBITDA of $10 million. As a percentage of revenue, EBITDA increased
by approximately 30 basis points, or approximately $4 million, due primarily to
improved project efficiencies and mix.
Clean Energy and Infrastructure Segment. EBITDA for our Clean Energy and
Infrastructure segment was $26 million, or 3.2% of revenue, for the six month
period ended June 30, 2021, as compared with EBITDA of $35 million, or 4.9% of
revenue, for the same period in 2020, a decrease in EBITDA of approximately $9
million, or 25%. Higher levels of revenue contributed an increase in EBITDA of
approximately $6 million. As a percentage of revenue, EBITDA decreased by
approximately 170 basis points, or $14 million, due to project start-up delays,
reduced project efficiencies, including weather-related inefficiencies and mix.
Oil and Gas Segment. EBITDA for our Oil and Gas segment was $306 million, or
22.7% of revenue, for the six month period ended June 30, 2021, as compared with
$155 million, or 21.2% of revenue, for the same period in 2020, an increase of
$151 million, or 98%. Higher levels of revenue contributed an increase in EBITDA
of $132 million, and improved productivity contributed an increase in EBITDA of
approximately $20 million. EBITDA margins increased by approximately 150 basis
points due primarily to improved project efficiencies, close-outs and mix.
Electrical Transmission Segment. EBITDA for our Electrical Transmission segment
was $13 million, or 3.5% of revenue, for the six month period ended June 30,
2021, as compared with EBITDA of $5 million, or 2.0% of revenue, for the same
period in 2020, an increase in EBITDA of approximately $8 million, or 153%.
Higher levels of revenue contributed an increase in EBITDA of $2 million. As a
percentage of revenue, EBITDA increased by approximately 150 basis points, or $5
million, due primarily to project mix.
Other Segment. EBITDA from Other businesses totaled approximately $16 million
and $15 million for the six month periods ended June 30, 2021 and 2020, and
related primarily to equity in earnings from our investments in the Waha JVs.
Corporate. Corporate EBITDA was negative $60 million for the six month period
ended June 30, 2021, as compared with EBITDA of negative $63 million for the
same period in 2020, for an increase in EBITDA of approximately $3 million.
Corporate EBITDA for the six month period ended June 30, 2021 included
approximately $9 million of income related to changes in estimated Earn-out
accruals, net, whereas for the same period in 2020, Corporate EBITDA included $2
million of expense from changes to estimated Earn-out accruals, net and
approximately $4 million of income, net, from changes in the fair value of
certain investments. Excluding the effects of these items, other corporate
expenses for the six month period ended June 30, 2021 increased by approximately
$4 million as compared with the same period in the prior year, due primarily to
the effects of timing of legal and settlement matters.
Foreign Operations
Our foreign operations are primarily in Canada and, to a lesser extent, in
Mexico, the Caribbean and India. See Note 13 - Segments and Related Information
in the notes to the consolidated financial statements, which is incorporated by
reference.
Non-U.S. GAAP Financial Measures
As appropriate, we supplement our reported U.S. GAAP financial information with
certain non-U.S. GAAP financial measures, including earnings before interest,
income taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA
("Adjusted EBITDA"), adjusted net income ("Adjusted Net Income") and adjusted
diluted earnings per share ("Adjusted Diluted Earnings Per Share"). These
"adjusted" non-U.S. GAAP measures exclude, as applicable to the particular
periods, non-cash stock-based compensation expense and, for Adjusted Net Income
and Adjusted Diluted Earnings Per Share, amortization of intangible assets and
the tax effects of the adjusted items, including non-cash stock-based
compensation expense and the effects of changes in statutory tax rates. These
definitions of EBITDA and Adjusted EBITDA are not the same as in our Credit
Facility or in the indenture governing our senior notes; therefore, EBITDA and
Adjusted EBITDA as presented in this discussion should not be used for purposes
of determining our compliance with the covenants contained in our debt
instruments.
We use EBITDA and Adjusted EBITDA, as well as Adjusted Net Income and Adjusted
Diluted Earnings Per Share to evaluate our performance, both internally and as
compared with our peers, because these measures exclude certain items that may
not be indicative of our core operating results, as well as items that can vary
widely across different industries or among companies within the same industry.
We believe that these adjusted measures provide a baseline for analyzing trends
in our underlying business. Non-cash stock-based compensation expense can be
subject to volatility from changes in the market price per share of our common
stock or variations in the value and number of shares granted, and amortization
of intangible assets is subject to acquisition activity, which varies from
period to period. We exclude intangible asset amortization from our adjusted
measures due to its non-operational nature and inherent volatility, as
acquisition activity varies from period to period. We also believe
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this presentation is common practice in our industry and improves comparability
of our results with those of our peers, although each company's definitions of
these adjusted measures may vary as they are not standardized and should be used
in light of the provided reconciliations.
We believe that these non-U.S. GAAP financial measures provide meaningful
information and help investors understand our financial results and assess our
prospects for future performance. Because non-U.S. GAAP financial measures are
not standardized, it may not be possible to compare these financial measures
with other companies' non-U.S. GAAP financial measures having the same or
similar names. These financial measures should not be considered in isolation
from, as substitutes for, or alternative measures of, reported net income or
diluted earnings per share, and should be viewed in conjunction with the most
comparable U.S. GAAP financial measures and the provided reconciliations
thereto. We believe these non-U.S. GAAP financial measures, when viewed together
with our U.S. GAAP results and related reconciliations, provide a more complete
understanding of our business. We strongly encourage investors to review our
consolidated financial statements and publicly filed reports in their entirety
and not rely on any single financial measure.
The following table presents a reconciliation of net income to EBITDA and
Adjusted EBITDA in dollar and percentage of revenue terms, for the periods
indicated. The tables below (dollar amounts in millions) may contain slight
summation differences due to rounding.
                                                 For the Three Months Ended June 30,                                 For the Six Months Ended June 30,
                                                2021                              2020                              2021                             2020
Net income                          $    75.8             3.9  %       $  56.8             3.6  %       $   141.9             3.8  %       $  92.9            3.1  %
Interest expense, net                    13.8             0.7  %          14.8             0.9  %            26.3             0.7  %          31.8            1.1  %
Provision for income taxes               27.1             1.4  %          20.7             1.3  %            56.4             1.5  %          21.2            0.7  %
Depreciation                             87.5             4.5  %          57.7             3.7  %           166.8             4.5  %         110.8            3.7  %
Amortization of intangible assets        19.9             1.0  %           9.8             0.6  %            31.2             0.8  %          17.2            0.6  %
EBITDA                              $   224.1            11.4  %       $ 159.9            10.2  %       $   422.5            11.3  %       $ 273.8            9.2  %
Non-cash stock-based compensation
expense                                   6.1             0.3  %           5.8             0.4  %            11.6             0.3  %           9.9            0.3  %

Adjusted EBITDA                     $   230.2            11.7  %       $ 165.7            10.6  %       $   434.1            11.6  %       $ 283.7            9.5  %

A reconciliation of EBITDA to Adjusted EBITDA and Adjusted EBITDA margin by reportable segment, for the periods indicated is as follows:

                                                  For the Three Months Ended June 30,                                  For the Six Months Ended June 30,
                                                 2021                              2020                              2021                              2020
EBITDA                               $   224.1            11.4  %       $ 159.9            10.2  %       $   422.5            11.3  %       $ 273.8             9.2  %
Non-cash stock-based compensation
expense                                    6.1             0.3  %           5.8             0.4  %            11.6             0.3  %           9.9             0.3  %

Adjusted EBITDA                      $   230.2            11.7  %       $ 165.7            10.6  %       $   434.1            11.6  %       $ 283.7             9.5  %
Reportable Segment:
Communications                       $    72.7            11.5  %       $  76.4            11.7  %       $   121.5            10.1  %       $ 127.2             9.8  %
Clean Energy and Infrastructure           15.6             3.2  %          30.1             7.1  %            26.4             3.2  %          35.0             4.9  %
Oil and Gas                              138.1            22.2  %          80.1            21.7  %           305.7            22.7  %         154.5            21.2  %
Electrical Transmission                    9.3             4.0  %          (3.2)           (2.6) %            12.9             3.5  %           5.1             2.0  %
Other                                      8.3                 NM           7.5                 NM            15.8                 NM          14.9                 NM
Corporate                                (13.8)              -            (25.2)              -              (48.2)              -            (53.0)              -
Adjusted EBITDA                      $   230.2            11.7  %       $ 165.7            10.6  %       $   434.1            11.6  %       $ 283.7             9.5  %


NM - Percentage is not meaningful
The tables below reconcile reported net income and reported diluted earnings per
share, the most directly comparable U.S. GAAP financial measures, to Adjusted
Net Income and Adjusted Diluted Earnings Per Share.
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                                                                      For 

the Three Months Ended June 30,

                                                                2021                                        2020
                                                                          Diluted                                     Diluted
                                                Net Income (in         Earnings Per         Net Income (in         Earnings Per
                                                  millions)                Share               millions)               Share
Reported U.S. GAAP measure                     $        75.8          $     

1.02 $ 56.8 $ 0.78 Adjustments: Non-cash stock-based compensation expense

                6.1                  0.08                   5.8                  0.08
Amortization of intangible assets                       19.9                  0.27                   9.8                  0.13

Total adjustments, pre-tax                     $        26.0          $     

0.35 $ 15.6 $ 0.21

  Income tax effect of adjustments (a)                  (5.7)                (0.08)                 (3.5)                (0.05)
  Statutory tax rate effects (b)                         0.7                  0.01                     -                     -
Adjusted non-U.S. GAAP measure                 $        96.7          $     

1.30 $ 69.0 $ 0.95

                                                                        For 

the Six Months Ended June 30,

                                                                 2021                                         2020
                                                                            Diluted                                     Diluted
                                                 Net Income (in          Earnings Per         Net Income (in         Earnings Per
                                                   millions)                 Share               millions)               Share
Reported U.S. GAAP measure                     $         141.9          $   

1.91 $ 92.9 $ 1.26 Adjustments: Non-cash stock-based compensation expense

                 11.6                  0.16                   9.9                  0.13
Amortization of intangible assets                         31.2                  0.42                  17.2                  0.23

Total adjustments, pre-tax                     $          42.8          $       0.58          $       27.1          $       0.37
  Income tax effect of adjustments (a)                    (7.1)                (0.10)                 (6.1)                (0.08)
  Statutory tax rate effects (b)                           1.2                  0.02                     -                     -
Adjusted non-U.S. GAAP measure                 $         178.8          $   

2.41 $ 113.8 $ 1.54

(a)  Represents the tax effect of the adjusted items that are subject to tax,
including the tax effects of non-cash stock-based compensation expense, which
for the six month periods ended June 30, 2021 and 2020, included net tax
benefits of $0.1 million and net tax deficiencies of $0.2 million, respectively,
from the vesting of share-based payment awards. Tax effects are determined based
on the tax treatment of the related item, the incremental statutory tax rate of
the jurisdictions pertaining to the adjustment, and their effect on pre-tax
income. For the three and six month periods ended June 30, 2021, our
consolidated effective tax rates, as reported, were 26.3% and 28.4%,
respectively, and as adjusted, were 24.9% and 25.8%, respectively. For the three
and six month periods ended June 30, 2020, our consolidated effective tax rates,
as reported, were 26.7% and 18.6%, respectively, and as adjusted, were 26.0% and
19.3%, respectively.
(b)  For the three and six month periods ended June 30, 2021, includes the
effect of changes in certain state tax rates.
Financial Condition, Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations, availability
under our Credit Facility and our cash balances. Our primary liquidity needs are
for working capital, capital expenditures, insurance and performance collateral
in the form of cash and letters of credit, earn-out obligations, equity
investment funding requirements, debt service and income taxes. We also evaluate
opportunities for strategic acquisitions, investments and other arrangements
from time to time, and we may consider opportunities to borrow additional funds,
which may include borrowings under our Credit Facility or debt issuances, or to
refinance or retire outstanding debt, or repurchase additional shares of our
outstanding common stock in the future under share repurchase authorizations,
any of which may require our use of cash.
Capital Expenditures. For the six month period ended June 30, 2021, we spent
approximately $97 million on capital expenditures, or $84 million, net of asset
disposals, and incurred approximately $99 million of equipment purchases under
finance leases. We estimate that we will spend approximately $170 million on
capital expenditures, or approximately $120 million, net of asset disposals, in
2021, and expect to incur approximately $160 million to $180 million of
equipment purchases under finance leases. Actual capital expenditures may
increase or decrease in the future depending upon business activity levels, as
well as ongoing assessments of equipment lease versus buy decisions based on
short and long-term equipment requirements.
Acquisitions and Earn-out Liabilities. We typically utilize cash for business
acquisitions and other strategic arrangements, and for the six month period
ended June 30, 2021, we used $589 million of cash for this purpose. In addition,
in most of our acquisitions, we have agreed to make future payments to the
sellers that are contingent upon the future earnings performance of the acquired
businesses, which we also refer to as "Earn-out" payments. Earn-out payments may
be paid in cash or, under specific circumstances, MasTec common stock, or a
combination thereof, at our option. The estimated total value of future Earn-out
liabilities as of June 30, 2021 was approximately $120 million. Of this amount,
$17 million represents the liability for earned amounts. The remainder is
management's estimate of Earn-out liabilities that are contingent upon future
performance. For the six month periods ended June 30, 2021 and 2020, we made
Earn-out payments of $46 million and $50 million, respectively.
Income Taxes. For the six month period ended June 30, 2021, tax payments, net of
tax refunds, were $61 million. For the six month period ended June 30, 2020, tax
payments, net of tax refunds were $1 million, which included the benefit of tax
payment deferrals of approximately
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$8 million resulting from federal and state COVID-19 relief provisions. Our tax
payments vary with changes in taxable income and earnings based on estimates of
full year taxable income activity and estimated tax rates.
Working Capital. We need working capital to support seasonal variations in our
business, primarily due to the effect of weather conditions on external
construction and maintenance work and the spending patterns of our customers,
both of which influence the timing of associated spending to support related
customer demand. Working capital needs are generally higher during the summer
and fall months due to increased demand for our services when favorable weather
conditions exist in many of the regions in which we operate. Conversely, working
capital needs are typically converted to cash during the winter months. These
seasonal trends, however, can be offset by changes in the timing of projects,
which can be affected by project delays or accelerations and/or other factors
that may affect customer spending.
Working capital requirements also tend to increase when we commence multiple
projects or particularly large projects because labor, including subcontractor
costs, and certain other costs, including inventory, become payable before the
receivables resulting from work performed are collected. The timing of billings
and project close-outs can contribute to changes in unbilled revenue. As of
June 30, 2021, we expect that substantially all of our unbilled receivables will
be billed to customers in the normal course of business within the next twelve
months. Total accounts receivable, which consists of contract billings, unbilled
receivables and retainage, net of allowance, increased to approximately $2.0
billion as of June 30, 2021 from $1.8 billion as of December 31, 2020 due
primarily to higher levels of revenue, offset, in part, by lower DSOs. See below
for related discussion.
Our payment billing terms are generally net 30 days, and some of our contracts
allow our customers to retain a portion of the contract amount (generally, from
5% to 10% of billings) until the job is completed. As part of our ongoing
working capital management practices, we evaluate opportunities to improve our
working capital cycle time through contractual provisions and certain financing
arrangements. For certain customers, we maintain inventory to meet the materials
requirements of the contracts. Occasionally, certain of our customers pay us in
advance for a portion of the materials we purchase for their projects or allow
us to pre-bill them for materials purchases up to specified amounts. Vendor
terms are generally 30 days. Our agreements with subcontractors often contain a
"pay-if-paid" provision, whereby our payments to subcontractors are made only
after we are paid by our customers.
Summary of Financial Condition, Liquidity and Capital Resources
Including our current assessment of the potential effects of the COVID-19
pandemic on our results of operations and capital resource requirements, we
anticipate that funds generated from operations, borrowings under our Credit
Facility and our cash balances will be sufficient to meet our working capital
requirements, anticipated capital expenditures, debt service obligations,
insurance and performance collateral requirements, letter of credit needs,
earn-out obligations, required income tax payments, acquisition, strategic
arrangement and investment funding requirements, share repurchase activity and
other liquidity needs for at least the next twelve months.
Sources and Uses of Cash
As of June 30, 2021, we had approximately $769 million in working capital,
defined as current assets less current liabilities, as compared with $944
million as of December 31, 2020, a decrease of approximately $175 million. Cash
and cash equivalents totaled approximately $237 million and $423 million as of
June 30, 2021 and December 31, 2020, respectively.
Sources and uses of cash are summarized below (in millions):
                                                                  For the 

Six Months Ended June 30,

                                                                      2021                 2020
Net cash provided by operating activities                        $      349.3          $    467.2
Net cash used in investing activities                            $     (676.1)         $   (136.7)
Net cash provided by (used in) financing activities              $      

140.8 $ (354.6)

Operating Activities. Cash flow from operations is primarily influenced by
changes in the timing of demand for our services and operating margins, but can
also be affected by working capital needs associated with the various types of
services we provide. Working capital is affected by changes in total accounts
receivable, prepaid expenses and other current assets, accounts payable and
payroll tax payments, including the effect of deferrals from COVID-19 relief
provisions, accrued expenses and contract liabilities, all of which tend to be
related. These working capital items are affected by changes in revenue
resulting from the timing and volume of work performed, variability in the
timing of customer billings and collections of receivables, as well as
settlement of payables and other obligations. Net cash provided by operating
activities for the six month period ended June 30, 2021 was $349 million, as
compared with approximately $467 million for the same period in 2020, for a
decrease in cash provided by operating activities of approximately $118 million.
The decrease was primarily due to the effect of revenue growth-related working
capital changes in assets and liabilities, net, partially offset by an increase
in net income and increases in certain expenses that reconcile net income to
operating cash flows, including depreciation expense.
Our days sales outstanding, net of contract liabilities ("DSO") was 80 as of
June 30, 2021 and 86 as of December 31, 2020. DSO is calculated as total
accounts receivable, net of allowance, less contract liabilities, divided by
average daily revenue for the most recently completed quarter as of the balance
sheet date. Our DSOs can fluctuate from period to period due to timing of
billings, billing terms, collections and settlements, timing of project
close-outs and retainage collections, changes in project and customer mix and
the effect of working capital initiatives. The decrease in our DSOs for the six
month period ended June 30, 2021 was due to timing of ordinary course billing
and collection activities. Other than matters subject to litigation, we do not
anticipate material collection issues related to our outstanding accounts
receivable balances, nor do we believe that we have material amounts due from
customers experiencing financial difficulties. Based on current information, we
expect to collect substantially all of our outstanding accounts receivable
balances within the next twelve months.
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Investing Activities. Net cash used in investing activities increased by
approximately $539 million to $676 million for the six month period ended
June 30, 2021 from $137 million for the six month period ended June 30, 2020. We
completed seven acquisitions during the six month period ended June 30, 2021,
for which we paid $589 million in cash, an increase of approximately $579
million as compared with the same period in 2020. These acquisitions were funded
with cash on hand and borrowings under our senior secured credit facility.
Capital expenditures totaled $97 million, or $84 million, net of asset disposals
for the six month period ended June 30, 2021, as compared with $133 million, or
$115 million, net of asset disposals, for the same period in 2020, for a
decrease in cash used in investing activities of approximately $31 million.
Payments for other investments, which related primarily to investments in
certain equity investees, decreased from $17 million for the six month period
ended June 30, 2020 to $6 million for the same period in 2021. Proceeds from
other investing activities, net, together with proceeds from other investments
decreased from $5 million for the six month period ended June 30, 2020 to $3
million for the same period in 2021.
Financing Activities. Net cash provided by financing activities for the six
month period ended June 30, 2021 was $141 million, as compared with net cash
used in financing activities of $355 million for the same period in 2020, for an
increase in cash provided by financing activities of $495 million. The increase
in cash provided by financing activities was driven primarily by credit facility
and other borrowing-related activity, net, which for the six month period ended
June 30, 2021 totaled $253 million of borrowings, net of repayments, as compared
with $166 million of repayments, net, for the six month period ended June 30,
2020, for an increase in cash provided by financing activities of approximately
$419 million, primarily related to our 2021 acquisitions. Additionally, there
were no share repurchases for the six month period ended June 30, 2021, whereas
for the same period in 2020, share repurchases totaled $120 million, for a
reduction in cash used in financing activities in 2021.
Offsetting the above mentioned increases in cash provided by financing
activities, we paid approximately $9 million to holders of our non-controlling
interests for the six month period ended June 30, 2021, including $7 million as
consideration to acquire 15% of the remaining interests of one of these
entities. Additionally, payments of finance lease obligations increased by
approximately $15 million for the six month period ended June 30, 2021 as
compared with the same period in 2020, for an increase in cash used in financing
activities.
Additionally, payments of acquisition-related contingent consideration included
within financing activities totaled $21 million for the six month period ended
June 30, 2021 as compared with $10 million for the same period in 2020, for an
increase in cash used in financing activities of $11 million. Total payments of
acquisition-related contingent consideration, including payments in excess of
acquisition-date liabilities, which are classified within operating activities,
totaled $44 million for the six month period ended June 30, 2021 as compared
with $50 million for the same period in 2020. The method of determining the
amount of excess of acquisition-date liabilities was revised in the fourth
quarter of 2020 to more closely align the cash flow presentation for such
amounts with the economics of the contingent consideration arrangements. Excess
of acquisition-date liability payments included within operating cash flows
totaled $23 million for the six month period ended June 30, 2021 as compared
with $40 million for the same period in 2020.
Senior Secured Credit Facility
We have a senior secured credit facility (the "Credit Facility") maturing on
September 19, 2024. Aggregate borrowing commitments under the Credit Facility
total $1.75 billion, composed of $1.35 billion of revolving commitments and a
term loan totaling $400 million in original principal amount, of which $393
million was outstanding as of June 30, 2021. Borrowings under the Credit
Facility are used for working capital requirements, capital expenditures and
other corporate purposes, including potential acquisitions or other strategic
arrangements, equity investments, share repurchases and the repurchase or
prepayment of indebtedness.
We are dependent upon borrowings and letters of credit under the Credit Facility
to fund our operations. Should we be unable to comply with the terms and
conditions of our Credit Facility, we would be required to obtain modifications
to the Credit Facility or obtain an alternative source of financing to continue
to operate, neither of which may be available to us on commercially reasonable
terms, or at all. The Credit Facility is subject to certain provisions and
covenants, as more fully described in Note 7 - Debt in the notes to the audited
consolidated financial statements included in our 2020 Form 10-K.
4.50% Senior Notes
We have $600 million of 4.50% Senior Notes due August 15, 2028 (the "4.50%
Senior Notes"). The 4.50% Senior Notes are fully and unconditionally guaranteed
on a senior unsecured, joint and several basis by our wholly-owned domestic
restricted subsidiaries that guarantee our existing credit facilities, subject
to certain exceptions. The 4.50% Senior Notes are subject to certain provisions
and covenants, as more fully described in Note 7 - Debt in the notes to the
audited consolidated financial statements included in our 2020 Form 10-K.
Debt Covenants
We were in compliance with the provisions and covenants contained in our
outstanding debt instruments as of June 30, 2021.
Additional Information
For detailed discussion and additional information pertaining to our debt
instruments, see Note 7 - Debt in the notes to the audited consolidated
financial statements included in our 2020 Form 10-K. Also see Note 7 - Debt in
the notes to the consolidated financial statements in this Form 10-Q for current
period balances and discussion, which is incorporated by reference.
Off-Balance Sheet Arrangements
As is common in our industry, we have entered into certain off-balance sheet
arrangements in the ordinary course of business. Our significant off-balance
sheet transactions include liabilities associated with non-cancelable operating
leases with durations of less than twelve months, letter of credit obligations,
surety and performance and payment bonds entered into in the normal course of
business, self-insurance liabilities, liabilities associated with multiemployer
pension plans, liabilities associated with potential funding obligations,
indemnification and/or guarantee arrangements relating to our equity and other
investment arrangements, including our variable interest entities. Refer to Note
14 - Commitments and Contingencies, Note 4 - Fair Value of Financial Instruments
and Note 15 - Related Party Transactions in the notes to the
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consolidated financial statements, which are incorporated by reference.
Impact of Inflation
The primary inflationary factors affecting our operations are labor and fuel
costs, and to a lesser extent, material costs. In times of low unemployment, our
labor costs may increase due to shortages in the supply of skilled labor.
Additionally, the prices of oil and gas are subject to unexpected fluctuations
due to events outside of our control, including geopolitical events, the effects
of climate change and fluctuations in global supply and demand, which have
recently caused volatility in the oil and gas markets. We closely monitor
inflationary factors and any impact they may have on our business operations,
operating results or financial condition.

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