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Earnings Per Share

9 Months Ended

Sep. 30, 2011

Earnings Per Share

Earnings Per Share

Note 2 – Earnings Per Share

Basic earnings per share is computed by dividing earnings available to MasTec's common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed on the basis of fully diluted shares and earnings, which includes the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and restricted share awards as well as shares associated with the Company's outstanding convertible securities.

As described in Note 9 – Debt, the Company had convertible notes outstanding during both the three and nine month periods ended September 30, 2011 and 2010. During the first quarter of 2011, the Company exchanged $105.3 million of its original 4.0% senior convertible notes (the "Original 4.0% Notes") and $97 million of its original 4.25% senior convertible notes (the "Original 4.25% Notes" and, together with the Original 4.0% Notes, the "Original Notes") for identical principal amounts of new 4.0% and 4.25% senior convertible notes (the "New 4.0% Notes" and the "New 4.25% Notes," respectively and, collectively, the "New Notes"). The terms of the New Notes are substantially identical to the Original Notes, except that the New Notes have an optional physical, cash or combination settlement feature and contain certain conditional conversion features. Due to the optional cash settlement feature and management's intent to settle the principal amount thereof in cash, the conversion shares underlying the outstanding principal amount of the New Notes are not required to be included in the Company's diluted share count. If, however, the Company's average stock price per share exceeds the $15.76 conversion price for the New 4.0% Notes or the $15.48 conversion price for the New 4.25% Notes, the resulting amount, in shares, of the premium over the principal amount is included in the Company's diluted share count ("premium shares").

The number of common shares issuable upon conversion of the Company's Original Notes are reflected in the calculation of diluted earnings per share for the corresponding periods by application of the "if-converted" method to the extent their effect is dilutive. Under the "if-converted" method, net income is adjusted to add back the after-tax amount of interest recognized in the period associated with the convertible notes, and correspondingly, the convertible notes are assumed to have been converted with the resulting common shares added to weighted average shares outstanding. Premium shares associated with the New Notes are reflected in the calculation of diluted earnings per share to the extent that the Company's average stock price for the corresponding periods exceeds the respective conversion prices of the New Notes, beginning with the date of issuance, or the beginning of the period, as applicable.

The following table summarizes the principal amounts of the Company's outstanding convertible notes for the periods indicated, including their respective classification within the computation of earnings per share for each period (in millions):


		Three and Nine Months Ended September 30,
		2011				2010
Dilutive:
New 4.0% senior convertible notes (1)		$	105.3			$	—
New 4.25% senior convertible notes (1)			97.0				—
Original 4.0% senior convertible notes (2)			9.7				115.0
Original 4.25% senior convertible notes (2)			3.0				100.0

Total principal value, outstanding convertible notes		$	215.0			$	215.0

(1)

Diluted shares associated with the New Notes are attributable to the premium over the respective conversion prices.

(2)

Diluted shares associated with the Original Notes are attributable to the underlying principal amounts.

The Company's average stock price for the three and nine month periods ended September 30, 2011 exceeded the conversion prices of the New Notes. The number of premium shares included in the Company's diluted share count varies with fluctuations in the Company's actual share price for the related periods. Higher actual share prices result in a greater number of equivalent premium shares. Premium shares included in the Company's diluted share count for the periods indicated were as follows (equivalent premium shares in thousands):


		Three Months Ended September 30, 2011								Nine Months Ended September 30, 2011
		New 4.0% Senior Convertible Notes				New 4.25% Senior Convertible Notes				New 4.0% Senior Convertible Notes				New 4.25% Senior Convertible Notes
Conversion price		$	15.76			$	15.48			$	15.76			$	15.48
Weighted average share price		$	19.81			$	19.81			$	19.31			$	19.28
Weighted equivalent premium shares			1,366				1,371				1,166				1,187

The following table provides details of the Company's earnings per share calculations for the periods indicated (in thousands, except per share amounts):


		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Basic:
Net income attributable to MasTec		$	31,842			$	30,006			$	97,442			$	52,017
Weighted average shares outstanding			84,732				76,104				81,981				76,064


Basic earnings per share attributable to MasTec		$	0.38			$	0.39			$	1.19			$	0.68


Diluted:
Net income
Basic net income attributable to MasTec		$	31,842			$	30,006			$	97,442			$	52,017
Interest expense on original 4.0% senior convertible notes, net of tax			60				680				272				2,040
Interest expense on original 4.25% senior convertible notes, net of tax			20				628				134				1,885


Diluted net income attributable to MasTec		$	31,922			$	31,314			$	97,848			$	55,942


Shares
Basic weighted average shares outstanding			84,732				76,104				81,981				76,064
Dilutive common stock equivalents			1,042				644				1,206				716
Dilutive premium shares, new 4.0% senior convertible notes			1,366				—				1,166				—
Dilutive premium shares, new 4.25% senior convertible notes			1,371				—				1,187				—
Dilutive shares, original 4.0% senior convertible notes			612				7,297				945				7,297
Dilutive shares, original 4.25% senior convertible notes			194				6,462				446				6,462


Diluted weighted average shares outstanding			89,317				90,507				86,931				90,539


Diluted earnings per share attributable to MasTec		$	0.36				0.35			$	1.13			$	0.62

For the three and nine month periods ended September 30, 2011, the weighted average number of anti-dilutive restricted awards not included in the Company's diluted earnings per share calculations were 7,609 and 2,564, respectively.