UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006

Commission File Number 001-08106

MASTEC, INC.

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, FL		33134
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (305) 599-1800

     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 x     No o

     Indicate by check mark whether the registrant is a large accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

o Large accelerated filer          x Accelerated filer          o Non-accelerated filer

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No x

     As of November 7, 2006, MasTec, Inc. had 65,115,149 shares of common stock, $0.10 par value, outstanding.

 

 

MASTEC, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2006

TABLE OF CONTENTS

Part I.		Financial Information
Item 1.		Financial Statements
		Condensed Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, 2006 and 2005			3
		Condensed Consolidated Balance Sheets as of September 30, 2006 (Unaudited) and December 31, 2005			4
		Condensed Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005			5
		Notes to Condensed Unaudited Consolidated Financial Statements			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			36
Item 4.		Controls and Procedures			36
Part II.		Other Information
Item 1.		Legal Proceedings			37
Item 1A.		Risk Factors			38
Item 5.		Other Information			39
Item 6.		Exhibits			40
Signatures					41
EX-10.53 Loan and Security Agreement
EX-10.54 Asset Purchase Agreement
EX-31.1 Section 302 CEO Certification
EX-32.1 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification

Part I. Financial Information

Item 1. Financial Statements

MASTEC, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenue		$	253,870			$	220,969			$	704,722			$	624,604
Costs of revenue, excluding depreciation			214,743				183,873				604,824				543,385
Depreciation			3,711				3,932				10,771				12,645
General and administrative expenses, including non-cash stock compensation expense of $2,169 and $5,392, respectively, in 2006 and $195 and $409, respectively, in 2005			21,157				17,001				55,124				45,876
Interest expense, net of interest income			2,155				4,804				7,988				14,346
Other income (expense), net			3,130				(32	)			5,096				3,113
Income from continuing operations before minority interest			15,234				11,327				31,111				11,465
Minority interest			(986	)			(573	)			(1,180	)			(995	)
Income from continuing operations			14,248				10,754				29,931				10,470
Loss from discontinued operations			(21,870	)			(3,005	)			(65,434	)			(13,619	)
Net income (loss)		$	(7,622	)		$	7,749			$	(35,503	)		$	(3,149	)
Basic net income (loss) per share:
Continuing operations		$	0.22			$	0.22			$	0.48			$	0.21
Discontinued operations			(0.34	)			(0.06	)			(1.04	)			(0.27	)
Total basic net income (loss) per share		$	(0.12	)		$	0.16			$	(0.56	)		$	(0.06	)
Basic weighted average common shares outstanding			65,024				49,039				63,022				48,876
Diluted net income (loss) per share:
Continuing operations		$	0.22			$	0.22			$	0.46			$	0.21
Discontinued operations			(0.33	)			(0.06	)			(1.01	)			(0.27	)
Total diluted net income (loss) per share		$	(0.11	)		$	0.16			$	(0.55	)		$	(0.06	)
Diluted weighted average common shares outstanding			66,243				50,033				64,578				49,674

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

MASTEC, INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

		September 30,				December 31,
		2006				2005
		(Unaudited)				(Audited)
Assets
Current assets:
Cash and cash equivalents		$	69,962			$	2,024
Accounts receivable, unbilled revenue and retainage, net			176,742				171,832
Inventories			28,712				17,832
Income tax refund receivable			257				1,489
Prepaid expenses and other current assets			45,538				42,442
Current assets held for sale			36,605				69,688
Total current assets			357,816				305,307
Property and equipment, net			60,567				48,027
Goodwill			150,702				127,143
Deferred taxes, net			42,386				51,468
Other assets			53,560				46,070
Long-term assets held for sale			—				6,149
Total assets		$	665,031			$	584,164
Liabilities and Shareholders’ Equity
Current liabilities:
Current maturities of debt		$	1,579			$	4,266
Accounts payable and accrued expenses			107,227				90,324
Other current liabilities			47,506				45,549
Current liabilities related to assets held for sale			26,826				30,099
Total current liabilities			183,138				170,238
Other liabilities			36,781				37,359
Long-term debt			127,439				196,104
Long-term liabilities related to assets held for sale			669				860
Total liabilities			348,027				404,561
Commitments and contingencies
Shareholders’ 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 — 100,000,000; issued and outstanding shares — 65,072,573 and 49,222,013 shares in 2006 and 2005, respectively			6,507				4,922
Capital surplus			527,397				356,131
Accumulated deficit			(217,403	)			(181,900	)
Accumulated other comprehensive income			503				450
Total shareholders’ equity			317,004				179,603
Total liabilities and shareholders’ equity		$	665,031			$	584,164

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

MASTEC, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		For the Nine Months Ended
		September 30,
		2006				2005
Cash flows from operating activities:
Net loss		$	(35,503	)		$	(3,149	)
Adjustments to reconcile loss to net cash provided by (used in) operating activities:
Depreciation and amortization			11,463				14,088
Impairment of assets			34,516				—
Non-cash stock and restricted stock compensation expense			5,649				409
(Gain) on sale of fixed assets			(1,422	)			(2,805	)
Write down of fixed assets			144				675
Provision for doubtful accounts			7,267				3,759
Provision for inventory obsolescence			302				881
Income from equity investment			(3,581	)			(649	)
Accrued losses on construction projects			5,566				2,176
Minority interest			1,180				995
Changes in assets and liabilities, net of assets acquired:
Accounts receivable, unbilled revenue and retainage, net			(11,787	)			(31,068	)
Inventories			3,262				(1,373	)
Income tax refund receivable			1,159				1,469
Other assets, current and non-current portion			7,435				(14,909	)
Accounts payable and accrued expenses			4,925				12,458
Other liabilities, current and non-current portion			(6,486	)			285
Net cash provided by (used in) operating activities			24,089				(16,758	)
Cash flows (used in) investing activities:
Cash paid for acquisitions			(19,356	)			—
Capital expenditures			(16,188	)			(5,102	)
Payments received from sub-leases			333				570
Investments in unconsolidated companies			(3,755	)			(3,423	)
Investments in life insurance policies			(1,043	)			—
Net proceeds from sale of assets			3,121				5,853
Net cash (used in) investing activities			(36,888	)			(2,102	)
Cash flows provided by financing activities:
Proceeds from issuance of common stock, net			156,465				—
Payments of other borrowings, net			(4,017	)			80
Payments of capital lease obligations			(563	)			(273	)
Payments of senior subordinated notes			(75,000	)			—
Proceeds from issuance of common stock pursuant to stock option exercises			3,921				2,490
Payments of financing costs			(116	)			—
Net cash provided by financing activities			80,690				2,297
Net increase (decrease) in cash and cash equivalents			67,891				(16,563	)
Net effect of currency translation on cash			47				(91	)
Cash and cash equivalents — beginning of period			2,024				19,548
Cash and cash equivalents — end of period		$	69,962			$	2,894
Cash paid during the period for:
Interest		$	13,873			$	16,711
Income taxes		$	217			$	298
Supplemental disclosure of non-cash information:
Equipment acquired under capital lease		$	7,665			$	—
Auction receivable		$	570			$	352
Investment in unconsolidated companies payable in October		$	925			$	925
Accruals for inventory at quarter-end		$	13,364			$	7,556

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

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

Note 1 — Nature of the Business

     MasTec, Inc. (collectively, with its subsidiaries, “MasTec” or the “Company”) is a leading specialty contractor operating mainly throughout the United States and Canada across a range of industries. The Company’s core activities are the building, installation, maintenance and upgrade of communications and utility infrastructure. The Company’s primary customers are in the following industries: communications (including satellite television and cable television), utilities and government. The Company provides similar infrastructure services across the industries it serves. Customers rely on MasTec to build and maintain infrastructure and networks that are critical to their delivery of voice, video and data communications, electricity and transportation systems. MasTec is organized as a Florida corporation and its fiscal year ends December 31. MasTec or its predecessors have been in business for over 70 years.

Note 2 — Basis for Presentation

     The accompanying condensed unaudited consolidated financial statements for MasTec have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all information and notes required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2005. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. The results of operations for the periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. For the Company, key estimates include the recognition of revenue for costs and estimated earnings in excess of billings, allowance for doubtful accounts, accrued self-insured claims, the fair value of goodwill and intangible assets, asset lives used in computing depreciation and amortization, including amortization of intangibles, and accounting for income taxes, contingencies and litigation. While the Company believes that such estimates are fair when considered in conjunction with the consolidated financial position and results of operations taken as a whole, actual results could differ from those estimates and such differences may be material to the financial statements.

Note 3 — Significant Accounting Policies

(a) Principles of Consolidation

     The accompanying financial statements include MasTec, Inc. and its subsidiaries. The Company consolidates GlobeTec Construction, LLC as it has a 51% ownership interest in this entity. Other parties’ interests in this entity are reported as a minority interest in the condensed unaudited consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

(b) Statements of Cash Flows

     The Company revised the presentation of its cash flow statement and elected not to disclose cash flows from discontinued operations separately for all periods presented. Accordingly, the prior period has been revised to conform with the current year presentation.

(c) Comprehensive Income (Loss)

     Comprehensive income (loss) is a measure of net income (loss) and all other changes in equity that result from transactions other than with shareholders. Comprehensive income (loss) consists of net loss and foreign currency translation adjustments.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     Comprehensive income (loss) consisted of the following (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Net income (loss)		$	(7,622	)		$	7,749			$	(35,503	)		$	(3,149	)
Foreign currency translation gain (loss)			(5	)			(48	)			53				(89	)
Comprehensive income (loss)		$	(7,627	)		$	7,701			$	(35,450	)		$	(3,238	)

(d) Revenue Recognition

     Revenue and related costs for master and other service agreements billed on a time and materials basis are recognized as the services are rendered. There are also some service agreements that are billed on a fixed fee basis. Under the Company’s fixed fee master service and similar type service agreements, the Company furnishes various specified units of service for a separate fixed price per unit of service. The Company recognizes revenue as the related unit of service is performed. For service agreements on a fixed fee basis, profitability will be reduced if the actual costs to complete each unit exceed original estimates. The Company also immediately recognizes the full amount of any estimated loss on these fixed fee projects if estimated costs to complete the remaining units exceed the revenue to be received from such units.

     The Company recognizes revenue on unit based installation and construction projects using the units-of-delivery method. The Company’s unit based contracts relate primarily to contracts that require the installation or construction of specified units within an infrastructure system. Under the units-of-delivery method, revenue is recognized at the contractually agreed price per unit as the units are completed and delivered. Profitability will be reduced if the actual costs to complete each unit exceed original estimates. The Company is also required to immediately recognize the full amount of any estimated loss on these projects if estimated costs to complete the remaining units for the project exceed the revenue to be earned on such units. For certain customers with unit based installation and construction projects, the Company recognizes revenue after the service is performed and work orders are approved to ensure that collectibility is probable from these customers. Revenue from completed work orders not collected in accordance with the payment terms established with these customers is not recognized until collection is assured.

     The Company’s non-unit based, fixed price installation and construction contracts relate primarily to contracts that require the construction and installation of an entire infrastructure system. The Company recognizes revenue and related costs as work progresses on non-unit based, fixed price contracts using the percentage-of-completion method, which relies on contract revenue and estimates of total expected costs. The Company estimates total project costs and profit to be earned on each long-term, fixed-price contract prior to commencement of work on the contract. The Company follows this method since reasonably dependable estimates of the revenue and costs applicable to various stages of a contract can be made. Under the percentage-of-completion method, the Company records revenue and recognizes profit or loss as work on the contract progresses. The cumulative amount of revenue recorded on a contract at a specified point in time is that percentage of total estimated revenue that incurred costs to date bear to estimated total contract costs. If, as work progresses, the actual contract costs exceed estimates, the profit recognized on revenue from that contract decreases. The Company recognizes the full amount of any estimated loss on a contract at the time the estimates indicate such a loss.

(e) Basic and Diluted Net Income (Loss) Per Share

     The computation of basic net income (loss) per share is based on the weighted average number of common shares outstanding during the period. The computation of diluted net income (loss) per common share is based on the weighted average of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options and unvested restricted stock (“common stock equivalents”). For the three months and nine months ended September 30, 2006, diluted net income (loss) per common share includes the effect of common stock equivalents in the amount of 1,218,516 shares and 1,594,520 shares, respectively. For the three and nine months ended September 30, 2005, diluted net income (loss) per common share includes the effect of 994,000 shares and 797,000 shares, respectively, of common stock equivalents.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

(f) Valuation of Long-Lived Assets

     The Company reviews long-lived assets, consisting primarily of property and equipment and intangible assets with finite lives, for impairment in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). In analyzing potential impairment, the Company used projections of future discounted cash flows from the assets. These projections are based on its view of growth rates for the related business, anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. The Company believes that its estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. In addition, in connection with the Company’s agreement to sell substantially all of its state Department of Transportation projects and assets, it evaluated long-lived assets for these operations under SFAS No. 144 based on projections of future discounted cash flows from these assets in 2006 and the contractual selling price and expected closing costs for the assets held for sale. As a result of this process, the Company determined that an impairment charge was necessary. See Note 8.

(g) Valuation of Goodwill and Intangible Assets

     Goodwill acquired in a purchase business combination and determined to have an infinite useful life is not amortized, but instead tested for impairment at least annually. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), the Company conducts, on at least an annual basis, a review of its reporting entities to determine whether the carrying values of goodwill exceed the fair market value using a discounted cash flow methodology for each entity. Should this be the case, the value of its goodwill may be impaired and written down.

     The Company could record impairment losses if, in the future, profitability and cash flows of the reporting entities decline to the point where the carrying value of those units exceed their market value.

     During the nine months ended September 30, 2006, the Company recorded $23.6 million of goodwill in connection with the DSSI acquisition as described in Note 5.

(h) Accrued Insurance

     The Company maintains insurance policies subject to per claim deductibles of $2 million for its workers’ compensation policy, $2 million for its general liability policy and $3 million for its automobile liability policy. The Company has excess umbrella coverage for losses in excess of the primary coverages of up to $100 million per claim and in the aggregate. The Company also maintains an insurance policy with respect to employee group health claims subject to per claim deductibles of $300,000. The Company actuarially determines any liabilities for unpaid claims and associated expenses, including incurred but not reported losses and reflects those liabilities in the condensed unaudited consolidated balance sheet as other current and non-current liabilities. The determination of such claims and expenses and the appropriateness of the related liability is reviewed and updated quarterly. During the nine months ended September 30, 2006, the Company changed the discount factor used in estimating actuarial insurance reserves for its workers compensation, general and automobile liability policies from 3.5% to 4.5% as of March 31, 2006, and from 4.5% to 5.2% as of June 30, 2006 to better reflect current market conditions and to use a discount factor that is more in line with the market interest rate the Company receives on its investments. The change in discount rate resulted in a decrease of insurance reserves of $2.3 million as of September 30, 2006.

     The Company is periodically required to post letters of credit and provide cash collateral to its insurance carriers and surety companies. As of September 30, 2006 and December 31, 2005, total outstanding letters of credit amounted to $65.3 million and $57.6 million, respectively, of which $48.2 million and $41.8 million were outstanding to support our casualty and medical insurance requirements at September 30, 2006 and December 31, 2005, respectively. Cash collateral posted amounted to $24.8 million at September 30, 2006 and December 31, 2005. Cash collateral is included in other assets. The 2006 increase in the letters of credit is related to additional collateral provided to the insurance carrier for the 2006 plan year in the amount of $7.7 million, in comparison to the $18 million of cash collateral provided to the Company’s insurance carrier for the 2005 plan year.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

(i) Stock Based Compensation

     In the first quarter of 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). This Statement requires companies to expense the estimated fair value of stock options and similar equity instruments issued to employees over the vesting period in their statement of operations. SFAS 123R eliminates the alternative to use the intrinsic method of accounting provided for in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), which generally resulted in no compensation expense recorded in the financial statements related to the grant of stock options to employees if certain conditions were met.

     The Company adopted SFAS 123R using the modified prospective method effective January 1, 2006, which requires the Company to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, amounts for periods prior to January 1, 2006 presented herein have not been restated to reflect the adoption of SFAS 123R. The pro forma effect of the 2005 prior period is as follows and has been disclosed to be consistent with prior accounting rules (in thousands, except per share data):

		For the Three				For the Nine Months
		Months Ended				Ended September 30,
		September 30, 2005				2005
Net income (loss), as reported		$	7,749			$	(3,149	)
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards			(1,987	)			(4,181	)
Pro forma net income (loss)		$	5,762			$	(7,330	)
Basic net income (loss):
As reported		$	0.16			$	(0.06	)
Pro forma		$	0.12			$	(0.15	)
Diluted net income (loss):
As reported		$	0.15			$	(0.06	)
Pro forma		$	0.12			$	(0.15	)

     The fair value concepts were not changed significantly in SFAS 123R, however, in adopting SFAS 123R, companies must choose among alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, the Company will continue using the Black-Scholes valuation model and has elected to use the ratable method to amortize compensation expense over the vesting period of the grant.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     The fair value of each option granted was estimated using the following assumptions:

		For the Three Months Ended				For the Nine Months Ended
		September 30,				September 30,
		2006		2005		2006		2005
Expected life — employees		4.26 - 7.00 years		4.17 - 6.17 years		4.26 - 7.00 years		4.17 - 6.17 years
Expected life — executives		5.74 - 9.74 years		5.38 - 7.41 years		5.74 - 9.74 years		5.38 - 7.41 years
Volatility percentage		40% - 65%		60% - 65%		40% - 65%		60% - 65%
Interest rate		4.58% - 4.62%		4.53% - 4.57%		4.58% - 4.85%		4.54% - 4.60%
Dividends		None		None		None		None
Forfeiture rate		7.27%		6.97%		7.21%		6.97%

     Total non-cash stock compensation expense for the three months ended September 30, 2006 related to unvested stock options amounted to approximately $1,765,000, which is included in general and administrative expenses in the condensed unaudited consolidated statements of operations. During the three months ended September 30, 2006 and 2005, the Company granted 265,000 options and 485,000 options, respectively, to employees and executives to purchase shares of the Company’s common stock at their fair value on the date of grant. The options granted during the three months ended September 30, 2006 and 2005 had a weighted average exercise price of $12.25 per share and $9.92 per share, respectively. The weighted average fair value of options granted during the period was $8.03 per share and $6.38 per share, respectively.

     Total non-cash stock compensation expense for the nine months ended September 30, 2006 related to unvested stock options amounted to approximately $4,680,000, of which $241,900 is included in loss from discontinued operations and $4,438,000 is included in general and administrative expenses in the condensed unaudited consolidated statements of operations. Included in the expense is approximately $396,900 of compensation expense related to accelerations of stock options that occurred in the nine months ended September 30, 2006. Accelerations were a result of certain benefits given to employees who ceased employment during the nine month period. During the nine months ended September 30, 2006 and 2005, the Company granted 1,064,500 options and 742,500 options, respectively, to employees and executives to purchase shares of the Company’s common stock at their fair value on the date of grant. The options granted during the nine months ended September 30, 2006 and 2005 had a weighted average exercise price of $13.50 per share and $9.43 per share, respectively. The weighted average fair value of options granted during the nine months ended September 30, 2006 and 2005 was $8.47 per share and $6.06 per share, respectively.

     The Company also grants restricted stock, which is valued based on the market price of the common stock on the date of grant. Compensation expense arising from restricted stock grants is recognized using the straight-line method over the vesting period. Unearned compensation for restricted stock is a reduction of shareholders’ equity in the condensed unaudited consolidated balance sheets. Through September 30, 2006, the Company has issued 254,518 shares of restricted stock valued at approximately $2,543,000 which is being expensed over various vesting periods (12 months to 3 years). Total unearned compensation related to restricted stock grants as of September 30, 2006 is approximately $1,099,800. Restricted stock expense for the three months ended September 30, 2006 and 2005 is approximately $403,200 and $200,700, respectively, and is included in general and administrative expenses in the condensed unaudited statements of operations. Restricted stock expense for the nine months ended September 30, 2006 and 2005 is approximately $954,400 and $342,900, respectively, and is included in general and administrative expenses in the condensed unaudited consolidated statements of operations.

(j) Reclassifications

     Certain reclassifications were made to the prior period financial statements in order to conform to the current period presentation. In addition, as discussed in Note 8, the Company in 2005 announced its intention to sell substantially all of its state Department of Transportation related projects and assets. Accordingly, the net loss for these projects and assets for the three and nine months ended September 30, 2005 have been reclassified from the prior period presentation as a loss from discontinued operations in the Company’s condensed unaudited consolidated statements of operations.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

(k) Equity investments

     The Company has one investment which is accounted for by the equity method as the Company owns 49% of the entity and has the ability to exercise significant influence over the operational policies of the limited liability company. The Company’s share of its earnings or losses in this investment is included as other income, net in the condensed unaudited consolidated statements of operations. As of September 30, 2006, the Company’s investment exceeded the net equity of such investment and accordingly the excess is considered to be equity goodwill. The Company periodically evaluates the equity goodwill for impairment under Accounting Principle Board No. 18, “The Equity Method of Accounting for Investments in Common Stock”, as amended. See Note 11.

(l) Fair value of financial instruments

     The Company estimates the fair market value of financial instruments through the use of public market prices, quotes from financial institutions and other available information. Judgment is required in interpreting data to develop estimates of market value and, accordingly, amounts are not necessarily indicative of the amounts that we could realize in a current market exchange. Short-term financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, equaled their carrying values. At September 30, 2006 and December 31, 2005, the fair value of the Company’s outstanding senior subordinated notes was $121.0 million and $195.0 million, respectively, based on quoted market values. The Company uses letters of credit to back certain insurance policies. The letters of credit reflect fair value as a condition of their underlying purpose and are subject to fees under the credit agreement.

Note 4 — Sale of the Company’s Common Stock

     On January 24, 2006, the Company completed a public offering of 14,375,000 shares of common stock at $11.50 per share. The net proceeds from the sale were $156.5 million after deducting underwriting discounts and offering expenses. The Company used $18.5 million of the net proceeds for the cash portion of the purchase price for the DSSI acquisition, as described in Note 5. On March 2, 2006, the Company used $75.5 million of the net proceeds to redeem a portion of its 7.75% senior subordinated notes due February 2008 plus interest (see Note 7). The Company expects to use the remaining net proceeds for working capital, other possible acquisitions of assets and businesses, fund organic growth and other general corporate purposes.

Note 5 — Acquisition of Digital Satellite Services, Inc.

     Effective January 31, 2006, the Company acquired substantially all of the assets and assumed certain operating liabilities and contracts of Digital Satellite Services, Inc., which it refers to as the DSSI acquisition. The purchase price was composed of $18.5 million in cash, $6.9 million of MasTec common stock (637,214 shares based on the closing price of the Company’s common stock of $11.77 per share on January 27, 2006 discounted by 8.75% due to the shares being restricted for 120 days), $856,000 of transaction costs and an earn-out based on future performance. Pursuant to the terms of the purchase agreement, the Company registered the resale of the MasTec common stock on April 28, 2006.

     DSSI, which had revenues exceeding $50 million for the year ended December 31, 2005 (unaudited), was involved in the installation of residential and commercial satellite and security services in several markets including Atlanta, Georgia, the Greenville-Spartanburg area of South Carolina and Asheville, North Carolina, and portions of Tennessee, Kentucky and Virginia. These markets are contiguous to areas in which the Company is active with similar installation services. Following the DSSI acquisition, the Company provides installation services from the mid-Atlantic states to South Florida.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     The purchase price allocation for the DSSI acquisition is based on fair-value of each of the following components on January 31, 2006 (unaudited) (in thousands):

Net assets		$	2,026
Non-compete agreements			658
Goodwill			23,559
Purchase price		$	26,243

     The non-compete agreements are with an executive and with the shareholders of DSSI and will be amortized over a five and a seven year period, respectively.

     DSSI’s results of operations prior to the date of acquisition are not significant to the Company’s results of operations or financial condition and accordingly, no pro forma information is disclosed.

Note 6 — Other Assets and Liabilities

     Prepaid expenses and other current assets as of September 30, 2006 and December 31, 2005 consist of the following (in thousands):

		September 30,				December 31,
		2006				2005
Deferred tax assets		$	14,150			$	5,308
Notes receivable			1,926				2,231
Non-trade receivables			16,283				21,452
Other investments			5,133				4,815
Prepaid expenses and deposits			6,120				6,563
Other			1,926				2,073
Total prepaid expenses and other current assets		$	45,538			$	42,442

     Other non-current assets consist of the following as of September 30, 2006 and December 31, 2005 (in thousands):

		September 30,				December 31,
		2006				2005
Investment in real estate		$	1,683			$	1,683
Equity investment			12,604				5,268
Long-term portion of deferred financing costs, net			2,807				4,124
Cash surrender value of insurance policies			7,412				6,369
Non-compete agreements, net			1,361				900
Insurance escrow			24,840				24,792
Other			2,853				2,934
Total other assets		$	53,560			$	46,070

     Other current and non-current liabilities consist of the following as of September 30, 2006 and December 31, 2005 (in thousands):

		September 30,				December 31,
		2006				2005
Current liabilities:
Accrued compensation		$	14,522			$	11,084
Accrued insurance			17,164				17,144
Billings in excess of costs			4,327				2,505
Accrued professional fees			3,987				3,484
Accrued interest			1,563				6,329
Accrued losses on contracts			215				509
Accrued payments related to equity investment			925				925
Other			4,803				3,569
Total other current liabilities		$	47,506			$	45,549

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

		September 30,				December 31,
		2006				2005
Non-current liabilities:
Accrued insurance		$	34,070			$	34,926
Minority interest			2,642				1,837
Other			69				596
Total other liabilities		$	36,781			$	37,359

Note 7 — Debt

     Debt is comprised of the following at September 30, 2006 and December 31, 2005 (in thousands):

		September 30,				December 31,
		2006				2005
Revolving credit facility at LIBOR plus 1.25% as of September 30, 2006 and 2.25% as of December 31, 2005 (5.37% as of September 30, 2006 and 5.25% as of December 31, 2005) or, at the Company’s option, the bank’s prime rate as of September 30, 2006 and the bank’s prime rate plus 0.75% as of December 31, 2005 (9.00% as of September 30, 2006 and 8.00% as of December 31, 2005)		$	—			$	4,154
7.75% senior subordinated notes due February 2008			120,963				195,943
Capital lease obligations			7,391				—
Notes payable for equipment, at interest rates from 7.5% to 8.5% due in installments through the year 2008			664				273
Total debt			129,018				200,370
Less current maturities			(1,579	)			(4,266	)
Long-term debt		$	127,439			$	196,104

Revolving Credit Facility

     The Company has a secured revolving credit facility for its operations which was amended and restated on May 10, 2005 increasing the maximum amount of availability from $125 million to $150 million, subject to reserves of $5.0 million, and other adjustments and restrictions (the “Credit Facility”). The Credit Facility expires on May 10, 2010. The deferred financing costs related to the Credit Facility are included in prepaid expenses and other current assets and other assets in the condensed unaudited consolidated balance sheets.

     Based on the Company’s improved financial position, on May 8, 2006, the Company amended its Credit Facility (the “2006 Amendment”) to reduce the interest rate margins charged on borrowings and letters of credit. The 2006 Amendment also increases the maximum permitted purchase price for an acquisition, increases permitted receivable concentration of certain customers, increases the permitted capital expenditures and debt baskets, and reduces the required minimum fixed charge coverage ratio if net availability falls below $20.0 million.

     The amount that the Company can borrow at any given time is based upon a formula that takes into account, among other things, eligible billed and unbilled accounts receivable and equipment which can result in borrowing availability of less than the full amount of the Credit Facility. As of September 30, 2006 and December 31, 2005, net availability under the Credit Facility totaled $41.8 million and $55.4 million, respectively, net of outstanding standby letters of credit aggregating $65.3 million and $57.6 million as of such dates, respectively. At September 30, 2006, $48.2 million of the outstanding letters of credit were issued to support the Company’s casualty and medical insurance requirements. These letters of credit mature at various dates and most have automatic renewal provisions subject to prior notice of cancellation. The Credit Facility is collateralized by a first priority security interest in substantially all of the Company’s assets and a pledge of the stock of certain of its operating subsidiaries. All wholly-owned subsidiaries collateralize the Credit Facility. At September 30, 2006 and December 31, 2005, the Company had outstanding cash draws under the Credit Facility of $0 and $4.2 million, respectively. Interest under the Credit Facility accrues at rates based, at the Company’s option, on the agent bank’s base rate plus a margin of between 0.0% and 0.75% or the LIBOR rate (as defined in the Credit Facility) plus a margin of between 1.25% and 2.25%, depending on certain financial thresholds. The Credit Facility includes an unused facility fee of 0.375%, which may be adjusted to as low as 0.250%.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     If the net availability under the Credit Facility is under $20.0 million at any given day, the Company is required to be in compliance with a minimum fixed charge coverage ratio, which, as part of the 2006 Amendment, was reduced to 1.1 to 1.0 measured on a monthly basis. Certain events are triggered if the Company is not in compliance with this ratio. The fixed charge coverage ratio is generally defined to mean the ratio of the Company’s net income before interest expense, income tax expense, depreciation expense, and amortization expense minus net capital expenditures and cash taxes paid to the sum of all interest expense plus current maturities of debt for the period. The financial covenant was not applicable as of September 30, 2006 because the net availability under the Credit Facility was $41.8 million as of September 30, 2006 and net availability did not reduce below $20.0 million at any given day during the period.

     Based upon the 2006 Amendment and the Company’s current availability, liquidity and projections for 2006, the Company believes it will be in compliance with the Credit Facility’s terms and conditions and the minimum availability requirements for the remainder of 2006. The Company is dependent upon borrowings and letters of credit under this Credit Facility to fund operations. Should the Company be unable to comply with the terms and conditions of the Credit Facility, it would be required to obtain modifications to the Credit Facility or another source of financing to continue to operate. The Company may not be able to achieve its 2006 projections and this may adversely affect its ability to remain in compliance with the Credit Facility’s minimum net availability requirements and minimum fixed charge ratio in the future. The Company’s variable rate Credit Facility exposes it to interest rate risk. However, the Company had no cash borrowings outstanding under the Credit Facility at September 30, 2006.

Senior Subordinated Notes

     As of September 30, 2006, the Company had outstanding $121.0 million in principal amount of its 7.75% senior subordinated notes due in February 2008. Interest is due semi-annually. The notes are redeemable, at the Company’s option at 100% of the principal amount plus accrued but unpaid interest. On March 2, 2006, the Company redeemed $75.0 million of the senior subordinated notes and paid approximately $0.5 million in accrued interest. The notes also contain default (including cross-default) provisions and covenants restricting many of the same transactions restricted under the Credit Facility.

Capital Lease Obligations

     During 2006, the Company entered into several agreements which provided financing for various machinery and equipment totaling $7.7 million. These capital leases are non-cash transactions and, accordingly, have been excluded form the condensed unaudited consolidated statements of cash flows. These leases range between 60 and 84 months and have effective interest rates ranging from 6.03% to 7.65%. In accordance with Statement of Financial Accounting Standard No. 13, “Accounting for Leases” (“SFAS 13”), as amended, these leases were capitalized. SFAS 13 requires the capitalization of leases meeting certain criteria, with the related asset being recorded in property and equipment and an offsetting amount recorded as a liability. As of September 30, 2006, the Company had $7.4 million in total indebtedness relating to the capital leases entered into during 2006, of which $6.1 million was considered long-term.

     The Company had no holdings of derivative financial or commodity instruments at September 30, 2006.

Note 8 — Discontinued Operations

     In March 2004, the Company ceased performing contractual services for customers in Brazil, abandoned all assets of its Brazil subsidiary and made a determination to exit the Brazil market. The abandoned Brazil subsidiary has been classified as a discontinued operation. In November 2005, the subsidiary applied for relief and was adjudicated bankrupt by a Brazilian bankruptcy court. The subsidiary is currently being liquidated under court supervision. For the three months ended September 30, 2006 and 2005, the expenses incurred by the Brazilian subsidiary were principally related to legal fees incurred in connection with the bankruptcy proceedings. For the three months ended September 30, 2006 and 2005, the net loss from the Brazilian operations was $33,000 and $0, respectively. For the nine months ended September 30, 2006 and 2005, the net loss from these operations was $115,000 and $0, respectively.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     The following table summarizes the assets and liabilities for the Brazil operations as of September 30, 2006 and December 31, 2005 (in thousands):

		September 30,				December 31,
		2006				2005
Current assets		$	290			$	290
Non-current assets			—				—
Current liabilities			19,570				19,455
Non-current liabilities			2,170				2,170
Accumulated foreign currency translation			(21,030	)			(21,335	)

     During the fourth quarter of 2004, the Company ceased performing new services in the network services operations and sold these operations in 2005. On May 24, 2005, the Company sold certain of its network services operations assets to a third party for $208,501 consisting of $100,000 in cash and a promissory note in the principal amount of $108,501 due in May 2006. The promissory note is included in other current assets in the accompanying condensed unaudited consolidated balance sheet. These operations have been classified as a discontinued operation in all periods presented. The net income (loss) for the network services operations was $14,000 and ($100,000) for the three months and nine months ended September 30, 2006, respectively. The net loss for the network services operations was $0.1 million and $1.6 million for the three months and nine months ended September 30, 2005, respectively.

     The following table summarizes the assets and liabilities of the network services operations as of September 30, 2006 and December 31, 2005 (in thousands):

		September 30,				December 31,
		2006				2005
Current assets		$	210			$	883
Non current assets			34				34
Current liabilities			414				816
Non current liabilities			—				—
Shareholder’s (deficit) equity			(170	)			101

     The following table summarizes the results of operations of network services (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenue		$	11			$	92			$	113			$	3,869
Cost of revenue			(11	)			(82	)			(113	)			(3,859	)
Operating and other expenses.			14				(155	)			(100	)			(1,601	)
Income (loss) from operations before benefit for income taxes		$	14			$	(145	)		$	(100	)		$	(1,591	)
Benefit for income taxes			—				—				—				—
Net income (loss)		$	14			$	(145	)		$	(100	)		$	(1,591	)

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     On December 31, 2005, the executive committee of the Company’s board of directors voted to sell substantially all of its state Department of Transportation related projects and assets. The projects and assets that are for sale have been accounted for as discontinued operations for all periods presented, including reclassification of the results of operations from these projects to discontinued operations for the three months and nine months ended September 30, 2005. A quarterly review of the carrying value of the underlying net assets related to the state Department of Transportation projects and assets was conducted in connection with the decision to sell these projects and assets. Following the second quarter of 2006 results and cash flow projections for these projects and related assets, management determined there were sufficient indicators of impairment to the underlying net assets of the state Department of Transportation related projects and assets. As a result, a non-cash impairment charge of $20.8 million was recorded for the estimated sales price and disposition of the state Department of Transportation related projects and assets. In estimating this charge, management assumed a six month projected cash flow and an estimated selling price using a weighted probability cash flow approach based on management’s estimates. In addition, as discussed in Note 14, on November 9, 2006, the Company entered into an agreement to sell the state Department of Transportation related projects and net assets. We have agreed to keep certain liabilities related to the state Department of Transportation related projects. As a result of this agreement, a non-cash impairment charge was recorded during the quarter ended September 30, 2006 of approximately $13.7 million, calculated using the contractual sales price for these assets and management’s estimates of closing costs. Pursuant to the purchase agreement, the purchase price is subject to adjustments based on the value of the net assets sold as of the closing date. In addition, the purchase agreement is subject to a financing contingency and customary closing conditions. Accordingly, these estimates are subject to change in the future and the Company may incur additional losses in the future. As of September 30, 2006, the carrying value of the subject net assets for sale was approximately $9.1 million after taking into consideration the impairment charges. This amount is comprised of total assets of $36.6 million less total liabilities of $27.5 million. All impairment charges are included in discontinued operations.

     The following table summarizes the assets held for sale and liabilities related to the assets held for sale for the state Department of Transportation operations as of September 30, 2006 and December 31, 2005 (in thousands):

		September 30,				December 31,
		2006				2005
Accounts receivable, net		$	26,458			$	44,906
Inventory			10,147				23,724
Other current assets			—				1,058
Current assets held for sale		$	36,605			$	69,688
Property and equipment, net		$	—			$	3,822
Long-term assets			—				2,327
Long-term assets held for sale		$	—			$	6,149
Current liabilities related to assets held for sale		$	26,826			$	30,099
Long-term liabilities related to assets held for sale		$	669			$	860

     The following table summarizes the results of operations for the state Department of Transportation related projects and assets that are considered to be discontinued (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenue		$	19,673			$	22,579			$	66,739			$	72,822
Cost of revenue			(24,449	)			(23,500	)			(87,264	)			(78,176	)
Operating and other expenses			(17,075	)			(1,939	)			(44,694	)			(6,673	)
Loss from operations before benefit for income taxes		$	(21,851	)		$	(2,860	)		$	(65,219	)		$	(12,027	)
Benefit for income taxes			—				—				—				—
Net loss		$	(21,851	)		$	(2,860	)		$	(65,219	)		$	(12,027	)

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

Note 9 — Commitments and Contingencies

     In April 2006, the Company settled, without payment to the plaintiffs by the Company, several complaints for purported securities class actions that were filed against the Company and certain officers in the second quarter of 2004. While the Company believes it would have ultimately been successful in defense of these actions, given the amount of the settlement, the inherent risk of uncertainty of the legal proceedings, and the substantial time and expense of defending these proceedings, the Company concluded that entering into the settlement was the appropriate course of action. On September 30, 2006, the parties executed a Stipulation of Settlement and filed a Joint Motion for Preliminary Approval of the settlement of the federal securities class action. The settlement is contingent upon final approval by the Court at a final fairness hearing at which the Court will determine whether the settlement is fair, reasonable and adequate. As part of the settlement, the Company’s excess insurance carrier has retained its rights to seek reimbursement of up to $2.0 million from the Company based on its claim that notice was not properly given under the policy. The Company believes these claims are without merit and plans to continue vigorously defending this action. The Company also believes that it has claims against the insurance broker for any losses arising from the notice.

     The parties in two shareholder derivative actions, which are based on the same circumstances as the purported federal securities class action and related SEC formal investigation, have executed stipulations of settlement. We are waiting final approval of the settlements from the court.

     The Company continues to cooperate with the SEC in the previously disclosed formal investigation related to the restatement of the Company’s financial statements in 2001 through 2003.

     In October 2005, eleven former employees filed a Fair Labor Standards Act (“FLSA”) collective action against MasTec in the Federal District Court in Tampa, Florida, alleging failure to pay overtime wages as required under the FLSA. The matter is currently stayed. The Company does not believe it is liable under the FLSA as alleged in the complaint. The Company and the plaintiffs are currently negotiating a settlement but the potential loss associated with such settlement, if one occurs, cannot presently be determined.

     During construction of a natural gas pipeline project in Oregon in 2003, the Company and its customer, Coos County, Oregon, were cited for violations of the Clean Water Act by the U.S. Army Corps of Engineers (“Corps of Engineers”). Despite protracted negotiations, the parties were unable to settle these complaints. On March 30, 2006, the Corps of Engineers filed suit against the Company and Coos County in Federal District Court in Oregon. The Company is defending this action vigorously, but may be unable to do so without incurring significant expenses. At this stage of the proceeding, potential loss, if any, cannot be determined.

     In connection with the same project, a complaint alleging failure to comply with prevailing wage requirements was filed against us by the Oregon Bureau of Labor and Industry. This matter was filed with the state court in Coos County. The Company is defending this action vigorously, but may be unable to do so without incurring significant expenses. The potential loss, if any, cannot presently be determined.

     The Company has accrued $125,000 for all unresolved Coos County matters and unpaid settlements as of September 30, 2006.

     In June 2005, the Company posted a $2.3 million bond in order to pursue the appeal of a $1.7 million final judgment entered September 30, 2005 against the Company for damages plus attorney’s fees resulting from a break in a Citgo pipeline. The Company seeks a new trial and reduction in the damages award. The Company will continue to contest this matter in the appellate court, and on subsequent retrial. The amount of the loss, if any, relating to this matter not covered by insurance is estimated to be $100,000 to $2.4 million, of which $100,000 is recorded in the unaudited condensed consolidated balance sheet as of September 30, 2006, as accrued expenses.

     In October 2003, a MasTec subsidiary filed a lawsuit in a New York state court against Inepar Industria e Construcoes (“Inepar”), its Brazilian joint venture partner. MasTec sued Inepar for breach of contract arising out of Inepar’s failure to indemnify MasTec for claims resulting from numerous misrepresentations made by Inepar. Inepar subsequently failed to answer MasTec’s complaint and MasTec sought a default judgment. In September 2006, the state court entered a judgment in favor of MasTec and against Inepar in the amount of $58.4 million. MasTec has commenced the collection process in the United States and has commenced the lengthy process in Brazil to execute on the judgment. Due to the uncertainty of the ongoing collection process, MasTec has accounted for the receipt of any amounts related to this judgment in our favor as a gain contingency and has not reflected these amounts in our financial statements.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     In December, 2004, the Company brought an action against NextiraOne Federal in the Federal Court in Eastern District of Virginia, to recover payment for services rendered in connection with a federal Department of Defense project on a network wiring contract. The Company’s network services are now a discontinued operation. NextiraOne counterclaimed for offsets and remediation. On May 5, 2006, the court ruled that the Company failed to establish an entitlement to recover damages for contract work done, and that NextiraOne Federal failed to establish an entitlement to recover costs of alleged offsets and costs of remediation. Neither party obtained the relief sought. The Company believes the ruling is an error, and has sought remedy on appeal. The Company may be unable to obtain relief without additional expenses.

     The Company is also a party to other pending legal proceedings arising in the normal course of business. While complete assurance cannot be given as to the outcome of any legal claims, management believes that any financial impact would not be material to its results of operations, financial position or cash flows.

     The Company is required to provide payment and performance bonds for some of its contractual commitments related to projects in process. At September 30, 2006, the cost to complete projects for which the $297.2 million in performance and payment bonds are outstanding was $44.8 million.

     On January 3, 2005, MasTec entered into an employment agreement with Gregory S. Floerke relating to his employment as Chief Operations Officer. He was solely focused and responsible for managing intelligent traffic services related projects for MasTec. The agreement was to expire on January 2, 2007 unless earlier terminated, and provided that Mr. Floerke would be paid an annual salary of $300,000 during the first year of employment and $350,000 during the second year of employment. The agreement also provided for the grant to Mr. Floerke of stock options pursuant to MasTec’s stock option plans and contained confidentiality, non-competition and non-solicitation provisions. Mr. Floerke resigned effective March 30, 2006. In connection therewith, the Company entered into a separation agreement with Mr. Floerke in which the Company paid him $95,000. This separation agreement terminated the employment agreement with Mr. Floerke. The Company also recorded approximately $242,000 in stock compensation for the first quarter of 2006 related to the extension of the exercise period on Mr. Floerke’s stock options and the acceleration of the vesting of his unvested options. This amount is included in non-cash stock compensation expense as discussed in Note 3(i) and is included in loss from discontinued operations.

Note 10 — Concentrations of Risk

     The Company provides services to its customers in the following industries: communications, utilities and government.

     Revenue for customers in these industries is as follows (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Communications		$	189,311			$	161,079			$	515,984			$	458,230
Utilities			48,541				46,806				146,443				128,707
Government			16,018				13,084				42,295				37,667
		$	253,870			$	220,969			$	704,722			$	624,604

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     During 2006, the Company reviewed its categorization of customers during previous periods. As a result of such review, certain reclassifications have been made to previously disclosed revenue by industries. Revenue for customers by industry is as follows (in thousands):

		2005 Quarter Ended																2006 Quarter Ended
		March 31				June 30				September 30				December 31				March 31				June 30
Communications		$	143,843			$	153,309			$	161,079			$	162,467			$	156,821			$	169,852
Utilities			38,556				43,345				46,806				46,991				53,744				44,158
Government			11,577				13,006				13,084				13,984				8,187				18,090
		$	193,976			$	209,660			$	220,969			$	223,442			$	218,752			$	232,100

     The Company grants credit, generally without collateral, to its customers. Consequently, the Company is subject to potential credit risk related to changes in business and economic factors. However, the Company generally has certain lien rights on that work and concentrations of credit risk are limited due to the diversity of the customer base. The Company believes its billing and collection policies are adequate to minimize potential credit risk. During the three months ended September 30, 2006, 45.0% of the Company’s total revenue was attributed to two customers. Revenue from these two customers accounted for 36.4% and 8.6%, respectively, of total revenue for the three months ended September 30, 2006. During the three months ended September 30, 2005, two customers accounted for 40.4% of the Company’s total revenue after adjustment for discontinued operations (see Note 8). Revenue from these two customers accounted for 31.3% and 9.1%, respectively, of the total revenue for the three months ended September 30, 2005. During the nine months ended September 30, 2006, 46.5% of the Company’s total revenue was attributed to two customers. Revenue from these two customers accounted for 36.1% and 10.4%, respectively, of the total revenue for the nine months ended September 30, 2006. During the nine months ended September 30, 2005, 42.4% of the Company’s total revenue was attributed to two customers. Revenue from these two customers accounted for 30.7% and 11.7%, respectively, of the total revenue for the nine months ended September 30, 2005.

     The Company maintains allowances for doubtful accounts for estimated losses resulting from the unwillingness or inability of customers to make required payments. Management analyzes historical bad debt experience, customer concentrations, customer credit-worthiness, the availability of mechanics and other liens, the existence of payment bonds and other sources of payment, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. If judgments regarding the collectibility of accounts receivables were incorrect, adjustments to the allowance may be required, which would reduce profitability. In addition, the Company’s reserve mainly covers the accounts receivable related to the unprecedented number of customers that filed for bankruptcy protection during the year 2001 and general economic climate of 2002. As of September 30, 2006, the Company had remaining receivables from customers undergoing bankruptcy reorganization totaling $13.6 million net of $7.2 million in specific reserves. As of December 31, 2005, the Company had remaining receivables from customers undergoing bankruptcy reorganization totaling $14.5 million net of $8.0 million in specific reserves. Based on the analytical process described above, management believes that the Company will recover the net amounts recorded. The Company maintains an allowance for doubtful accounts of $13.5 million and $15.9 million as of September 30, 2006 and December 31, 2005, respectively, for both specific customers and as a reserve against other past due balances. The decrease in reserves is due to certain specific reserves being written off against the receivable in the nine months ended September 30, 2006. Should additional customers file for bankruptcy or experience difficulties, or should anticipated recoveries in existing bankruptcies and other workout situations fail to materialize, the Company could experience reduced cash flows and losses in excess of the current allowance.

Note 11 — Equity Investment

     The Company has a 49% interest in a limited liability company that it purchased from a third party. The purchase price for this investment was an initial amount of $3.7 million which was paid in four quarterly installments of $925,000 through December 31, 2005. Beginning in the first quarter of 2006, eight additional contingent quarterly payments are expected to be made to the third party from which the interest was purchased. The contingent payments will be up to a maximum of $1.3 million per quarter based on the level of unit sales and profitability of the limited liability company in specified preceding quarters. The first four quarterly payments, each of $925,000, were made on January 10, 2006, April 10, 2006, July 11, 2006 and October 10, 2006. The October amount is included in accrued expenses and other assets at September 30, 2006. In addition, the purchase price for this investment requires an additional payment contingent on future results of the limited liability company. The Company also may be required under the agreement to make capital contributions from time to time equal to 49% of the additional capital required by the venture. In March 2006, the venture requested a total capital contribution in the amount of $2.0 million of which $980,000, or 49%, was paid by MasTec. Accordingly, this amount increased the investment balance which is included in other assets at September 30, 2006.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     As of September 30, 2006, the Company’s investment exceeded the net equity of such investment and accordingly the excess is considered to be equity goodwill.

     The Company has accounted for this investment using the equity method as the Company has the ability to exercise significant influence over the financial and operational policies of this limited liability company. The Company recognized $2.0 million and $0.1 million in investment income during the three months ended September 30, 2006 and 2005, respectively. The Company recognized $3.6 million and $0.6 million in investment income during the nine months ended September 30, 2006 and 2005, respectively. As of September 30, 2006, the Company had an investment balance of approximately $12.6 million in relation to this investment included in other assets in the condensed unaudited consolidated financial statements.

Note 12 — Related Party Transactions

     MasTec purchases, rents and leases equipment used in its business from a number of different vendors, on a non-exclusive basis, including Neff Corp., in which Jorge Mas, the Company’s Chairman and Jose Mas, the Company’s Vice-Chairman and Executive Vice President, were directors and owners of a controlling interest through June 4, 2005. Juan Carlos Mas, the brother of Jorge and Jose Mas, is Chairman, Chief Executive Officer, a director and a shareholder of Neff Corp. During the period from April 1, 2005 through June 4, 2005, the Company paid Neff $155,395. During the period from January 1, 2005 through June 4, 2005, the Company paid Neff $328,013. MasTec believes the amount paid to Neff was equivalent to the payments that would have been made between unrelated parties for similar transactions acting at arm’s length.

     MasTec has entered into split dollar agreements with key executives and the Chairman of the Board. During the three months ended September 30, 2006 and 2005, MasTec paid $433,800 and $410,000, respectively, in premiums in connection with these split dollar agreements. During the nine months ended September 30, 2006 and 2005, MasTec paid $1,043,500 and $410,000, respectively, in premiums in connection with these split dollar agreements.

Note 13 — New Accounting Pronouncements

     In September 2006, the Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No. 108 (“SAB 108”), “Considering the effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” Traditionally, there have been two widely-recognized methods for quantifying the effects of financial statement misstatements: the “roll-over” method and the “iron curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement, including the reversing effect of prior year misstatements. The iron-curtain method focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. In SAB 108, the SEC staff established an approach that is commonly referred to as a “dual approach” because it now requires quantification of errors under both the iron curtain and the roll-over methods. For the Company, SAB 108 is effective for the fiscal year ending December 31, 2006. The adoption of SAB 108 is not expected to have any effect on MasTec’s financial position, net earnings or prior year financial statements.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”), “Fair Value Measurements”. This statement establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. SFAS 157 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. For the Company, SFAS 157 is effective for the fiscal year beginning January 1, 2008. Management is currently evaluating this standard to determine its impact, if any, on the Company.

     In July 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 48 (“FIN No. 48”), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.” This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is evaluating the effect this Interpretation will have on its consolidated financial statements.

MasTec, Inc.
Notes to Condensed Unaudited Consolidated Financial Statements

     In February 2006, the FASB issued Statement of Financial Accounting Standard No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.” In March 2006, the FASB issued Statement of Financial Accounting Standard No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140.” These Statements are not expected to have a material effect on the Company’s consolidated financial statements.

Note 14 — Subsequent Events

     On November 9, 2006, the Company entered into an asset purchase agreement with a third party to sell substantially all its state Department of Transportation projects and underlying net assets. We have agreed to keep certain liabilities related to the state Department of Transportation related projects. The selling price specified in the purchase agreement is $6 million payable in cash upon closing and a $5 million note due five years from the date the acquisition is consummated. In addition, the buyer is required to pay the Company an earn out contingent on the future operations of the projects sold to the third party. As a result of the contractual selling price and an estimate of closing costs, the Company recognized a $13.7 million non-cash impairment charge in the three months ended September 30, 2006. The purchase agreement is subject to a financing contingency and customary closing conditions. Pursuant to the purchase agreement, the purchase price is subject to adjustments based on the value of the net assets sold as of the closing date. Accordingly, these estimates are subject to change in the future and the Company may incur additional losses in the future.

     On November 7, 2006, the Company amended its Credit Facility and provided its insurer with an $18 million letter of credit under the facility simultaneously with the insurer returning cash collateral of $18 million plus all accrued interest to the Company. As collateral for this letter of credit, the Company pledged $18 million to its lenders under the Credit Facility. This increase in the outstanding balance of letters of credit will not result in a reduction to our net availability under the Credit Facility as long as sufficient cash or other collateral is granted to our lenders.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts but are the intent, belief, or current expectations, of our business and industry, and the assumptions upon which these statements are based. Words such as “anticipates”, “expects”, “intends”, “will”, “could”, “would”, “should”, “may”, “plans”, “believes”, “seeks”, “estimates” and variations of these words and the negatives thereof and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, including those described under “Risk Factors” in the Form 10-K as updated by Item 1A “Risk factors” in this report. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. Readers are cautioned to not place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this report. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

Overview

     We are a leading specialty contractor operating mainly throughout the United States and Canada and across a range of industries. Our core activities are the building, installation, maintenance and upgrade of communications and utility infrastructure. Our primary customers are in the following industries: communications (including satellite television and cable television), utilities and governments. We provide similar infrastructure services across the industries we serve. Our customers rely on us to build and maintain infrastructure and networks that are critical to their delivery of voice, video and data communications, electricity and transportation systems.

     Effective January 31, 2006, we acquired substantially all of the assets and assumed certain operating liabilities and contracts of Digital Satellite Services, Inc., which we refer to as the DSSI acquisition. The purchase price was composed of $18.5 million in cash, $6.9 million of MasTec common stock (637,214 shares based on the closing price of $11.77 per share on January 27, 2006 discounted due to shares being restricted for up to 120 days), $856,000 of transaction costs and an earn-out based on future performance. Pursuant to the terms of the purchase agreement, we registered the resale of the MasTec common stock on April 28, 2006.

     DSSI, which had revenues exceeding $50 million during the year ended December 31, 2005 (unaudited), was involved in the installation of residential and commercial satellite and security services in several markets including Atlanta, Georgia, the Greenville-Spartanburg area of South Carolina and Asheville, North Carolina, and portions of Tennessee, Kentucky and Virginia. These markets are contiguous to areas in which we are active with similar installation services. Following the DSSI acquisition, we provide installation services from the mid-Atlantic states to South Florida.

     The purchase price allocation for the DSSI acquisition is based on fair-value of each of the following components as of January 31, 2006 (in thousands):

Net assets		$	2,026
Non-compete agreements			658
Goodwill			23,559
Purchase price		$	26,243

Revenue

     We provide services to our customers which are companies in the communications, as well as utilities and government industries.

     Revenue for customers in these industries is as follows (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Communications		$	189,311			$	161,079			$	515,984			$	458,230
Utilities			48,541				46,806				146,443				128,707
Government			16,018				13,084				42,295				37,667
		$	253,870			$	220,969			$	704,722			$	624,604

     During 2006, the Company reviewed its categorization of customers during previous periods. As a result of such review, certain reclassifications have been made to previously disclosed revenue by industries. Revenue for customers by industry is as follows (in thousands):

		2005 Quarter Ended																2006 Quarter Ended
		March 31				June 30				September 30				December 31				March 31				June 30
Communications		$	143,843			$	153,309			$	161,079			$	162,467			$	156,821			$	169,852
Utilities			38,556				43,345				46,806				46,991				53,744				44,158
Government			11,577				13,006				13,084				13,984				8,187				18,090
		$	193,976			$	209,660			$	220,969			$	223,442			$	218,752			$	232,100

     A majority of our revenue is derived from projects performed under service agreements. Some of these agreements are billed on a time and materials basis and revenue is recognized as the services are rendered. We also provide services under master service agreements which are generally multi-year agreements. Certain of our master service agreements are exclusive up to a specified dollar amount per work order for each defined geographic area. Work performed under master service and other agreements is typically generated by work orders, each of which is performed for a fixed fee. The majority of these services typically are of a maintenance nature and to a lesser extent upgrade services. These master service agreements and other service agreements are frequently awarded on a competitive bid basis, although customers are sometimes willing to negotiate contract extensions beyond their original terms without re-bidding. Our master service agreements and other service agreements have various terms, depending upon the nature of the services provided and are typically subject to termination on short notice. Under our master service and similar type service agreements, we furnish various specified units of service each for a separate fixed price per unit of service. We recognize revenue as the related unit of service is performed. For service agreements on a fixed fee basis, profitability will be reduced if the actual costs to complete each unit exceed original estimates. We also immediately recognize the full amount of any estimated loss on these fixed fee projects if estimated costs to complete the remaining units for the project exceed the revenue to be received from such units.

     The remainder of our work is generated pursuant to contracts for specific installation and construction projects or jobs. For installation/construction projects, we recognize revenue on the units-of-delivery or percentage-of-completion methods. Revenue on unit based projects is recognized using the units-of-delivery method. Under the units-of-delivery method, revenue is recognized as the units are completed at the contractually agreed price per unit. For certain customers with unit based installation and construction projects, we recognize revenue after the service is performed and the work orders are approved to ensure that collectibility is probable from these customers. Revenue from completed work orders not collected in accordance with the payment terms established with these customers is not recognized until collection is assured. Revenue on non-unit based contracts is recognized using the percentage-of-completion method. Under the percentage-of-completion method, we record revenue as work on the contract progresses. The cumulative amount of revenue recorded on a contract at a specified point in time is that percentage of total estimated revenue that incurred costs to date bear to estimated total contract costs. Customers are billed with varying frequency: weekly, monthly or upon attaining specific milestones. Such contracts generally include retainage provisions under which 2% to 15% of the contract price is withheld from us until the work has been completed and accepted by the customer. If, as work progresses, the actual projects costs exceed estimates, the profit recognized on revenue from that project decreases. We recognize the full amount of any estimated loss on a contract at the time the estimates indicate such a loss.

     Revenue by type of contract is as follows (in thousands):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Master service and other service agreements		$	174,878			$	144,414			$	504,169			$	435,348
Installation/construction projects agreements			78,992				76,555				200,553				189,256
		$	253,870			$	220,969			$	704,722			$	624,604

Costs of Revenue

     Our costs of revenue include the costs of providing services or completing the projects under our contracts including operations payroll and benefits, fuel, subcontractor costs, equipment rental, materials not provided by our customers, and insurance. Profitability will be reduced if the actual costs to complete each unit exceed original estimates on fixed price service agreements. We also immediately recognize the full amount of any estimated loss on fixed fee projects if estimated costs to complete the remaining units for the project exceed the revenue to be received from such units.

     Our customers generally supply materials such as cable, conduit and telephone equipment. Customer furnished materials are not included in revenue and cost of sales due to all materials being purchased by the customer. The customer determines the specifications of the materials that are to be utilized to perform installation/construction services. We are only responsible for the performance of the installation/construction services and not the materials for any contract that includes customer furnished materials nor do we not have any risk associated with customer furnished materials. Our customers retain the financial and performance risk of all customer furnished materials.

General and Administrative Expenses

     General and administrative expenses include all costs of our management and administrative personnel, provisions for bad debts, rent, utilities, travel, business development efforts and back office administration such as financial services, insurance, administration, professional costs and clerical and administrative overhead.

Discontinued Operations

     In 2004, we declared our Brazil subsidiary and network services operations as discontinued operations. In December 2005, we declared substantially all of our state Department of Transportation related projects and assets a discontinued operation due to our intention to sell these projects and assets. Accordingly, results of operations for the three months and nine months ended September 30, 2005 of substantially all of our state Department of Transportation related projects and assets have been reclassified to discontinued operations and all financial information for all periods presented reflects these operations as discontinued operations.

     On November 9, 2006, we entered into an agreement to sell our State Department of Transportation related projects and net assets. See Note 14 in Part 1. Item 1. Financial Statements.

Critical Accounting Policies and Estimates

     Our 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 accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, intangible assets, reserves and accruals, impairment of assets, income taxes, insurance reserves and litigation and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities, that are not readily apparent from other sources. Actual results may differ from these estimates if conditions change or if certain key assumptions used in making these estimates ultimately prove to be materially incorrect.

     We believe the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

     Revenue and related costs for master and other service agreements billed on a time and materials basis are recognized as the services are rendered. There are also some master service agreements that are billed on a fixed fee basis. Under our fixed fee master service and similar type service agreements, we furnish various specified units of service for a separate fixed price per unit of service. We recognize revenue as the related unit of service is performed. For service agreements on a fixed fee basis, profitability will be reduced if the actual costs to complete each unit exceed original estimates. We also immediately recognize the full amount of any estimated loss on these fixed fee projects if estimated costs to complete the remaining units exceed the revenue to be received from such units.

     We recognize revenue on unit based installation/construction projects using the units-of-delivery method. Our unit based contracts relate primarily to contracts that require the installation or construction of specified units within an infrastructure system. Under the units-of-delivery method, revenue is recognized at the contractually agreed upon price as the units are completed and delivered. Our profitability will be reduced if the actual costs to complete each unit exceed our original estimates. We are also required to immediately recognize the full amount of any estimated loss on these projects if estimated costs to complete the remaining units for the project exceed the revenue to be earned on such units. For certain customers with unit based installation/construction projects, we recognize revenue after service has been performed and work orders are approved to ensure that collectibility is probable from these customers. Revenue from completed work orders not collected in accordance with the payment terms established with these customers is not recognized until collection is assured.

     Our non-unit based, fixed price installation/construction contracts relate primarily to contracts that require the construction and installation of an entire infrastructure system. We recognize revenue and related costs as work progresses on non-unit based, fixed price contracts using the percentage-of-completion method, which relies on contract revenue and estimates of total expected costs. We estimate total project costs and profit to be earned on each long-term, fixed-price contract prior to commencement of work on the contract. We follow this method since reasonably dependable estimates of the revenue and costs applicable to various stages of a contract can be made. Under the percentage-of-completion method, we record revenue and recognize profit or loss as work on the contract progresses. The cumulative amount of revenue recorded on a contract at a specified point in time is that percentage of total estimated revenue that incurred costs to date bear to estimated total contract costs. If, as work progresses, the actual contract costs exceed our estimates, the profit we recognize from that contract decreases. We recognize the full amount of any estimated loss on a contract at the time our estimates indicate such a loss.

Allowance for Doubtful Accounts

     We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our clients to make required payments. Management analyzes past due balances based on invoice date, historical bad debt experience, customer concentrations, customer credit-worthiness, customer financial condition and credit reports, the availability of mechanics’ and other liens, the existence of payment bonds and other sources of payment, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. We review the adequacy of reserves for doubtful accounts on a quarterly basis. If our estimates of the collectibility of accounts receivable are incorrect, adjustments to the allowance for doubtful accounts may be required, which could reduce our profitability.

     Our estimates for our allowance for doubtful accounts are subject to significant change during times of economic weakness or uncertainty in either the overall U.S. economy or the industries we serve, and our loss experience has increased during such times.

     We recorded provisions against the results of operations for doubtful accounts of $3.8 million and $1.9 million for the three months ended September 30, 2006 and 2005, respectively. We recorded provisions against the results of operations for doubtful accounts of $7.3 million and $3.8 million for the nine months ended September 30, 2006 and 2005, respectively. All provisions against the results of operations for doubtful accounts are included in part in general and administrative expenses and in part in loss from discontinued operations in our condensed unaudited consolidated financial statements. These provisions are based on the results of management’s quarterly reviews and analyses of our write-off history.

Inventories

     Inventories consist of materials and supplies for construction projects, and are typically purchased on a project-by-project basis. Inventories are valued at the lower of cost (using the specific identification method) or market. Construction projects are completed pursuant to customer specifications. The loss of the customer or the cancellation of the project could result in an impairment of the value of materials purchased for that customer or project. Technological or market changes can also render certain materials obsolete. Reserves for inventory obsolescence are determined based upon the specific facts and circumstances for each project and market conditions. The reserves were mainly due to inventories that were purchased for specific jobs no longer in process.

Valuation of Long-Lived Assets

     We review long-lived assets, consisting primarily of property and equipment and intangible assets with finite lives, for impairment in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). In analyzing potential impairment, we use projections of future undiscounted cash flows from the assets. These projections are based on our views of growth rates for the related business, anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. In addition, in connection with our agreement to sell substantially all of our state Department of Transportation projects and assets, we evaluated long-lived assets for these operations under SFAS No. 144 based on projections of future discounted cash flows from these assets in 2006 and the contractual selling price and an estimate of closing costs for the assets held for sale.

     During the second quarter of 2006, we determined that sufficient indicators of impairment existed in connection with the state Department of Transportation projects and assets. As a result, $20.8 million non-cash impairment charge was recorded for the estimated sales price and disposition of the state Department of Transportation projects and assets. In addition, on November 9, 2006, we entered into an agreement to sell the state Department of Transportation related projects and net assets. As a result, a non-cash impairment charge was recorded during the quarter ended September 30, 2006 of approximately $13.7 million calculated using the contractual sales price for these assets and management’s estimates of transaction costs. These impairment charges are included in discontinued operations.

Valuation of Goodwill and Intangible Assets

     Goodwill acquired in a purchase business combination and determined to have an infinite useful life is not amortized, but instead tested for impairment at least annually. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, we conduct, on at least an annual basis, a review of our reporting entities to determine whether the carrying values of goodwill exceed the fair market value using a discounted cash flow methodology for each entity. Should this be the case, the value of our goodwill may be impaired and written down.

     We could record additional impairment losses if, in the future, profitability and cash flows of our reporting units decline to the point where the carrying value of those units exceed their market value.

     In the nine months ended September 30, 2006, we recorded $23.6 million of goodwill in connection with the DSSI acquisition.

Insurance Reserves

     We presently maintain insurance policies subject to per claim deductibles of $2 million for our workers’ compensation policy, $2 million for our general liability policy and $3 million for our automobile liability policy. We have excess umbrella coverages of up to $100 million per claim and in the aggregate. We also maintain an insurance policy with respect to employee group health claims subject to per claim deductibles of $300,000. We actuarially determine any liabilities for unpaid claims and associated expenses, including incurred but not reported losses, and reflect those liabilities in our balance sheet as other current and non-current liabilities. The determination of such claims and expenses and the appropriateness of the related liability is reviewed and updated quarterly. During the nine months ended September 30, 2006, we changed the discount factor used in estimating our actuarial insurance reserves for the workers compensation, general and automobile liability policies from 3.5% to 4.5% as of March 31, 2006, and from 4.5% to 5.2% as of June 30, 2006 to better reflect current market conditions and to use a discount factor more in line with the market rate we are receiving on our investments. The changes in discount factor resulted in a decrease in insurance reserves of $2.3 million as of September 30, 2006.

     We are required to periodically post letters of credit and provide cash collateral to our insurance carriers and surety companies. Total outstanding letters of credit amounted to $65.3 million at September 30, 2006 and $57.6 million as of December 31, 2005, of which $48.2 million and $41.8 million were outstanding to support our casualty and medical insurance requirements at September 30, 2006 and December 31, 2005, respectively. Cash collateral posted amounted to $24.8 million at September 30, 2006 and $24.8 million as of December 31, 2005. The 2006 increase in collateral for our insurance programs is related to additional collateral provided to the insurance carrier for the 2006 plan year in the amount of $7.7 million of letters of credit. We may be required to post additional collateral in the future which may reduce our liquidity, or pay increased insurance premiums, which could decrease our profitability.

Stock Compensation

     In the first quarter of 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). This Statement requires companies to expense the estimated fair value of stock options and similar equity instruments issued to employees over the vesting period in their statement of operations. SFAS 123R eliminates the alternative to use the intrinsic method of accounting provided for in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), which generally resulted in no compensation expense recorded in the financial statements related to the grant of stock options to employees if certain conditions were met.

     We adopted SFAS 123R using the modified prospective method effective January 1, 2006, which requires us to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, amounts presented for periods prior to January 1, 2006 have not been restated to reflect the adoption of SFAS 123R. However, the pro forma effect for the three months and nine months ended September 30, 2005 is disclosed in Note 3(i) in Part 1. Item 1 Financial Statements, consistent with prior accounting rules.

     The fair value concepts were not changed significantly in SFAS 123R, however, in adopting this Standard, companies must choose among alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, we will continue using the Black-Scholes valuation model and have elected to use the ratable method to amortize compensation expense over the vesting period of the grant.

     Total non-cash stock compensation expense related to unvested stock options for the three months ended September 30, 2006 amounted to $1.8 million which is included in general and administrative expenses. Total non-cash stock compensation expense related to unvested stock options for the nine months ended September 30, 2006 amounted to $4.7 million, of which $0.2 million was included in loss from discontinued operations and $4.4 million is included in general and administrative expenses.

Valuation of Equity Investments

     We have one investment which we account for by the equity method because we own 49% of the entity and we have the ability to exercise significant influence over the operational policies of the entity. Our share of the earnings or losses in this investment is included in other income, net, in the condensed unaudited consolidated statements of operations. As of September 30, 2006, our investment exceeded the net equity of such investment and accordingly the excess is considered to be equity goodwill. We periodically evaluate the equity goodwill for impairment under Accounting Principles Board No. 18, “The Equity Method of Accounting for Investments in Common Stock”, as amended. We recognized approximately $2.0 million and $0.1 million of investment income in the three months ended September 30, 2006 and 2005, respectively, and $3.6 million and $0.6 million of investment income in the nine months ended September 30, 2006 and 2005, respectively.

Income Taxes

     We record income taxes using the liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequence of temporary differences between the financial statement and income tax bases of our assets and liabilities. We estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. The recording of a net deferred tax asset assumes the realization of such asset in the future. Otherwise a valuation allowance must be recorded to reduce this asset to its net realizable value. We consider future pretax income and ongoing prudent and feasible tax planning strategies in assessing the need for such a valuation allowance. In the event that we determine that we may not be able to realize all or part of the net deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged against income in the period such determination is made.

     As a result of our operating losses, we have recorded valuation allowances aggregating $48.1 million and $33.9 million as of September 30, 2006 and December 31, 2005, respectively, to reduce certain of our net deferred Federal, foreign and state tax assets to their estimated net realizable value. We anticipate that we will generate sufficient pretax income in the future to realize our deferred tax assets. In the event that our future pretax operating income is insufficient for us to use our deferred tax assets, we have based our determination that the deferred tax assets are still realizable based on feasible tax planning strategies that are available to us involving the sale of one or more of our operations.

Litigation and Contingencies

     Litigation and contingencies are reflected in our condensed unaudited consolidated financial statements based on our assessments, with legal counsel, of the expected outcome of such litigation or expected resolution of such contingency. If the final outcome of such litigation and contingencies differs significantly from our current expectations, such outcome could result in a charge to earnings. See Note 9 to our condensed unaudited consolidated financial statements in Part I. Item 1. and Part II. Item 1. to this Form 10-Q for description of legal proceedings and commitments and contingencies.

Results of Operations

Comparison of Quarterly Results

     The following table reflects our consolidated results of operations in dollar and percentage of revenue terms for the periods indicated. This table includes the reclassification for the three and nine months ended September 30, 2005 of the net loss for the state Department of Transportation related projects and assets to discontinued operations from the prior period presentation (in thousands).

		For the Three Months Ended September 30,																For the Nine Months Ended September 30,
		2006								2005								2006								2005
Revenue		$	253,870				100.0	%		$	220,969				100.0	%		$	704,722				100.0	%		$	624,604				100.0	%
Costs of revenue, excluding depreciation			214,743				84.6	%			183,873				83.2	%			604,824				85.8	%			543,385				87.0	%
Depreciation			3,711				1.5	%			3,932				1.8	%			10,771				1.5	%			12,645				2.0	%
General and administrative expenses			21,157				8.3	%			17,001				7.7	%			55,124				7.8	%			45,876				7.3	%
Interest expense, net of interest income			2,155				0.8	%			4,804				2.2	%			7,988				1.1	%			14,346				2.3	%
Other income (expense), net			3,130				1.2	%			(32	)			(0.0	)%			5,096				0.7	%			3,113				0.5	%
Income (loss) from continuing operations before minority interest			15,234				6.0	%			11,327				5.1	%			31,111				4.4	%			11,465				1.9	%
Minority interest			(986	)			(0.4	)%			(573	)			(0.2	)%			(1,180	)			(0.2	)%			(995	)			(0.2	)%
Income (loss) from continuing operations			14,248				5.6	%			10,754				4.9	%			29,931				4.2	%			10,470				1.7	%
Loss from discontinued operations			(21,870	)			(8.6	)%			(3,005	)			(1.4	)%			(65,434	)			(9.3	)%			(13,619	)			(2.2	)%
Net income (loss)		$	(7,622	)			(3.0	)%		$	7,749				3.5	%		$	(35,503	)			(5.0	)%		$	(3,149	)			(0.5	)%

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

     Revenue. Our revenue was $253.9 million for the three months ended September 30, 2006, compared to $221.0 million for the same period in 2005, representing an increase of $32.9 million or 14.9%. This increase was due primarily to increased revenue of approximately $23.3 million from DIRECTV due to a greater number of installations and larger market share from the DSSI acquisition, higher revenue of $1.6 million from BellSouth mostly for work we were awarded for central office installations, increased revenue from Verizon of $1.8 million due to additional work orders and a general increase in business activity from other customers in the third quarter of 2006 compared to the same period of 2005. These increases in revenue were partially offset by a decrease in revenue of $2.5 million from Florida Power and Light, which was mostly attributable to certain storm-related work performed during the three months ended September 30, 2005, while there was no storm-related revenue during the comparable period of 2006.

     Costs of Revenue. Our costs of revenue were $214.7 million or 84.6% of revenue for the three months ended September 30, 2006, compared to $183.9 million or 83.2% of revenue for the same period in 2005. The decrease in margins was due primarily to an increase in insurance and fuel expenses as a percentage of revenue. During the three months ended September 30, 2006, we incurred additional insurance expense as a result of higher claims. Fuel costs as a percentage of revenue in the three months ended September 30, 2006 was 3.8% compared to 3.4% in the three months ended September 30, 2005. These increases in fuel costs as a percentage of revenue are a direct result of the rising fuel costs during the period.

     Depreciation. Depreciation was $3.7 million for the three months ended September 30, 2006, compared to $3.9 million for the same period in 2005, representing a decrease of $0.2 million or 5.6%. The decrease in depreciation expense in the three months ended September 30, 2006 was due primarily to our continued reduction in capital expenditures resulting from our entering into operating leases for our fleet requirements. We also continue to dispose of excess equipment.

     General and administrative expenses. General and administrative expenses were $21.2 million or 8.3% of revenue for the three months ended September 30, 2006, compared to $17.0 million or 7.6% of revenue for the same period in 2005, representing an increase of $4.2 million or 24.5%. This increase is mainly attributable to non-cash stock compensation, additional personnel, and legal expenditures. Non-cash stock compensation expense was $2.2 million, or 0.9% of revenue for the three months ended September 30, 2006, compared to $0.2 million for the same period in 2005 representing an increase of $2.0 million. Effective January 1, 2006, we account for our stock-based award plans in accordance with SFAS 123R (revised 2005), “Share Based Payment”, which requires us to expense over the vesting period the fair-value of stock options and other equity-based compensation issued to employees. In accordance with SFAS 123R, we expensed $1.8 million in the three months ended September 30, 2006 related to unvested stock options. In addition, we recorded approximately $0.4 million related to restricted stock awards during the three months ended September 30, 2006. For the three months ended September 30, 2005, we expensed $0.2 million related to restricted stock awards. Had we adopted SFAS 123R in 2005, we would have been required to expense $2.0 million for the three months ended September 30, 2005. See the pro forma compensation expense disclosure in Note 3(i) to our condensed unaudited consolidated financial statements. The increase in general and administrative expenses was also due to hiring additional personnel to address increased business activity and additional legal expenses of approximately $1.6 million during the three months ended September 30, 2006 compared to the same period in 2005.

     Interest expense, net. Interest expense, net of interest income was $2.2 million or 0.8% of revenue for the three months ended September 30, 2006, compared to $4.8 million or 2.2% of revenue for the same period in 2005 representing a decrease of approximately $2.7 million or 55.1%. The decrease was due to lower interest rates charged during the period under our Credit Facility based on our improved operating performance and the amendment to our Credit facility in 2006, as well as a reduction in interest expense due to our redemption of $75.0 million principal of our 7.75% senior subordinated notes on March 2, 2006. In addition, the decrease in interest expense, net was due to the higher interest income we earned during the period as a result of investing the remaining net proceeds from our January 2006 equity offering and higher interest rates earned on our invested funds.

     Other income (expense), net. Other income, net was $3.1 million for the three months ended September 30, 2006, compared to an expense of $32,000 in the three months ended September 30, 2005, representing an increase of $3.2 million. The increase mainly relates to the equity income we recognized on our 49% investment in a limited liability company in addition to gains on sale of fixed assets in the third quarter of 2006 compared to the third quarter of 2005.

     Minority interest. Minority interest for GlobeTec Construction, LLC resulted in a charge of $1.0 million for the three months ended September 30, 2006, compared to a charge of $0.6 million for the same period in 2005 representing an increase in minority interest charge of $0.4 million. The joint venture experienced an increase in business profits in the three months ended September 30, 2006 compared to the same period in 2005. As a result of such increase in profits, the minority interest charge increased during the three months ended September 30, 2006.

     Discontinued operations. The loss on discontinued operations, which includes our Brazilian and network services operations, as well as our operations of the state Department of Transportation related projects and assets, was $21.9 million for the three months ended September 30, 2006 compared to a loss of $3.0 million in the three months ended September 30, 2005. The net loss for our state Department of Transportation related projects and assets amounted to $21.9 million for the three months ended September 30, 2006 compared to a net loss of $2.9 million in the three months ended September 30, 2005. The net loss for Department of Transportation related projects increased primarily due to a non-cash impairment charge of $13.7 million taken in connection with the contractual selling price agreed to in the related asset purchase agreement which we entered into on November 9, 2006, as well as our estimated selling costs for these projects and assets. In addition, we experienced lower revenues, operational costs overruns and inefficiencies on certain existing Department of Transportation projects, as well as increased bad debt expense of approximately $1.5 million in the three months ended September 30, 2006 as compared to the three months ended September 30, 2005. The net loss for our Brazilian operations for the three months ended September 30, 2006 was approximately $33,000 and was attributable to legal fees related to the Brazilian operations bankruptcy proceedings. The net income for our network services operations amounted to $14,000 for the three months ended September 30, 2006 compared to a net loss of $0.1 million in the three months ended September 30, 2005 as a result of the winding down of the network services operations. The net income for network services in the three months ended September 30, 2006 is mostly attributable to certain recoveries.

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

     Revenue. Our revenue was $704.7 million for the nine months ended September 30, 2006, compared to $624.6 million for the same period in 2005, representing an increase of $80.1 million or 12.8%. This increase was due primarily to increased revenue of approximately $62.2 million from DIRECTV due to a greater number of installations and larger market share from the DSSI acquisition, higher revenue of $16.7 million from BellSouth mostly attributed to work we were awarded for central office installations and an increase in general business activity from other customers in the nine month period ended September 30, 2006 compared to the same period of 2005. These increases in revenue were partially offset by a decrease in revenue of $16.2 million from Verizon mostly attributed to the timing of generating work orders. In the nine months ended September 30, 2005, fiber-to-the-home installations for Verizon had just commenced and the volume of work orders were high whereas in the nine months ended September 30, 2006 the installations have normalized.

     Costs of Revenue. Our costs of revenue were $604.8 million or 85.8% of revenue for the nine months ended September 30, 2006, compared to $543.4 million or 87.0% of revenue for the same period in 2005 reflecting an improvement in margins. The improvement in margins was primarily due to a decrease in subcontractor expense as a percentage of revenue with operational payroll only slightly increasing as a percentage of revenue. During the nine months ended September 30, 2006, we continued to reduce the use of subcontractors without hiring a proportional number of additional employees. These decreases were partially offset by increases in fuel costs. Fuel costs as a percentage of revenue in the nine months ended September 30, 2006 was 3.7% compared to 3.0% in the nine months ended September 30, 2005. These increases in fuel costs as a percentage of revenue are a direct result of rising fuel costs during the period.

     Depreciation. Depreciation was $10.8 million for the nine months ended September 30, 2006, compared to $12.6 million for the same period in 2005, representing a decrease of $1.9 million or 14.8%. The decrease in depreciation expense in the nine months ended September 30, 2006 was due primarily to our continued reduction in capital expenditures resulting from our entering into operating leases for fleet requirements. We also continue to dispose of excess equipment in 2006. However, depreciation expense is expected to increase in the future as a result of several capital lease agreements we entered into during the nine month period ended September 30, 2006 to finance various machinery and equipment totaling $7.7 million.

     General and administrative expenses. General and administrative expenses were $55.1 million or 7.8% of revenue for the nine months ended September 30, 2006, compared to $45.9 million or 7.3% of revenue for the same period in 2005, representing an increase of $9.2 million or 20.2%. This increase is attributable to non-cash stock compensation, additional personnel, and legal expenditures. Non-cash stock compensation expense was $5.4 million or 0.8% of revenue for the nine months ended September 30, 2006, compared to $0.4 million for the same period in 2005 representing an increase of $5.0 million. Effective January 1, 2006, we account for our stock-based award plans in accordance with SFAS 123R (revised 2005) “Share Based Payment” which requires us to expense over the vesting period the fair-value of stock options and other equity-based compensation issued to employees. In accordance with SFAS 123R, we expensed $4.4 million in the nine months ended September 30, 2006 related to unvested stock options and restricted stock awards. In addition, we recorded approximately $1.0 million related to restricted stock awards during the nine months ended September 30, 2006. For the nine months ended September 30, 2005, we expensed $0.3 million related to restricted stock awards. Had we adopted SFAS 123R in 2005, we would have been required to expense $4.2 million for the nine months ended September 30, 2005. See the pro forma compensation expense disclosure in Note 3(i) to our condensed unaudited consolidated financial statements. The increase in general and administrative expenses was also due to hiring additional personnel to address increased business activity and additional legal expenses of approximately $3.2 million during the nine months ended September 30, 2006 compared to the same period in 2005. These increases in general and administrative expenses were partially offset by decreases in insurance expense and professional fees. There has been a reduction in insurance expense as a result of improved claims and loss history during 2006, as well as a reduction in our insurance reserve based on a change to the discount factor used for estimating actuarial insurance reserves. The discount factor was changed from 3.5% to 5.2% to reflect current market conditions and to use a discount factor more in line with the market interest rate we receive on our investments.

     Interest expense, net. Interest expense, net of interest income was $8.0 million or 1.1% of revenue for the nine months ended September 30, 2006, compared to $14.3 million or 2.3% of revenue for the same period in 2005 representing a decrease of approximately $6.4 million or 44.3%. The decrease was due to lower interest rates charged during the period under our Credit Facility based on our improved operating performance and the 2006 Amendment, as well as a reduction in interest expense due to our redemption of $75.0 million principal of our 7.75% senior subordinated notes on March 2, 2006. In addition, the decrease in interest expense, net was due to the higher interest income we earned during the period as a result of investing the remaining net proceeds from our January 2006 equity offering and higher interest rates earned on our invested funds.

     Other income (expense), net. Other income, net was $5.1 million for the nine months ended September 30, 2006, compared to $3.1 million in the nine months ended September 30, 2005, representing an increase of $2.0 million or 63.7%. The increase mainly relates to an increase in the equity income we recognize on our 49% investment in a limited liability company, in addition to higher gains on sale of fixed assets during the nine months ended September 30, 2005 compared to the same period of 2006.

     Minority interest. Minority interest for GlobeTec Construction, LLC resulted in a charge of $1.2 million for the nine months ended September 30, 2006, compared to a charge of $1.0 million for the same period in 2005, representing an increase in minority interest charge of $0.2 million. The joint venture experienced an increase in business profits in the nine months ended September 30, 2006 compared to the same period in 2005. As a result on the increased profits, the minority interest charge increased during the nine month ended September 30, 2006.

     Discontinued operations. The loss on discontinued operations, which includes our Brazilian and network services operations, as well as our operations of the state Department of Transportation related projects and assets, was $65.4 million for the nine months ended September 30, 2006 compared to $13.6 million in the nine months ended September 30, 2005. The net loss on our state Department of Transportation related projects and assets amounted to $65.2 million for the nine months ended September 30, 2006 compared to a net loss of $12.0 million in the nine months ended September 30, 2005. The net loss for these Department of Transportation projects increased due to an impairment charge, lower revenue, and operational cost overruns and inefficiencies on certain existing projects. During the second quarter of 2006, we determined there were sufficient indicators of impairment to the carrying value of the underlying net assets of the state Department of Transportation projects and assets. As a result, $20.8 million non-cash impairment charge was recorded in the second quarter of 2006 for the estimated selling price and disposition of the state Department of Transportation projects and assets. All impairment charges are included in discontinued operations. On November 9, 2006, we entered into an agreement to sell the state Department of Transportation related projects and assets to a third party. The contractual selling price is less than we estimated in the impairment charge recorded in the quarter ended June 30, 2006. As a result, a non-cash impairment charge was recorded during the quarter ended September 30, 2006 of approximately $13.7 million based on the contractual selling price agreed to in the related asset purchase agreement which we entered into and our estimated closing costs. In addition to the impairment charge, the loss during the nine months ended September 30, 2006 as compared to the nine months ended September 30, 2005 included increased legal expenses of approximately $2.0 million and bad debt expense of approximately $3.0 million. In addition, we had increased operating expenses related to stock compensation expense of $0.2 related to a terminated executive, duplication of back-office functions in order to ensure an easier transition and moving costs related to the consolidation of office space. The net loss for our Brazilian operations for the nine months ended September 30, 2006 was $115,000 and was attributable to legal fees related to the Brazilian operations bankruptcy proceedings. The net loss for our network services operations decreased to $100,000 for the nine months ended September 30, 2006 from a net loss of $1.6 million in the nine months ended September 30, 2005 as a result of the winding down of the network services operations. The loss for network services operations in the nine months ended September 30, 2006 is mostly attributable to overhead personnel and legal costs in winding down the operations.

Financial Condition, Liquidity and Capital Resources

     On January 24, 2006, we completed a public offering of 14,375,000 shares of our common stock at $11.50 per share. The net proceeds from the sale were approximately $156.5 million after deducting underwriting discounts and offering expenses. We used $18.5 million of the net proceeds for the cash portion of the purchase price for the DSSI acquisition, as described below. On March 2, 2006, we used $75.5 million of the net proceeds of the public offering to redeem a portion of our 7.75% senior subordinated notes due February 2008, including the payment of related interest. We expect to use the remaining net proceeds for working capital, other possible acquisitions of assets and businesses, organic growth and other general corporate purposes.

     In addition to the public offering we completed in the first quarter of 2006, our primary sources of liquidity are cash flows from continuing operations, borrowings under our credit facility, capital leases and proceeds from sales of assets and investments. Our primary liquidity needs are for working capital, capital expenditures, insurance collateral in the form of cash and letters of credit, equity investment obligations and debt service. In January 2006, we issued a $6.5 million letter of credit to our insurance carrier related to our 2006 insurance plans. At the present time, we have no other commitments to issue additional collateral in 2006 related to our insurance policies. Following the March redemption of $75.0 million principal amount of subordinated notes, our semi-annual interest payments on our senior subordinated notes was reduced to approximately $5.4 million. In addition to ordinary course working capital requirements, we estimate spending between $20.0 million and $40.0 million per year on capital expenditures in order to keep our equipment new and in good condition in order for them to operate efficiently. We will, however, because of our improved financial condition, continue to evaluate lease versus buy decisions to meet our equipment needs and based on this evaluation our capital expenditures may increase in 2006 from this estimate. We are also re-negotiating existing leases and will be entering into new leases with more favorable terms. We expect to continue to sell older vehicles and equipment as we upgrade with new equipment and we expect to obtain proceeds from these sales in excess of $1.0 million per quarter depending upon market conditions. From time to time, we engage in a review and analysis of our performance to our key strategic objectives. In connection with this process, we consider activities including the sale or divestitures of portions of our assets, operations, real estate or other properties. Any actions taken may impact our liquidity.

     We have a 49% interest in a limited liability company. The purchase price for this investment was an initial amount of $3.7 million which was paid in four quarterly installments of $925,000. As of September 30, 2006, five additional contingent quarterly payments are expected to be made to the third party from which the interest was purchased in addition to an additional purchase price payment contingent on certain performance. The contingent payments will be up to a maximum of $1.3 million per quarter based on the level of unit sales and profitability of the limited liability company in specified preceding quarters. In addition, a final contingent payment to a maximum of $3.6 million is required based on the profitability of the limited liability company. Four contingent quarterly payments, each of $925,000, were made on January 10, 2006, April 10, 2006, July 11, 2006 and October 10, 2006. In March 2006, we also made an additional capital contribution of $980,000.

     We require working capital to support seasonal variations in our business, primarily due to the impact of weather conditions on external construction and maintenance work, including storm restoration work, and the corresponding spending by our customers on their annual capital expenditure budgets. Our business is typically slower in the first and fourth quarters of each calendar year and stronger in the second and third quarters. We generally experience seasonal working capital needs from approximately April through September to support growth in unbilled revenue and accounts receivable, and to a lesser extent, inventory. Our billing terms are generally net 30 to 60 days, although some contracts allow our customers to retain a portion (from 2% to 15%) of the contract amount until the contract is completed to their satisfaction. We maintain inventory to meet the material requirements of some of our contracts. Some 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 a specified amount.

     Our vendors generally offer us terms ranging from 30 to 90 days. Our agreements with subcontractors usually contain a “pay-when-paid” provision, whereby our payments to subcontractors are made after we are paid by our customers.

     We anticipate that funds generated from continuing operations, the net proceeds from our public offering completed in the first quarter, borrowings under our credit facility, and proceeds from sales of assets and investments will be sufficient to meet our working capital requirements, anticipated capital expenditures, insurance collateral requirements, equity investment obligations, letters of credit and debt service obligations for at least the next twelve months.

     As of September 30, 2006, we had $174.7 million in working capital compared to $135.1 million as of December 31, 2005. Cash and cash equivalents increased from $2.0 million at December 31, 2005 to $70.0 million at September 30, 2006 mainly due to the net proceeds received from the public offering of approximately $156.5 million offset by payments made in connection with the redemption of $75.0 million principal on our senior subordinated notes and $18.5 million cash purchase price paid in connection with the DSSI acquisition.

     Net cash provided by operating activities was $24.1 million for the nine months ended September 30, 2006 compared to a use of $16.8 million for the nine months ended September 30, 2005. The net cash provided by operating activities in the nine months ended September 30, 2006 was primarily related to the timing of cash payments to vendors and sources of cash from other assets and inventory management. Even though the net loss incurred during the nine month period ended September 30, 2006 was higher than the comparable period of 2005, this increase in the net loss was offset by non-cash charges for impairment and stock compensation and therefore improved the net cash provided by operating activities. The net use of cash in operating activities during the nine months ended September 30, 2005 was mainly attributed to the net loss incurred during the period and the increase in accounts receivable, unbilled revenues and retainage, in addition to the cash collateral payments of $13.5 million required by our insurance carrier.

     Net cash used in investing activities was $36.9 million for the nine months ended September 30, 2006 compared to net cash used in investing activities of $2.1 million for the nine months ended September 30, 2005. Net cash used in investing activities during the nine months ended September 30, 2006 primarily related to cash payments made in connection with the DSSI acquisition of $19.4 million, capital expenditures in the amount of $16.2 million and payments related to our equity investment in the amount of $3.8 million offset by $3.1 million in net proceeds from sales of assets. Net cash used in investing activities during the nine months ended September 30, 2005 primarily related to $5.1 million used for capital expenditures and $3.4 million related to our equity investment offset by $5.9 million in net proceeds from the sale of assets.

     Net cash provided by financing activities was $80.7 million for the nine months ended September 30, 2006 compared to $2.3 million for the nine months ended September 30, 2005. Net cash provided by financing activities in the nine months ended September 30, 2006 was primarily related to net proceeds from the issuance of common stock of $156.5 million and proceeds from the issuance of common stock pursuant to stock option exercises in the amount of $3.9 million partially offset by the redemption of $75.0 million principal on our senior subordinated notes and payments for borrowings of $3.8 million. Net cash provided by financing activities in the nine months ended September 30, 2005 was mainly due to proceeds from the issuance of common stock of $2.5 million.

     During the nine month period ended September 30, 2006, we entered into several capital lease arrangements to finance the acquisition of $7.7 million of equipment and machinery.

     Cash used in discontinued operations in the nine months ended September 30, 2006 was $31.1 million. This mainly consisted of $31.3 million in cash used in operating activities, mostly attributed to our net loss from these operations. We expect cash flow from discontinued operations to be positive in the future based on cash flows expected in 2006 and our estimated selling price for our state Department and Transportation projects and assets. However, this expectation may not be realized if we are not able to sell these projects and assets at our estimated selling price or our cash flow changes because of changes in economic conditions.

     We have a secured revolving credit facility for our operations which was amended and restated on May 10, 2005 increasing the maximum amount of availability from $125 million to $150 million subject to reserves of $5.0 million, and other adjustments and restrictions. The costs related to this amendment were $2.6 million which are being amortized over the life of the credit facility. The credit facility expires on May 10, 2010. These deferred financing costs are included in prepaid expenses and other current assets and other assets in our consolidated balance sheet. Based on our improved financial position, on May 8, 2006, we were able to amend our credit facility to reduce the interest rate margins charged on borrowings and letters of credit. This amendment also increases the permitted maximum purchase price of an acquisition, increases permitted receivable concentration of certain customers, increases the permitted capital expenditures and debt baskets, and reduces the required minimum fixed charge coverage ratio if net availability falls below $20.0 million. On November 7, 2006, we amended our credit facility and provided our insurer with an $18 million letter of credit under the facility simultaneously with the insurer returning cash collateral of $18 million plus all accrued interest to us. As collateral for this letter of credit, we pledge $18 million to our lenders under the credit facility. This increase in the outstanding balance in letter of credit will not result in a reduction to our net availability under the credit facility as long as sufficient cash or collateral is granted to our lenders.

     The amount that we can borrow at any given time is based upon a formula that takes into account, among other things, eligible billed and unbilled accounts receivable and equipment which can result in borrowing availability of less than the full amount of the credit facility. As of September 30, 2006 and December 31, 2005, net availability under the credit facility totaled $41.8 million and $55.4 million, respectively, which included outstanding standby letters of credit aggregating $65.3 million and $57.6 million in each period, respectively. At September 30, 2006, $48.2 million of the outstanding letters of credit were issued to support our casualty and medical insurance requirements. These letters of credit mature at various dates through August 2006 and most have automatic renewal provisions subject to prior notice of cancellation. The credit facility is collateralized by a first priority security interest in substantially all of our assets and a pledge of the stock of certain of the operating subsidiaries. All wholly-owned subsidiaries collateralize the facility. At September 30, 2006 and December 31, 2005, we had outstanding cash draws under the credit facility in the amount of $0 and $4.2 million, respectively. Interest under the credit facility accrues at rates based, at our option, on the agent bank’s base rate plus a margin of between 0.0% and 0.75% or the LIBOR rate (as defined in the credit facility) plus a margin of between 1.25% and 2.25%, depending on certain financial thresholds. The credit facility includes an unused facility fee of 0.375%, which may be adjusted to as low as 0.250%.

     If the net availability under the credit facility is under $20.0 million on any given day, we are required to be in compliance with a minimum fixed charge coverage ratio measured on a monthly basis and certain events are triggered. Our operations are required to comply with this fixed charge coverage coverage ratio if these conditions of availability are not met. The credit facility further provides that once net availability is greater than or equal to $20.0 million for 90 consecutive days, the fixed charge coverage ratio will no longer apply. The fixed charge coverage ratio is generally defined to mean the ratio of our net income before interest expense, income tax expense, depreciation expense, and amortization expense minus net capital expenditures and cash taxes paid to the sum of all interest expense plus current maturities of debt for the period. The financial covenant was not applicable as of September 30, 2006, because at that time net availability under the credit facility was $41.8 million and net availability did not reduce below $20.0 million on any given day during the period.

     Based upon the amendment of the credit facility, our current availability, net proceeds from the sale of common stock, liquidity and projections for 2006, we believe we will be in compliance with the credit facility’s terms and conditions and the minimum availability requirements for the remainder of 2006. We are dependent upon borrowings and letters of credit under this credit facility to fund operations. Should we be unable to comply with the terms and conditions of the credit facility, we would be required to obtain modifications to the credit facility or another source of financing to continue to operate. We may not be able to achieve its 2006 projections and this may adversely affect our ability to remain in compliance with the credit facility’s minimum net availability requirements and minimum fixed charge ratio in the future.

     Our variable rate credit facility exposes us to interest rate risk. However, we had no cash borrowings outstanding under the credit facility at September 30, 2006.

     As of September 30, 2006, $121.0 million of our 7.75% senior subordinated notes due in February 2008, with interest due semi-annually were outstanding. The notes contain default (including cross-default) provisions and covenants restricting many of the same transactions as under our credit facility. The indenture which governs our senior subordinated notes allows us to incur the following additional indebtedness among others: the credit facility (up to $150 million), renewals to existing debt permitted under the indenture plus an additional $25 million of indebtedness among others: the indenture prohibits incurring further indebtedness unless our fixed charge coverage ratio is at least 2:1 for the four most recently ended fiscal quarters determined on a pro forma basis as if that additional debt has been incurred at the beginning of the period. The definition of our fixed charge coverage ratio under the indenture is essentially equivalent to that under our credit facility.

     Some of our contracts require us to provide performance and payment bonds, which we obtain from a surety company. If we were unable to meet our contractual obligations to a customer and the surety paid our customer the amount due under the bond, the surety would seek reimbursement of such payment from us. At September 30, 2006, the cost to complete on our $297.2 million performance and payment bonds was $44.8 million.

New Accounting Pronouncements

     See Note 13 to our condensed unaudited consolidated financial statements in Part 1. Item 1. to this Form 10-Q for certain new accounting pronouncements.

Seasonality

     Our operations are historically seasonally slower in the first and fourth quarters of the year. This seasonality is primarily the result of client budgetary constraints and preferences and the effect of winter weather on network activities. Some of our clients, particularly the incumbent local exchange carriers, tend to complete budgeted capital expenditures before the end of the year and defer additional expenditures until the following budget year.

Impact of Inflation

     The primary inflationary factor affecting our operations is increased labor costs. We are also affected by changes in fuel costs which increased significantly in 2006 and 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk related to changes in interest rates and fluctuations in foreign currency exchange rates. Our variable rate credit facility exposes us to interest rate risk. However, we had no cash borrowings under the credit facility at September 30, 2006.

Interest Rate Risk

     Less than 1% of our outstanding debt at September 30, 2006 was subject to variable interest rates. The remainder of our debt has fixed interest rates. Our fixed interest rate debt includes $121.0 million (face value) in senior subordinated notes. The carrying value and market value of our debt at September 30, 2006 was $121.0 million. Based upon debt balances outstanding at September 30, 2006, a 100 basis point (i.e. 1%) addition to our weighted average effective interest rate for variable rate debt would increase our interest expense by less than $100,000 on an annual basis.

Foreign Currency Risk

     We have an investment in a subsidiary in Canada and sell our services into this foreign market.

     Our foreign net asset/exposure (defined as assets denominated in foreign currency less liabilities denominated in foreign currency) for Canada at September 30, 2006 of U.S. dollar equivalents was a net asset of $2.2 million as of September 30, 2006 compared to $1.5 million at December 31, 2005.

     Our Canada subsidiary sells services and pays for products and services in Canadian dollars. A decrease in the Canadian foreign currency relative to the U.S. dollar could adversely impact our margins. An assumed 10% depreciation of the foreign currency relative to the U.S. dollar over the three months ended September 30, 2006 (i.e., in addition to actual exchange experience) would have resulted in a translation reduction of our revenue by $148,000 and $396,000 in the three months and nine months ended September 30, 2006, respectively.

     As the assets, liabilities and transactions of our Canada subsidiary are denominated in Canadian dollars, the results and financial condition are subject to translation adjustments upon their conversion into U.S. dollars for our financial reporting purposes. A 10% decline in this foreign currency relative to the U.S. dollar over the course of the three months ended September 30, 2006 (i.e., in addition to actual exchange experience) would have resulted in a reduction in our foreign subsidiaries’ translated operating loss of $6,000 and $73,000 in the three months and nine months ended September 30, 2006, respectively.

     See Note 1 to our Consolidated Financial Statements in our Annual Report on Form 10-K for further disclosures about market risk.

ITEM 4. CONTROLS AND PROCEDURES

     As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, we concluded that as of September 30, 2006, our disclosure controls and procedures are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

     There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Set forth below is information with respect to those legal proceedings which became a reportable event, or as to which there had been material developments, in the quarter ended September 30, 2006.

     In April 2006, we settled, without payment to the plaintiffs by us, several complaints for purported securities class actions that were filed against us and certain officers in the second quarter of 2004. While we believe that we would have ultimately been successful in defense of these actions, given the amount of the settlement, the inherent risk of uncertainty of the legal proceedings, and the substantial time and expense of defending these proceedings, we concluded that entering into the settlement was the appropriate course of action. On September 30, 2006, the parties executed a Stipulation of Settlement and filed a Joint Motion for Preliminary Approval of the settlement of the federal securities class action. The settlement is contingent upon final approval by the Court at a final fairness hearing at which the Court will determine whether the settlement is fair, reasonable and adequate. As part of the settlement, our excess insurance carrier has retained its rights to seek reimbursement of up to $2.0 million from us based on its claim that notice was not properly given under the policy. We believe these claims are without merit and plan to continue vigorously defending this action. We also believe that we have claims against the insurance broker for any losses arising from the notice.

     The parties in two shareholder derivative actions, which are based on the same circumstances as the purported federal securities class action and related SEC formal investigation, have executed stipulations of settlement. We are waiting final approval of the settlements from the court.

     We continue to cooperate with the SEC in the previously disclosed formal investigation related to the restatement of our financial statements in 2001 through 2003.

     In October 2005, eleven former employees filed a Fair Labor Standards Act (“FLSA”) collective action against MasTec in the Federal District Court in Tampa, Florida, alleging failure to pay overtime wages as required under that Act. The matter is currently stayed. We do not believe MasTec is liable under the FLSA as alleged in the complaint. We are currently negotiating with the plaintiffs a settlement but the potential loss associated with such settlement, if one occurs, cannot presently be determined.

     During construction of a natural gas pipeline project in Oregon in 2003, MasTec and its customer, Coos County, Oregon, were cited for violations of the Clean Water Act by the U.S. Army Corps of Engineers (“Corps of Engineers”). Despite protracted negotiations, the parties were unable to settle these complaints. On March 30, 2006, the Corps of Engineers filed suit against us and Coos County in Federal District Court in Oregon. We are defending this action vigorously, but may be unable to do so without incurring significant expenses. At this stage of the proceeding, potential loss, if any, cannot be determined.

     In connection with the same project, a complaint alleging failure to comply with prevailing wage requirements was filed against us by the Oregon Bureau of Labor and Industry. This matter was filed with the state court in Coos County. We are defending this action vigorously, but may be unable to do so without incurring significant expenses. The potential loss, if any, cannot presently be determined.

     We have incurred $125,000 for all unresolved Coos County matters and unpaid settlements as of September 30, 2006.

     In June 2005, we posted a $2.3 million bond in order to pursue the appeal of a $1.7 million final judgment entered September 30, 2005 against us for damages plus attorney’s fees resulting from a break in a Citgo pipeline. We are seeking a new trial and reduction in the damages award. We will continue to contest this matter in the appellate court, and on subsequent retrial. The amount of the loss, if any, relating to this matter not covered by insurance is estimated to be $100,000 to $2.4 million, of which $100,000 is recorded in the unaudited condensed consolidated balance sheet as of September 30, 2006, as accrued expenses.

     In October 2003, a MasTec subsidiary filed a lawsuit in a New York state court against Inepar Industria e Construcoes or Inepar, its Brazilian joint venture partner. MasTec sued Inepar for breach of contract arising out of Inepar’s failure to indemnify MasTec for claims resulting from numerous misrepresentations made by Inepar. Inepar subsequently failed to answer MasTec’s complaint and MasTec sought a default judgment. In September 2006, the state court entered a judgment in favor of MasTec and against Inepar in the amount of $58.4 million. MasTec has commenced the collection process in the United States and has commenced the lengthy process in Brazil to execute on the judgment. Due to the uncertainty of the ongoing collection process, MasTec has accounted for the receipt of any amounts related to this judgment in our favor as a gain contingency and has not reflected these amounts in our financial statements.

     In June 2006, prior to arbitration on a claim brought by MasTec for payments due from ABB Power (“ABB”), we settled all differences between MasTec and ABB in exchange for partial payment to MasTec from ABB.

     In December 2004, we brought an action against NextiraOne Federal in the Federal Court in Eastern District of Virginia, to recover payment for services rendered in connection with a federal Department of Defense project on a network wiring contract. Our network services are now a discontinued operation. NextiraOne counterclaimed for offsets and remediation. On May 5, 2006, the court ruled that we failed to establish an entitlement to recover damages for contract work done, and that NextiraOne Federal failed to establish an entitlement to recover costs of alleged offsets and costs of remediation. Neither party obtained the relief sought. We believe the ruling is an error, and we have sought remedy on appeal. We may be unable to obtain relief without additional expenses.

     We are also a party to other pending legal proceedings arising in the normal course of business. While complete assurance cannot be given as to the outcome of any legal claims, management believes that any financial impact would not be material to its results of operations, financial position or cash flows.

ITEM 1A. RISK FACTORS

     In the course of operations, we are subject to certain risk factors, including but not limited to, risks related to rapid technological and structural changes in the industries we serve, the volume of work received from clients, contract cancellations on short notice, operating strategies, economic downturn, collectibility of receivables, significant fluctuations in quarterly results, effect of continued efforts to streamline operations, management of growth, dependence on key personnel, availability of qualified employees, competition, recoverability of goodwill, and deferred taxes and potential exposures to environmental liabilities and political and economic instability in foreign operations. See “Risk Factors” in our most recently filed Annual Report on Form 10-K for a complete description of these risk factors.

     Except as set forth below, there have been no material changes to any of the risk factors disclosed in our most recently filed Annual Report on Form 10-K.

We may incur costs due to complaints that were filed against us and certain of our officers.

     In the second quarter of 2004, several complaints for a purported securities class action were filed against us and certain of our officers. We have settled these actions without payments to the plaintiffs by us. As part of the settlement, our excess insurance carrier has retained its rights to seek up to $2.0 million in reimbursement from us based on its claim that notice was not properly given under the policy. The parties in the shareholder derivative action, which is based on the same factual predicate as the purported securities class, have executed a memorandum of understanding and are presently finalizing the stipulation of settlement. Once executed the stipulation of settlement will be filed with the court for final approval. We may be unable to successfully resolve these disputes without incurring significant expenses. See Part II. Item 1. Legal Proceedings.

     In the three months ended September 30, 2006, we derived approximately 36.4%, 8.6% and 7.6% of our revenue from DIRECTV^®, Verizon and BellSouth, respectively. During the nine months ended September 30, 2006, we derived approximately 36.1%, 10.4% and 8.1% of our revenue from DIRECTV^®,, BellSouth and Verizon, respectively. . Because our business is concentrated among relatively few major customers, our revenue could significantly decline if we lose one or more of these customers or if the amount of business from Verizon continues to reduce, which could result in reduced profitability and liquidity.

     Prior to January 2006, we accounted for our stock-based award plans to employees and directors in accordance with APB No. 25, “Accounting for Stock Issued to Employees” under which compensation expense is recorded to the extent that the current market price of the underlying stock exceeds the exercise price. Under this method, we generally did not recognize any compensation related to employee stock option grants we issued under our stock option plans at fair value. In December 2004, the Financial Accounting Standards Board issued SFAS 123R “Share-Based Payment” or SFAS 123R. This statement, which was effective for us beginning on January 1, 2006, requires us to recognize the expense attributable to stock options granted or vested subsequent to December 31, 2005 and had a material negative impact on our profitability of $2.0 million in the three months ended September 30, 2006 or $0.03 diluted earnings per share, and $5.7 million in the nine months ended September 30, 2006 or $0.09 diluted earnings per share.

     SFAS 123R required us to recognize share-based compensation as compensation expense in our statement of operations based on the fair values of such equity on the date of the grant, with the compensation expense recognized over the vesting period. This statement also required us to adopt a fair value-based method for measuring the compensation expense related to share-based compensation. Due to additional stock options granted and the value of our common stock increasing, we now expect the annual stock compensation expense related to unvested stock options to be approximately $8.0 million in 2006. The annual share-based compensation expense still could be affected by, among other things, additional stock options granted to employees and directors, the volatility of our stock price and the exercise price of the options granted.

We may incur long-lived assets impairment charges which could harm our profitability.

     In accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” we review long-lived assets for impairment. In analyzing potential impairment of our state Department of Transportation related projects and assets we used projections of future discounted cash flows from these assets in 2006 and estimated a selling price by using a weighted probability cash flow analysis based on management’s estimates, as well as our negotiations with third parties for the sale of these assets. See Note 14 to our condensed unaudited financial statements in Part 1. Item 1. to this Form 10-Q. These estimates are all subject to changes in the future and if we are not able to sell these projects and assets at the estimated selling price or our cash flow changes because of changes in economic conditions, growth rates or changes in terminal values, we may incur additional impairment charges in the future related to these operations.

ITEM 5. OTHER INFORMATION

     On November 7, 2006, we amended our credit facility and provided our insurer with an $18 million letter of credit under the facility simultaneously with the insurer returning cash collateral of $18 million plus all accrued interest to us. As collateral for this letter of credit, we pledge $18 million to our lenders under the credit facility. This increase in the outstanding balance in letters of credit will not result in a reduction to our net availability under the credit facility as long as sufficient cash or collateral is granted to our lenders.

ITEM 6. EXHIBITS

Exhibit No.		Description
10.53*		Second Amendment to Amended and Restated Loan and Security Agreement dated May 8, 2006 by and between MasTec, Inc., the subsidiaries of MasTec, Inc. identified therein, the financial institutions party from time to time to the Loan Agreement and Bank of America, N.A., as administrative agent.
10.54*		Asset Purchase Agreement dated as of November 9, 2006 between MasTec North America, Inc. and LM-ITS Acquisition LLC.
31.1*		Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Exhibit 10.53

SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT

          THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”) is made and entered into this 7^th day of November, 2006, by and between MASTEC, INC., a Florida corporation (“MasTec”), the Subsidiaries of MasTec identified on the signature pages hereto (together with MasTec, hereinafter collectively referred to as the “Borrowers”), the financial institutions party from time to time to the Loan Agreement (as hereinafter defined) (the “Lenders”) and BANK OF AMERICA, N.A., a national bank in its capacity as collateral and administrative agent for the Lenders (together with its successors in such capacity, “Agent”).

Recitals:

          Agent, Lenders and Borrowers are parties to a certain Amended and Restated Loan and Security Agreement dated May 10, 2005 (as amended, restated, modified or supplemented, and in effect on the date hereof, the “Loan Agreement”), pursuant to which Agent and Lenders have made certain revolving credit loans and letter of credit accommodations to or for the benefit of Borrowers.

          MasTec provided to ACE American Insurance Company (“ACE”) certain cash collateral as security for MasTec’s obligations to ACE under a certain insurance policy issued by ACE for the benefit of MasTec and the other Borrowers to enable MasTec and Borrowers’ to comply with certain obligations under worker’s compensation laws and similar legislation. Borrowers now desire to replace the cash collateral provided to secure MasTec’s obligations to ACE with a Letter of Credit in the stated amount of $18,000,000 (the amount of the cash collateral currently pledged to ACE) issued pursuant to the Loan Agreement.

          Borrowers have requested that Agent and Lenders agree that the Letter of Credit to be issued to ACE will not result in a reduction in Borrowers’ Availability under the Loan Agreement so long as sufficient cash or other collateral is granted to Agent, for the benefit of itself and Lenders, for such Letter of Credit.

          In furtherance of the foregoing, Borrowers have requested that Agent and Lenders amend the Loan Agreement, and Agent and Lenders are willing to do so, on the terms and subject to the conditions set forth in this Amendment.

          NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

          1) Definitions. All capitalized terms used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such terms in the Loan Agreement.

          2) Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:

               a. By deleting the definition of “Borrowing Base” in its entirety from Section 1.1 of the Loan Agreement and by inserting the following in lieu thereof:

     Borrowing Base — on any date of determination thereof, an amount equal to the lesser of: (a) the aggregate amount of the Revolver Commitments on such date minus the Availability Reserve on such date, or (b) an amount equal to (i) the sum of the Accounts Formula Amount on such date plus the Eligible Unbilled Accounts Formula Amount on such date plus the Fixed Assets Formula Amount on such date plus the Eligible Cash Collateral Amount on such date minus (ii) the Availability Reserve on such date. Notwithstanding the foregoing, in no event shall the aggregate amount of Revolver Loans outstanding at any date as measured by Eligible Accounts and Eligible Unbilled Accounts of the Canadian Obligors exceed, in the aggregate, $5,000,000.

               b. By inserting the following new definitions in Section 1.1 of the Loan Agreement in proper alphabetical sequence:

     Ace LC — a Letter of Credit issued for the account of MasTec for the benefit of ACE American Insurance Company (“ACE”) in the stated amount of $18,000,000 with respect to MasTec’s insurance coverage for claims under worker’s compensation laws or similar legislation effected through ACE from time to time.

     Ace LC Collateral Account — a Deposit Account, securities account or other account established by MasTec at BofA or an Affiliate of BofA and over which Agent has control within the meaning of the UCC; provided, that, any interest, interest equivalent or other income that accrues, from time to time, on the cash or financial assets maintained or deposited in such account shall be the property of Borrowers and paid by BofA or its Affiliate to Borrowers from time to time.

     Eligible Cash Collateral — cash and Cash Equivalents of MasTec that (i) are on deposit in the Ace LC Collateral Account, (ii) are subject to the perfected, first priority security interest and Lien in favor of Agent, on behalf of the Secured Parties, upon such cash and Cash Equivalents, and BofA (or the other applicable depositary institution or intermediary at which the Ace LC Collateral Account is maintained) has executed a deposit account control agreement in favor of Agent, for the benefit of the Secured Parties, or such other documentation as may be required by Agent with respect to the Ace LC Collateral Account and the cash and Cash Equivalent maintained therein, in each case in form and substance satisfactory to Agent in all respects, and (iii) are not subject to any Lien, claim or other interest in favor of any Person other than Agent.

     Eligible Cash Collateral Amount — on any date of determination, an amount equal to the lesser of (i) $18,000,000, and (ii) 100% of the amount of Eligible Cash Collateral on such date; provided, that, it is the intent of the parties that (i) the amount of eligible Cash Collateral maintained in the Ace LC Collateral Account shall be equal to the undrawn amount of the Ace LC on such date, (ii) Borrowers shall not be required on any date to maintain Eligible Cash Collateral in an amount greater than the undrawn amount of the Ace LC on such date, and (iii) to extent that on any date the Eligible Cash Collateral in the Ace LC Collateral Account exceeds the undrawn amount of the Ace LC on such date, BofA or its Affiliate at which the Ace LC Collateral Account is maintained shall, at the request of Borrowers, pay the amount of Eligible Cash Collateral in excess of undrawn amount of the Ace LC to Borrowers.

               c. By deleting Section 3.2.2 of the Loan Agreement in its entirety and by substituting the following in lieu thereof:

     3.2.2. LC Facility Fees. Borrowers shall pay: (a)(i) to Agent, for the Pro Rata account of each Lender for all Letters of Credit, the Applicable Margin in effect for Revolver Loans that are LIBOR Loans on a per annum basis based on the average amount available to be drawn under Letters of Credit outstanding and all Letters of Credit that are paid or expire during the period of measurement (or, with respect to each Letter of Credit that is secured by cash deposited by Borrowers into the Cash Collateral Account on terms satisfactory to Agent, 0.75% (or 0.50% with respect to the Ace LC) on a per annum basis based on the average amount available to be drawn under all such cash-collateralized Letters of Credit outstanding and all such cash-collateralized Letters of Credit that are paid or expire during the period of measurement) , in each case payable monthly, in arrears, on the first Business Day of the following month; (ii) to Agent, for its own account a Letter of Credit fronting fee of 0.125% per annum based on the average amount available to be drawn under all Letters of Credit outstanding and all Letters of Credit that are paid or expire during the period of measurement, payable monthly, in arrears, on the first Business Day of the following month; and (iii) to Issuing Bank for its own account all customary charges associated with the issuance, amending, negotiating, payment, processing and administration of all Letters of Credit.

               d. By deleting Section 7.1(xi) of the Loan Agreement in its entirety and by substituting the following in lieu thereof:

     (xi) all monies now or at any time or times hereafter in the possession or under the control of Agent or a Lender or a bailee or Affiliate of Agent or a Lender, including any Cash Collateral in the Cash Collateral Account and cash, Cash Equivalents and other Property in the Ace LC Collateral Account;

               e. By deleting Section 7.4.1 of the Loan Agreement in its entirety and by substituting the following in lieu thereof:

     7.4.1. Cash Collateral. In addition to the items of Property referred to in Section 7.1 above, (i) the Obligations shall also be secured by the Cash Collateral (other than any Cash Collateral held in the ACE Cash Collateral Account) and all of the other items of Property from time to time described in any of the Security Documents as security for any of the Obligations, including all of the Collateral described in the Canadian Security Agreement, in each case to the extent provided herein and (ii) the LC Obligations relating to the Ace LC, and only such LC Obligation, shall be secured by all cash, Cash Equivalents and other Property from time to time in the Ace LC Collateral Account.

          3) Ratification and Reaffirmation. Each Borrower hereby ratifies and reaffirms the Obligations, each of the Loan Documents and all of such Borrower’s covenants, duties, indebtedness and liabilities under the Loan Documents.

          4) Acknowledgments and Stipulations. Each Borrower acknowledges and stipulates that the Loan Agreement and the other Loan Documents executed by such Borrower are legal, valid and binding obligations of such Borrower that are enforceable against such Borrower in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by such Borrower); the security interests and Liens granted by such Borrower in favor of Agent are duly perfected, first priority security interests and Liens, subject only to Permitted Liens; and, as of the close on business on November 6, 2006, the unpaid principal amount of the Revolver Loans totaled $0, and the face amount of outstanding Letters of Credit totaled $65,295,498.74.

          5) Representations and Warranties. Each Borrower represents and warrants to Agent and Lenders, to induce Agent and Lenders to enter into this Amendment, that no Default or Event of Default exists on the date hereof; the execution, delivery and performance of this Amendment have been duly authorized by all requisite entity action on the part of such Borrower and this Amendment has been duly executed and delivered by such Borrower; and all of the representations and warranties made by Borrowers in the Loan Agreement are true and correct in all material respects on and as of the date hereof after giving effect to this Amendment and to the revised Schedules to the Loan Agreement delivered herewith.

          6) Reference to Loan Agreement. Upon the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement,” “hereunder,” or words of like import shall mean and be a reference to the Loan Agreement, as amended by this Amendment.

          7) Breach of Amendment. This Amendment shall be part of the Loan Agreement and a breach of any representation, warranty or covenant herein shall constitute an Event of Default.

          8) Conditions Precedent. The amendments contained in Section 2 of this Amendment shall become effective as of the date hereof, in each case on the date, in each case on the date on which Agent shall have received, on or before November 7, 2006, the following documents, each of which shall be satisfactory in form and substance to Agent and in sufficient copies for each Lender:

     a. this Amendment duly executed and delivered by the Borrowers, the Lenders and Agent and the Consent and Reaffirmation of Guarantors, duly executed and delivered by the Guarantors; and

     b. a certificate of the secretary or assistant secretary of each Obligor having attached thereto the articles or certificate of incorporation and bylaws of such Obligor (or containing the certification of such secretary or assistant secretary that no amendment or modification of such articles or certificate of incorporation or bylaws has become effective since May 10, 2005), and certifying all entity action, including shareholders’ or members’ approval, if necessary, has been taken by such Obligor and/or its shareholders or members to authorize the execution, delivery and performance of this Amendment and the incumbency of the officers of such Obligor executing this Amendment and any other documents in connection herewith.

          9) Expenses of Agent. Borrowers agree to pay, on demand, all costs and expenses incurred by Agent in connection with the preparation, negotiation and execution of this Amendment and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of Agent’s legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby.

          10) Effectiveness; Governing Law. This Amendment shall be effective upon acceptance by Agent in Atlanta, Georgia (notice of which acceptance is hereby waived), whereupon the same shall be governed by and construed in accordance with the internal laws of the State of Georgia.

          11) Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

          12) No Novation, etc.. Except as otherwise expressly provided in this Amendment, nothing herein shall be deemed to amend or modify any provision of the Loan Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This Amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Loan Agreement as herein modified shall continue in full force and effect.

          13) Counterparts; Telecopied Signatures. This Amendment may be executed in any number of counterparts and by different parties to this Amendment on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.

          14) Further Assurances. Each Borrower agrees to take such further actions as Agent shall reasonably request from time to time in connection herewith to evidence or give effect to the amendments set forth herein or any of the transactions contemplated hereby.

          15) Section Titles. Section titles and references used in this Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto.

          16) Waiver of Jury Trial. To the fullest extent permitted by Applicable Law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this Amendment.

[Signatures on following page]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above.

		BORROWERS:
		MASTEC, INC.
ATTEST:
/s/ Albert de Cardenas		By: /s/ Stephen M. Wagman
Albert de Cardenas, Secretary		Name: Stephen M. Wagman
		Title: Executive Vice President
[CORPORATE SEAL]
		MASTEC TC, INC.
		By: /s/ Stephen M. Wagman
		Name: Stephen M. Wagman
		Title: Executive Vice President
		MASTEC FC, INC.
		By: /s/ Stephen M. Wagman
		Name: Stephen M. Wagman
		Title: Executive Vice President
		MASTEC CONTRACTING COMPANY, INC.
		By: /s/ Stephen M. Wagman
		Name: Stephen M. Wagman
		Title: Executive Vice President
		MASTEC MINNESOTA SW, LLC
		By: /s/ Stephen M. Wagman
		Name: Stephen M. Wagman
		Title: Executive Vice President

[Signatures continue on following page]

[Signatures continue on following page]

CONSENT AND REAFFIRMATION

          Each of the undersigned guarantors of the Obligations at any time owing to Agent or Lenders hereby (i) acknowledges receipt of a copy of the foregoing Second Amendment to Amended and Restated Loan and Security Agreement; (ii) consents to Borrowers’ execution and delivery thereof and of the other documents, instruments or agreements any Borrower agrees to execute and deliver pursuant thereto; (iii) agrees to be bound thereby; and (iv) affirms that nothing contained therein shall modify in any respect whatsoever its respective guaranty of the Obligations and reaffirms that such guaranty is and shall remain in full force and effect.

          IN WITNESS WHEREOF, the undersigned has executed this Consent and Reaffirmation, as of the date of such Second Amendment to Amended and Restated Loan and Security Agreement.

EXHIBIT 10.54

ASSET PURCHASE AGREEMENT

     This ASSET PURCHASE AGREEMENT (“Agreement”) is hereby made and entered into this 9th day of November, 2006, by and between LM-ITS Acquisition Company LLC, a Delaware limited liability company (“Buyer”), and MasTec North America, Inc., a Florida corporation (“Seller”).

     WHEREAS, Seller, through its department of transportation service group, provides specialty contracting services to state Departments of Transportation, including traffic management systems, related IT installations, and roadside construction services (such service group, the “Business”); and

     WHEREAS, Buyer and Seller desire that Buyer acquire certain assets and assume certain liabilities of the Business, including substantially all of Seller’s state Department of Transportation related projects and assets, on the terms and conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants hereinafter set forth, the parties hereto, intending to be legally bound, agree as follows:

     1. Recitals and Definitions.

          a. Recitals. The recitals contained herein are true and correct and by this reference are incorporated herein and made a part of this Agreement.

          b. Definitions. Capitalized terms not otherwise defined herein shall have the respective meanings set forth on Exhibit A.

     2. Purchase and Sale of Assets. Upon the terms and subject to the conditions contained herein, at the Closing Seller shall sell, assign, transfer and convey to Buyer, and Buyer shall purchase from Seller, free and clear of any Encumbrances, other than Permitted Encumbrances, all of Seller’s right, title and interest in the following assets (collectively, the “Assets”):

          a. all accounts receivable (whether current or noncurrent) of the Business, other than the Excluded Receivables, and all causes of action specifically pertaining to the collection of the foregoing (collectively, the “Acquired Receivables”);

          b. all Inventory of the Business (collectively, the “Acquired Inventory”);

          c. all of the Intellectual Property set forth on Schedule 2(c) (the “Acquired Intellectual Property”);

          d. all rights and interest of the Seller under the Contracts, including the Contracts set forth on Schedule 2(d) (the “Acquired Contracts”);

          e. all tangible personal property of the Business, including the machinery, equipment, tools, supplies, construction in progress, furniture and computer hardware, whether owned, leased or licensed set forth on Schedule 2(e) (the “Acquired Personal Property”);

          f. all projects of the Business set forth on Schedule 2(f), other than projects completed prior to the Closing Date, and other projects of the Business entered into after the date of this Agreement in accordance with this Agreement (the “Current Projects”);

          g. all other current assets, retainages and other long term assets of the Business as of the Closing Date, including those set forth on Schedule 2(g);

          h. except to the extent Seller is required to retain the originals pursuant to any Applicable Law (in which case a copy will be provided to the Buyer), the originals and/or copies (if originals are unavailable) of all information and records relating primarily to the Assets or the Business, including books, records, databases, ledgers, files, documents, correspondence, lists, plats, plans and designs of fixtures and equipment, specifications, technical information, creative materials, advertising and promotional materials, studies, reports, sales records, service records, supplier lists, customer lists, sales order files, engineering data files, purchase order files, supplier files, other supplier information, customer files, other customer information, environmental control, monitoring and test records and all other printed or written materials, whether or not confidential or proprietary;

          i. all software, programs and source code, program documentation, manuals, forms, guides, and other materials with respect thereto, to the extent transferable to Buyer without cost to Seller, including without limitation Microsoft Office applications, including Microsoft Windows (the “Transferable Software”), provided that the Oracle software shall not be transferred even if permitted pursuant to Seller’s license from Oracle;

          j. all expenses that have been prepaid by Seller relating primarily to the operation of the Business, including but not limited to ad valorem taxes, lease and rental payments;

          k. all rights, claims, credits, causes of action or rights of set-off or recoupment against Persons other than Seller and its Affiliates relating primarily to the Business or the Assets, including, without limitation, unliquidated rights under manufacturers’ and vendors’ warranties and rights to insurance proceeds as to the Assets;

          l. all Permits used in the Business, to the extent the transfer thereof is permitted by Applicable Law, including those set forth on Schedule 2(l) (collectively, the “Acquired Permits”);

          m. $2,500,000 of cash (the “Minimum Cash”); and

          n. the right to use the letters “ITS” to the extent MasTec has any right to use such letters (for purposes of clarity and notwithstanding anything to the contrary set forth herein, MasTec makes no representation or warranty as to ownership or the right to use such letters), but without any reference to MasTec.

     3. Excluded Assets. Notwithstanding anything to the contrary set forth in Section 2 or elsewhere in this Agreement, the following assets of Seller (collectively, the “Excluded Assets”) are not part of the sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the property of Seller after the Closing:

          a. all cash and cash equivalents (including, without limitation, checking account balances, certificates of deposit and other time deposits and petty cash) other than the Minimum Cash;

          b. all accounts receivable of Seller not related to the Business;

          c. accounts receivable of the Business to be designated by Seller prior to Closing in the aggregate amount of no more than $2,500,000 (the “Retained Receivables”);

          d. all Inventory of Seller other than the Acquired Inventory;

          e. all rights and interest of Seller under all contracts, agreements, leases (including leases of real property outside the State of Florida), licenses, commitments, sales and purchase orders, and other undertakings of any kind, whether written or oral other than the Acquired Contracts;

          f. all tangible personal property, including machinery, equipment, tools, supplies, construction in progress, furniture and fixtures, leasehold improvements and computer hardware, whether owned, leased or licensed other than the Acquired Personal Property;

          g. all projects of Seller other than the Acquired Projects;

          h. all (i) confidential personnel and medical records pertaining to any employee of Seller or its affiliates the disclosure or transfer of which is prohibited by Applicable Law; (ii) corporate minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of Seller; (iii) documents relating to proposals to acquire the Assets by Persons other than Buyer; and (iv) all accounting and other books and records that do not relate to the Assets;

          i. all insurance policies and agreements;

          j. all refunds, prepayments, rights of recoupment, and other rights with respect to any Taxes relating to periods prior to and including the Closing;

          k. all intercompany accounts receivable, loans and advances;

          l. all of Seller’s assets which are not primarily used in connection with the Business;

          m. the name “MasTec” and all other Intellectual Property of the Seller and its Affiliates other than the Acquired Intellectual Property;

          n. all assets related to Excluded Liabilities;

          o. all software, programs and source code, program documentation, manuals, forms, guides, and other materials with respect thereto, other than the Transferable Software;

          p. all Permits other than the Acquired Permits;

          q. all of Seller’s rights hereunder; and

          r. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an assignment of any Contract or Permit if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach thereof or would be legally ineffective. If any such consent is not obtained prior to Closing or does not remain in full force and effect at Closing in satisfaction of the conditions set forth in Sections 14(e) and 15(e) or if such consent is not required to be obtained pursuant to such sections, or if any attempt at an assignment thereof would be ineffective or would affect the rights of Seller thereunder so that Buyer would not in fact receive all such rights, Buyer and Seller shall use reasonable efforts to enter into a mutually agreeable, reasonable and lawful arrangement under which Buyer obtains the benefits and assumes the obligations in respect of such Contract or Permit from and after the Closing, including subcontracting, sublicensing or subleasing to Buyer, and under which Seller would enforce for the benefit of Buyer, with Buyer assuming the obligations, any and all rights of Seller against a third Person party thereto.

     4. Assignment and Assumption of Liabilities.

          a. Subject to the terms and conditions set forth in this Agreement and except for the Excluded Liabilities, Buyer shall assume all of the Assumed Liabilities. “Assumed Liabilities” means:

               i) all Liabilities of the Business (including all Liabilities pursuant to the Acquired Contracts and Acquired Permits) arising or to be performed after or in respect of periods following the Closing, including all Liabilities for liquidated damages under the Acquired Contracts or related to the Assets;

               ii) all accounts payable reflected in the Closing Working Capital;

               iii) all Liabilities in respect of Transferred Employees, and beneficiaries of employees of the Business, including under or relating to WARN or any similar state or local law in each case to the extent relating to or arising out of any actions taken by Buyer on or after the Closing Date;

               iv) all Liabilities relating to claims of manufacturing or design defects with respect to any product sold (regardless of whether any such product was purchased prior to or after the Closing Date) or service provided by the Business on or after the Closing Date, including Liabilities in respect of investigations regarding product safety, product recall and related matters;

               v) all liabilities and obligations relating to warranty obligations or services with respect to any product sold or service provided by the Business prior to, on or after the Closing Date;

               vi) all Liabilities relating to the ITS Leases with respect to the period after the Closing Date;

               vii) all Liabilities relating to the Occupational Safety and Health Act of 1970, as amended, and any regulations, decisions or orders promulgated thereunder, together with any state or local law, regulation or ordinance pertaining to worker, employee or occupational safety or health in effect as the same may be amended, supplemented or superseded, relating to or arising out of the operation, affairs and conduct of the Business by Buyer in respect of periods following the Closing;

               viii) all Liabilities arising from or relating to the Proceedings set forth on Schedule 4(a)(viii) (the “Assumed Proceedings”); and

               ix) a pro rata portion of all ad valorem real property taxes for the portion of the taxable year ending after the Closing Date.

          b. The assumption by Buyer of the Assumed Liabilities, the transfer thereof by Seller, and the limitations of such transfer shall in no way expand the rights or remedies of any third party against Buyer or Seller or its Affiliates as compared to the rights and remedies which such third party would have had against Seller or its Affiliates had Buyer not assumed such liabilities. Without limiting the generality of the preceding sentence, the assumption by Buyer of the Assumed Liabilities shall not create any third party beneficiary rights which are not presently granted to any party under the terms of any Contract which is expressly assumed by Buyer under the terms of this Agreement.

     5. Excluded Liabilities. Buyer shall not assume, and shall not be deemed to have assumed, the following liabilities (collectively, the “Excluded Liabilities”):

          a. any liability or obligation of the Seller arising under this Agreement;

          b. except to the extent provided in Section 12(f), any liability or obligation of the Seller or its Affiliates with respect to, or arising out of, any employee benefit plan, executive deferred compensation plan or any other plans or arrangements for the benefit of any employees of the Seller or any such Affiliate, including the Transferred Employees;

          c. any liability or obligation of the Seller to any shareholders of the Seller or any of their Affiliates or to any party claiming to have a right to acquire any ownership interests or other securities convertible into or exchangeable for any ownership interests of the Seller;

          d. all Environmental Liabilities relating to or arising out of the operation, affairs and conduct of the Business by Buyer in respect of periods prior to Closing;

          e. any Taxes, fees, expenses or other amounts required to be paid as a result of the transaction contemplated by this Agreement;

          f. any liability of Seller for Taxes (with respect to the Business or otherwise) for periods prior to the Closing;

          g. all Liabilities arising from or relating to Proceedings other than the Assumed Proceedings;

          h. except to the extent an Assumed Liability pursuant to Section 4, liabilities and obligations asserted after Closing relating to or arising out of the operation, affairs and conduct of the Business by Seller in respect of periods prior to the Closing; or

          i. Defective Installation Losses.

     6. Purchase Price.

          a. The purchase price for the Assets shall be:

               i) $6,000,000 payable in cash to the Seller at Closing (the “Base Purchase Price”) by wire transfer of immediately available funds to such account or accounts as Seller shall have designated prior to the Closing Date; plus

               ii) Buyer’s Promissory Note (the “Note”) payable to Seller in the face amount of $5,000,000 in the form attached hereto as Exhibit B; plus

               iii) additional earn-out consideration (the “Earn-Out”) up to a maximum amount of $9,000,000 (the “Earn-Out Amount”) as follows:

          b. Earn-Out. In addition to the Base Purchase Price and the Note, Seller shall be entitled, upon full repayment of the Note and to the extent not prohibited by the terms of any credit facilities in favor of Buyer (to the extent any such restrictions exist, all payments which would be payable under this section absent such restriction shall be deferred until such time as the payment thereof is not prohibited by the terms of any such facilities), to additional earn-out consideration (the “Earn-Out”) up to a maximum amount (subject to adjustment as set forth in this Agreement) of $9,000,000 (the “Earn-Out Amount”) as follows:

               i) Until the earlier of (x) such time as $7,000,000 (as adjusted pursuant to this Agreement) (“1st Tier Earn-Out”) is paid in full pursuant to this Section 7(c)(i), or (y) the last day of the 5th full calendar year ending after the Closing Date, with respect to each calendar year following the Closing Date, Buyer shall pay to Seller an amount (“Earnout Payment”), equal to at least 35% of the Excess Cash Flow of the Business during such calendar year. Excess Cash Flow of the Business shall be cumulative and shall be adjusted so that if in any prior calculation year(s) the Excess Cash Flow of the Business was less than zero (“Yearly Shortfall”), such cumulative Yearly Shortfall is to be subtracted from the then cumulative Excess Cash Flow of the Business. If Excess Cash Flow of the Business in the year is greater than zero, a payment shall be due to Seller with respect to such year, and paid to Seller in accordance with

the terms herein. If the cumulative Excess Cash Flow of the Business following the Closing Date at any time is equal to or in excess of $50,000,000 (“Bonus Earn-Out Test”), then Buyer shall pay to Seller the difference between the Earn-Out Amount less cumulative Earnout Payments. Each Earnout Payment will be paid by Buyer to Seller by wire transfer of same day funds to an account designated by Seller within 5 days after such Earnout Payment has been finally determined.

               ii) Computation of Excess Cash Flow. For purposes of this Agreement and the Note, “Excess Cash Flow” of the Business for any calendar year shall mean (i) Cash Flow from Operations of the Business (as set forth on a Cash Flow Statement of the Business) with respect to such year for indebtedness senior to the Note (which indebtedness shall not be greater than $20 million not including surety claims pursuant to completion bonds), minus (ii) mandatory third party principal debt payments actually paid by Buyer during such year for indebtedness senior to the Note, minus (iii) Net Capital Expenditures. All components of Excess Cash Flow shall be determined in accordance with US GAAP, consistently applied. “Net Capital Expenditures” means all cash used for capital expenditures of the Business during such year (which shall not be greater than $3,000,000), minus the proceeds from asset sales of the Business during such year. In calculating Excess Cash Flow no deduction shall be made for (x) any management fees or other intercompany charges, of whatever kind or nature, charged by Buyer or any of its Affiliates to the Business, or any (y) legal, accounting or other diligence fees or expenses arising out of this Agreement or the transactions contemplated hereby. The purchase and sales prices of goods and services sold by the Business to Buyer or any of its Affiliates or purchased by the Business from Buyer or any of its Affiliates shall be adjusted to reflect the amounts that the Business would have realized or paid if dealing with an independent party in an arm’s-length commercial transaction.

               iii) Change of Control. Upon any Change of Control of Buyer, the proceeds paid to Buyer and its equity holders directly as a result of that Change of Control and limited only to those proceeds as a result of same, and its equity holders shall be paid or retained as follows:

                    1) first, Buyer shall retain an amount equal to all Invested Capital;

                    2) second, Buyer shall retain an amount equal to the Minimum Return;

                    3) third, Buyer shall pay Seller an amount equal to any portion of the 1st Tier Earn-Out not previously paid pursuant to Section 6(b)(i);

                    4) fourth, if (x) the Bonus Earn-Out Test (for which the proceeds of the Change of Control shall be deemed to be Excess Cash Flow) has been satisfied and (y) the Earn-Out Amount has not been paid in full, then, the next $2,000,000 shall be paid to Seller; and

                    5) finally, 100% of the remaining distributions shall be retained by Buyer.

               iv) For purposes of this Section 6(b), the following terms have the respective meanings below:

                    1) “Invested Capital” means the aggregate amount of equity contributed to Buyer less the aggregate amount of equity distributed from Buyer to its equity holders, excluding all management fees.

                    2) “Minimum Return” means, a 20% per annum compounded return, on all Invested Capital, less all amounts paid, distributed or otherwise transferred (excluding all management fees) from Buyer to its partners, shareholders or other equity holders.

                    3) “Change of Control” means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act of 1934, as amended) of effective control (whether through legal or beneficial ownership of equity interests of the Buyer, by contract or otherwise) of in excess of 50% of the voting securities, limited partnership interests, general partnership interests or any other equity interests of the Buyer, or (ii) the Buyer merges into or consolidates with any other Person, or any Person merges into or consolidates with the Buyer and, after giving effect to such transaction, the equity holders of the Buyer immediately prior to such transaction own less than 50% of the equity interests of the Buyer or the successor entity of such transaction, (iii) the Buyer sells, transfers, leases or licenses its assets, as an entirety or substantially as an entirety, to another Person, or (iv) the execution by the Buyer of an agreement to which the Buyer is a party or by which it is bound, providing for any of the events set forth above in (i) through (iii).

               v) Restrictions. Until such time as the Earn-Out Amount (as adjusted pursuant to this Agreement) has been paid in full:

                    1) the Business shall be managed and operated as a separate, stand alone entity;

                    2) without the prior written consent of Seller, there shall be no expenses imposed upon the Business by any Affiliate of Buyer, including without limitation, any corporate overhead charges, management fees, general and administrative expense allocation or charges or expenses relating to accounting, human resources, legal and compliance and information technology nor will any services or products be provided to the Business by an Affiliate of Buyer, except at rates that are at least as favorable as the Business could obtain from third parties; provided that Buyer shall be permitted to pay a management fee of no more than $25,000 per month to an Affiliate of Buyer; and

                    3) Buyer shall not make any distributions, pay or declare any dividends or otherwise transfer any of its assets to its Affiliates or other equity holders; provided that Buyer may make annual distributions to its equity holders in an amount not to exceed the federal income tax liability of such holders as a result of Buyer’s income during such period.

          c. Dispute Procedure. All disputes with respect to the Earn-Out shall be settled in the same manner as disputes regarding the Purchase Price adjustment as set forth in Section 7.

          d. Allocation of Purchase Price. The Base Purchase Price, the Note and the Earn-Out shall be referred to collectively as the “Purchase Price”. Prior to Closing, the Seller shall provide to Buyer a proposed allocation of the Purchase Price plus liabilities deemed assumed (the “Tax Purchase Price”) for the sale of the Assets. The Tax Purchase Price shall be allocated using principles that are consistent with the Internal Revenue Code of 1986, as amended. Prior to Closing, the Buyer and Seller shall mutually agree on a final allocation (the “Final Allocation”) of the Tax Purchase Price, which Final Allocation will be attached hereto as Schedule 6(d). After the Closing, the parties shall make consistent use of the allocation, fair market value and useful lives specified on Schedule 6(d) for all tax purposes and in all filings, declarations and reports with the Internal Revenue Service (“IRS”) and similar reports for state, local, or foreign purposes in respect thereof, including the reports required to be filed under Section 1060 of the Internal Revenue Code of 1986, as amended. Buyer shall prepare and deliver IRS Form 8594 to Seller within forty-five (45) days after the Closing Date to be filed with the IRS in accordance with Schedule 6(d). In any proceeding related to the determination of any tax, neither Buyer nor Seller shall contend or represent that such allocation is not a correct allocation.

     7. Purchase Price Adjustment.

          a. The 1^st Tier Earn-Out will be reduced by the amount, if any, by which the Target Working Capital exceeds the Closing Working Capital, or will be increased by the amount, if any, by which Closing Working Capital exceeds $41,800,000 as determined in accordance with this Section 7. After the Closing, the Purchase Price will be recalculated (as recalculated, the “Final Purchase Price”) based on the Closing Working Capital determined in accordance with this Section 7. All adjustments to the Purchase Price made pursuant to this Section 7 will be consistently treated by both the Buyer and Seller as adjustments to purchase price for United States federal, state and local Tax purposes.

          b. No later than forty five (45) calendar days following the Closing Date, Buyer will prepare and deliver to Seller a balance sheet of the Business as of the Closing Date prepared in accordance with US GAAP (excluding footnotes) on the same basis and applying the same accounting principles, policies and practices that were used in preparing the Interim Balance Sheet (the “Closing Balance Sheet”), together with a statement (the “Closing Statement”) setting forth Buyer’s determination of the Closing Working Capital.

          c. During the thirty (30) calendar day period immediately following the date of delivery to the Seller of the Closing Balance Sheet and the Closing Statement, the Seller’s representatives (i) will be permitted to review, during normal business hours and with reasonable prior notice, the books and records of Buyer relating to the Business and the working papers related to the preparation of the Closing Balance Sheet and the Closing Statement (including the determinations included therein), and (ii) will be given reasonable access, during normal business hours and with reasonable prior notice, to knowledgeable employees and accounting professionals of Buyer in order to facilitate the Seller’s review of the Closing Balance Sheet and

Closing Statement; provided, however, that the review and access described in clauses (i) and (ii) will not be conducted or provided at times or in a manner that would unreasonably interfere with Buyer’s operation of the Business. The Closing Balance Sheet and the Closing Statement (including the determinations included therein) will become final, binding and conclusive upon the Seller and the Buyer thirty (30) days following the Seller’s receipt thereof, unless Buyer receives from the Seller on or prior to such date written notice of the Seller’s disagreement with any account or determination set forth in the Closing Balance Sheet or Closing Statement (a “Dispute Notice”). Any Dispute Notice will specify in reasonable detail the nature and dollar amount of any disagreement so asserted (collectively, the “Disputed Items”). Any account or determination set forth or reflected on the Closing Balance Sheet or in the Closing Statement that is not specifically objected to in the Dispute Notice will be deemed final, binding and conclusive upon the Seller and the Buyer upon delivery of the Dispute Notice. If a timely Dispute Notice is received by the Buyer, then the Closing Balance Sheet and the related determination of Closing Working Capital set forth in the Closing Statement will become final, binding and conclusive upon Buyer and Seller on the first to occur of (x) the date on which Buyer and Seller resolve in writing all differences they have with respect to the Disputed Items or (y) the date on which all of the Disputed Items that are not resolved by Buyer and Seller in writing are finally resolved in writing by the Independent Accountants as follows.

          d. During the ten (10) calendar days following delivery of a Dispute Notice (or such longer period as the Buyer and Seller shall mutually agree), Buyer and Seller will seek in good faith to resolve in writing any differences which they have with respect to all Disputed Items. Any Disputed Item resolved in writing by the Buyer and Seller will be deemed final, binding and conclusive on the Buyer and Seller. If Buyer and Seller do not reach agreement on all of the Disputed Items during such 10-day period (or such longer period as they shall mutually agree), then at the end of such 10-day period Buyer and Seller will submit all unresolved Disputed Items (collectively, the “Unresolved Items”) to an independent third party accountant or consultant mutually agreeable to the Buyer and Seller (the “Independent Accountants”) to review and resolve such matters. The Independent Accountants will determine each Unresolved Item (the amount of which may not be more favorable to Buyer than the related amount set forth in the Closing Statement or more favorable to the Seller than the related amount set forth in the Dispute Notice) as promptly as may be reasonably practicable, and will endeavor to complete such process within a period of no more than fifteen (15) days. The Independent Accountants may conduct such proceedings as the Independent Accountants believe, in their sole discretion, will assist in the determination of the Unresolved Items; provided, however, that all communications between the Buyer and Seller or any of their respective representatives, on the one hand, and the Independent Accountants, on the other hand, will be in writing with copies simultaneously delivered to the non-communicating party. The Independent Accountants’ determination of the Unresolved Items will be final, binding and conclusive on the Buyer and Seller, effective as of the date the Independent Accountants’ written determination is received by the Buyer and Seller. The fees and expenses of the Independent Accountants shall be apportioned equitably between Seller, on the one hand, and Buyer, on the other hand, by the Independent Accountants so that the non-prevailing party on each issue bears the fees and expenses associated with that issue.

          e. Upon determination of Closing Working Capital pursuant to this Section 7, a final adjustment to the Purchase Price will be determined and satisfied as follows:

               i) if the Closing Working Capital computed as provided in this Section 7 based on the Final Closing Balance Sheet exceeds $41,800,000, the 1^st Tier Earn-Out shall be increased by an amount equal to the amount of such excess; or

               ii) if the Target Working Capital exceeds the Closing Working Capital based on the Final Closing Balance Sheet, the 1^st Tier Earn-Out shall be reduced by an amount equal to such excess; or

               iii) if Closing Working Capital is greater than or equal to the Target Working Capital but less than $41,800,000, there will be no purchase price adjustment.

     8. Seller’s Representations and Warranties. The Seller makes the representations and warranties to the Buyer set forth in this Section 8. All such representations and warranties are made subject to the exceptions noted in the Disclosure Schedules. Notwithstanding anything to the contrary contained in this Agreement or in the Disclosure Schedules, any information disclosed in one section of the Disclosure Schedules shall be deemed to be disclosed against all the representations and warranties of the Seller. Certain information set forth in the Disclosure Schedules and the Data Room is included solely for informational purposes and may not be required to be disclosed pursuant to this Agreement. The disclosure of any information in the Disclosure Schedules and the Data Room shall not be deemed to constitute an acknowledgement that such information is required to be disclosed in connection with the representations and warranties made by the Seller in this Agreement or that it is material, nor shall such information be deemed to establish a standard of materiality. All descriptions of documents contained in the Disclosure Schedules and the Data Room are qualified in their entirety by reference to the documents so described.

          a. Corporate Status and Authority. Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida; has the requisite corporate power to own, operate, and lease its assets and properties and to carry on the Business as it is now being conducted; and is duly qualified to do business in all jurisdictions in which the nature of the Business requires such qualification. The Business currently conducts business in the States set forth in Schedule 8(a).

          b. Title to Assets; Encumbrances. Except as set forth in Schedule 8(b), Seller owns, leases or has the legal right to use all of the Assets. Seller has good and transferable title to, or in the case of leased or subleased assets, valid or subsisting leasehold interests in, all of the Assets, free and clear of any Encumbrances other than Permitted Encumbrances and Encumbrances created by or through Buyer or its Affiliates.

          c. Legal Proceedings; Orders.

               i) Except as set forth on Schedule 8(c)(i), there is no pending or, to Seller’s Knowledge, threatened Proceeding: (i) by or against Seller that relates to or may affect the Business, or any of the Assets or (ii) that challenges, or that may have the effect of

preventing, delaying, making illegal or otherwise interfering with, any of the transactions contemplated by this Agreement.

               ii) Except as set forth on Schedule 8(c)(ii), there is no Order to which Seller with respect to the Business or any of the Assets is subject.

               iii) Except as set forth on Schedule 8(c)(iii): (i) Seller is, and, at all times since January 1, 2002 has been, in compliance in all material respects with all of the terms and requirements of each Order applicable to the Business or any of the Assets; and (ii) Seller has not received, at any time since January 1, 2002, any written notice or other communication from any Governmental Authority regarding any violation of, or failure to comply with, any term or requirement of any Order applicable to the Business or any of the Assets.

          d. Material Contracts.

               i) Except as set forth in Schedule 8(d), as of the date hereof Seller, with respect to the Business, is not party to or otherwise bound by or subject to:

                    1) any written employment, severance or sales representative contract which contains an obligation (excluding commissions) to pay more than $100,000 per year;

                    2) any written consulting contract;

                    3) any real property lease or equipment lease which constitutes part of the Business or the Assets;

                    4) any Contract containing any covenant limiting the freedom of Seller, with respect of the Business or the operations of the Business, to engage in any line of business or compete with any Person in any geographic area in any material respect;

                    5) any Contract in effect on the date of this Agreement relating to the disposition or acquisition of the assets of, or any interest in, any business enterprise which relates to the Business other than in the Ordinary Course of Business;

                    6) any offset agreement entered into in connection with an international sales transaction and relating to any contract that imposes on the Business an obligation to perform that will continue in effect on or after the Closing Date;

                    7) any Contract of any kind that (i) requires a payment by any party in excess of, or a series of payments which in the aggregate exceed, $100,000, (ii) has a term, or requires the performance of any obligations by any party over a period, in excess of one year, or (iii) involves any director, officer or stockholder of the Seller;

                    8) any Contract pursuant to which the Seller on behalf of the Business has made or will make loans or advances, or has or will have incurred debts or become a guarantor or surety or pledged its credit on or otherwise become responsible with respect to any

undertaking of another Person, in each case, in an amount over $100,000 (except for the negotiation or collection of negotiable instruments in transactions in the Ordinary Course of Business);

                    9) any indenture, loan agreement, note, mortgage, security agreement, lease of real property or personal property or other Contract relating to the borrowing of funds, an extension of credit or financing for which the Business is obligated; or

                    10) any Contract involving a partnership, joint venture or other cooperative undertaking.

               ii) Except as disclosed in Schedule 8(d), each contract disclosed in Schedule 8(d) is a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms (except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws now or hereafter in effect relating to or affecting creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers), and except with respect to liquidated damages owed by Seller and any delays or circumstances in connection therewith, Seller is not in default and has not failed to perform any obligation thereunder, and, to the Knowledge of Seller, there does not exist any event, condition or omission which would constitute a material breach or material default (whether by lapse of time or notice or both) by any other Person, which would give rise to any right of termination. Except as disclosed in Schedule 8(d), as of the date of this Agreement Seller has not received any written notification from any other Person party to any of the Contracts disclosed in Schedule 8(d) of a claim of default by Seller. Seller has previously made available to Buyer (i) true, accurate and complete copies of each document set forth on Schedule 8(d) (collectively, the “Identified Contracts”) and (ii) a written description of each oral arrangement so listed on Schedule 8(d). Except as set forth on Schedule 8(d), all such Identified Contracts and arrangements have been entered into by Seller in the Ordinary Course of Business. Except for sales of assets in the Ordinary Course of Business and this Agreement, neither Seller nor any of its Affiliates has any Contract or arrangement with respect to the sale or other disposition of the Business or any of the Assets.

          e. Compliance with Law and Other Regulations. The Business and each of the Assets is in compliance with, and no violation with respect thereto exists under, any and all Applicable Laws. As of the date of this Agreement, no action is pending or, to the Knowledge of Seller, has been threatened against the Seller regarding the material violation by the Business of any Applicable Laws.

          f. No Material Adverse Effect. Except as set forth in Schedule 8(f), since the date of the Interim Balance Sheet, there has not been any Material Adverse Effect.

          g. Agreement Not in Breach of Other Instruments Affecting Seller. Except as set forth on Schedule 8(g), neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller, the Business or any of the

Assets is subject or any provision of the charter or bylaws (or similar constitutive document) of the Seller or (ii) other than the need to obtain third party consents to the assignment of certain Acquired Contracts, violate or conflict with, result in a breach or termination of, constitute a default under, result in the acceleration of, give any third party any additional right (including the right to accelerate, terminate, modify, or cancel) under, require any notice or consent under or result in or constitute a circumstance which, with or without notice or lapse of time or both, would constitute any of the foregoing under, any Contract to which the Seller is a party or by which it or the Business is bound or to which any of the Assets is subject (or result in the imposition of any security interest upon any of the Assets or Business). Except as set forth on Schedule 8(g), the Seller is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority in order for the parties to consummate the transactions contemplated by this Agreement.

          h. Power of Seller to Execute Agreement. Seller has full corporate power and authority to execute, deliver, and perform this Agreement, and this Agreement has been duly executed and delivered and is the valid and legally binding obligation of Seller and is enforceable against it in accordance with its terms, except (i) to the extent that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws now or hereafter in effect relating to creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefore may be brought (regardless of whether such enforceability is considered in a proceeding at law or in equity).

          i. Employee Benefit Plans.

               i) Schedule 8(i) lists each Employee Plan or material Benefit Arrangement which covers Transferred Employees and each collective bargaining agreement covering Transferred Employees.

               ii) Except as set forth in Schedule 8(i), with respect to the Business:

                    1) neither Seller nor any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of organizations within the meaning of Code Sections 414(b). (c), (m) or (o) such member being referred to as an “ERISA Affiliate”) contributes, is obligated to contribute or has ever contributed to or had any liability to a multiemployer plan, as defined in Section 3(37) of ERISA;

                    2) no fiduciary of any funded Employee Plan has engaged in a nonexempt “prohibited transaction” (as that term is defined in Section 4975 of the Code and Section 406 of ERISA) which could subject Buyer to a penalty tax imposed by Section 4975 of the Code or Section 502(i) of ERISA;

                    3) no Employee Plan that is subject to Section 412 of the Code has incurred an “accumulated funding deficiency” within the meaning of Section 412 of the Code, whether or not waived;

                    4) each Employee Plan and Benefit Arrangement has been established and is operated and administered in all material respects in accordance with its terms and in material compliance with Applicable Law;

                    5) no Employee Plan subject to Title IV of ERISA has incurred any material liability under such title other than for the payment of premiums to the Pension Benefit Guaranty Corporation (“PBGC”);

                    6) no Employee Plan which is a “defined benefit plan” (within the meaning of ERISA) has been terminated; nor have there been any “reportable events” (as that term is defined in Section 4043 of ERISA and the regulations thereunder), other than reportable events arising directly from the Agreement or any of the transactions contemplated thereby, which would present a risk that an Employee Plan would be terminated by the PBGC in a distress termination;

                    7) each Employee Plan intended to qualify under Section 401 of the Code has received a determination letter, or an opinion or advisory letter upon which it may rely, that it is so qualified and, to the Seller’s knowledge, no event has occurred with respect to any such Employee Plan which could cause the loss of such qualification or exemption;

                    8) with respect to each Employee Plan listed in Schedule 8(i), Seller has made available to Buyer the most recent copy (where applicable) of (1) the plan document and all amendments; (2) the most recent determination letter; (3) any summary plan description and summary of material modifications; and (4) Form 5500;

                    9) with respect to the Transferred Employees, there are no post-retirement medical or health plans, dental plans, hospitalizations, life insurance or other plans or arrangements in effect;

                    10) there are no actions, claims or investigations pending or, to the knowledge of Seller threatened, against any Employee Plan, Benefit Arrangement, or any administrator, fiduciary or sponsor thereof with respect to the Business, other than benefit claims arising in the normal course of operation of such Employee Plan or Benefit Arrangement;

                    11) the consummation of the transactions contemplated by the Agreement in and of themselves will not entitle any individual to severance pay that is payable by Buyer, and will not accelerate the time of payment or vesting, or increase the amount of any compensation or benefits due any Transferred Employee to the extent such compensation or benefits are the responsibility of Buyer;

                    12) neither the Seller nor any ERISA Affiliate has any Liability that could have become a Liability of the Buyer (partially or totally within the meaning of ERISA) from any Employee Plan; and, without limitation by reference to any other provision of