SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 30, 1996
MASTEC, INC.
_______________________________________________
(Exact Name of Registrant as Specified in Charter)
Delaware 0-3797 59-1259279
_________________________________________________________________________
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3155 N.W. 77th Avenue, Miami, Florida 33122-0000
_________________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (305) 599-1800
8600 N.W. 36th Street, Miami, Florida 33166-0000
_________________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 49
Item 7. Consolidated Financial Statements and Exhibits Page
(a)Consolidated Financial Statements of Business Acquired
in Spanish Pesetas
Report of Independent Accountants F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-4
Consolidated Statements of Operations for the three years ended
December 31, 1995 F-8
Consolidated Statements of Cash Flows for the three years ended
December 31, 1995 F-11
Notes to the Consolidated Financial Statements F-12
(b) Pro forma Financial Information
The following unaudited pro forma condensed consolidated financial
statements are filed with this report: F-41
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996 F-42
Pro Forma Condensed Consolidated Statements of Continuing Operations:
Three months ended March 31, 1996 F-44
Year ended December 31, 1995 F-45
Page 2 of 49
AUDITORS' REPORT ON FINANCIAL STATEMENTS
To the Shareholders
of Sintel, S.A.:
We have audited the accompanying consolidated balance sheets of
SINTEL, S.A. AND SUBSIDIARIES as of December 31, 1995, and 1994,
the related consolidated statements of income, and changes in
shareholders' equity for each of the three years in the period
ended December 31, 1995, and the cash flows for each of the two
years in the period ended December 31, 1995 all expressed in
Spanish Pesetas. These financial statements are responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with general accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Sintel, S.A. and subsidiaries as of December 31, 1994 and
1995, and the results of their operations for each of the three
years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles in the United States.
Madrid, Spain
February 26, 1996
Page 3 of 49
Sintel, S.A. and Subsidiaries
Balance sheets as of December 31, 1995 and 1994
Currency - Thousands of Pesetas Consolidated Group
ASSETS 1995 1994
A) DUE FROM SHAREHOLDERS FOR UNCALLED CAPITAL - 42,126
B) LONG TERM ASSETS 5,698,912 6,131,970
I. Intangible assets 111,107 3,927
------------ ------------
Lease hold investments 98,951 -
Other intangible assets 39,940 8,764
Accumulated amortization (27,784) (4,837)
II. Fixed assets (Note 6) 2,204,842 2,516,120
------------ ------------
Land and buildings 722,251 690,625
Technical installations and machinery 888,181 998,091
Furniture 442,829 422,443
Computer hardware 559,352 817,619
Tools 1,065,920 997,039
Vehicles 1,364,289 1,360,075
Meter-reading equipment 1,407,954 1,492,365
Accumulated depreciation (4,245,934) (4,262,137)
III Investments (Note 7) 3,382,963 3,611,923
------------ ------------
Holdings carried by the equity method (Note 5) 238,929 412,532
Other investments 9,932 256,289
Loans to Telefonica Group companies (Note 18) 2,035,445 2,134,122
Other loans 827,472 672,233
Prepaid taxes (Note 15) 839,493 661,468
Long-term deposits and financial guarantees 36,569 57,580
Allowances (604,877) (582,301)
C) DEFERRED EXPENSES 121,435 31,196
Page 4 of 49
Sintel, S.A. and Subsidiaries
Balance sheets as of December 31, 1995 and 1994
Currency - Thousands of Pesetas Consolidated Group
ASSETS 1995 1994
D) CURRENT ASSETS 33,856,022 33,083,281
I. Inventories (Note 8) 3,956,706 4,205,446
------------ ------------
Inventories 3,156,339 3,063,187
Advances 851,522 1,200,751
Allowances (51,155) (58,492)
II. Accounts receivable (Note 9) 28,314,418 25,330,437
------------ ------------
Customer receivables 3,585,674 8,538,227
Receivable from Group companies,
Telefonica (Note 18) 21,269,306 16,116,345
Receivable from associated companies,
Telefonica Group (Note 18) 3,040,219 -
Receivable from associated companies,
Sintel Group (Note 18) 3,391 17,326
Sundry accounts receivable 423,664 715,592
Employee receivables 209,904 211,794
Taxes receivables (Note 15) 359,860 512,689
Allowances for doubtful accounts (577,600) (781,536)
III Short-term investments 1,062,594 2,955,358
------------ ------------
Loans to Telefonica group companies (Note 18) 407,513 2,675,833
Loans to Sintel group and associated
companies (Note 18) 90,734 310,548
Other loans 535,543 268,285
Short-term deposits and guarantees provided 28,804 8,126
Allowances (Note 18) - (307,434)
IV. Cash 395,334 286,853
V. Prepaids expenses 126,970 305,187
------------ ------------
TOTAL ASSETS (A+B+C+D) 39,676,369 39,288,573
============ ============
The accompanying Notes 1 to 20 are an integral part of these consolidated
balance sheets.
Page 5 of 49
Sintel, S.A. and Subsidiaries
Balance sheets as of December 31, 1995 and 1994
Currency - Thousands of Pesetas Consolidated Group
SHAREHOLDERS' EQUITY AND LIABILITIES 1995 1994
A) SHAREHOLDERS' EQUITY (Note 10) 2,243,876 2,438,208
I. Share capital 3,100,000 1,100,000
II. Other reserves 260,046 1,745,187
------------ ------------
Unrestricted reserves 4,062,334 4,253,434
Restricted reserves 321,190 321,190
Prior years' losses (4,123,478) (2,829,437)
III Reserves at companies consolidated by the global
integration method 883,427 534,973
IV. Reserves at companies carried by the
equity method 11,313 (185,732)
V. Translation differences (27,401) 19,997
------------ ------------
Companies consolidated by the global
integration method (23,527) 22,184
Companies carried by the equity method (3,874) (2,187)
VI. Loss (1,983,509) (776,217)
------------ ------------
Consolidated loss (1,829,823) (442,725)
Income attributted to minority interests (153,686) (333,492)
B. MINORITY INTERESTS (Note 11) 1,131,681 971,076
C. DEFERRED INCOME 1,409 106,873
D. ACCRUED LIABILITIES (Note 12) 2,795,839 2,483,412
E. LONG-TERM DEBT 9,600,464 13,008,857
I. Bonds (Note 13) - 2,021,874
II. Payable to banks (Note 14) 175,762 -
III Payable to Telefonica group and
associated companies (Notes 14 and 18) 7,909,237 10,209,194
Payable to Sintel group and
associated companies (Notes 14 and 18) - 65,339
IV. Other long-term payables 1,515,101 712,450
------------ ------------
Accrued taxes payable (Note 15) 1,454,290 712,450
Other accounts payable 60,811 -
V. Uncalled capital payments payable 364 -
Page 6 of 49
Sintel, S.A. and Subsidiaries
Balance sheets as of December 31, 1995 and 1994
Currency - Thousands of Pesetas Consolidated Group
SHAREHOLDERS' EQUITY AND LIABILITIES 1995 1994
F. CURRENT LIABILITIES 23,659,864 20,280,147
I. Bonds (Note 13) 2,044,231 22,500
II. Payable to banks 3,911,900 4,462,908
------------ ------------
Loans and other debts (Note 14) 3,757,136 4,331,825
Interest payable 154,764 131,083
III Payable to Telefonica and Sintel group and
associated companies 913,582 459,179
------------ ------------
Payable to Telefonica group companies (Note 18) 459,075 221,223
Payable to Sintel group companies (Note 18) - 13,711
Payable to Telefonica associated companies 451,584 224,199
Payable to Sintel associated companies 2,923 46
IV. Trade accounts payable 14,274,828 12,459,101
------------ ------------
Billings in excess of cost (Note 18) 2,033,540 1,946,795
Payable for purchases or services 5,758,161 6,400,638
Notes payable 6,483,127 4,111,668
V. Other nontrade payables 2,515,323 2,876,459
------------ ------------
Accrued taxes payable (Note 15) 1,498,196 1,906,920
Compensation payable 872,825 854,217
Other accounts payable 144,302 115,322
G. ACCRUED LIABILITIES (Note 18) 243,236 -
------------ ------------
TOTAL SHAREHOLDERS' INVESTMENT AND
LIABILITIES (A+B+C+D+E+F+G) 39,676,369 39,288,573
============ ============
The accompanying Notes 1 to 20 are an integral part of these consolidated
balance sheets.
Page 7 of 49
Sintel, S.A. and Subsidiaries
Consolidated statements of operations
for the years ended December 31, 1995, 1994 and 1993
Currency - Thousands of Spanish Pesetas Consolidated Group
DEBITS 1995 1994 1993
EXPENSES
Reduction in inventories - 1,642,983 1,051,534
Procurements 22,959,908 19,857,220 22,552,133
----------------------------------
Purchases from Telefonica Group companies (Note 18) 89,296 3,625 7,131
Purchases 2,774,693 1,606,735 2,545,221
Variation in raw materials and other supplies (62,293) 16,899 2,167
Work performed by Telefonica group companies (Note 18) 2,157 66,258 -
Work performed by other companies 20,156,055 18,163,703 19,997,614
Personnel expenses (Note 18) 20,206,569 16,931,124 19,971,548
Period depreciation and amortization 612,246 642,159 620,895
----------------------------------
Intangible assets 21,204 1,688 1,496
Tangible fixed assets 566,770 639,395 608,024
Deferred charges 24,272 1,076 11,375
Variation in operating provisions 2,912 169,245 45,412
----------------------------------
Variation in inventory provisions (6,380) (1,427) 983
Variation in other operating provisions 9,292 170,672 44,429
Other operating expenses 4,311,377 4,072,481 3,285,822
----------------------------------
Outside services from Telefonica group companies (Note 18) 606,110 108,147 702
Outside services 3,465,938 2,932,172 1,766,965
Taxes other than income tax 166,248 494,887 294,367
Other current operating expenses 73,081 537,275 1,223,788
I. OPERATING INCOME - 438,310 -
Other financial expenses on debts to Telefonica group companies (Note 18) 948,027 984,935 360,250
Other financial expenses on debts 1,227,185 791,447 1,822,685
Variation in financial investment provisions - - -
Exchange losses 302,251 411,275 25,054
II. FINANCIAL INCOME - - -
----------------------------------
Share in losses of companies carried by the equity method - - 11,243
----------------------------------
Page 8 of 49
Sintel, S.A. and Subsidiaries
Consolidated statements of operations
for the years ended December 31, 1995, 1994 and 1993
Currency - Thousands of Spanish Pesetas Consolidated Group
1995 1994 1993
III INCOME FROM ORDINARY ACTIVITIES - - -
----------------------------------
Losses on sale fixed assets 98,307 50,395 -
----------------------------------
Extraordinary expenses and losses (Note 18) 281,218 173,466 586,673
----------------------------------
IV. EXTRAORDINARY INCOME - - -
----------------------------------
V. INCOME BEFORE TAXES - - -
----------------------------------
Corporate income tax (821,125) (252,527) (214,210)
----------------------------------
VI. CONSOLIDATED INCOME - - -
----------------------------------
Income attributed to minority interests - - -
----------------------------------
VII.INCOME FOR THE YEAR - - -
================================
The accompanying Notes 1 to 20 are an integral part of these consolidated
statements of operations.
Page 9 of 49
Sintel, S.A. and Dependent Companies
Consolidated statements of operations
for the years ended December 31, 1995, 1994 and 1993
Currency - Thousands of Spanish Pesetas Consolidated Group
CREDITS 1995 1994 1993
REVENUE
Total net sales 47,031,888 43,455,710 46,676,818
------------ ------------ ------------
Net sales to Telefonica group companies (Note 18) 30,841,221 22,798,268 39,056,673
Net sales and services rendered 16,190,667 20,657,442 7,620,145
Increase in inventories 202,330 - -
Other operating revenues 110,598 297,812 294,054
------------ ------------ ------------
Sundry and other current operating revenues 75,597 243,340 268,483
Subsidies 35,001 54,472 25,571
I. OPERATING LOSS 748,196 - 556,472
Revenues from other securities and loans 267,699 578,754 516,418
------------ ------------ ------------
Telefonica group companies (Note 18) 30,408 214,743 208,148
Other companies 215,696 363,486 306,484
Other interest and similar revenues 21,595 525 1,786
Exchange gains 30,802 326,488 400,357
II. FINANCIAL LOSS 2,178,962 1,282,415 1,291,214
Share in income of companies carried by the equity method 281,947 372,454 -
III LOSS ON ORDINARY ACTIVITIES 2,645,211 471,651 1,858,929
Gains on fixed asset disposals 28,957 260 2,062
Extraordinary revenues (Note 18) 344,831 - 49,092
IV. EXTRAORDINARY LOSS 5,737 223,601 535,519
V. LOSS BEFORE TAXES 2,650,948 695,252 2,394,448
VI. CONSOLIDATED LOSS 1,829,823 442,725 2,180,238
Income attributed to minority interests (Note 11) 153,686 333,492 532,260
------------ ------------ ------------
VII LOSS FOR THE YEAR 1,983,509 776,217 2,712,498
============ ============ ============
The accompanying Notes 1 to 20 are an integral part of these consolidated
statements of operations.
Page 10 of 49
Sintel, S.A. and Subsidiaries
Consolidated statements of cash flow
for the years ended December 31, 1995, 1994 and 1993
Currency - Thousands of Spanish Pesetas Consolidated Group
1995 1994 1993
Cash flows from operating activities:
Net loss (1,983,609) (776,217) (2,712,498)
Adjustments to reconcile net loss to cash (used)
provided by operating activities:
Depreciation and amortization 587,974 641,083 609,520
Movements in financial investments provisions 22,576 0 (1,113)
Minority interest 66,182 378,172 592,904
Loss (gain) on sale of assets 69,350 50,135 (2,062)
Changes in assets and liabilities net of effect of
acquisitions and divestitures:
Accounts recivable-net and unbilled revenue (2,983,981) 2,442,149 6,210,468
Inventories 248,740 629,742 911,222
Short-term investments 1,892,764 (36,333) (446,892)
Prepaids 178,217 (144,277) (88,249)
Bonds 2,021,731 (140) (193,090)
Payable to banks (551,008) (890,328) (8,224,120)
Payable to group and associated companies 454,403 (474,080) (424,181)
Trade accounts payable 1,815,727 (480,060) (2,476,627)
Other nontrade payables (361,136) (1,043,393) (606,754)
Accrued liabilities 243,236 0 (286)
----------- ------------ ------------
Net cash (used) provided by operating activities 1,721,166 296,453 (6,851,758)
----------- ------------ ------------
Cash flows from investing activities:
Due from shareholders for uncalled capital 42,126 (42,126) 0
Intangible assets (128,384) (875) 0
Cash paid for acquisitions of fixed assets (471,125) (523,000) (341,762)
Proceeds from sale of fixed assets 146,283 14,540 5,349
Cash paid for investments (2,018,391) (1,477,204) (1,901,000)
Proceeds from sale of investments 2,224,775 380,626 598,638
Deferred expenses (90,239) (31,196) 23,640
Deferred income (105,464) (216,152) (192,433)
Accrued liabilities 312,427 (452,375) 797,544
Long term debt (3,408,393) 1,661,568 8,334,599
Share capital 2,000,000 0 0
Start up cost (23,000) 0 0
Sintelar 1994 adjustment. (47,744) 0 0
Translation differences (47,398) (45,626) 0
Absorption of SAC losses 0 (145,811) 0
Others 1,842 2,325 122,955
----------- ------------ ------------
Net cash provided by investing activities (1,612,685) (875,306) 7,447,530
Net increase in cash and cash equivalents 108,481 (578,853) 595,772
Cash beginning of period 286,853 865,706 269,934
----------- ------------ ------------
Cash end of period 395,334 286,853 865,706
=========== ============ ============
The accompanying Notes 1 to 20 are an integral part of these consolidated
statements of cash flow. Page 11 of 49
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUBSIDIARIES AND ASSOCIATED COMPANIES
SISTEMAS E INSTALACIONES DE TELECOMUNICACION, S.A. ("SINTEL, S.A." or the
"Company"), was incorporated on February 8, 1950 under the name of LIENA, S.A.
and adopted its present name, on May 2, 1975. Its registered offices are at
calle Arte 21, Madrid.
Sintel, S.A. engages mainly in the design and performance of projects and
operations of all kinds related to telecommunication and electricity networks
and systems.
The detail of the Company's subsidiaries and affiliates is as follows:
Consolidation
Line of Business Method % of Ownership
SUBSIDIARIES 1995 1994
Sintelar Telecommunication instalations(1) Consolidated 50% 50%
Sintel Venezuela Telecommunication instalations(2) Consolidated 99.99% 99.99%
Sintel Peru Telecommunication instalations(3) Consolidated 38% 38%
Cotronic Telecommunication instalations(4) Consolidated 51% 49%
Incosa Telecommunication instalations(5) Consolidated 51.1% 49%
AFFILIATED COMPANIES
Sietel Telecommunication instalations(6) Equity method 50% 50%
Sintel-Abengoa
Servicios. 2.000 Telecommunication instalations(7) Equity method 50% 50%
Sinaben Multimedia Multimedia teleco. network(8) Equity method 50% --
Inalca Telecommunication instalations(9) Equity method -- 44%
Sistemas Avanzados
de Control Telecommunication instalation(10) Equity method -- 42.12%
The registered offices of the foregoing companies are the following:
Sintelar: C/Carlos Pellegrini 1163. BUENOS AIRES (ARGENTINA)
Sietel: C/ Mac-Iver 125 piso 12. SANTIAGO DE CHILE (CHILE)
Sintel-Abengoa, Servicios 2000: C/ Infante D. Carlos 16, 2 D, SEVILLA (SPAIN).
Sintel Venezuela: 2 Avda. Campo Alegre, Quinta n 11 CARACAS (VENEZUELA)
Sintel Peru: Avda. Jose Pardo, 601 LIMA (PERU).
Sinaben Multimedia: c/ Arte, 21, MADRID (SPAIN).
Cotronic: C/ Competa 6, Edificio Milton 10-A, MALAGA (SPAIN).
Incosa: Poligono de Pocomaco, parcela A-2 Nave I, LA CORUNA (SPAIN).
Inalca: C/ Ramon y Cajal s/n. LA CAVA DELTEBRE, (TARRAGONA) (SPAIN).
Sistemas Avanzados de Control: C/ Estudio 3, ARAVACA (MADRID) (SPAIN).
Page 12 of 49
(1) and (3) Consolidated since Telefonica de Espana, S.A. has an indirect
holding in the company and, therefore, effective control is exercised
by virtue of holding a majority of the voting rights in the Board of
Directors.
(2), (4) and (5) Consolidated since Sintel has a majority of the voting rights.
(6), (7), (8),
(9) and (10) Carried by the equity method since Sintel exercises significant
management influence.
The data in the foregoing tables were furnished by the Group companies and
their net worth position is disclosed in their audited financial statements,
except for Sintel Abengoa, Servicios 2.000 A.I.E. and Sinaben Multimedia, which
did not fall within the minimum statutory audit requirements as of December 31,
1995 and 1994.
In view of the political and economic situation in Venezuela, the
Venezuelan government has intervened to control the outflow of foreign
currencies. This situation, together with the devaluation of the bolivar, gave
rise to a significant loss in the translation at year-end exchange rates of
Sintel Venezuela's foreign currency balances with the Parent Company Sintel S.A.
Management of the Company considers that the situation will be remedied in the
short run.
The Company's sole shareholder is Telefonica de Espana, S.A. Consequently,
as required by (Spanish corporation law) section 23 of the Second Additional
Provision of Limited Liability Companies Law 2/1995, which makes the legal
system stipulated for sole-shareholder limited liability companies applicable to
sole-shareholder corporations, the Company:
Registered the status and identity of the shareholder of the sole-shareholder
company in the Mercantile Register.
Keeps an updated register-book of any contracts entered into with the sole
shareholder, which is periodically legalized in the Mercantile Register.
The contracts between Sintel, S.A. and Telefonica de Espana, S.A.
("Telefonica")in 1995 were mainly of two kinds: comprehensive service contracts
and individual project or service contracts, which are awarded by public call
for tenders. The detail, by type, of the comprehensive service contracts is as
follows:
Contract Expiration Economic Conditions
- - Lines and Cables 12/31/98 - Price per certified scale point,
variable based on province
- May be terminated by either party
in September 1997
- - Wiring system and trenches 12/31/97 - Price per certified scale point,
variable based on province
- - Single line 12/31/96 - Price per certified scale point,
variable based on province
- - Multi-line 04/30/96 - Price per certified scale point
The transactions with Telefonica in 1995 and 1994 are detailed in Note 18.2.
Page 13 of 49
NOTE 2. PROPOSED ALLOCATION OF THE PARENT COMPANY'S LOSS
The Company's directors will propose at the Shareholders' Meeting that the
1995 loss be allocated to "Prior Years' Losses".
The 1994 loss was allocated to "Prior Years' Losses".
NOTE 3. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS
A) The accompanying consolidated financial statements were prepared from the
accounting records of Sintel and of its Subsidiaries (see Note 1), whose
respective financial statements were prepared by the directors of each
company in accordance with the Spanish National Chart of Accounts as
approved by Royal Decree dated December 20, 1990 and Royal Decree 1815/1991
and, accordingly, they give a true and fair view of the net worth,
financial position and results of the Sintel Group. The accompanying
consolidated financial statements as of December 31, 1995, were prepared by
the directors of Sintel, S.A., according to the structure of with the
Spanish National Chart of Accounts and were adapted to US GAAP.
B) Accounting principles
The consolidated financial statements were prepared in accordance with the
accounting principles of prudence, going concern, cost, accrual basis,
revenue and expense matching, no offset, consistency and materiality. The
income from projects is recognized as explained in Note 4 since it is a
more appropriate way to present a true and fair view of the net worth,
financial position and results of the Sintel group.
C) Consolidation principles
The companies at which there is effective control in their representation
and decision-making bodies were consolidated by the global integration
method; those in which there is significant influence but not ownership of
a majority of the voting rights were consolidated by the equity method
All significant accounts and transactions between consolidated companies
were eliminated in consolidation.
The equity of minority interests in stockholders' equity and results of the
consolidation of affiliates is presented under the "Minority Interests" and
"Income Attributed to Minority Interests" captions in the consolidated
balance sheet and consolidated statement of operation, respectively (see
Note 11).
The effect of inclusion, by the equity method, of the holdings in
associated companies in the consolidated balance sheets is reflected under
the "Reserves at Companies Carried by the Equity Method" and "Share in the
Income/Losses of Companies Carried by the Equity Method" captions, as
appropriate.
Page 14 of 49
The accompanying consolidated financial statements do not include the tax
effect of the incorporation of the subsidiaries' reserves to the Sintel
consolidated annual accounts, due to the fact that the reserves have not
been transferred and will not be distributed at the end of the period, and
will be used as a financing source of the subsidiaries to reduce their
indebtness.
D) Comparative information
The following companies were included in consolidation for the first time
in 1995 and 1994:
Company Registered Offices
1995 :
Group and multigroup companies
SINABEN MULTIMEDIA A.I.E. C/ ARTE, 21 MADRID (SPAIN)
1994 :
Group and multigroup companies
SINTEL VENEZUELA 22. AVDA. CAMPO ALEGRE QUINTA
No. 11 CARACAS (VENEZUELA)
SINTEL PERU AVDA. JOSE PARDO, 601 LIMA (PERU)
Also, the following companies were excluded from consolidation in 1995 as a
result of sale:
Company Registered Offices
1995 :
Associated companies:
INALCA, S.A. C/ RAMON Y CAJAL, S/N LA CAVA
DELTEBRE (TARRAGONA) (SPAIN)
SISTEMAS AVANZADOS DE CONTROL C/ ESTUDIO, 3, ARAVACA (MADRID)
The companies excluded from consolidation in 1995 contributed in 1994
losses of approximately Ptas. 255,727,000 to the "Companies Carried by the
Equity Method" caption and approximately Ptas. 96,406,000 of results.
Page 15 of 49
NOTE 4. VALUATION STANDARDS
The valuation criteria used by the Company were as follows:
A) Standardization of items.
The financial statements of the individual companies have been
formulated following homogeneous accounting principles. For those
companies where different principles have been used, the corresponding
adjustment was done in the process of consolidation, in order to
present the annual consolidated accounts on a homogeneus basis.
B) Adjustment of balance sheets of foreign companies.
The items in the balance sheet and income statement of foreign companies
are adjusted, before being translated to pesetas, for the effects of the
changes in prices, in accordance with the rules applicable for these
purposes in the country where the foreign company is located.
C) Translation methods (year-end exchange rates)
The financial statements of the foreign Group companies were translated
to pesetas at the exchange rates ruling at year-end (December 31, 1995
and 1994), except for:
1. Capital stock, which was translated at historical exchange rates.
2. Reserves, which were translated at the average exchange rates in
the years in which they arose.
3. Income statement balances, which were translated at the average
exchange rates for the year.
The exchange difference arising from application of this method is
included under the "Shareholder's Equity - Translation Differences"
caption in the accompanying consolidated balance sheets, net of the
portion relating to minority interests, which is presented under the
"Minority Interests" caption of the accompanying consolidated balance
sheets.
D) Tangible fixed assets
Tangible fixed assets are recorded at cost. Expenditures for
repairs and maintenance are charged to expenses as incurred.
Expenditures for betterment's and major improvements are capitalized.
The Companies depreciate its tangible fixed assets by the
straight-line method at rates based on the following years of
estimated useful life:
Years of Estimated
ASSET Useful Life
Buildings and other structures (brand new assets) 50
Buildings and other structures (second hand assets) 25
Machinery 7
Tools 3
Vehicles 7
Furniture 10
Computer hardware 4
Meter-reading equipment 10
Installations 14
Page 16 of 49
E) Other loans granted
The balance of the "Financial Investments - Other Loans" caption
relates basically to Sintelar's long-term receivables from its
customer Telecom.
F) Inventories
Inventories (raw materials and other supplies) are valued at the
lower of average cost or market. "Work-in-Process" and "Completed
Work" are carried at cost of the allocated items (mainly direct labor
and outsourced services)
Obsolete, defective and slow-moving inventories have been reduced
to net realizable value.
G) Subsidies
Operating subsidies are credited to the statement of operations in the
year in which they are granted. The subsidies granted in 1995 and 1994
relate basically to social security allowances for training courses.
H) Liability for pensions
In 1990 the Parent Company Sintel, S.A. reached an agreement with
its employees in connection with the pension commitments established
by the collective labor agreement and the internal regulations. Under
this agreement, a pension plan was set up at Gestion de Prevision y
Pensiones, S.A. (Argentaria). The Company undertook to make annual
contributions of 2.384% of the fixed compensation (2% for employees
who joined the Company after November 4, 1990).
The liability registered by the Company as of December 31, 1990, to
cover all the liabilities incurred in this regard at that date,
amounted to approximately Ptas. 2,133,521,000, based on the
calculations by independent actuaries, using individual capitalization
techniques and an assumed interest of 6%. Under the financial
rebalancing plan set up with Gestion de Prevision y Pensiones, S.A.
(Argentaria), approximately Ptas. 470,000,000 were contributed to this
Company in 1990, and the remaining amounts incurred at that date and
the related interest were to be paid over 33 years, as agreed in the
plan.
Contributions to the fund in 1995 amounted to approximately Ptas.
81,684,000 (approximately Ptas. 78,542,000 in 1994), in accordance
with the financial rebalancing plan mentioned above, and approximately
Ptas. 53,875,000, to cover the unamortized amounts for past services
of employees who left the Company due to retirement, disability or
death in 1995.
Additionally, Ptas. 106,838,000 have been recorded to cover the
financial expenses due to the amounts pending to be paid to Gestion de
Prevision y Pensiones, S.A. for the past services.
Approximately Ptas. 178,813,000 were paid in 1995 (Ptas.
190,349,000 in 1994) and recorded under "Personnel Expenses" relating
to current obligations for the year.
Page 17 of 49
I) Other provisions for contingencies and expenses
This relates to the estimated amount required for probable or certain
third-party liability arising from litigation in progress or from
outstanding indemnity payments or obligations of undetermined amount,
and guarantees provided by the Company. This provision is recorded
when the contingency or obligation giving rise to the indemnity or
payment arises.
J) Extraordinary long-service bonus
Under the collective labor agreement in force, the Parent Company
Sintel, S.A. is required to pay an extraordinary bonus equal to one
month's current salary to employees reaching 25 years of uninterrupted
service at the Company. As of December 31, 1995, the Company had
recorded a provision of approximately Ptas. 245,196,000 for the
liability incurred in this connection through that date, which is
included under the "Accrued liabilities long term" caption on the
accompanying balance sheet. As of December 31, 1994, the Company had
recorded a provision of approximately Ptas. 230,657,000 in this
connection.
K) Corporate income tax
The expense for corporate income tax of each year is calculated
on the basis of book income before taxes, increased or decreased, as
appropriate, by the permanent differences from taxable income, net of
tax relief and tax credits. The corporate income tax expense was
recorded taking into account, where applicable, the resolutions
adopted by Telefonica based on the ICAC resolution dated April 30,
1992, establishing the criteria for the recording of corporate income
tax at companies which file consolidated tax returns.
Prepaid taxes are only recognized in assets insofar as their
realization in the future is reasonably assured. The tax arising from
the income obtained from sales to Telefonica de Espana, S.A. by the
companies consolidated for tax purposes and pending collection from
third parties is deferred for tax purposes by the Group. The effect of
this deferral, arising from the aforementioned Telefonica
transactions, is recorded under the "Investments - Loans to Telefonica
Group Companies" and "Other Long-Term Payables- Accrued Taxes Payable"
captions.
L) Foreign currency transactions
Foreign currency balances are translated to pesetas at the
exchange rates ruling at the balance sheet date. Exchange losses are
charged to period income. Exchange gains are credited to income when
they arise. At December, 31 1995, 1994 and 1993 no significant
exchange gains are pending to be recorded.
M) Recognition of revenue and expenses
Revenue and expenses are recognized on an accrual basis. In accordance with
the accounting principle of prudence, the Company only records realized
income at year-end, whereas foreseeable contingencies and losses,
including possible losses, are recorded as soon as they become known.
Page 18 of 49
Revenues from projects taking over one year are valued by adding to
the cost incurred the expected profit margin, which is calculated on
the basis of the percentage of completion of the project
proportionally between the estimated cost and the contractual selling
price. If the difference between the resulting value and the billings
made is positive, it is recorded in the "Customer Receivables -
Unissued Billings" account under the "Accounts Receivable - Customer
Receivables" and "Accounts Receivable - Receivable from Group
Companies" captions. If the difference is negative, the excess
billings are recorded under in the "Customer Advances" account under
the "Trade Accounts Payable- billings in excess of costs" caption.
The result on the scaled projects of the Telecommunication Networks
division is estimated on the basis of the monthly percentage of
completion and the sale price agreed upon with Telefonica de Espana,
S.A. (under general agreements). The completed work not yet billed to
Telefonica is included under the "Receivable from Group Companies -
Receivable from Group Companies for Accrued Billings" caption.
The "Customer Receivables - Unissued Billings" caption also includes
the balances, valued at selling price, of services rendered and
pending final billing. If losses are expected, the related provisions
are recorded for their full amount.
N) Termination indemnities
Under current labor regulations, Sintel, S.A. is required to make
indemnity payments to employees terminated under certain conditions.
As of December 31, 1995, management of Sintel, S.A. had reached an
agreement with the workers' representatives in connection with the
early retirement of 35 employees in the period 1996 through 1999. A
provision of approximately Ptas. 529,524,000 was recorded in 1995 in
this connection, under the caption "Personnel expenses" in the
accompanying statement of operations.
NOTE 5.- HOLDINGS IN COMPANIES CARRIED BY THE EQUITY METHOD
The movements in 1995 in this caption in the accompanying consolidated
balance sheets were as follows:
In thousands of pesetas
Balance Transfer to Attribution of Share in Balance
at Consolidated Dividends Losses to Translation Income for at
12/31/94 Additions Companies Sales Suppl 95 Interim 95 Shareholders Differences the year 12/31/95
Contronic 44,043 0 (44,043) 0 0 0 0 0 0 0
Incosa 71,997 0 (71,997) 0 0 0 0 0 0 0
S.A.C. 107,686 0 0 (107,686) 0 0 0 0 0 0
Servicios 2.000 0 0 0 0 0 0 4,768 0 (6,103) (3,604)
Sietel 191,075 0 0 0 (180,253) (54,007) 0 (3,331) 287,743 241,227
AIE Sinaben 0 1,000 0 0 0 0 0 0 306 1,306
- ------------------------------------------------------------------------------------------------------------------------------------
Total 412,532 1,000 (116,040) (107,686) (180,253) (54,007) 4,768 (3,331) 281,946 238,929
====================================================================================================================================
Page 19 of 49
NOTE 6. TANGIBLE FIXED ASSETS
The movements in 1995 in fixed asset accounts and in the related
accumulated depreciation were as follows:
A) VARIATIONS IN FIXED ASSETS (COST)
In thousands of pesetas
Increase Exchange
Balance Retire- (Decrease) Rate Balance
at Additions ments by Variation at
12/31/94 Transfer 12/31/95
Land and buildings 690,625 25,255 - 6,371 - 722,251
Technical
installations
and machinery 998,091 70,532 (147,291) (23,637) (9,514) 888,181
Furniture 422,443 14,236 (1,500) 15,741 (8,091) 442,829
Computer hardware 817,619 59,413 (329,326) 12,786 (1,140) 559,352
Tools 997,039 72,680 (30,788) 31,357 (4,368) 1,065,920
Vehicles 1,360,075 21,414 (70,780) 72,975 (19,395) 1,364,289
Meter-reading
equipment 1,492,365 207,595 (305,940) 13,941 (7) 1,407,954
- ------------------------------------------------------------------------------
Total 6,778,257 471,125 (885,625) 129,534 (42,515) 6,450,776
==============================================================================
B) MOVEMENTS IN ACCUMULATED DEPRECIATION
In thousands of pesetas
Balance Increase Exchange Balance
at Amounts (Decrease) Rate at
12/31/94 Provisions Used by Variation 12/31/95
Transfer
Land and buildings 86,782 10,461 - 1,146 - 98,389
Technical
installations
and machinery 500,103 99,377 (83,214) (7,296) (4,375) 504,595
Furniture 250,876 41,224 (896) 5,949 (2,249) 294,904
Computer hardware 663,490 43,803 (273,346) 5,393 (1,454) 437,886
Tools 891,808 65,415 (26,829) 22,531 (2,456) 950,469
Vehicles 945,965 143,644 (27,314) 53,975 (6,772) 1,109,498
Meter-reading
equipment 923,113 162,846 (298,458) 68,935 (6,243) 850,193
- ------------------------------------------------------------------------------
Total 4,262,137 566,770 (710,057) 150,633 (23,549) 4,245,934
==============================================================================
In 1995 Sintel, S.A. reorganized its work centers. As a result, as of
December 31, 1995, assets with a cost value of approximately Ptas. 677,655,000
and accumulated depreciation of approximately Ptas. 92,174,000 were not directly
assigned to operations. The depreciation of these assets charged to the "Period
Depreciation and Amortization - Tangible Fixed Assets" caption in 1995 amounted
to approximately Ptas. 9,568,000.
Page 20 of 49
Company's management plan to rent or sale these assets to third parties.
The items which were fully depreciated as of December 31, 1995 and 1994,
were as follows:
In thousands of pesetas
1995 1994
Technical installations and machinery 100,260 142,673
Furniture 96,083 96,274
Computer hardware 328,352 385,425
Tools 835,551 840,954
Vehicles 435,953 440,841
Meter-reading equipment 357,749 378,782
---------- ----------
Total 2,153,948 2,284,949
Projected investments (including financial investments) for 1996 at Sintel,
S.A. amount to approximately Ptas. 310,000,000.
The Parent Company and the Group have taken out insurance policies to cover
the possible risks to which their tangible fixed assets are subject.
NOTE 7.- FINANCIAL INVESTMENTS
The movements in 1995 in "Financial Investments" accounts and in the related
provisions were as follows:
A) VARIATIONS IN GROSS FINANCIAL INVESTMENTS :
In thousands of pesetas
Balance Exchange Balance
at at
12/31/94 Investments Divestments Transfer Adjustment 12/31/95
Holdings carried
by the equity
method 412,532 293,817 (467,420) - - 238,929
Other holdings 256,289 152 (60) (246,449) - 9,932
Loans to group
companies 2,134,122 1,340,961 (1,420,578) (19,060) - 2,035,445
Other loans 672,233 164,099 (186,529) 256,656 (78,987) 827,472
Tax prepayments 661,468 202,925 (24,900) - - 839,493
Deposits and
guarantees 57,580 16,437 (27,241) (10,207) - 36,569
- -------------------------------------------------------------------------------
Total 4,194,224 2,018,391 (2,126,728) (19,060) (78,987) 3,987,840
===============================================================================
The transfer of approximately Ptas. 246,449,000 in 1995 from "Other
Holdings" was due to the fact that the long-term loans from Sintelar to the
temporary joint ventures in which it participates were transferred in 1995 to
the "Other Loans" caption.
Page 21 of 49
The 1995 divestments in the "Loans to Group Companies" caption amounting to
Ptas. 1,420,578,000 relate to collections made in 1995 under the supplementary
contract with Telefonica de Espana, S.A. (Ptas. 200,940,000) and in connection
with collections arising from this Company due to the long-term tax credit
(Ptas. 1,219,638,000).
The detail, by type of transaction, of the long-term loans to group
companies is as follows:
In thousands of pesetas.
1995 1994
Receivable from Telefonica for long-term
tax credit 581,155 1,216,644
Receivable from Telefonica for long-term
internal transactions 1,454,290 694,484
Receivable from Telefonica for long-term
consolidated taxation - 3,094
Receivable from Telefonica under
supplementary contract - 220,000
--------- ---------
TOTAL 2,035,445 2,134,222
========= =========
B) MOVEMENTS IN FINANCIAL INVESTMENT PROVISIONS :
In thousands of pesetas
Balance Amounts Balance
at at
12/31/94 Provisions Used Transfers 12/31/95
Prepaid taxes (Note 15) 582,232 - - - 582,232
(Nota 15)
Other companies 69 22,576 - - 22,645
- ------------------------------------------------------------------------------
Total 582.301 22,576 - - 604,877
==============================================================================
The provisions relate to those recorded by Sintelar.
NOTE 8. INVENTORIES
The breakdown of the balances of the Group's "Inventories" caption as of
December 31, 1995 and 1994, is as follows:
In thousands of pesetas
1995 1994
Raw materials and other supplies 305,782 412,781
Work-in-process 2,360,648 2,226,440
Completed work 489,909 423,966
Allowance (51,155) (58,492)
Advances to suppliers 851,522 1,200,751
---------- ----------
TOTAL 3,956,706 4,205,446
========== ==========
Page 22 of 49
NOTE 9. ACCOUNTS RECEIVABLE
The balances as of December 31, 1995 and 1994, are as follows:
In thousands of pesetas
1995 1994
Customer receivables 3,585,674 8,538,227
------------ ------------
Customer receivables 3,509,301 5,294,665
Customer receivables for accrued billings 76,373 3,243,562
Receivable from Group companies,Telefonica 21,269,306 16,116,345
------------ ------------
Receivable from Group companies (Note 18) 20,810,257 15,742,644
Receivable from Group companies
for accrued billings (Note 18) 459,049 373,701
Receivable from associated companies,
Telefonica Group (Note 18) 3,040,219 -
Receivable from associated companies,
Sintel Group (Note 18) 3,391 17,326
Sundry accounts receivable 423,664 715,592
Employee receivables 209,904 211,794
Tax receivables 359,860 512,689
Allowances for doubtful accounts (577,600) (781,536)
----------- -----------
TOTAL 28,314,418 25,330,437
Page 23 of 49
NOTE 10. SHAREHOLDER'S EQUITY
The movements in equity accounts in 1995 and 1994 were as follows:
In thousands of pesetas
Allocation of Loss
----------------------------------
Other Distribution Transfer Transfer
Reserves of Dividends due to due to
of the Reserves at within Changes Sales Balance
Balance at Other Controlling Consolidated Gross the Loss for in of at
12/31/94 Variations Company Companies Dividends Group the Year Holdings Holdings 12/31/95
Subscribed capital
stock 1,100,000 2,000,000 - - - - - - - 3,100,000
Unrestricted reserve 4,253,434 - - - - - - - (191,100) 4,062,334
Legal reserve 220,000 - - - - - - - - 220,000
Restricted reserve 101,190 - - - - - - - - 101,190
Prior years' losses (2,829,437) (23,000) (1,315,222) - (158,490) 202,671 - - - (4,123,478)
Reserves at companies
consolidated by the
global method 534,973 (47,744) - 356,300 - (22,417) - 62,315 - 883,427
Reserves at
companies carried by
the equity method (185,732) 3,124 256,838 162,764 (78,407) (180,254) - (62,315) - 11,313
Translation
differences in
consolidation 19,997 (47,398) - - - - - - - (27,401)
Loss for the year (776,217) - 776,217 - - - (1,983,509) - - (1,983,509)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 2,438,208 1,884,982 (282,167) 519,064 (236,897) - (1,983,509) - (95,805) 2,243,876
===================================================================================================================================
Page 24 of 49
Allocation of Loss
----------------------------------
Other Distribution Transfer Transfer
Reserves of Dividends due to due to
of the Reserves at within Changes Sales Balance
Balance at Other Controlling Consolidated Gross the Loss for in of at
12/31/93 Variations Company. Companies Dividends Group the Year Holdings Holdings 12/31/94
Subscribed capital
stock 1,100,000 - - - - - - - - 1,100,000
Unrestricted reserve 4,061,243 1,091 191,100 - - - - - - 4,253,434
Legal reserve 220,000 - - - - - - - - 220,000
Restricted reserve 101,190 - - - - - - - - 101,190
Prior years' losses 337,251 - (2,987,927) - (337,251) 158,490 - - - (2,829,437)
Reserves at companies
consolidated by the
global method 1,479 1,143 90 532,261 - - - - - 534,973
Reserves at
companies carried by
the equity method 229,340 (145,811) 36,306 (11,245) (158,490) - - - - (185,732)
Translation
differences in
consolidation 19,997 (47,398) - - - - - - - 19,997
Loss for the year (2,712,498) - 2,712,498 - - - (776,217) - - (776,217)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL 3,403,628 (189,203) (47,933) 521,016 (473,083) - (776,217) - - 2,438,208
===================================================================================================================================
As of December 31, 1995, the Company's capital stock consisted of 3,100,000
fully subscribed and paid registered shares of Ptas. 1,000 par value each. As of
December 31, 1994, the capital stock consisted of 1,100,000 fully subscribed and
paid registered shares of Ptas. 1,000 par value each. The capital increase
carried out in 1995 is in the process of registration in the Commercial
Register.
The companies and individuals outside the Group or related to Sintel, S.A.
through common shareholders with an ownership interest of 10% or more in any
Group company are as follows:
December 31, 1995
Shareholders Investee Percentage of
Ownership
T. Internacional Sintelar 25
C.H.S. Sintelar 25
T. Internacional Sintel Peru 25
Grana y Montero Sintel Peru 37
Antonio Soto Incosa 16.3
Jose Doval Incosa 16.3
Antonio Di Lello Cotronic 26
Gines Ramis Cotronic 12.5
Julio J. Rodriguez Cotronic 10.5
Iecsa-Sideco Sietel 50
Abengoa Servicios 2.000 50
Abengoa Sinaben M. 50
Page 25 of 49
Under the Corporations Law, as amended, 10% of income for each year must be
transferred to the legal reserve until the balance of this reserve reaches at
least 20% of capital stock.
The legal reserve can be used to increase capital provided that the
remaining reserve balance does not fall below 10% of the increased capital stock
amount.
Except as mentioned above, until the legal reserve exceeds 20% of capital
stock, it can only be used to offset losses, provided that sufficient other
reserves are not available for this purpose.
The breakdown of the reserves, and loss for the year relating to the Group
of consolidated companies, and translation differences is as follows at
December 31, 1995:
In thousands of pesetas
Reserves At Reserves at
Companies Companies
Consolidated Carried by Income
By The the (Loss) Translation
Global Method Equity Method for the Year Differences
Sintel - - (2,328,070) -
Sintelar 857,314 - (81,875) (36,799)
Sietel - 11,313 287,743 (3,874)
Sintel Venezuela (40,944) (28,899) 13,315
Sintel Peru (11,948) - 103,055 (43)
Servicios 2.000 (6,102) -
Cotronic 29,908 - 29,407 -
Incosa 49,097 - 40,926 -
Inalca - - - -
S.A.C. - - - -
Sinaben - - 306 -
- -----------------------------------------------------------------------------
TOTAL 883,427 11,313 (1,983,509) (27,401)
=============================================================================
The variations in the number of shares and in their par value are as follows:
Thousands of Shares
Number of shares registered 12/31/93 12/31/94 12/31/95
Beginning balance 1,100 1,100 1,100
New shares issued - - 2,000
------- ------- -------
Ending balance 1,100 1,100 3,100
In pesetas
12/31/93 12/31/94 12/31/95
Par value of the shares at the
end of the year 1,000 1,000 1,000
Page 26 of 49
NOTE 11. MINORITY INTERESTS
The movements in 1995 in this caption in the accompanying consolidated
balance sheets were as follows (in thousands of Pesetas):
Balance (Loss) Change Balance
at Income for in Translation Other at
12/31/94 the Year Holding Differences Variations 12/31/95
Sintelar 878,595 (81,875) - (51,367) (1,551) 743,802
Sintel Peru 92,481 168,143 - (4,742) (29,844) 226,038
Cotronic - 28,254 39,688 - - 67,942
Incosa - 39,164 54,735 - - 93,899
- -------------------------------------------------------------------------------
Total 971,076 153,686 94,423 (56,109) (31,395) 1,131,681
===============================================================================
The breakdown of the balance of the "Minority Interests" caption as of
December 31, 1995, is as follows (in thousands of Pesetas):
Translation (Loss) Income
Capital Stock Reserves Differences for the Year Total
Sintelar 5,163 857,314 (36,800) (81,875) 743,802
Sintel Peru 77,459 (19,495) (69) 168,143 226,038
Cotronic 4,900 34,788 - 28,254 67,942
Incosa 4,890 49,845 - 39,164 93,899
- ----------------------------------------------------------------------------
TOTAL 92,412 922,452 (36,869) 153,686 1,131,681
============================================================================
NOTE 12. ACCRUED LIABILITIES
The breakdown of the balance of this caption as of December 31, 1995 and
1994, is as follows:
In Thousands of Pesetas
Amounts
1994 Provisions Used 1995
For third-party liability 292,548 91,087 (64,402) 319,233
For early retirements - 379,496 - 379,496
For asset/liability
position contingencies 179,572 - (79,572) 100,000
Liability for pensions 1,780,634 106,838 (135,558) 1,751,914
Extraordinary long-
service bonus 230,658 18,996 (4,458) 245,196
- ------------------------------------------------------------------------------
Total 2,483,412 596,417 (283,990) 2,795,839
==============================================================================
Page 27 of 49
NOTE 13. BONDS OUTSTANDING
The detail of the debentures outstanding as of December 31, 1995, and of the
main features thereof is as follows (in thousands of Pesetas):
Issue Par Effective
Date % Value Amount Redemption
05/31/89 12.25 2,000,000 2,021,874 1996
The accrued interest payable amounted to approximately Ptas. 22,357,000 in
1995 and Ptas. 22,500,000 in 1994. Therefore, the balance outstanding amounted
to approximately Ptas. 2,044,231,000 in 1995.
NOTE 14. PAYABLE TO BANKS ENTITIES AND PAYABLE TO GROUP AND ASSOCIATED COMPANIES
14.1 These accounts are classified in the balance sheet by maturity. The
balances as of December 31, 1995 and 1994, are as follows (in thousands of
Pesetas):
a) Long-term
1995 1994
Loans from Telefonica Group (Telfisa) 7,909,237 10,209,194
Long-term debt to Sintel Group - 65,339
------------ ------------
Total Payable to Group and Associated
Companies 7,909,237 10,274,533
============ ============
These balances relate to the financing received from Telfisa (a Telefonica
Group Company), by virtue of the long-term financing contract entered into in
1993, at market rates with interest ranging from 8.87% to 10.22%.
The loan from Telfisa matures on November 2, 1996. However, the Company
records it at long-term since there is an agreement to automatically renew it at
maturity.
Page 28 of 49
The detail of the balance of the long-term "Payable to Banks" caption as of
December 31, 1995, which amounted to approximately Ptas. 175,762,000, is as
follows:
In Thousands of Pesetas
Principal
Outstanding Unused
Bank Maturity Limit or Balance Balance
Used
INCOSA :
Banco de Galicia 05/18/97 25,000 24,739 261
Banco de Galicia 05/18/97 135,000 77,600 57,400
Bankinter Indefinite 50,000 45,744 4,256
COTRONIC :
Loan from Unicaja 01/16/99 73,000 27,679
--------- --------- --------
Total 283,000 175,762 61,917
========= ========= ========
b) Short-term
In Thousands of Pesetas
1995 1994
Loans received by:
Sintel 2,410,841 4,331,825
Sintelar 905,513 -
Cotronic 151,038 -
Incosa 221,322 -
Sintel Peru 68,422 -
----------- -----------
3,757,136 4,331,825
=========== ===========
Page 29 of 49
c) Credit and discount lines
As of December 31, 1995, the Sintel Group had the following credit and
discount lines, with the limits and unused amounts detailed below:
Credit In Thousands of Pesetas
facilities
Principal
Outstanding
Maturity Limit Or Balance Unused
Used Balance
SINTEL :
Atlantico 01/05/96 1,000,000 260,385 739,615
Andalucia 01/18/96 500,000 458,981 41,019
Bankinter 06/06/96 2,500,000 554,223 1,945,777
Barclays 06/10/96 1,000,000 695,756 304,244
Popular Espanol 06/22/96 500,000 450,973 49,027
Urquijo - - (9,477) 9,477
INCOSA :
Credit Lyonnais 10/19/96 25,000 (7,522) 32,522
B.B.V. 09/12/96 35,000 32,486 2,514
Banco Gallego 01/05/96 15,000 3,724 11,276
Banco Simeon 10/18/96 25,000 24,331 669
Bankinter 11/07/96 25,000 23,715 1,285
Credit Lyonnais 10/19/96 85,000 71,669 13,331
B.B.V. 09/15/96 150,000 46,546 103,454
Banco Gallego 01/30/96 35,000 5,709 29,291
Banco Simeon 10/18/96 50,000 19,928 30,072
Slibail Iberica, S.A. 07/16/96 - 736 -
(Leasing) - - - -
COTRONIC:
Loan from Unicaja - - 9,231 -
Banco Herrero 02-04-96 50,000 42,875 7,125
Banco Atlantico 10-06-96 100,000 98,932 1,068
SINTELAR:
Citibank 07-25-96 449,358 449,358 -
Bansud 07-14-96 456,155 456,155 -
SINTEL PERU :
Extebandes Indefinite 242,820 68,422 174,398
----------- ----------- -----------
Total 7,243,333 3,757,136 3,496,164
=========== =========== ===========
The average annual interest on these credit facilities was 10.13% in 1995
(8.70% in 1994) for the Parent Company.
The financial expenses accrued and payable by the Sintel Group as of
December 31, 1995, amounted to approximately Ptas. 441,963,000, of which Ptas.
154,764,000 related to interest payable to credit entities and Ptas. 287,199,000
to interest payable to Telefonica group companies, and are included under the
short-term "Payable to Telefonica Group Companies" caption.
Page 30 of 49
As of December 31, 1994, these financial expenses amounted to approximately
Ptas. 347,798,000, of which Ptas. 131,083,000 related to interest payable to
credit entities and Ptas. 216,624,000 to interest payable to group companies,
and are included under the short-term "Payable to Telefonica Group and
Associated Companies" caption.
NOTE 15. ACCRUED TAXES PAYABLE, TAX RECEIVABLES AND PREPAID TAXES
The breakdown of these captions as of December 31, 1995 and 1994 is as follows:
In Thousands of Pesetas
1995 1994
Long-term accrued taxes payable and other :
Deferred taxes on intragroup transactions 1,454,290 712,450
----------- ---------
Total long-term accrued taxes payable 1,454,290 712,450
=========== =========
In Thousands of Pesetas
1995 1994
Short-term accrued taxes payable and other :
Personal income tax withholdings 228,381 211,685
VAT payable 681,891 941,359
Withholdings from income from financial capital
and other 143,277 307,660
Accrued social security taxes 313,604 362,650
Taxes payable abroad 127,869 72,690
Other government entities 838 3,748
Canary Islands general indirect tax 2,336 7,128
---------- ----------
Total short-term accrued taxes payable 1,498,196 1,906,920
========== ==========
In Thousands of Pesetas
1995 1994
Tax prepayments and other long-term items :
Prepaid taxes 839,493 661,468
Allowances (582,232) (582,232)
--------- ---------
Total prepaid taxes net 257,261 79,236
========= =========
In Thousands of Pesetas
1995 1994
Short-term tax receivables and other:
Prepaid taxes on intragroup transactions 10,041 10,041
Social security receivables 11,461 9,465
Sundry tax receivables (international) 338,209 493,183
Tax withholdings and prepayments 149 -
--------- --------
Total short-term tax receivables 359,860 512,689
========= ========
Page 31 of 49
NOTE 16. TAX MATTERS
By Ministerial Order dated July 27, 1993, the Directorate-General of Taxes
authorized Telefonica de Espana, S.A. to extend its consolidated taxation status
for corporate income tax purposes for 1993, 1994 and 1995, as group number
24/90, which includes the Parent Company Sintel, S.A. from 1990. This
authorization is conditional upon compliance with the requirements stipulated by
current legislation (Royal Decree 15/1977 and Law 18/1982).
As a result of application of the consolidated taxation system, the
individual credits and debits of Sintel, S.A. for corporate income tax purposes
are included in Telefonica de Espana, S.A.
The Parent Company has the following years open for review by the tax
inspection authorities for the main taxes applicable to it :
Tax Years
Corporate income tax 1993 and subsequent years
Local taxes 1991 and subsequent years
Personal income tax withholdings 1993 and subsequent years
VAT 1993 and subsequent years
Transfer tax 1990 and subsequent years
Withholdings from income from movable capital 1993 and subsequent years
The remaining consolidated Group companies have the last five years open
for review by the tax inspection authorities for all taxes applicable to them.
NOTE 17. GUARANTEE COMMITMENTS TO THIRD PARTIES AND OTHER CONTINGENT LIABILITIES
Sintel, S.A. and the Group have provided guarantees for third parties to
finance entities, government agencies, etc., basically to back project
completion, as follows :
Thousands of Pesetas
12/31/95 12/31/94
Group companies 89,830 233,068
Associated and multigroup companies 1,407,316 70,366
Other guarantees 1,387,451 4,613,681
The SIEMENS-SINTEL-PAGE joint venture and the SINTEHMAGREB joint venture
have provided guarantees to customers for project completion amounting to
approximately Ptas. 1,239,271,000 and Ptas. 437,348,000, respectively. The
Parent Company is jointly and severally liable for the guarantees provided in
proportion to its holdings (27.3% and 50.0%, respectively).
Management of the consolidated companies considers that the unforeseen
liabilities, if any, as of December 31, 1995, which might arise from the
guarantees provided would not be material.
Page 32 of 49
NOTE 18. REVENUES AND EXPENSES
18.1 The breakdown of the Consolidated Group's ordinary net sales is as follows:
In Thousands of Pesetas
Geographical market 1995 1994 1993
Spain 31,469,416 28,669,295
Venezuela 379,935 110,827
Argentina 12,477,556 14,536,616
Peru 2,704,981 138,972
---------------------------------------
Total 47,031,888 43,455,710 46,676,818
=======================================
Page 33 of 49
18.2 Transactions with Group companies
The transactions carried out in 1994 and 1995 with Telefonica de Espana,
S.A., the Telefonica Group companies and the Company's investees, and the
balances as of December 31, 1995 and 1994, are as follows:
1995
In Thousands of Pesetas
Receivables
from Group Short-Term Long-Term Notes
Work-in- Receivables Companies Short-Term Long-Term Payables Payables Payable
Process and from for Loans to Loans to to to Billings to
Completed Group Accrued Group Group Group Group in excess Group
Work Companies Billings Companies Companies Companies Companies of cost Companies
TELEFONICA 923,453 8,244,311 (75,858) 407,513 2,035,455 140,120 - 1,281,829 -
----------- ----------- -------- --------- ---------- --------- ---------- ----------- -------
TELEFONICA GROUP
DEPENDENT COMPANIES: 314,561 12,565,946 534,907 - - 318,955 7,909,237 26,058 1,307
----------- ----------- -------- --------- ---------- --------- ---------- ----------- -------
CABITEL - - - - - 13 - - -
ESTRATEGIAS TELEFONICAS - 33 - - - - - 28 -
MAPTEL - - - - - - - - -
TELFISA - 10,022,668 - - - 287,199 7,909,237 - -
T. SERV. MOV. 253,598 1,685,520 476,595 - - - - 25,382 909
T.S.I.P. 46,990 124,235 2,254 - - 1,651 - - -
T.S.S. - - - - - 29,953 - - 398
T.S.A.I. 118 282 - - - - - 165 -
TELEFONICA INTERN. DE ESPANA 85 533 - - - - - 459 -
TELEFONICA SISTEMAS, S.A. 13,755 884 - - - 139 - - -
CPT PERU - 730,036 56,058 - - - - - -
PLAYA DE MADRID - 257 - - - - - - -
TELEF. MULTIMEDIA - 1,470 - - - - - - -
MENSATEL 15 28 - - - - - 24 -
TELEFONICA GROUP
ASSOCIATED COMPANIES: - 3,040,219 - - - - - - -
----------- ----------- -------- --------- ---------- --------- ---------- ----------- -------
TELEFONICA ARGENTINA - 3,040,219 - - - - - - -
SINTEL GROUP
DEPENDENT COMPANIES: 15,382 - - - - - - - -
----------- ----------- -------- --------- ---------- --------- ---------- ----------- -------
SINTEL - PERU 4,100 - - - - - - - -
SINTELAR 11,282 - - - - - - - -
SINTEL GROUP
ASSOCIATED COMPANIES: 505 3,391 - 90,734 - - - - -
----------- ----------- -------- --------- ---------- --------- ---------- ----------- -------
SINABEN 505 3,391 - - - - - - -
SIETEL - - - 90,734 - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total 1,253,901 23,853,867 459,049 498,247 2,035,445 459,075 7,909,237 1,307,887 1,307
==================================================================================================================================
Page 34 of 49
1995
In Thousands of Pesetas
Expenses Revenues
Work Outside Interest Other Current Financial
Purchases Performed Services Payable on Sales Operaing Revenues
from by from Debt to to Revenues from
Group Group Group Group Group from Group Group
Companies Companies Companies Companies Companies Companies Companies
TELEFONICA 363 55 337,735 12,379 25,408,523 - 30,408
----------- ----------- -------- --------- ----------- --------- ---------
TELEFONICA GROUP
SUBSIDIARIES: 88,933 2,102 268,375 935,648 5,432,698 9,688 -
----------- ----------- -------- --------- ----------- --------- ---------
TELEFONICA INTERNACIONAL - - 952 - 1,598 - -
ANTARES - - 166,866 - - - -
PLEYADE INDUSTRIAL - - 84,126 - - - -
CABITEL - 749 - - - - -
ESTRATEGIAS TELEF. - - - - 1,369 - -
MAPTEL - - - - 5,613 - -
CPT - PERU - - - - 3,131,062 - -
PLAYA MADRID - - 13,033 - 221 - -
MENSATEL - - 2,824 - - - -
ST & HILO - - 154 - - - -
T.S.I.P. 1,624 - - - 186,015 - -
T.S.A.I. - - 420 - 78 - -
TELEFONICA SISTEMAS, S.A. 240 - - - 7,590 - -
TELFISA - - - 935,648 - - -
TELYCO, S.A. 1,301 440 - - - - -
TSM - - - - 2,099,021 - -
TSS 85,768 685 - - - - -
TSC - 228 - - - - -
TS- MULTIMEDIA - - - - 131 9,688 -
- -------------------------------------------------------------------------------------------------------------
Total 89,296 2,157 606,110 948,027 30,841,221 9,688 30,408
=============================================================================================================
Page 35 of 49
1994
In Thousands of Pesetas
Receivables
from Group Short-Term Long-Term Notes
Work-in- Receivables Companies Short-Term Long-Term Payables Payables Payable
Process and from for Loans to Loans to to to Billings to
Completed Group Accrued Group Group Group Group in excess Group
Work Companies Billings Companies Companies Companies Companies of cost Companies
TELEFONICA 1,107,137 9,064,060 366,715 2,675,053 2,134,122 3,176 - 1,453,400 -
----------- ----------- -------- --------- ---------- --------- ---------- ----------- -------
TELEFONICA GROUP
DEPENDENT COMPANIES: 38,180 6,678,584 6,986 780 - 218,047 10,209,194 5,418 9,494
----------- ----------- -------- --------- ---------- --------- ---------- ----------- -------
CABITEL - - - - - 762 - - -
ESTRATEGIAS TELEFONICAS - 538 - - - - - - -
MAPTEL - 19,626 - - - - - 5,418 5,559
TELFISA - 6,248,862 - - - 216,624 10,209,194 - -
T. SERV. MOV.(TS-1) 8,710 69,874 - - - - - - -
T.S.I.P. 10,654 334,696 6,986 - - - - - -
T.S.S. - - - - - - - - 3,250
T.S.A.I. - - - - - - - - 77
TELEFON.INTER. DE ESPANA, S.A. - - - - - - - - 547
TELEFONICA SISTEMAS, S.A. 18,816 4,988 - 780 - 203 - - -
TELYCO - - - - - 458 - - 61
SINTEL GROUP
DEPENDENT COMPANIES: - - - 3,114 - 13,711 65,339 - -
SINTELAR - - - - - 813 - - -
SINTEL VENEZUELA - - - - - - 65,339 - -
SINTEL PERU - - - 3,114 - 12,898 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,145,317 15,742,644 373,701 2,678,947 2,134,122 234,934 10,274,533 1,458,818 9,494
===================================================================================================================================
In Thousands of Pesetas
Assets Liabilities
Receivable from Short-Term Provisions
Receivable Associated Loans to Payable for
from Companies Advances Associated for Short-Term
Associated for Accrued to Companies Purchases Financial
Companies Billings Suppliers or services Investments
SINTEL GROUP
ASSOCIATED COMPANIES:
COTRONIC, S.A. - - 57,810 - 171,028 -
INALCA, S.A. 14,429 2,851 2,315 - 15,165 -
INCOSA, S.A. - - 75,113 - 208,610 -
SIST. AVANZAD. DE CONTROL, S.A. - - 2,129 307,434 20,217 307,434
SERVICIOS 2.000 A.I.E. 46 - - - - -
- ------------------------------------------------------------------------------------------------------------
Total 14,475 2,851 137,367 307,434 415,020 307,434
============================================================================================================
Page 36 of 49
1994
In Thousands of Pesetas
Expenses Revenues
Work Outside Interest Other Current Financial
Purchases Performed Services Payable on Operating Sales Revenues
from by from Debt to Expenses to from
Group Group Group Group Group Group Group
Companies Companies Companies Companies Companies Companies Companies
TELEFONICA - - - 117,058 323,581 22,037,213 214,743
----------- ----------- -------- --------- ---------- ----------- ---------
TELEFONICA SUBSIDIARIES: 3,625 66,258 108,147 867,877 149,839 761,055 -
----------- ----------- -------- --------- ---------- ----------- ---------
TELEFONICA INTERNACIONAL - - 4,758 - - - -
ANTARES - - - - 120,199 - -
PLEYADE INDUSTRIAL - - 94,510 - - - -
CABITEL - 1,091 - - - - -
ESTRATEGIAS TELEF. - - - - - 817 -
MAPTEL - - - - - 76,185 -
PLAYA MADRID - - - - 29,640 - -
MENSATEL - - 607 - - - -
ST & HILO - - 207 - - - -
T.S.I.P. - - - - - 496,424 -
T.S.A.I. - - 67 - - - -
TELEFONICA SISTEMAS, S.A. - 65,098 7,945 - - 51,954 -
TELFISA - - - 867,877 - - -
TELYCO, S.A. 741 - 53 - - - -
TSM 58 - - - - 131,779 -
TSS 2,826 - - - - 3,896 -
TSC - 69 - - - - -
- ------------------------------------------------------------------------------------------------------------
Total 3,625 66,258 108,147 984,935 473,420 22,798,268 214,743
============================================================================================================
In Thousands of Pesetas
Expenses Revenues
Purchases and Sales and Services
Outside Services Rendered
TELEFONICA GROUP ASSOCIATED COMPANIES: 1,097 447
--------- ---------
ERITEL 450 447
TELECOM. VALLES 647 -
SINTEL GROUP ASSOCIATED COMPANIES: 721,299 34,997
--------- ---------
COTRONIC, S.A. 337,798 -
INALCA, S.A. 28,771 27,111
INCOSA, S.A. 302,229 7,886
SISTEMAS AVANZADOS DE CONTROL, S.A. 52,501 -
--------- ---------
Total 722,396 35,444
========= =========
No bad debt allowance has been recorded in the accompanying balance sheets
as of December 31, 1995 and 1994, for accounts receivable from Group companies.
Page 37 of 49
18.3 Labor force
The detail of the Sintel Group's average number of employees in 1995 and
1994 and of the personnel expenses is as follows:
1995 1994
Managers and graduates 442 448
Nongraduate technicians 699 632
Clerical staff, messengers, etc. 410 407
Manual workers 2,586 2,426
-------- -------
Total 4,137 3,913
======== =======
In Thousands of Pesetas
Personnel expenses 1995 1994 1993
Wages and salaries 11,241,251 12,317,539 12,899,024
Employee welfare expenses 3,305,196 3,375,652 3,609,402
Other personnel expenses 1,830,190 649,684 700,122
------------ ------------ ------------
16,376,637 16,342,875 17,208,548
Lump-sum payment 2,844,651 588,249 2,763,000
Annuity 156,157 - -
------------ ------------ ------------
Termination indemnities 3,000,808 588,249 2,763,000
Relocations 221,925 - -
Processing of terminations for
permanent disability (Medicalia) 77,675 - -
Provision for early retirements 529,524 - -
------------ ------------ ------------
Restructuring cost 3,829,932 588,249 2,763,000
------------ ------------ ------------
Total 20,206,569 16,931,124 19,971,548
============ ============ ============
18.4 The breakdown of the balances of "Extraordinary Expenses and Losses" and
"Extraordinary Revenues" is as follows:
In Thousand of Pesetas
Extraordinary expenses 1995 1994 1993
Tax assessments 58,350 - -
Spanish Employment Institute
(INEM) courses - 11,906 -
Other extraordinary expenses 222,868 161,560 -
------------ ------------ ------------
Total 281,218 173,466 586,673
============ ============ ============
In Thousands of Pesetas
Extraordinary revenues 1995 1994 1993
Refund from insurance company 44,518 - -
Provisions released 92,000 - 10,336
Other extraordinary revenues 208,313 - 38,756
------------ ------------ ------------
Total 344,831 - 49,092
============ ============ ============
Page 38 of 49
The Parent Company continued the labor force restructuring process which
gave rise to the termination with indemnity payments of 413 employees in
1995, at a cost of Ptas. 2,844,651,000, and to the termination of 18
employees with future pension plan commitments amounting to Ptas.
156,157,000.
Also, as of December 31, 1995, management of the Parent Company reached an
agreement with the workers' representatives for the early retirement of 35
employees in 1996 through 1999. A provision of approximately Ptas.
529,524,000 was recorded in 1995 in this connection, of which Ptas.
379,496,000 were included under the "Accrued liabilities - Long term"
caption (see Note 12) and Ptas. 150,028,000 under the "Accruel liabilities
- Short term" caption, based on maturity.
There were 91 terminations with indemnity payments at the Parent Company in
1994, the cost of which amounted to approximately Ptas. 588,249,000.
18.5 Individual company result
The contribution of each consolidated company to the loss for 1995 and 1994
is as follows:
Thousands of Pesetas
1995
Consolidated Income (Loss) Total (Loss)
(Loss) Income Attributed to Income for the
Minority Year
Interests
Sintel (2,337,636) - (2,337,636)
Sintelar (163,750) 81,875 (81,875)
Sietel 287,743 - 287,743
Servicios 2.000 (6,102) - (6,102)
Sintel Venezuela (19,333) - (19,333)
Sintel Peru 271,198 (168,143) 103,055
Cotronic 57,661 (28,254) 29,407
Incosa 80,090 (39,164) 40,926
Sinaben Multimedia 306 - 306
----------- ---------- -----------
Total (1,829,823) (153,686) (1,983,509)
=========== ========== ===========
NOTE 19. OTHER INFORMATION
19.1 Directors' remuneration
The overall remuneration paid to the directors of Sintel, S.A. for
discharging their functions at the various Group and associated companies
amounted to approximately Ptas. 25,972,000 in 1995 and Ptas. 22,359,000 in 1994.
One of the directors of the Parent Company has availed himself, as an
employee of SINTEL, S.A., of the pension plan for SINTEL employees, under the
same conditions as those applicable to other employees. The pension plan
contributions (annual cost) for this director amounted to Ptas. 386,666 in 1995
and Ptas. 383,399 in 1994.
The Parent Company granted no loans to the Board members and provided no
guarantees for them.
Page 39 of 49
19.2 Future prospects
As a result of the extraordinary losses arising from the labor force
restructuring, the Parent Company incurred significant losses in 1995, although
income was obtained from ordinary activities.
Management forecasts for 1996 sustained sales which, together with the
effects of the 1995 restructuring, would enable the Parent Company to return to
a profit-making situation.
However, the Parent Company's business activities and operations largely
depend on its future financial capacity, backed by the financing received
through Telfisa (see Note 14), and on the sales to its major customer and sole
shareholder, Telefonica de Espana, S.A. (see Note 18.2).
NOTE 20. ADDITIONAL INFORMATION
The Sintel Group's consolidated loss for the years ended December 31, 1995,
1994 and 1993, is as follows according with the US GAAP format:
In Thousands of Pesetas
1995 1994 1993
Net sales 47,031,888 43,455,710 46,676,608
Cost of sales (36,743,602) (35,274,388) (38,415,697)
------------ ------------ ------------
GROSS INCOME 10,288,286 8,181,322 8,260,911
General administrative and selling
expenses (7,466,198) (7,452,575) (6,587,120)
Restructuring cost (3,829,932) (588,249) (2,894,000)
------------ ------------ ------------
OPERATING (LOSS) INCOME (1,007,844) 140,498 (1,220,209)
Other revenues (extraordinary and
other) 484,386 298,072 322,440
Other expenses (extraordinary and
other) (230,475) (223,861) (17,872)
------------ ------------ ------------
(LOSS) INCOME BEFORE INTEREST AND
TAXES (753,933) 214,709 (915,641)
Financial revenues 580,448 1,105,130 902,692
Financial expenses (2,477,463) (2,015,091) (2,733,509)
------------ ------------ ------------
INCOME BEFORE TAXES (2,650,948) (695,252) (2,746,458)
Corporate income tax 821,125 252,527 566,213
Income attributed to minority
interests (153,686) (333,492) (532,253)
------------ ------------ ------------
LOSS FOR THE YEAR (1,983,509) (776,217) (2,712,498)
============ ============ ============
Page 40 of 49
Item 7(b) - Pro forma financial information
The unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company as
of March 31, 1996 reflects the financial position of the Company after giving
effect to the April 30, 1996 acquisition of Sistemas e Instalaciones de
Telecomunicacion, S.A. ("Sintel") , a former wholly owned subsidiary of
Telefonica de Espana, S.A. ("Telefonica") as if the Sintel acquisition took
place on March 31, 1996. The unaudited Pro Forma Condensed Consolidated
Statements of Continuing Operations for the fiscal year ended December 31, 1995
and the three months ended March 31, 1996 are presented as if the acquisition
occurred on January 1, 1995 and are based on the results of continuing
operations of the Company and Sintel for the year ended December 31, 1995 and
the three months ended March 31, 1996. The pro forma adjustments include the
sale of certain buildings by Sintel to Telefonica and the repayment by
Telefonica of certain tax credits which occurred on April 1, 1996. These
adjustments along with a capital contribution made by Telefonica to Sintel on
March 28, 1996, are herein after referred to as the "Related Transactions".
The unaudited combined pro forma financial information is presented for
illustrative purposes only, giving effect to the Sintel acquisition and Related
Transactions, accounted for as a "purchase", as such term is used under
generally accepted accounting principles. The unaudited combined pro forma
financial information is not necessarily indicative of the future financial
position or future results of continuing operations of the Company, or of the
financial position or results from continuing operations of the Company that
would have actually occurred had the transactions been in effect as of the date
or for the periods presented. In addition, there are certain special charges,
primarily severance costs, included in the operating results of Sintel totaling
$30.2 million and $1.6 million for the year ended December 31, 1995 and for the
three months ended March 31, 1996, respectively. The operating results of MasTec
for the year ended December 31, 1995 include other special charges totaling
$23.1 million relating to the write down of real estate and other non-operating
investments held for sale to estimated net realizable value. It should also be
noted that the Company's consolidated statement of operations will reflect the
Sintel acquisition commencing on April 30, 1996, the closing date.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical consolidated financial statements and
related notes of the Company and Sintel.
Certain amounts reported in the Sintel historical consolidated financial
information have been reclassified to conform with the MasTec presentations in
the Unaudited Pro Forma Combined Balance Sheet and Statements of Continuing
Operations. The historical consolidated financial statements of Sintel included
in Item 7(a) above have been translated to U.S. dollars in accordance with
Statement of Financial Accounting Standards No. 52 "Foreign Currency
Translation" utilizing the exchange rate in effect at March 31, 1996 of 124
pesetas to $1 and the average exchange rate of 124 pesetas to $1 and 127 pesetas
to $1 for the three month period ended March 31, 1996 and the year ended
December 31, 1995, respectively.
Page 41 of 49
PRO FORMA FINANCIAL INFORMATION
MasTec, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of March 31, 1996
(unaudited)
(Dollars and shares in thousands )
MasTec Sintel Pro forma Combined
Adjustments 1,2 Pro forma
ASSETS
Current assets
Cash and cash equivalents $1,414 $5,788 ($5,323) 5 $1,879
Accounts receivable-net 59,859 255,617 (27,999) 5 287,477
Notes receivable 25,829 25,829
Inventories 3,469 9,678 (1,398) 5 11,749
Deferred and refundable income taxes 2,168 2,168
Real estate investments 10,886 10,886
Investment in discontinued operations 6,622 6,622
Other 1,916 1,972 (833) 5 3,055
--------- --------- --------- ---------
Total current assets 112,163 273,055 (35,553) 349,665
Property-net 44,945 17,062 (8,824) 3(a),5 53,183
Investment in unconsolidated subsidiaries 17,594 2,582 6,427 5 26,603
Long term investments 1,770 9,424 (6,819) 3(d),5 4,375
Other assets 8,137 848 2,989 2,5 11,974
--------- --------- --------- ---------
TOTAL ASSETS $184,609 $302,971 ($41,780) $445,800
========= ========= ========= =========
Page 42 of 49
PRO FORMA FINANCIAL INFORMATION
MasTec, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of March 31, 1996
(unaudited)
(Dollars and shares in thousands )
MasTec Sintel Pro forma Combined
Adjustments 1,2 Pro forma
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of debt $35,669 $81,590 $1,907 4,5 $119,166
Accounts payable 15,114 129,230 (18,835) 5 125,509
Accrued income taxes 2,846 2,118 3(b) 4,964
Other 14,844 13,949 9,751 2,4 38,544
--------- --------- --------- ---------
Total current liabilities 68,473 224,769 (5,059) 288,183
Deferred income taxes 6,444 6,444
Accrued insurance 8,057 8,057
Accrued pension 14,178 14,178
Other liabilities 3,811 8,201 (196) 5 1,816
--------- --------- --------- ---------
Total other liabilities 18,312 22,379 (196) 40,495
Minority interest 8,345 (7,016) 5 1,329
Long-term debt 33,990 5,517 12,452 3(e),4 51,959
Convertible subordinated debentures 9,625 9,625
--------- --------- --------- ---------
Total long-term debt 43,615 5,517 12,452 61,584
Shareholders' equity
Common stock 2,643 49,194 (49,194) 6 2,643
Capital surplus 134,187 134,187
Retained earnings 9,344 (7,233) 7,233 3(c),6 9,344
Accumulated translation adjustments 3 3
Treasury stock (91,968) (91,968)
--------- --------- --------- ---------
Total shareholders' equity 54,209 41,961 (41,961) 54,209
--------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $184,609 $302,971 ($41,780) $445,800
========= ========= ========= =========
Page 43 of 49
PRO FORMA FINANCIAL INFORMATION
MasTec, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF CONTINUING OPERATIONS
for the three months ended March 31, 1996
(unaudited)
(Dollars and shares in thousands except per share amounts)
MasTec Sintel Pro forma Combined
1996 1996 Adjustments 1,2 Pro forma
Revenue $ 62,547 $ 82,422 $ (21,207) 5 $ 123,762
Costs of revenue 47,330 62,478 (16,755) 5 93,053
---------- ---------- ---------- ----------
Gross profit 15,217 19,944 (4,452) 30,709
General and administrative 6,478 11,481 (3,001) 5 14,958
Depreciation and amortization 2,262 1,228 (445) 5,7(b) 3,045
---------- ---------- ---------- ----------
Operating income 6,477 7,235 (1,006) 12,706
Interest expense 1,677 4,244 (915) 5,7(a) 5,006
Interest and dividend income (839) (259) 219 5 (879)
Other (income) expense ,net (8) 1,772 (1,821) 5 (57)
Special charges 0 1,561 1,561
---------- ---------- ---------- ----------
Income (loss) before income taxes 5,647 (83) 1,511 7,075
Equity in earnings
of unconsolidated companies 366 561 (533) 5 394
Provision (benefit) for income taxes 2,323 (29) 178 7(c) 2,472
Minority interest 5 118 (468) 5 (345)
---------- ---------- ---------- ----------
Income (loss) from continuing operations $ 3,695 $ 625 $ 332 $ 4,652
========== ========== ========== ==========
Average shares outstanding 16,155 16,155
Earnings(loss) per share from continuing
continuing operations $ 0.23 $ 0.29
========== ==========
Page 44 of 49
PRO FORMA FINANCIAL INFORMATION
MasTec, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF CONTINUING OPERATIONS
for the year ended December 31, 1995
(unaudited)
(Dollars and shares in thousands except per share amounts)
MasTec Sintel Pro forma Combined
Adjustments 1,2 Pro forma
Revenue $ 174,583 $ 370,330 $(114,828) 5 $ 430,085
Costs of revenue 130,762 289,320 (96,187) 5 323,895
---------- ---------- ---------- ----------
Gross Profit 43,821 81,010 (18,641) 106,190
General and administrative 19,081 53,968 (14,327) 5 58,722
Depreciation and amortization 6,913 4,821 (1,628) 5,7(b) 10,106
---------- ---------- ---------- ----------
Operating income 17,827 22,221 (2,686) 37,362
Interest expense 4,954 19,508 (5,199) 5,7(a) 19,263
Interest and dividend income (3,349) (2,350) 1,357 5 (4,342)
Other income, net (2,028) (1,999) 337 5 (3,690)
Special charges 23,086 30,157 53,243
---------- ---------- ---------- ----------
(Loss) income before income taxes (4,836) (23,095) 819 5 (27,112)
Equity in earnings (losses) of unconsolidated
companies (300) 2,220 167 5 2,087
(Benefit) provision for income taxes (1,835) (6,466) 405 5,7(c) (7,896)
Minority interest 161 (1,210) 679 5 (370)
---------- ---------- ---------- ----------
(Loss) income from continuing operations $ (3,140) $ (15,619) $1,260 $ (17,499)
========== ========== ======== ==========
Average shares outstanding 16,046 16,046
Loss per share
from continuing operations $ (0.20) $ (1.09)
========== ==========
Page 44 of 49
Notes to Unaudited Pro Forma Combined Financial Information
1. Terms of the Acquisition- On April 30, 1996 (the closing date), MasTec
purchased all of the outstanding stock of Sintel from Telefonica for Spanish
Pesetas ("Pesetas") 4.9 billion (US$39.5 million at an exchange rate of 124
Pesetas to $1 U.S. dollar). An initial payment of Pesetas 650 million (US $5.2
million) was made on April 30, 1996, a second payment of Pesetas 650 million
(US $5.2 million) is due December 31, 1996 and the balance of the purchase
price, Pesetas 3.6 billion (US$ 29.1 million), is due to be paid in two equal
installments at year-end 1997 and 1998. As part of the purchase and sale
agreement, Telefonica made a capital contribution of Pesetas 3 billion (US$ 24.2
million) on March 28, 1996 and on April 1, 1996 purchased several buildings for
Pesetas 1.5 billion (US$ 12 million ) and repaid tax credits previously utilized
by Telefonica of Pesetas 581 million (US$ 4.7 million). The capital
contribution, sale of buildings and repayment of tax credits are herein referred
to as the Related Transactions. The proceeds generated by the Related
Transactions totaling US$ 41 million were used to reduce Sintel's outstanding
debt.
2. Purchase Price Allocation-The purchase price of $39.5 million plus expenses
of $ 162,000 have been allocated to the estimated fair value of acquired assets
and assumed liabilities after taking into consideration the Related Transactions
previously described. Managements' preliminary estimate of fair value
approximated that of the carrying value of the net assets acquired as of March
31, 1996 after reflecting a reserve for involuntary employee termination
benefits of $ 9.5 million and the resulting deferred tax asset of $3.4 million.
The final allocation will be contingent upon final assessment of the fair value
of the net assets acquired. The allocation reflects management's best estimate
based upon currently available information and significant differences from that
currently presented are not expected.
3.Related Transaction Adjustments-The following adjustments have been made to
reflect all of the Related Transactions which were consummated on April 1, 1996.
No adjustment has been made regarding the capital contribution of $24.2 million
as this transaction is reflected in Sintel's March 31, 1996 Consolidated Balance
Sheet (see Note 1) ( dollars in thousands):
3a)To reduce property, at cost, net of accumulated depreciation
to reflect sale to Telefonica $ 5,948
3b)To record taxes payable related to gain of $6,052 on sale of
property to Telefonica $ 2,118
3c)To record net gain on sale of property $ 3,934
3d)To reduce long term investments to reflect the repayment by
Telefonica of tax credits utilized by Telefonica in prior
periods $ 4,648
3e)To reduce Sintel's long term debt with the proceeds from the sale
of buildings and repayment of tax credits $ 16,648
4. Purchase Price Payment and Financing Adjustments-To record $5.2 million
dollar payment made to Telefonica on the closing date in accordance with the
terms of the purchase and sale agreement, which was assumed to be financed by
MasTec for purposes of the pro forma adjustments, the financing by Telefonica of
the balance of the purchase price ( $34.3 million of which $5.2 million is
current and $29.1 million is long term ) and $162,000 in anticipated expenses.
Page 46 of 49
5.Adjustments related to Equity Method Accounting- Although the Company
exercises control over the daily operations of Sintelar and Sintel Peru ( 50%
and 38% ownership, respectively), as a result of the acquisition, Sintel no
longer has an indirect holding in these entities ( see Note 1 to Sintel's
Consolidated Financial Statements). Accordingly, the following adjustments have
been made to reflect the investment in Sintelar and Sintel Peru under the equity
method of accounting:
March 31, 1996
Reduce :
Cash and cash equivalents $ 5,323
Accounts receivable 27,999
Inventories 1,398
Other current assets 833
Property-net 2,876
Long term investments 2,171
Other assets 366
Accounts payable and accrued expenses 18,835
Current portion of long term debt 8,493
Other liabilities 196
Minority interest 7,016
Increase:
Investment in unconsolidated companies 6,427
Three months ended Year ended
March 31, 1996 December 31, 1995
Reduce:
Revenue $ 21,207 $ 114,828
Costs of revenue 16,755 96,187
General and administrative expenses 3,001 14,327
Depreciation and amortization 392 1,345
Interest expense 459 3,548
Interest income 219 1,357
Other expense (income), net 1,821 337
Adjust:
Equity in earnings (losses) of
unconsolidated companies 533 (167)
Provision (benefit) for income taxes 0 268
Minority interest 468 ( 679)
6. Elimination of Sintel equity.
Page 47 of 49
7. Pro Forma Income Statement Adjustments- The Company's pro forma income
statement data for the three months ended March 31, 1996 and the year ended
December 31, 1995 presents the effects of the Sintel acquisition and Related
Transactions as if they occurred as of January 1, 1995, including:
Three months
ended Year ended
March 31, 1996 December 31, 1995
a.The Pro Forma adjustments to interest expense
are as follows:
To reduce interest expense resulting from the
cash received ($41 million) from the Related
Transactions (see Note 1)
( at 9.6 % for 1996 and 10.2% for 1995) $ (983) $ (4,081)
To record interest expense related to debt
incurred in connection with the Sintel
acquisition ( see Note 4) ( at 6.2% per annum) 527 2,430
Total pro forma interest expense adjustment $ (456) $ (1,651)
======= =======
b. Decrease in depreciation expense related to the
buildings sold to Telefonica (see Note 3) $ ( 53) $ (283)
======= =======
c. To record tax effect related to the interest and
depreciation adjustments reflected above $ 178 $ 673
======= =======
Page 48 of 49
SIGNATURES
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.
Date: July 15, 1996
MASTEC, INC.
/s/ Edwin D. Johnson
___________________________
Edwin D. Johnson
Senior Vice President-
Chief Financial Officer
(Principal Financial Officer
and Authorized Officer)
Page 49 of 49
