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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 March 31, 1997
Commission file number 0-3797
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[GRAPHIC OMITTED]
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(Exact name of registrant as specified in its charter)
Delaware 59-1259279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3155 N.W. 77th Avenue, Miami, FL 33122-1205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 599-1800
Former name, former address and former fiscal year, if changed since last
report: Not Applicable
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class of Common Stock May 9, 1997
$ 0.10 par value 26,440,514
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 .
MasTec, Inc.
Index
PART I FINANCIAL INFORMATION
Item 1 - Unaudited Condensed Consolidated Statements of Income
for the Three Month Period Ended March 31, 1997 and
March 31, 1996.............................................................................3
Condensed Consolidated Balance Sheets as of March 31, 1997
(Unaudited) and December 31, 1996..........................................................4
Unaudited Consolidated Statement of Stockholders' Equity for
the Three Month Period ended March 31, 1997................................................5
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Month Period Ended March 31, 1997 and
March 31, 1996.............................................................................6
Notes to Condensed Consolidated
Financial Statements (Unaudited)...........................................................9
Item 2 - Management's Discussion and Analysis of Results of Operations
and Financial Condition...................................................................14
PART II OTHER INFORMATION.........................................................................17
MasTec, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
THREE MONTHS ENDED
MARCH 31,
(Unaudited)
1997 1996
----- ----
Revenue .............................................. $ 130,143 $ 62,547
Costs of revenue ..................................... 93,215 47,330
Depreciation and amortization ........................ 3,804 2,262
General and administrative expenses .................. 17,629 6,478
--------- ---------
Operating income ............................ 15,495 6,477
Interest expense ..................................... 2,873 1,677
Interest and dividend income ......................... 462 824
Interest on notes from stockholders .................. 0 15
Other income, net .................................... 520 8
--------- ---------
Income from continuing operations before equity in
earnings of unconsolidated companies,
provision for income taxes and minority interest ... 13,604 5,647
Equity in earnings of unconsolidated companies ....... 737 366
Provision for income taxes ........................... 4,969 2,323
Minority interest .................................... (34) 5
--------- ---------
Income from continuing operations .................... 9,338 3,695
Discontinued operations:
Loss from discontinued operations
(net of applicable income taxes) ................... (51) (14)
--------- ---------
Net income ........................................... 9,287 $ 3,681
========= =========
Weighted average shares outstanding (1) .............. 26,068 24,232
========= =========
Earnings per share:
Continuing operations ................................ $ 0.36 $ 0.15
Discontinued operations .............................. 0.00 0.00
--------- ---------
$ 0.36 $ 0.15
========= =========
The accompanying notes are an integral part of these financial statements.
(1) Amounts have been adjusted to reflect the three-for-two stock split
declared in February 1997.
MasTec, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1997 1996
---- ----
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 1,672 $ 4,754
Accounts receivable-net and unbilled revenue ....... 257,940 306,022
Notes receivable ................................... 531 29,549
Inventories ........................................ 6,333 4,837
Other current assets ............................... 28,732 37,477
--------- ---------
Total current assets ........................ 295,208 382,639
--------- ---------
Property and equipment-at cost ....................... 83,909 80,119
Accumulated depreciation ............................. (24,062) (20,517)
--------- ---------
Property-net ................................ 59,847 59,602
Investments in unconsolidated companies .............. 67,164 30,209
Notes receivable from stockholders ................... 1,770 1,770
Other assets ......................................... 18,993 10,893
--------- ---------
TOTAL ASSETS ................................ $ 442,982 $ 485,113
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of debt ......................... $ 35,542 $ 38,035
Accounts payable ................................... 127,817 162,377
Other current liabilities .......................... 26,525 28,352
--------- ---------
Total current liabilities ................... 189,884 228,764
--------- ---------
Other liabilities .................................... 35,388 35,688
--------- ---------
Long-term debt ....................................... 97,325 117,157
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock ....................................... 2,643 2,643
Capital surplus .................................... 80,234 149,083
Retained earnings .................................. 45,015 35,728
Accumulated translation adjustments ................ (1,863) (802)
Treasury stock ..................................... (5,644) (83,148)
--------- ---------
Total stockholders' equity .................. 120,385 103,504
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .. $ 442,982 $ 485,113
========= =========
The accompanying notes are an integral part of these financial statements.
MasTec, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
(In thousands)
for the three months ended March 31, 1997
Common Stock Accumulated
Issued Capital Retained Translation Treasury
Shares Amount Surplus Earnings Adjustment Stock Total
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 26,435 $ 2,643 $ 149,083 $ 35,728 $ (802) $(83,148) $103,504
Net income 9,287 9,287
Cumulative effect of
translation (1,061) (1,061)
Stock issued to employees
from treasury stock (134) 300 166
Stock issued for acquisitions
from treasury stock 4,080 1,402 5,482
Stock issued from
Treasury stock 3,007 3,007
Stock issued for stock dividend
from treasury stock (75,802) 75,802 0
- --------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1997 26,435 $ 2,643 $ 80,234 $ 45,015 $ (1,863) $ 5,644) $120,385
==========================================================================================================================
The accompanying notes are an integral part of these financial statements.
MasTec, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
THREE MONTHS ENDED
MARCH 31,
1997 1996
---- ----
(Unaudited)
Cash flows from operating activities:
Net income $ 9,287 $ 3,681
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Minority interest 34 (5)
Depreciation and amortization 3,804 2,262
Equity in earnings of unconsolidated companies (737) (366)
Loss on sale of assets 187 93
Changes in assets and liabilities net of
effect of acquisitions and divestitures:
Accounts receivable-net and unbilled revenue 33,044 (5,828)
Inventories and other current assets (1,019) (370)
Other assets (626) 128
Accounts payable and accrued expenses (27,425) (4,292)
Income taxes 637 (571)
Other current liabilities 168 667
Net assets of discontinued operations 32 (222)
Deferred taxes (1,034) 1,157
Other liabilities (294) 618
-------- --------
Net cash provided by (used in) operating activities 16,058 (3,048)
Cash flows from investing activities:
Cash acquired in acquisitions 654 167
Cash paid for acquisitions (4,588) (1,000)
Repayment of notes receivable 26 735
Capital expenditures (1,887) (881)
Investment in unconsolidated companies (3,797) (644)
Net proceeds from sale of discontinued operations 2,005 0
Proceeds from sale of assets 4,614 5,293
-------- --------
Net cash (used in) provided by investing activities (2,973) 3,670
Cash flows from financing activities:
Proceeds from Revolver 19,280 1,400
Borrowings 69 952
Debt repayments (38,420) (2,660)
Net proceeds from common stock issued 3,173 22
-------- --------
Net cash used in financing activities (15,898) (286)
-------- --------
Net (decrease) increase in cash and cash equivalents (2,813) 336
Effect of translation on cash (269) 2
Cash and cash equivalents - beginning of period 4,754 1,076
-------- --------
Cash and cash equivalents - end of period $ 1,672 1,414
======== ========
Supplemental disclosures of cash flow information: Cash paid during the period:
Interest $ 2,251 $ 1,358
Income taxes $ 4,537 $ 1,724
The accompanying notes are an integral part of these financial statements.
MasTec, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
Supplemental disclosure of non-cash investing and financing activities:
THREE MONTHS ENDED
MARCH 31,
1997 1996
---- ----
(Unaudited)
Acquisitions Fair value of assets acquired:
Accounts receivable $ 5,487 $ 3,660
Inventories 193 722
Other current assets 77 26
Property 3,491 657
Other assets 1,323 11
------- ---------
Total non-cash assets 10,571 5,076
------ -------
Liabilities 3,626 2,873
Debt 3,246 576
------- --------
Total liabilities assumed 6,872 3,449
------- -------
Net non-cash assets acquired 3,699 1,627
Cash acquired 654 167
-------- --------
Fair value of net assets acquired 4,353 1,794
Excess over fair value of assets acquired 6,174 4,956
------- -------
Purchase price $ 10,527 $ 6,750
====== =======
Note payable issued in acquisitions $ 130 $ 3,500
Cash paid and common stock issued for acquisitions 6,397 1,000
Contingent consideration 4,000 2,250
------- -------
Purchase price $ 10,527 $ 6,750
====== =======
Property acquired through financing arrangements $ 413 $ 1,690
======== ======
In 1997, the Company issued approximately 172,982 shares of Common Stock for
acquisitions. Common Stock was issued from treasury stock at a cost of
approximately $1.4 million.
In 1996, the Company's purchase of an additional 3% interest in a cable
television operator was financed in part by the sellers for $2 million.
The accompanying notes are an integral part of these financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. CONSOLIDATION AND PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of MasTec, Inc. ("MasTec" or the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. They
do not include all information and notes required by generally accepted
accounting principles for complete financial statements and should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's annual report on Form 10-K for the year ended December 31, 1996.
The year end condensed balance sheet data was derived from audited financial
statements but does not include all disclosures required by generally accepted
accounting principles. The financial information furnished reflects all
adjustments, consisting only of normal recurring accruals which are, in the
opinion of management, necessary for a fair presentation of the financial
position and results of operations for the periods presented. The results of
operations are not necessarily indicative of future results of operations or
financial position of MasTec.
The financial position and results of operations of the Company's
foreign subsidiaries are measured using local currency as the functional
currency. The Company translates foreign currency financial statements by
translating balance sheet accounts at the exchange rate on the balance sheet
date and income statement accounts at the average exchange rate for the period.
Translation gains and losses are recorded in stockholders' equity, and realized
gains and losses are reflected in income.
2. ACQUISITIONS
Domestic
During the quarter ended March 31, 1997, the Company completed certain
acquisitions which have been accounted for under the purchase method of
accounting and the results of operations have been included in the Company's
condensed consolidated financial statements from the respective acquisition
dates. If the acquisitions had been made at the beginning of 1997 or 1996, pro
forma results of operations would not have differed materially from actual
results. Acquisitions made in 1997 were Kennedy-Cable Construction, Inc. and
Shanco Corporation, two contractors servicing multiple systems operators such as
MediaOne, Time Warner, and Cox Communications in a number of states including
Alabama, Florida, Georgia, New Jersey, New York, North Carolina, South Carolina
and Texas; and R.D. Moody & Associates, Inc. and B&D Contractors, Inc. of North
Carolina, two telecommunications and utility contractors with operations
primarily in the southeastern United States.
International
On April 30, 1996, the Company purchased from Telefonica de Espana,
S.A. ("Telefonica"), 100% of the capital stock of Sistemas e Instalaciones de
Telecomunicacion, S.A. ("Sintel"), a company engaged in telecommunications
infrastructure construction services in Spain, Argentina, Chile, and Peru. The
Sintel acquisition gave the Company a significant international presence. See
Note 6 regarding geographic information.
The following information presents the unaudited pro forma condensed
results of operations for the three months ended March 31, 1996 as if the
Company's acquisition of Sintel and the Related Transactions had occurred on
January 1, 1996. The Sintel acquisition has been treated as a "purchase" as the
term is used under generally accepted accounting principles. Management's
preliminary estimate of fair value approximated that of the carrying value of
the net assets acquired after reflecting a reserve for employee terminations net
of deferred taxes. The pro forma results, which include adjustments to increase
interest expense resulting from the debt incurred pursuant to the Sintel
acquisition ($527,000), offset by the reduction in interest and depreciation
expenses resulting from the Related
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
Transactions ($1.0 million) and a tax expense of 35% is presented for
informational purposes only and is not necessarily indicative of the future
results of operations or financial position of the Company or the results of
operations or financial position of the Company had the Sintel acquisition and
the Related Transactions occurred January 1, 1996.
Pro forma results of operations
for the three months ended March 31, 1996
Revenue $ 123,762
Income from continuing operations 4,652
Net income $ 4,638
Earnings per share:
Continuing operations $ 0.19
Discontinued operations 0.00
Net income $ 0.19
The pro forma results for the three months ended March 31, 1996 include
special charges incurred by Sintel related to a restructuring plan of $1.0
million, net of tax.
3. RELATED PARTY TRANSACTIONS
Notes receivable from stockholders bear interest at the prime rate plus
2% (10.50% at March 31, 1997). In April 1997, $1.1 million due on the notes had
been repaid.
4. NOTES RECEIVABLE
In July 1995, the Company made a $25 million one year non-recourse term
loan to Devono Company Limited, a British Virgin Islands corporation ("Devono").
The loan was collateralized by 40% of the capital stock of a holding company
that owns 52.6% of the capital stock of Consorcio Ecuatoriano de
Telecomunicaciones, S.A. ("Conecell"), one of two cellular phone operators in
the Republic of Ecuador. In May 1997, the Company converted its loan and accrued
interest into the stock of the holding company and accordingly is reflecting its
investment as an investment in unconsolidated companies in the accompanying
March 31, 1997 consolidated balance sheet.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
5. DEBT
Debt is comprised of the following (in thousands):
March 31, December 31,
1997 1996
---- ----
Revolver, Fleet Credit Facility at LIBOR plus 2.00%
(7.69% and 7.75% at March 31, 1997 and
December 31, 1996, respectively) $ 16,550 $ 24,865
Term Loan, Fleet Credit Facility, at LIBOR plus 2.25%
(7.94% and 8.00% at March 31, 1997 and
December 31, 1996, respectively) 21,000 22,000
Revolving credit facility, at MIBOR plus 0.30% (6.30%
and 7.00% at March 31, 1997 and December 31, 1996,
respectively due November 1, 1998) 33,134 43,613
Other debt denominated in Spanish Pesetas, at interest
rates from 6.5% to 8.15% 13,331 11,048
Notes payable for equipment, at interest rates from
7.5% to 8.5% due in installments through the year 2000 17,319 18,865
Notes payable for acquisitions, at interest rates from
7% to 8% due in installments through February 2000 29,023 32,253
Real estate mortgage notes, at interest
rates from 8.5% to 8.53% due in installments
through the year 2001 2,510 2,548
--------- ---------
Total debt 132,867 155,192
Less current maturities (35,542) (38,035)
-------- --------
Long term debt $ 97,325 $ 117,157
======== =======
The Company maintains a $50 million credit facility with Fleet Capital
Corporation (the "Fleet Credit Facility") collateralized by certain equipment
and receivables maturing January 2000 and also maintains several other credit
facilities for the purpose of financing equipment purchases. The Company may
reborrow under the Revolver as principal payments under the Term Loan are made.
Interest on the Term Loan accrues, at the Company's option, at the rate of prime
or 2.25% over LIBOR. Interest on the Revolver accrues, at the Company's option,
at the rate of prime or 2.00% over LIBOR. Additionally, the Company has several
credit facilities denominated in Pesetas, one of which is a revolving credit
facility with a wholly-owned finance subsidiary of Telefonica. Interest on this
facility accrues at MIBOR (Madrid interbank offered rate) plus .30%. At March
31, 1997, the Company had $71.6 million (10.3 billion Pesetas) of debt
denominated in Pesetas, including $25.2 million remaining of the acquisition
debt incurred as a result of the Sintel Acquisition (see Note 2). The Company
has obtained commitments from certain financial institutions led by Bank of
Boston for a $125 million revolving credit facility to replace the Fleet Credit
Facility and certain other domestic debt.
Debt agreements contain, among other things, restrictions on the
payment of dividends and require the observance of certain financial covenants
such as minimum levels of cash flow and tangible net worth.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
6. OPERATIONS BY GEOGRAPHIC AREAS
The Company's principal source of revenue is the provision of
telecommunications infrastructure construction services in the United States and
Spain. The Company did not have significant international operations in the
quarter ended March 31, 1996, accordingly, only 1997 geographic information is
presented below:
1997
Revenue
Domestic $ 74,434
International 55,709
--------
Total $ 130,143
=======
Operating income
Domestic $ 10,134
International 5,361
--------
Total $ 15,495
========
Identifiable assets
Domestic $ 127,028
International 199,954
Corporate 116,000
-------
Total $ 442,982
=======
There are no transfers between geographic areas. Operating income
consists of revenue less operating expenses, and does not include interest
expense, interest and other income, equity in earnings of unconsolidated
companies, minority interest and income taxes. Domestic operating income is net
of corporate general and administrative expenses. Identifiable assets of
geographic areas are those assets used in the Company's operations in each area.
Corporate assets include cash and cash equivalents, investments in
unconsolidated companies, net assets of discontinued operations, real estate
held for sale and notes receivable.
7. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company derives a substantial portion of its revenue from the
provision of telecommunications infrastructure services to Telefonica and to
BellSouth. For the quarter ended March 31, 1997, approximately 38% and 13% of
the Company's revenue was derived from services performed for Telefonica and
BellSouth, respectively. During the quarter ended March 31, 1996, the Company
derived 25% of its revenue from BellSouth. Although the Company's strategic plan
envisions diversification of its customer base, the Company anticipates that it
will continue to be dependent on Telefonica and its affiliates and BellSouth for
a significant portion of its revenue in the future.
8. COMMITMENTS AND CONTINGENCIES
In December 1990, Albert H. Kahn, a stockholder of the Company, filed a
purported class action and derivative suit in Delaware state court against the
Company, the then-members of its Board of Directors, and National Beverage
Corporation ("NBC"), the Company's then-largest stockholder. The complaint
alleges, among other things, that the Company's Board of Directors and NBC
breached their respective fiduciary duties in approving certain transactions,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
including the distribution in 1989 to the Company's stockholders of all of the
common stock of NBC owned by the Company and the exchange by NBC of shares of
common stock of the Company for certain indebtedness of NBC to the Company. The
lawsuit seeks to rescind these transactions and to recover damages in an
unspecified amount.
In November 1993, Mr. Kahn filed a class action and derivative
complaint against the Company, the then-members of its Board of Directors,
Church & Tower, Inc. and Jorge L. Mas, Jorge Mas and Juan Carlos Mas, the
principal shareholders of Church & Tower, Inc. The 1993 lawsuit alleges, among
other things, that the Company's Board of Directors and NBC breached their
respective fiduciary duties by approving the terms of the acquisition of the
Company by the Mas family, and that Church & Tower, Inc. and its principal
shareholders had knowledge of the fiduciary duties owed by NBC and the Company's
Board of Directors and knowingly and substantially participated in the breach of
these duties. The lawsuit also claims derivatively that each member of the
Company's Board of Directors engaged in mismanagement, waste and breach of
fiduciary duties in managing the Company's affairs prior to the acquisition by
the Mas family.
Each of the foregoing lawsuits is pending and no trial date has been
set. The Company believes that the allegations in each of the lawsuits are
without merit and intends to defend these lawsuits vigorously.
The Company is involved in a lawsuit filed in November 1995 by
BellSouth arising from certain work performed by a subcontractor of the Company
from 1991 to 1993. The amount claimed against the Company in this lawsuit
approximates $800,000. The Company has filed a counterclaim against BellSouth
for unpaid invoices related to this work. The Company believes that the
allegations asserted by BellSouth in the lawsuit are without merit and intends
to defend the lawsuit vigorously.
All of the claims asserted in the lawsuits described above, with the
exception of the second lawsuit filed by Albert Kahn, arise from activities
undertaken prior to March 1994, the date of the consummation of the acquisition
of the Company by the Mas Family.
The Company is a party to other pending legal proceedings arising in
the normal course of business, none of which the Company believes is material to
the Company's financial position or results of operations.
ITEM 2
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Overview
MasTec is one of the world's leading contractors specializing in the
build-out of telecommunications and related infrastructure. The Company's
principal business consists of the design, installation and maintenance of the
outside physical plant for telephone and cable television communications systems
and of integrated voice, data and video local and wide area networks inside
buildings, and the installation of central office equipment. The Company also
provides infrastructure services to public utilities and the traffic control and
highway safety industry.
In April 1996, the Company purchased Sintel, a company engaged in
telecommunications infrastructure construction services in Spain, Argentina,
Chile and Peru, from Telefonica. The Sintel acquisition gave the Company a
significant international presence and more than doubled the size of the Company
in terms of revenue and number of employees. In Argentina, Chile and Peru, the
Company operates through unconsolidated joint ventures in which it holds
interests ranging from 38% to 50%. See Notes 2 and 6 to the Condensed
Consolidated Financial Statements for pro forma financial information and
geographic information, respectively.
Results of Operations
Revenue is generated primarily from telecommunications and related
infrastructure services. Infrastructure services are provided to telephone
companies, public utilities, CATV operators, other telecommunications providers,
governmental agencies and private businesses.
Costs of revenue includes subcontractor costs and expenses, materials
not supplied by the customer, fuel, equipment rental, insurance, operations
payroll and employee benefits.
General and administrative expenses include management salaries and
benefits, rent, travel, telephone and utilities, professional fees and clerical
and administrative overhead.
Three Months Ended March 31, 1997 vs. Three Months Ended March 31, 1996.
The following table sets forth certain historical consolidated
financial data as a percentage of revenue for the three months ended March 31,
1997 and 1996.
1997 1996
---- ----
Revenue 100.0% 100.0%
Costs of revenue 71.6% 75.7%
Depreciation and amortization 2.9% 3.6%
General and administrative expenses 13.5% 10.4%
Operating margin 11.9% 10.4%
Interest expense 2.2% 2.7%
Interest and dividend income and other income, net,
equity in unconsolidated companies and minority
interest 1.3% 1.9%
Income from continuing operations 7.2% 5.9%
Revenue increased 108% from $62.5 million in 1996 to $130.1 million in
1997 while operating income increased 139% from $6.5 million to $15.5 million. A
significant portion of this growth is a direct result of the acquisition of
Sintel, which contributed $55.7 million to revenue and $5.4 million to operating
income. Domestic operations, which accounted for all of 1996 results, grew 19%
in revenue to $74.4 million in 1997 and contributed $10.1 million to operating
income. Favorably impacting domestic operating income were short-term projects
with attractive pricing and terms.
Depreciation and amortization costs were $3.1 million for domestic
operations in the first quarter of 1997 as compared to $2.3 million in 1996.
Depreciation and amortization costs relating to international operations, which
are less capital intensive were $700,000 for the first quarter of 1997. The
increase in domestic depreciation expense is due to increased capital
expenditures made in the latter part of 1996 as well as depreciation expense
generated by acquisitions.
Although domestic general and administrative expenses as a percentage
of revenue decreased slightly from 10.4% in 1996 to 10.3% in 1997, the dollar
amount increased $1.2 million primarily due to acquisitions. General and
administrative expenses related to international operations were 17.9% of
revenue. The seasonal decline in international revenue resulted in a higher
percentage of general and administrative expenses to revenue than had been
experienced over the last two quarters, although, in terms of local currency,
the amount of general and administrative expenses has declined.
Interest expense increased from $1.7 million in 1996 to $2.9 million in
1997. Included in interest expense for 1997 is $1.2 million of interest expense
incurred by Sintel to fund its working capital needs. Interest expense also
increased due to new borrowings used for acquisitions, for equipment purchases
and to make investments in unconsolidated companies. Offsetting the increase was
the conversion of the Company's 12% Subordinated Convertible Debentures to
Common Stock on June 30, 1996.
Interest and dividend income, other income, net, equity in earnings of
unconsolidated companies and minority interest increased from $1.2 million in
1996 to $1.7 million in 1997 as a result of equity in earnings of unconsolidated
companies, primarily those acquired as part of the Sintel acquisition, and
interest income and other fees earned and collected on short-term customer
project financing provided by the Company.
Financial Condition, Liquidity and Capital Resources
The Company's primary source of liquidity has been cash flow from
operating activities, external sources of financing, and the proceeds from the
sale of non-core assets. During the quarter ended March 31, 1997, $16.1 million
was generated from operations compared to $3.0 million used in operating
activities in the comparable quarter of 1996, primarily due to higher earnings
and strong collections of receivables. Also during the quarter ended March 31,
1997, the Company invested $4.6 million in acquisitions and received $6.6
million from the sale of non-core assets. Cash paid for capital expenditures was
$1.9 million and an additional $400,000 of capital expenditures were financed.
The Company used its excess cash to repay debt, principally under its Revolver
and its revolving credit facility with a wholly owned finance subsidiary of
Telefonica. See Note 5 to the Condensed Consolidated Financial Statements.
As of March 31, 1997, working capital was approximately $105.3 million
compared to working capital of approximately $124.3 million at December 31, 1996
(excluding the note receivable which was converted to stock of an unconsolidated
company during May 1997--see Note 4 to the Condensed Consolidated Financial
Statements). Included in working capital are the net assets of discontinued
operations and real estate held for sale. Proceeds from the sale or repayment of
these assets will be used for general corporate purposes including furthering
the Company's growth strategy.
During the quarter ended March 31, 1997, the Company completed four
acquisitions and increased its investment in unconsolidated companies. The
combined cash consideration for these transactions amounted to approximately
$8.4 million. Additionally, the Company raised approximately $3.2 million in
equity.
The Company is pursuing a strategy of growth through internal growth
and expansion through acquisitions and joint ventures. The Company anticipates
that this growth as well as operating cash requirements, capital expenditures
and debt service, will be funded from cash flow generated by operations, sale of
non-core assets, and external sources of financing. The success of the Company's
growth strategy will be dependent in part on the Company obtaining the
additional external financing it announced for a new $125 million dollar
revolving credit facility.
The Company conducts business in several foreign currencies, that are
subject to fluctuations in the exchange rate relative to the U.S. dollar. The
Company does not enter into foreign exchange contracts; however, as a means of
hedging its balance sheet currency risk, the Company attempts to balance its
foreign currency denominated assets and liabilities. There can be no assurance
that a balance can be maintained. In addition, the Company's results of
operations from foreign activities are translated into U.S. dollars at the
average prevailing rates of exchange during the period reported, which average
rates may differ from the actual rates of exchange in effect at the time of the
actual conversion into U.S. dollars. The Company currently has no plans to
repatriate significant earnings from its international operations.
The Company's current and future operations and investments in certain
foreign countries are generally subject to the risks of political, economic or
social instability, including the possibility of expropriation, confiscatory
taxation, hyper-inflation or other adverse regulatory or legislative
developments, or limitations on the repatriation of investment income, capital
and other assets. The Company cannot predict whether any of such factors will
occur in the future or the extent to which such factors would have a material
adverse effect on the Company's international operations.
PART II - OTHER INFORMATION
MARCH 31, 1996
Item 1. Legal Proceedings.
See Note 8 to the Condensed Consolidated Financial Statements.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27.1 Article 5 - Financial Data Schedules.
(b) Report on Form 8-K
None
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.
MasTec, Inc.
Registrant
Date: May 9, 1997 /s/ Edwin D. Johnson
--------------------
Edwin D. Johnson
Senior Vice President-
Chief Financial Officer
(Principal Financial and
Accounting Officer)
5
0000015615
MasTec,Inc.
1,000
U.S. Dollars
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
1
1,672
0
257,940
(3,064)
6,333
295,208
83,909
(24,062)
442,982
189,884
0
0
0
2,643
117,742
442,982
130,143
130,143
93,215
93,215
21,433
0
2,873
14,307
4,969
9,338
(51)
0
0
9,287
.36
.36
