SEC Filing | MasTec Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 Commission File Number 001-08106 MASTEC, INC. (Exact name of registrant as specified in its charter) Florida 65-0829355 (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 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 . As of August 3, 2000, MasTec, Inc. had 47,301,572 shares of common stock, $0.10 par value, outstanding.

MASTEC, INC. FORM 10-Q TABLE OF CONTENTS Part I. Financial Information Item 1. Financial Statements Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2000 and 1999......................... 4 Consolidated Balance Sheets as of June 30, 2000 (Unaudited) and December 31, 1999............................................... 5 Unaudited Consolidated Statement of Changes in Shareholders' Equity for the Six Months Ended June 30, 2000................................................. 6 Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999..................... 7 Notes to Consolidated Financial Statements (Unaudited) ............. 9 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition................................................ 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 19 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders................ 19 Item 6. Exhibits and Reports on Form 8-K................................... 20 Signatures ............................................................... 21

MASTEC, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ----------------------------- 2000 1999 2000 1999 ------------- ------------- ------------- -------------- Revenue North America $ 286,418 $ 225,163 $ 548,790 $ 413,384 International 11,279 13,525 21,601 32,100 ------------- ------------- ------------- -------------- 297,697 238,688 570,391 445,484 Costs of revenue 224,933 178,269 433,862 340,366 Depreciation 13,183 11,715 26,661 22,094 Amortization 2,675 2,152 6,176 4,420 General and administrative expenses 21,930 20,542 45,042 39,933 Interest expense 4,303 7,311 9,859 13,542 Interest income 1,054 3,633 2,267 5,742 Other income, net 4,873 178 5,253 301 ------------- ------------- ------------- -------------- Income before provision for income taxes and minority interest 36,600 22,510 56,311 31,172 Provision for income taxes (15,120) (9,279) (23,499) (12,949) Minority interest (138) (1,054) 7 (1,694) ------------- ------------- ------------- -------------- Net income $ 21,342 $ 12,177 $ 32,819 $ 16,529 ============= ============= ============= ============== Weighted average common shares outstanding 46,823 41,547 45,314 41,270 Basic earnings per share 0.46 $ 0.29 $ 0.72 $ 0.40 Weighted average common shares outstanding 49,055 42,243 47,445 41,937 Diluted earnings per share 0.44 $ 0.29 $ 0.69 $ 0.39 The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC. CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, 2000 1999 ------------- ------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 40,153 $ 27,635 Cash in escrow 45,000 - Accounts receivable, unbilled revenue and retainage, net 283,759 251,576 Inventories 19,935 14,264 Assets held for sale 24,678 53,639 Other current assets 29,695 34,634 ------------- ------------- Total current assets 443,220 381,748 Property and equipment, net 154,554 153,527 Investments in unconsolidated companies 17,687 18,006 Intangibles, net 182,991 151,556 Other assets 22,164 23,572 ------------- ------------- Total assets $ 820,616 $ 728,409 ============= ============= Liabilities and shareholders' equity Current liabilities: Current maturities of debt $ 4,642 $ 12,200 Accounts payable 66,273 74,408 Other current liabilities 67,735 71,882 ------------- ------------- Total current liabilities 138,650 158,490 ------------- ------------- Other liabilities 40,720 45,628 ------------- ------------- Long-term debt 199,570 267,458 ------------- ------------- Commitments and contingencies Shareholders' equity: Common stock 4,705 4,235 Capital surplus 319,165 167,387 Retained earnings 134,022 101,203 Foreign currency translation adjustments (16,216) (15,992) ------------- ------------- Total shareholders' equity 441,676 256,833 ------------- ------------- Total liabilities and shareholders' equity $ 820,616 $ 728,409 ============= ============= The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands) (Unaudited) Common Stock Foreign ----------------------- Currency Capital Retained Translation Shares Amount Surplus Earnings Adjustments Total - -------------------------------------------------------------------------------------------------------- Balance December 31, 1999 42,350 $ 4,235 $ 167,387 $ 101,203 $ (15,992) $ 256,833 Net income 32,819 32,819 Foreign currency translation (224) (224) adjustments Stock issued 4,696 470 151,778 152,248 ======================================================================================================== Balance June 30, 2000 47,046 $ 4,705 $ 319,165 $ 134,022 $ (16,216) $ 441,676 ======================================================================================================== The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, -------------------------------------- 2000 1999 --------------- --------------- Cash flows from operating activities: Net income $ 32,819 $ 16,529 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 32,837 26,514 Minority interest (7) 1,694 (Gain) loss on sale of assets (7,349) 3,573 Changes in assets and liabilities net of effect of acquisitions: Accounts receivables, unbilled revenue and retainage, net (25,920) 7,774 Inventories and other current assets (11,285) (5,735) Other assets (6,831) 3,280 Accounts payable (14,534) (13,855) Other current liabilities (9,000) (22,595) Other liabilities (1,329) 5,045 ---------------- --------------- Net cash (used in) provided by operating activities (10,599) 22,224 ---------------- --------------- Cash flows from investing activities: Capital expenditures (28,252) (36,680) Cash paid for acquisitions (net of cash acquired) and (17,374) (12,140) contingent consideration Repayment of notes receivable, net 946 18,667 Investment in unconsolidated companies held for sale - (7,398) Distribution to joint venture partner (4,900) - Net proceeds from sale of assets 15,232 25,893 ---------------- --------------- Net cash used in investing activities (34,348) (11,658) ---------------- --------------- Cash flows from financing activities: Repayments, net for revolving credit facilities (75,446) (426) Net proceeds from common stock issued 132,595 108 ---------------- --------------- Net cash provided by (used in) financing activities 57,149 (318) ---------------- --------------- Net increase in cash and cash equivalents 12,202 10,248 Effect of translation on cash 316 (2,848) Cash and cash equivalents - beginning of period 27,635 19,864 ---------------- --------------- Cash and cash equivalents - end of period $ 40,153 $ 27,264 ================ =============== The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (dollars in thousands) (Unaudited) Supplemental disclosure of non-cash investing and financing activities: During the six months ended June 30, 2000, we completed certain acquisitions which have been accounted for as purchases. The fair value of the net assets acquired totaled $1.0 million and was comprised primarily of $3.3 million of accounts receivable, $1.8 million of property and equipment, $0.5 million of other assets and $1.4 million in cash, offset by $6.0 million of assumed liabilities. The excess of the purchase price over the net assets acquired was $16.6 million and was allocated to goodwill. MasTec also issued 183,759 shares of common stock with a value of $14.9 million related to the payment of contingent consideration from earlier acquisitions. Of the $14.9 million, $0.2 million was recorded as a reduction of other current liabilities and $14.7 million as additional goodwill. On June 30, 2000, we sold our PCS system in Latin America that was being held for sale for $45.0 million. On July 5, 2000, we received the proceeds related to the sale. Accordingly such proceeds have been reflected as cash in escrow in the accompanying consolidated balance sheet. During the six months ended June 30, 1999, we completed certain acquisitions which have been accounted for as purchases. The fair value of the net assets acquired totaled $3.5 million and was comprised primarily of $7.0 million of accounts receivable, $2.1 million of property and equipment, $0.7 million of other assets and $0.3 million in cash, offset by $6.6 million of assumed liabilities. The excess of the purchase price over the fair value of net assets acquired was $7.8 million and was allocated to goodwill. We also issued 527,597 shares of common stock with a value of $11.3 million related to the payment of contingent consideration from earlier acquisitions. Of the $11.3 million, $2.3 million was recorded as a reduction of other current liabilities and $9.0 million as additional goodwill. The accompanying notes are an integral part of these consolidated financial statements.

MASTEC, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis for Presentation of Consolidated Financial Statements The accompanying unaudited consolidated financial statements of MasTec, Inc. 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 together with the audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 1999. The balance sheet data as of December 31, 1999 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. Certain reclassifications have been made to conform to the 2000 presentation. 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, results of operations and cash flows for the quarterly periods presented. The results of operations for the periods presented are not necessarily indicative of our future results of operations for the entire year. Our comprehensive income for the six months ended June 30, 2000 and 1999 was $32.6 million and $5.7 million, respectively. The components of comprehensive income are net income and foreign currency translation adjustments. On June 19, 2000, we effected a three-for-two split of our common stock in the form of a stock dividend to shareholders of record as of May 29, 2000. To reflect the split, common stock was increased and capital surplus was decreased by $1.6 million. All references in the consolidated financial statements to shares and related prices, weighted average number of shares, per share amounts and stock plan data have been adjusted to reflect the stock split on a retroactive basis. Note 2 - Recently Issued Accounting Pronouncements In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 "Revenue Recognition": (SAB 101), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB 101 is applicable beginning with our fourth quarter 2000 consolidated financial statements. Based on our current analysis of SAB 101, we do not believe it will have a material impact on the financial results of the Company. Note 3 - Acquisitions, Investing and Divestitures Activities During 2000, we have completed four acquisitions, two each in our external communication services group and internal communication services group. These acquisitions have been accounted for under the purchase method of accounting. The most significant adjustments to the balance sheet resulting from these acquisitions are disclosed in the supplemental disclosure of non-cash investing and financing activities in the accompanying statement of cash flows. On June 30, 2000, we sold our PCS system in Latin America which was held for sale for a gain of $9.6 million. During the second quarter, we also recorded a charge of $5.4 million comprised primarily of the write-off of two Latin American operations.

MASTEC, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Debt Debt is comprised of the following (in thousands): June 30, December 31, 2000 1999 ---------- ------------ Revolving credit facility at LIBOR plus 1.25%, $ - $ 64,000 6.98% at December 31, 1999) Other bank facilities (8.25% at June 30, 2000 and 7.32% at 2,434 7,707 December 31, 1999) Notes payable for equipment, at interest rates from 7.5% to 8.5% 4,323 3,920 due in installments through the year 2002 Notes payable for acquisitions, at interest rates from 7.0% to 1,664 4,254 8.0% due in installments through February 2001 Senior Notes, 7.75% due February 2008 195,791 199,777 ----------- ------------ Total debt 204,212 279,658 Less current maturities (4,642) (12,200) ----------- ------------ Long-term debt $ 199,570 $ 267,458 =========== ============ We have a credit facility that provides for borrowings up to an aggregate amount of $100.0 million, which we have reduced from $165.0 following our public offering in March 2000. Amounts outstanding under the revolving credit facility mature on June 9, 2002. We are required to pay an unused facility fee ranging from .25% to .50% per annum on the facility, depending upon certain financial covenants. The credit facility is secured by a pledge of shares of certain of our subsidiaries. Interest under the credit facility accrues at rates based, at our option, on the agent bank's base rate plus a margin of up to .50% depending on certain financial covenants or 1% above the overnight federal funds effective rate, whichever is higher, or its LIBOR Rate (as defined in the credit facility) plus a margin of 1.00% to 2.25%, depending on certain financial covenants. We also have $200.0 million, 7.75% senior subordinated notes due in February 2008 with interest due semi-annually. The credit facility and the senior notes contain customary events of default and covenants which prohibit, among other things, making investments in excess of a specified amount, incurring additional indebtedness in excess of a specified amount, paying dividends in excess of a specified amount, making capital expenditures in excess of a specified amount, creating certain liens, prepaying other indebtedness, including the senior notes, and engaging in certain mergers or combinations without the prior written consent of the lenders. The credit facility also provides that we must maintain certain financial ratio coverage, requiring, among other things minimum ratios at the end of each fiscal quarter of debt to earnings and earnings to interest expense. Note 5 - Operations by Segments and Geographic Areas We currently derive a substantial portion of our revenue from providing external communication services to Bell South Telecommunications, Inc. For the six months ended June 30, 2000, approximately 10% of our domestic revenue was derived from services performed for them. The following table set forth, for the three months and six months ended June 30, 2000 and 1999, certain information about segment results of operations and segment assets (in thousands):

MASTEC, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Months External Internal External International Other Consolidated 2000 Communication Communication Energy (2) Services Services Networks - --------------------------------------------------------------------------------------------------------------------------- Revenue $ 209,018 $ 40,509 $ 36,891 $ 11,279 $ - $ 297,697 Depreciation 9,907 524 2,408 - 344 13,183 Amortization 1,189 307 202 977 - 2,675 Income before provision 31,025 4,615 3,486 4,214 (6,740) 36,600 for income taxes and minority interest Three Months External Internal External International Other Consolidated 1999 Communication Communication Energy (2) Services Services Networks - --------------------------------------------------------------------------------------------------------------------------- Revenue $ 167,642 $ 19,003 $ 38,186 $ 13,526 $ 331 $ 238,688 Depreciation 7,934 348 3,061 - 372 11,715 Amortization 948 250 201 753 - 2,152 Income before provision 25,463 777 3,110 2,463 (9,303) 22,510 for income taxes and minority interest Six Months External Internal External International Other Consolidated 2000 Communication Communication Energy (1) (2) Services Services Networks - --------------------------------------------------------------------------------------------------------------------------- Revenue $ 402,009 $ 72,527 $ 74,254 $ 21,601 $ - $ 570,391 Depreciation 19,528 991 5,349 - 793 26,661 Amortization 2,210 556 404 3,006 - 6,176 Income before provision 55,617 7,080 5,593 3,204 (15,183) 56,311 for income taxes and minority interest Capital expenditures 25,064 819 1,835 534 - 28,252 Total assets 449,182 90,933 81,769 89,414 109,318 820,616 Six Months External Internal External International Other Consolidated 1999 Communication Communication Energy (1) (2) Services Services Networks - --------------------------------------------------------------------------------------------------------------------------- Revenue $ 296,520 $ 40,306 $ 75,136 $ 32,100 $ 1,422 $ 445,484 Depreciation 14,925 704 5,705 - 760 22,094 Amortization 1,891 509 392 1,628 - 4,420 Income before provision 38,524 1,370 6,167 3,532 (18,421) 31,172 for income taxes and minority interest Capital expenditures 29,571 451 6,473 - 185 36,680 Total assets 377,076 53,396 87,780 141,197 62,933 722,382 (1) For the six months ended June 30, 2000 and 1999, reflects revenue, depreciation, amortization, income before provision for income taxes and minority interest and capital expenditures related to our Brazilian operations. As of June 30, 2000 and 1999, total assets for Brazil consisted of $50.4 million and $86.8 million, respectively and the remainder relates to our interest in international assets not related to our core business.

(2) Consists of non-core construction and corporate operations, which includes interest expense net of interest income of $8.2 million and $8.8 million for the six months ended June 30, 2000 and 1999, respectively. For the three months ended June 30, 2000 and 1999, the interest expense, net of interest income was $3.5 million and $4.4 million, respectively. There are no significant transfers between geographic areas and segments. Total assets are those assets used in our operations in each segment. Corporate assets include cash and cash equivalents, real estate assets held for sale and notes receivable. Note 6 - Commitments and Contingencies In November 1997, we filed a lawsuit against Miami-Dade County in Florida state court alleging breach of contract and seeking damages exceeding $3.0 million in connection with the county's refusal to pay amounts due us under a multi-year agreement to perform road restoration work for the Miami-Dade Water and Sewer Department ("MWSD"), a department of the county, and the county's wrongful termination of the agreement. The County has refused to pay amounts due to us under the agreement until alleged overpayments under the agreement have been resolved, and has counterclaimed against us seeking unspecified damages. We are vigorously pursuing this lawsuit. We own minority interests in Argentina and Spain. Our investment in Argentina is a minority interest with a carrying value of $17.9 million as of June 30, 2000 in Supercanal Holding, S.A., a holding company of numerous cable television operators in western Argentina ("Supercanal"). We also own an indirect minority interest in and have made a $3.0 million working capital loan to Sistemas e Instalaciones de Comunicacion, S.A. ("Sintel"), a Spanish telecommunications infrastructure services provider. Supercanal has defaulted on its third party debt and has filed a petition under Argentine law seeking protection from its creditors. We do not guarantee any of this indebtedness. In January 2000, the majority shareholder of Supercanal approved a capital increase that would have required us to contribute approximately $5.9 million to maintain our interest if the capital increase is effected in full, but the capital increase has been enjoined by an Argentine judge and we cannot determine whether or when the capital increase will be effected. During the second quarter of 2000, Sintel filed a petition under Spanish law seeking protection from its creditors, including our working capital loan. In July 2000, Sintel approved a capital increase that will require us to contribute approximately $2.6 million to maintain our interest if the capital increase is effected in full. Management is considering whether to subscribe to the capital increase. We have determined that the carrying value of these assets has not been impaired, but we are monitoring investments to determine whether a charge is warranted in the future. Our 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. We 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 our international operations.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Except for historical information, the matters discussed below are forward looking statements made pursuant to the safe harbor provisions for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company's current expectations and are subject to a number of risks, uncertainties and assumptions relating to the Company's operations, financial condition and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in any forward-looking statements made by the Company in this Quarterly Report. These and other risks are detailed in documents filed by the Company with the Securities and Exchange Commission. The Company does not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances. General We design, build, install, maintain and monitor internal and external networks supporting the Internet, Internet-related applications, e-commerce and other communications and energy facilities for leading telecommunications, cable television, energy and other Fortune 500 companies. Based on revenue, we are the largest end-to-end telecommunications and energy infrastructure service provider in North America. We offer comprehensive network infrastructure solutions to a diverse group of customers, enabling our customers to connect with their customers. Currently, we operate from approximately 200 locations throughout North America, which accounted for 96% of our revenue for the six months ended June 30, 2000. Internationally we operate in Brazil through a 51% joint venture which we consolidate net of a 49% minority interest after tax. For the six months ended June 30, 2000, approximately 10.7% of our domestic revenue was derived from services performed for BellSouth Telecommunications, Inc. Our top 10 customers combined account for approximately 50% of our domestic revenue in the quarter. We report our operations in four segments: - External Communication Services, - External Energy Services, - Internal Communication Services and - International. External Communication Services represents our core business and is divided into five service lines: - inter-exchange networks, - local exchange networks, - broadband networks, and - intelligent transportation networks. Internal Communication Services includes: - switching and transmission services, - structured cabling services, - wireless networks, and - monitoring services.

Results of Operations North America The following table states for the periods indicated our North American operations in dollar and percentage of revenue terms (in thousands): Three Months Ended June 30, Six Months Ended June 30, ---------------------------------------------- ---------------------------------------------- 2000 1999 2000 1999 ----------------------- ---------------------- ---------------------- ----------------------- Revenue $ 286,418 100.0% $ 225,162 100.0% $ 548,790 100.0% $ 413,384 100.0% Costs of revenue 215,653 75.3% 169,305 75.2% 416,342 75.9% 316,381 76.5% Depreciation 13,183 4.6% 11,715 5.2% 26,661 4.9% 22,094 5.3% Amortization 1,698 0.6% 1,399 0.6% 3,170 0.6% 2,792 0.7% General and administrative 20,582 7.2% 18,510 8.2% 42,260 7.7% 36,016 8.8% expenses Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999 The following table sets forth the revenue and change in revenue by North American operating segments, in dollar and percentage terms (in thousands): Three Months Ended June 30, Change ----------------------------- ----------------------------- 2000 1999 $ % -------------- ------------- ------------- ------------- External Communication Services $ 209,018 $ 167,642 $ 41,376 24.7% External Energy Services 36,891 38,186 (1,295) (3.4%) Internal Communication Services 40,509 19,003 21,506 113.2% Other - 331 (331) (100.0%) ============== ============= ============= ------------- $ 286,418 $ 225,162 $ 61,256 27.2% ============== ============= ============= Our North American revenue was $286.4 million for the three months ended June 30, 2000, compared to $225.2 million for the same period in 1999, representing an increase of $61.3 million or 27.2% primarily all organic. Revenue from our two combined segments offering services to the datacom world increased by 33.7%. Of our three operating segments, the fastest growing is our internal communication services primarily due to growth in services provided at central office facilities resulting from regulatory co-location requirements to open central office facilities to new competitors. Our external communication services segment is also growing primarily due to the increased demand for bandwidth by end-users which has spurred increased network construction and upgrades by our customers. Our external energy segment decreased slightly due to our focus on increasing profitability prior to any future growth. During the three months ended June 30, 2000, we completed four acquisitions, two in our external communications segment and two in our internal communication services segment. This compares to two acquisitions for the three months ended June 30, 1999 in our external communication services segment. Our North American costs of revenue was $215.7 million or 75.3% of revenue for the three months ended June 30, 2000, compared to $169.3 million or 75.2% of revenue for the same period in 1999. In 2000, margins decreased due to increased training costs in our external communication services offset by increased value added service offering in our internal communication services and inceased efficiency in our energy segment.

Depreciation expense was $13.2 million or 4.6% of revenue for the three months ended June 30, 2000, compared to $11.7 million or 5.2% of revenue for the same period in 1999. The increased depreciation expense resulted from our investment in our fleet to support revenue growth. The decline as a percentage of revenue was due to an increase in revenue from our internal communication segment which is less capital intensive. General and administrative expenses were $20.6 million or 7.2% of revenue for the three months ended June 30, 2000, compared to $18.5 million or 8.2% of revenue for the same period in 1999. The decline in general and administrative expenses as a percentage of revenue for the three months ended June 30, 2000 was due primarily to our ability to support higher revenue with a reduced administrative base. Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 The following table sets forth the revenue and change in revenue by North American operating segments, in dollar and percentage terms (in thousands): Six Months Ended June 30, Change ----------------------------- ----------------------------- 2000 1999 $ % -------------- ------------- ------------- ------------- External Communication Services $ 402,009 $ 296,520 $ 105,489 35.6% External Energy Services 74,254 75,136 (882) (1.2%) Internal Communication Services 72,527 40,306 32,221 79.9% Other - 1,422 (1,422) (100.0%) ============== ============= ============= ------------- $ 548,790 $ 413,384 $ 135,406 32.8% ============== ============= ============= Our North American revenue was $548.8 million for the six months ended June 30, 2000, compared to $413.4 million for the same period in 1999, representing an increase of $135.4 million or 32.8%, primarily all organic. Revenue from our two combined segments offering services to the datacom world increased by 40.9%. Of our three operating segments, the fastest growing is our internal communication services primarily due to growth in services provided at central office facilities resulting from regulatory co-location requirements to open central office facilities to new competitors. Our external communication services segment is also growing primarily due to the increased demand for bandwidth by end-users which has spurred increased network construction and upgrades by our customers. Our external energy segment remained relatively constant due to our focus to increasing profitability prior to any future growth. During the six months ended June 30, 2000, we completed four acquisitions, two in our external communications segment and two in our internal communications services segment. This compares to three acquisitions for the six months ended June 30, 1999 in our external communication services segment. Our North American costs of revenue were $416.3 million or 75.9% of revenue for the six months ended June 30, 2000, compared to $316.4 million or 76.5% of revenue for the same period in 1999. In 2000, margins improved due to increased productivity in our external and internal communication services offset by a slight decline in our energy segment due to poor weather conditions experienced earlier in 2000. Depreciation expense was $26.7 million or 4.9% of revenue for the six months ended June 30, 2000, compared to $22.1 million or 5.3% of revenue for the same period in 1999. The increased depreciation expense resulted from our investment in our fleet to support revenue growth. The decline as a percentage of revenue was due to an increase in revenue from our internal communication segment which is less capital intensive. General and administrative expenses were $42.3 million or 7.7% of revenue for the six months ended June 30, 2000, compared to $36.0 million or 8.8% of revenue for the same period in 1999. The decline in general and administrative expenses as a percentage of revenue for the six months ended June 30, 2000 was due primarily to our ability to support higher revenue with a reduced administrative base.

International The following tables set forth for the periods indicated our Brazilian operations in dollar and percentage terms (in thousands): Three Months Ended June 30, Six Months Ended June 30, --------------------------------------------- ---------------------------------------------- 2000 1999 2000 1999 ---------------------- ---------------------- ---------------------- ---------------------- Revenue $ 11,279 100.0% $ 13,525 100.0% $ 21,601 100.0% $ 32,100 100.0% Costs of revenue 9,280 82.3% 8,964 66.3% 17,520 81.1% 23,985 74.7% Amortization 977 8.7% 753 5.6% 3,006 13.9% 1,628 5.1% General and administrative 1,348 12.0% 2,032 15.0% 2,782 12.9% 3,917 12.2% expenses Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999 Our International operations' functional currency is the Brazilian real. Brazilian revenue was $11.3 million for the three months ended June 30, 2000, compared to $13.5 million for the same period in 1999, representing a decrease of $2.2 million or 16.6%. Brazilian revenue decreased primarily due to the completion of prior existing contracts. Brazil had revenue of R$19.6 million reals during the three months ended June 30, 2000, compared to R$23.7 million reals for the same period in 1999, representing a decrease of 17.3%. The average currency exchange rate was 1.74 reals per US dollar for the period ended June 30, 2000 compared to 1.75 reals per US dollar for the same period in 1999. Amortization expense was $1.0 million or 8.7% of revenue for the three months ended June 30, 2000 compared to $0.8 million or 5.6% of revenue for the same period in 1999. Amortization relates primarily to an intangible asset resulting from one acquisition completed in early 1998 that was being amortized over a five year period relative to the volume of work under specified contracts but has been accelerated during 2000. As of June 30, 2000, almost the entire balance has been amortized. General and administrative expenses were $1.3 million or 12% of revenue for the three months ended June 30, 2000, compared to $2.0 million or 15% of revenue for the same period in 1999. General and administrative expenses were R$2.3 million reals or 11.7% of reals revenue during the three months ended June 30, 2000, compared to R$3.6 million reals or 15.2% of reals revenue for the same period in 1999. The decline in general and administrative expenses in relation to revenue in real terms was due to an effort to reduce overhead as the revenue base has declined. Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 Our International operations' functional currency is the Brazilian real. Brazilian revenue was $21.6 million for the six months ended June 30, 2000, compared to $32.1 million for the same period in 1999, representing a decrease of $10.5 million or 32.7%. Brazilian revenue decreased primarily due to the completion of prior existing contracts. Brazil had revenue of R$37.4 million reals during the six months ended June 30, 2000, compared to R$54.2 million reals for the same period in 1999, representing a decrease of 31.0%. The average currency exchange rate was 1.73 reals per US dollar for the period ended June 30, 2000 compared to 1.69 reals per US dollar for the same period in 1999. Amortization expense was $3.0 million or 13.9% of revenue for the six months ended June 30, 2000 compared to $1.6 million or 5.1% of revenue for the same period in 1999. Amortization relates primarily to an intangible asset resulting from one acquisition completed in early 1998 that was being amortized over a five year period relative to the volume of work under specified contracts but has been accelerated during 2000. As of June 30, 2000, almost the entire balance has been amortized. General and administrative expenses were $2.8 million or 12.9% of revenue for the six months ended June 30, 2000, compared to $3.9 million or 12.2% of revenue for the same period in 1999. General and administrative expenses were R$4.8 million reals or 12.8% of reals revenue during the six months ended June 30, 2000, compared to R$6.6 million reals or 12.2% of reals revenue for the same period in 1999. The decline in general and administrative expenses in relation to revenue in real terms was due to an effort to reduce overhead as the revenue base has declined. Consolidated Results The following table sets forth for the periods indicated certain consolidated income statement data for North America and International and the related percentage of consolidated revenue. Three Months Ended June 30, Six Months Ended June 30, ---------------------------------------------------------------------------------------------- 2000 1999 2000 1999 ----------------------- ---------------------------------------------- ----------------------- Interest expense $ (4,303) (1.4%) $ (7,311) (3.1%) $ (9,859) (1.7%) $ (13,542) (3.0%) Interest income 1,054 0.4% 3,633 1.5% 2,267 0.4% 5,742 1.3% Other income, net 4,873 1.6% 178 0.1% 5,253 0.9% 301 - Income before provision for 36,600 12.3% 22,510 9.4% 56,311 9.9% 31,172 7.0% income taxes and minority interest Provision for income taxes (15,120) (5.1%) (9,279) (3.9%) (23,499) (4.1%) (12,949) (2.9%) Minority interest (138) - (1,054) (0.4%) 7 - (1,694) (0.4%) ============ ========== ============ ======================= ========= ============ ========== Net income $ 21,342 7.2% $ 12,177 5.1% $ 32,819 5.8% $ 16,529 (3.7%) ============ ========== ============ ======================= ========= ============ ========== Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999 For the three months ended June 30, 2000, interest expense declined from $7.3 million to $4.3 million primarily due to the repayment of debt under our revolving credit facility with a portion of the proceeds of our offering of 3.75 million shares which raised approximately $126.0 million in net proceeds. Interest income for the three months ended June 30, 1999 includes interest accrued and collected from a customer financing arrangement which terminated in September 1999. Interest income for the three months ended June 30, 2000 was mainly comprised of interest earned on temporary investments as a result of our 3.75 million equity offering completed in March 6, 2000. For the three months ended June 30, 2000, we reflected a gain of $9.6 million related to the sale of our PCS system in Latin America. We also recorded a charge of $5.4 million comprised primarily of the write-off of two Latin American operations. Reflected in other income, net for the three months ended June 30, 1999, are the following transactions. MasTec sold assets held for sale with a book value of approximately $9.7 million for approximately $6.1 million recognizing a loss on sale of approximately $3.6 million. Offsetting the loss from disposal of non-core assets was a fee of $3.5 million collected from a telecommunications customer related to a vendor financing arrangement. Our effective tax rate for North American and Brazil operations approximates 42% and 33% respectively, for the three and six months ended June 30, 2000 and 1999. The trends experienced during the three months ended June 30, 2000 are consistent with those of the six months ended June 30, 2000 to six months ended June 30, 1999.

Financial Condition, Liquidity and Capital Resources Our primary liquidity needs are for working capital, capital expenditures, acquisitions and investments, and debt service. Our primary sources of liquidity are cash flows from operations, borrowings under revolving lines of credit, issuances of stock and the proceeds from the sale of assets held for sale. Net cash used in operating activities was $10.6 million for the six months ended June 30, 2000, compared to net cash provided by operating activities of $22.2 million for the same period in 1999. In 1999, we collected approximately $42.0 million from a customer to whom we were providing vendor financing of which approximately $14.3 million related to work performed in 1999 with the balance being for work performed in 1998. Our working capital at June 30, 2000, excluding assets held for sale of $24.7 million, was $279.9 million compared to $169.6 million at December 31, 1999 excluding assets held for sale of $53,639. Our North American working capital as of June 30, 2000 was comprised primarily of $265.2 million in accounts receivable, $36.9 million in inventories and other current assets and $75.4 million in cash and cash in escrow, net of $118.5 million in current liabilities. We have a credit facility that provides for borrowings up to an aggregate amount of $100.0 million, which we have reduced from $165.0 million during 2000. Amounts outstanding under the revolving credit facility mature on June 9, 2002. We are required to pay an unused facility fee ranging from .25% to .50% per annum on the facility, depending upon certain financial covenants. The credit facility is secured by a pledge of shares of certain of our subsidiaries. Interest under the credit facility accrues at rates based, at our option, on the agent bank's base rate plus a margin of up to .50% depending on certain financial covenants or 1% above the overnight federal funds effective rate, whichever is higher, or its LIBOR Rate (as defined in the credit facility) plus a margin of 1.00% to 2.25%, depending on certain financial covenants. We also have $200.0 million, 7.75% senior subordinated notes due in February 2008 with interest due semi-annually. The credit facility and the senior notes contain customary events of default and covenants which prohibit, among other things, making investments in excess of a specified amount, incurring additional indebtedness in excess of a specified amount, paying dividends in excess of a specified amount, making capital expenditures in excess of a specified amount, creating certain liens, prepaying other indebtedness, including the senior notes, and engaging in certain mergers or combinations without the prior written consent of the lenders. The credit facility also provides that we must maintain certain financial ratio coverages, requiring, among other things, minimum ratios at the end of each fiscal quarter of debt to earnings and earnings to interest expense. During 2000, we invested $28.3 million primarily in our fleet to support revenue growth. We collected $15.2 million in net proceeds related to assets sold, primarily from the sale of our Spanish operations. Subsequent to June 30, 2000, we received $45.0 million in proceeds held in escrow at June 30 from the sale of our PCS system in Latin America in the second quarter. We anticipate that available cash, cash flows from operations and the proceeds from the sale of assets and investments and borrowing availability under the Credit Facility will be sufficient to satisfy our working capital requirements for the foreseeable future. We also own minority interests in Argentina and Spain. Our investment in Argentina is a minority interest with a carrying value of $17.9 million as of June 30, 2000 in Supercanal Holding, S.A., a holding company of numerous cable television operators in western Argentina ("Supercanal"). We also own a minority interest in and have made a $3.0 million working capital loan to Sistemas e Instalaciones S.A. ("Sintel"), a Spanish telecommunications infrastructure services provider. Supercanal has defaulted on its third party debt and has filed a petition under Argentine law seeking protection from its creditors. We do not guarantee any of this indebtedness. In January 2000, the majority shareholder of Supercanal approved a capital increase that would have required us to contribute approximately $5.9 million to maintain our interest if the capital increase is effected in full, but the capital increase has been enjoined by an Argentine judge and we cannot determine whether or when the capital increase will be effected.

During the second quarter of 2000, Sintel filed a petition under Spanish law seeking protection from its creditors, including our working capital loan. In July 2000, Sintel approved a capital increase that will require us to contribute approximately $2.6 million to maintain our interest if the capital increase is effected in full. Management is considering whether to subscribe to the capital increase. We have determined that the carrying value of these assets has not been impaired, but we are monitoring investments to determine whether a charge is warranted in the future. While we do not currently anticipate taking an additional impairment charge on any of these assets, there can be no assurance that future transactions or events will not result in any further impairment of these assets. If we were to take a charge, however, it could adversely affect our earnings for the period in which we incurred the charge. Seasonality Our North America operations have historically been seasonally weaker in the first and fourth quarters of the year and have produced stronger results in the second and third quarters. This seasonality is primarily the result of customer budgetary constraints and preferences and the effect of winter weather on external network activities. Some of our U.S. customers, particularly the incumbent local exchange carriers, tend to complete budgeted capital expenditures before the end of the year and defer additional expenditures until the following budget year. Revenue in reals from our Brazilian operations is not expected to fluctuate seasonally. Impact of Inflation The primary inflationary factor affecting our operations is increased labor costs. We have experienced some increases in labor costs. Competition for qualified personnel could increase labor costs for us further in the future. Our international operations may, at times in the future, be exposed to high inflation in certain foreign countries. During the six months ended June 30, 2000, we generated approximately 4% of our total revenue from our Brazilian operations that are susceptible to currency devaluation. We anticipate that revenue from our Brazilian operations will be less significant to our operations in the foreseeable future due to our continued focus on domestic operations. In addition, any deterioration in economic conditions in Brazil and other Latin American countries could adversely impact our results of operations, financial position and cash flows. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Notes 4 and 6 of Notes to Consolidated Financial Statements for disclosure about market risk. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS The Annual Meeting of shareholders of MasTec was held on May 17, 2000. The holders of MasTec's common stock, $0.10 par value, were entitled to elect two Class II directors to serve until 2003 and until their successors are elected and qualified. Proxies for 32,065,269 shares of the 46,505,745 entitled to vote were received.

The following table sets forth the names of the two persons elected at the Annual Meeting to serve as directors until 2003 and the number of votes cast for or against respect to each person. Class II Director For Withheld Olaf Olafsson 32,028,233 37,037 William N. Shiebler 32,026,947 38,322 Also at the Annual Meeting, a proposal to increase the shares reserved for issuance under the 1994 Stock Incentive Plan by 1,000,000 shares was voted upon with the following votes cast: For Against Withheld 25,984,287 6,039,219 41,763 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit No.* Description 27 Financial Data Schedule - --------------------- + Exhibit filed with the Securities and Exchange Commission. MasTec agrees to provide this exhibit supplementally upon request.

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. Date: August 4, 2000 /s/ CARMEN M. SABATER --------------------- Carmen M. Sabater Senior Vice President - Chief Financial Officer (Principal Financial Officer) Date: August 4, 2000 /s/ ARLENE VARGAS ----------------- Arlene Vargas Vice President and Controller Principal Accounting Officer)

5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 85,153 0 291,090 7,331 19,935 443,220 278,334 123,780 820,616 138,650 195,791 0 0 4,705 436,971 820,616 570,391 570,391 433,862 511,741 0 0 9,859 56,311 23,499 32,819 0 0 0 32,819 .72 .69