SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
Commission File Number 0-3797
MASTEC, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0829355
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3155 N.W. 77th Avenue, Miami, FL 33122-1205 (305) 599-1800
(Address of principal executive offices) Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.10 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The number of shares of common stock outstanding as of March 21, 2001 was
47,719,061. The aggregate market value of the voting stock held by
non-affiliates of the registrant based on the $12.89 closing price for the
registrant's common stock on the New York Stock Exchange on March 19, 2001 was
approximately $615,098,696. Directors, executive officers and 10% or greater
shareholders are considered affiliates for purposes of this calculation but
should not necessarily be deemed affiliates for any other purpose.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement relating to the 2001 Annual
Meeting of Shareholders are incorporated by reference.
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 our current
expectations and are subject to a number of risks, uncertainties and assumptions
relating to our 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 us
in this Annual Report. These and other risks are detailed in documents filed by
us with the Securities and Exchange Commission, including our registration
statement on Form S-3 (No.333-90027). We are not obligated to revise these
forward-looking statements to reflect future events or circumstances.
BUSINESS
General
We are a leading end-to-end voice, video, data and energy network
infrastructure solution for a broad range of communications, broadband, energy
and other corporate clients. We have a diverse client base representing all the
major segments of the industries we serve. Our broad suite of services allows
our clients to connect with their customers. We design, build, install, maintain
and monitor internal and external networks, transmission facilities and data
storage centers supporting e-commerce and other communications, computing and
energy systems. We are a national services provider, operating from 200 service
locations throughout the United States and Canada. We also operate in Brazil
through a 51% owned joint venture.
Strategy
We believe we are one of the few national, multi-disciplinary
infrastructure providers capable of providing a comprehensive solution to our
clients' bandwidth infrastructure needs from basic installation and construction
to sophisticated engineering, design and integration. Our diverse and
long-standing client base, experienced management and integrated value added
service offering provide a stable base of repeat business and enable us to
quickly and efficiently meet client demands.
Our strategy is to use these competitive strengths to increase market share
in the fragmented network infrastructure industry by expanding relationships
with long-time clients across multiple service offerings. We also provide
turn-key solutions to new clients who are seeking a single source for their
infrastructure requirements. We are focused on leveraging our administrative
base and achieving other cost savings and efficiencies through better
utilization of our equipment, facilities and personnel and through economies of
scale. We continue to expand our capabilities and geographic scope through
selected acquisitions and investments although our primary focus is organic
growth. We believe these strategies will permit us to continue to grow
profitably. However, current economic conditions may impact our ability to grow
at historical levels.
Clients
Our clients include some of the largest and most prominent companies in the
communications and energy fields, including:
o incumbent local exchange carriers,
o telecommunications equipment vendors,
o competitive local exchange carriers,
o government agencies such as departments of transportation,
o cable television operators,
o data storage and co-location facilities providers,
o long distance carriers,
o public and private energy companies
o wireless service providers, and
o financial institutions and other corporate clients.
We have over 200 clients, none of which accounted for 10% or more of our
revenue in 2000. Our top 10 clients combined accounted for approximately 44% of
our domestic revenue. Representative clients include:
AT&T Corporation Lucent Technologies, Inc.
BellSouth Corporation NEC Corporation
Carolina Power and Light Company Qwest Communications International,Inc.
Charter Cable, Inc. SBC Communications, Inc.
Comcast Corporation Sprint Corp.
Cox Communications, Inc. Telergy, Inc.
Enron Corporation Texas Utilities Company
First Union Corporation Time Warner, Inc.
Georgia Department of Transportation Verizon Communications, Inc.
Global Crossing, Ltd. Williams Communications Group
Level 3 Communications, Inc.
We provide the majority of our services to our clients under master service
agreements, which typically are exclusive multi-year service agreements to
satisfy our client's network requirements up to a specified dollar amount per
job within defined geographic areas. We currently have 88 master service
agreements across all service lines. Revenue from master service agreements
represents approximately 50% of our annual domestic revenue.
Services
We market our services individually and in combination to provide the most
efficient and effective solution to meet our clients' demands, which
increasingly require resources from multiple disciplines. Through our unified
"MasTec"(R) brand and an integrated organizational structure designed to permit
rapid deployment of labor, equipment and materials, we are able quickly and
efficiently to allocate resources to meet client needs.
We offer our services under two broad categories organized around our
clients:
Datacom Network Services. We design, build, install, maintain and monitor
the physical facilities used to provide end-to-end voice, video and data service
from the provider's central office, switching center or cable television
head-end to the ultimate consumer's home or business. We provide these services
both externally on public or private rights-of-ways or in our clients' premises.
Our services include:
- comprehensive project management, coordination, consulting and
administration;
- designing, installing, testing and documenting switching and transmission
equipment and supporting components at point-of-presence locations;
- network route development, right of way and other site acquisition, and
permitting;
- designing conduit networks and fiber rings;
- placing and splicing fiber optic, coaxial and copper cable; excavating
trenches in which to place the cable; and furnishing and placing related
structures such as poles, anchors, conduits, manholes, cabinets and closures;
- placing drop lines from our clients' main distribution terminals to their
customer's home or business;
- installing set-top boxes, satellite dishes and other connection devices
in homes and businesses;
- erecting wireless communication towers, constructing related structures
and installing associated equipment;
- designing and installing intelligent traffic networks;
- engineering, furnishing and installing integrated voice, video and data
networks inside client premises as well as the infrastructure required to
support complex e-commerce solutions;
- systems integration, which includes selecting, configuring and installing
software, hardware and other computing and communications equipment and cabling
to provide an integrated computing and communications system;
- monitoring, maintaining and restoring clients' networks 24 hours a day,
seven days a week;
- network device security and optimization,
- procuring materials;
- providing acceptance testing and as-built documentation; and
- maintaining, upgrading, removing and replacing these systems.
Energy Network Services. We provide external network and energy
infrastructure services to public and private utilities. These services consist
of overhead and underground installation and maintenance of electrical and other
utilities' transmission and distribution networks, substation construction and
maintenance, right-of-way maintenance and restoration of asphalt and concrete
surfaces. These services are substantially similar to the services we provide to
our datacom clients, but the work often involves the installation and splicing
of high-voltage transmission and distribution lines.
Brazil. We operate in Brazil through a 51% joint venture which we
consolidate net of a 49% minority interest after tax. Our Brazilian operations
provide datacom infrastructure services to a diverse group of telecommunication
companies primarily in the heavily populated states of southern Brazil.
Backlog
At December 31, 2000, we had a backlog in our domestic operations of
approximately $1.5 billion as compared to a backlog of approximately $970.1
million at December 31, 1999. Our backlog consists of the uncompleted portion of
services we are to perform under project-specific contracts as well as estimated
work on master service agreements. We expect to complete substantially all of
our backlog at December 31, 2000 during the next 18 months.
Sales and Marketing
We have developed a marketing plan emphasizing the "MasTec"(R) registered
trade name and an integrated service offering to position ourselves as a
seamless, end-to-end nationwide infrastructure services solution providing basic
infrastructure to sophisticated engineering, design and integration. We believe
our long-standing relationships with our clients and reputation for reliability
and efficiency facilitates our repeat business. Our marketing efforts are
principally carried out by the management of our service lines, most of whom
have many years' experience in the industries they serve, both at the service
provider level and in some cases with the clients we serve. Our service line
leadership markets to existing and potential telecommunications and other
clients to negotiate new contracts or to be placed on lists of vendors invited
to submit proposals for master service agreements and individual projects. Our
executive management supplements their efforts at the national level. We also
market through commissioned salespeople and our corporate marketing department.
Safety and Insurance
We are committed to ensuring that our team members perform their work
safely and strive to instill safe work habits in all of our team members. We
evaluate our team members not only on the basis of the efficiency and quality of
their work but also on their safety records and the safety records of the
employees they supervise. We also hold regular training sessions and seminars
with our team members devoted to safe work practices. We have established a
company-wide safety committee to share best practices among our units and to
monitor and improve compliance with safety regulations.
The primary claims we face in our operations are workers' compensation,
automobile liability and various general liabilities. We maintain insurance
policies with respect to these claims, but these policies are subject to
deductibles for worker's compensation, automobile liability and general
liability up to $250,000 per claim. We have umbrella coverage up to a policy
limit of $25.0 million and stop loss coverage of $16.1 million for 2000 claims.
We actuarially determine any liabilities for unpaid claims and associated
expenses, including incurred but not reported losses, and reflect those
liabilities in our balance sheet as an accrued liability. We continually review
these claims and expenses and the appropriateness of the accrued liability.
Suppliers
Our clients supply the majority of the raw materials and supplies necessary
to carry out our contracted work, although we are increasingly supplying
materials and supplies on turnkey projects. We obtain materials and supplies for
our own account from independent third-party providers and do not manufacture
any significant amount of materials or supplies for resale. We are not dependent
on any one supplier for any materials or supplies that we obtain for our own
account. We have not experienced any significant difficulty in obtaining an
adequate supply of materials and supplies.
We also use independent contractors to perform portions of our services and
to manage work flow. These independent contractors typically are sole
proprietorships or small business entities. Independent contractors typically
provide their own employees, vehicles, tools and insurance coverage. We are not
dependent on any single independent contractor.
Competition
There is no dominant provider in the network infrastructure services
industry. The industry is highly fragmented and we compete with other companies
in most of the markets in which we operate ranging from small independent firms
servicing local markets to larger firms servicing regional markets, as well as
large national and international engineering firms and equipment vendors on
turnkey projects who subcontract work to companies other than us. Despite the
current trend toward outsourcing, we also face competition from existing or
prospective clients who employ in-house personnel to perform some of the same
types of services we provide. Historically, there have been relatively few
significant barriers to entry into the markets in which we operate and, as a
result, any organization that had adequate financial resources and access to
technical expertise may become one of our competitors. We are, however, one of
the few providers with a nationwide comprehensive services offering.
We believe our clients consider a number of factors in choosing a service
provider, including technical expertise and experience, financial and
operational resources, nationwide presence, industry reputation and
dependability. Because of the highly competitive bidding environment for
infrastructure services, price historically has often been the principal factor
in determining whether the services provider is awarded the work on smaller,
less complex projects. Smaller competitors are sometimes able to win bids for
these projects based on price alone due to their lower overhead costs. We
believe our size, nationwide presence, integrated value added service offering,
financial strength and reputation provide a competitive advantage in obtaining
larger, more complex infrastructure projects and gaining market share in the
fragmented infrastructure services industry.
Regulation
Our operations are subject to various federal, state and local laws,
including:
- Contractor licensing requirements;
- Building and electrical codes;
- Permitting and inspection requirements; and
- Regulations related to labor relations, worker safety,
and environmental protection
We believe we have all material licenses and permits required to conduct
our operations and that we are in substantial compliance with all applicable
regulatory requirements.
Employees
As of December 31, 2000, we had approximately 9,800 team members in North
American operations and approximately 2,600 in Brazil. Approximately 600 of our
team members are represented by a labor union, principally the Communication
Workers of America or the International Brotherhood of Electrical Workers. We
believe that our employee relations are good.
Recruiting. Our primary hiring sources for our team members include
promotion from within, team member referrals, print and Internet advertising and
direct recruiting. We attract and retain team members by offering technical
training opportunities, bonus opportunities, stock ownership, competitive
salaries, and a comprehensive benefits package. Our "MasTec"(R) brand and
integrated service offering also has created a unified corporate culture that we
believe helps attract and retain team members. Team members are exposed to
numerous technologies being deployed by our clients which serves as a
recruitment tool. We attract talent from numerous sources including higher
learning institutions, colleges, and industry.
Training and Career Development. We believe that our continuous focus on
training and career development helps us to retain our team members. Team
members participate in on-going educational programs, many of which are
internally developed, to enhance their technical and management skills through
classroom and field training. Manufacturers of telecommunications equipment also
sponsor training programs covering the installation and maintenance of their
equipment, which our team members regularly attend. We also provide
opportunities for promotion and mobility within our integrated service
organization that we believe helps retain our team members.
We believe our corporate culture and organizational structure creates a
cooperative, entrepreneurial atmosphere and shared vision. We are dedicated to
maintaining an innovative, creative and empowering corporate culture that
provides our team members with personal and professional growth opportunities.
Other
We are organized as a Florida corporation. Our predecessor company was
formed in 1969, and we have operated as "MasTec" since 1994.
EXECUTIVE OFFICERS
The following is a list of the names and ages of all of our executive
officers, indicating all positions and offices they hold with us. Our executive
officers hold office for one year or until their successors are elected by our
Board of Directors.
Name Age Position
Joel-Tomas Citron 38 President and Chief Executive Officer
Austin J. Shanfelter 43 Executive Vice President and Chief Operating Officer
Carmen M. Sabater 36 Executive Vice President and Chief Financial Officer
Jose Sariego 46 Senior Vice President and General Counsel
Arlene Vargas 34 Vice President and Controller
Joel-Tomas Citron has been our Chief Executive Officer since October 1999
and our President since May 1999. He has been a member of our Board of Directors
since January 1998. Mr. Citron was the managing partner of Triscope Capital LLC,
a private investment partnership, from January to December 1998 and Chairman of
the Board of Directors of the United States subsidiary of Proventus AB, a
privately held investment company based in Stockholm, Sweden, from January 1992
to December 1997 (Proventus AB was publicly traded on the Stockholm Exchange
until 1995). Mr. Citron is also a member of the Board of Directors of Neff
Corporation; Oxigene Inc.; Proflowers.com, an e-commerce company; Telergy, Inc.,
a facilities-based provider of integrated communications services and high
bandwidth fiber optic capacity in the East Coast; and past Chairman of the Board
of Directors of American Information Systems, Inc. (now owned by Exodus
Communications, Inc.), a provider of Internet and Internet systems solutions.
Austin J. Shanfelter has been Chief Operating Officer since March 2000 and
Executive Vice President since February 2001. Prior to being named Chief
Operating Officer, he served as President of our Broadband Services group from
January 1997. Mr. Shanfelter has been in the datacom infrastructure industry
since 1981. Mr. Shanfelter has been a member of the Board of Directors of the
Power and Communications Contractors Association (PCCA), an industry trade
group, since 1993. He is also the Chairman of the Cable Television Contractors
Council of the PCCA. Mr. Shanfelter is also a member of the Society of Cable
Television Engineers since 1982 and the National Cable Television Association
since 1991.
Carmen M. Sabater has been Chief Financial Officer since May 1999 and
Executive Vice President since February 2001. From 1994 until May 1999, Ms.
Sabater was our Controller. Prior to joining us, Ms. Sabater was a Senior
Manager with Deloitte & Touche, a public accounting firm.
Jose Sariego has been our Senior Vice President and General Counsel since
September 1995. Prior to joining us, Mr. Sariego was Senior Corporate Counsel
and Secretary of Telemundo Group, Inc., a Spanish language television network,
from August 1994 to August 1995. From January 1990 to August 1994, Mr. Sariego
was a partner in the Miami office of Kelley Drye & Warren, an international law
firm.
Arlene Vargas has been our Vice President and Controller since September
1998. Prior to joining us, Ms. Vargas was a Senior Manager from July 1997 to
September 1998 and a Manager from July 1994 to July 1997 with
PricewaterhouseCoopers LLP, a public accounting firm.
PROPERTIES
Our corporate headquarters are located in a 60,000 square foot building
owned by us in Miami, Florida. Our principal operations are conducted from
approximately 200 service facilities, none of which we believe is material to
our operations because most of our services are performed in the clients'
premises or on public rights of way. In addition, we believe that equally
suitable alternative locations are available in all areas where we currently
conduct business.
We also own a substantial amount of equipment, which at December 31, 2000
had a gross book value of $269.0 million. This equipment includes vans, trucks,
tractors, trailers, bucket trucks, backhoes, bulldozers, directional boring
machines, digger derricks, cranes and testing equipment and software. We obtain
our equipment from various third-party vendors, none of which we depend upon,
and have not experienced any difficulties in obtaining desired equipment.
LEGAL PROCEEDINGS
We have filed lawsuits in Florida state court against a subsidiary of
Artcom Technologies, Inc., a holding company for a Spanish infrastructure
provider that we formerly owned, to recover more than $5.0 million due under a
promissory note and for breach of contract. We are also pursuing other claims
against Artcom affiliates totalling approximately $4.0 million. Artcom has
responded by suing us in federal court in Florida to recover approximately $6.0
million (subject to trebling) it alleges we received as a result of certain
allegedly unauthorized transactions by two former employees of Artcom that
occurred after we sold the company.
In January 2001, we filed suit in Florida state court against Broward
County, Florida, to recover approximately $5.0 million for work performed to
construct a detention facility for the Broward Sheriff's Office ("BSO"). The BSO
has filed a separate lawsuit in response to our lawsuit claiming $13.0 million
in damages for alleged delays in constructing the facility.
In November 1997, we filed a suit 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 to 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. The county has
counterclaimed against us seeking unspecified damages.
We are a party to other pending legal proceedings arising in the normal
course of business, none of which we believe is material to our financial
position or results of operations.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information. Our common stock currently is listed on the New York
Stock Exchange under the symbol "MTZ." The following table sets forth, for the
quarters indicated, the high and low sale prices of the common stock, as
reported by the New York Stock Exchange.
Year Ended December 31,
-------------------------------------------
1999 2000
High Low High Low
--------------------- -----------------
First Quarter $ 20.00 $ 13.46 $ 57.52 $ 27.81
Second Quarter $ 19.54 $ 14.25 $ 58.96 $ 32.63
Third Quarter $ 24.19 $ 17.94 $ 43.19 $ 27.31
Fourth Quarter $ 29.27 $ 19.31 $ 34.16 $ 19.25
Holders. As of December 31, 2000, there were 4,527 shareholders of record
of the common stock.
Dividends. We have not declared cash dividends since our inception and we
do not anticipate paying any cash dividends in the foreseeable future, but
intend instead to retain any future earnings for reinvestment in our business.
On February 28, 1997 and June 19, 2000 we effected three-for-two splits of our
outstanding shares of common stock by paying each of our shareholders a stock
dividend of one share of common stock for every two shares of common stock held
by the shareholder on the record date for each split. We paid cash in lieu of
fractional shares resulting from the stock splits based on the last sale price
as reported on the New York Stock Exchange on the record date. All references in
this Annual Report to shares of common stock or share prices have been adjusted
to give retroactive effect to the stock splits.
Any future determination as to the payment of dividends will be made at the
discretion of our Board of Directors and will depend upon our operating results,
financial condition, capital requirements, general business conditions and such
other factors as the Board of Directors deem relevant. In addition, certain
credit agreements to which we are a party prohibit us from paying dividends or
making other distributions on the common stock without the prior written consent
of the lenders under such credit agreements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data, which are
derived from our audited consolidated financial statements. The operating data
for 1996, 1997 and 1998 includes the results of our Spanish operations, 87% of
which we sold effective December 31, 1998. You should read the following
selected financial data together with our consolidated financial statements and
their notes as well as "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Year Ended December 31,
----------------------------------------------------------------------
1996(1) 1997(1)(2) 1998(1) 1999 2000
------------- -------------- ------------- ------------- -------------
(dollars in thousands, except per share amounts)
Statement of Operations Data:
Revenue:
North America $ 284,645 $ 377,046 $ 669,628 $ 1,003,802 $ 1,274,985
Brazil - 74,900 141,954 55,220 55,311
Spain 188,155 207,493 237,340 - -
------------- ------------- ------------- ------------- -------------
Total revenue 472,800 659,439 1,048,922 1,059,022 1,330,296
Costs of revenue (1) 352,329 495,840 803,112 803,799 1,017,878
Depreciation 9,471 17,222 32,288 46,447 52,413
Amortization 2,529 6,633 11,025 9,701 11,042
General and administrative expenses (1) 58,529 82,261 140,472 91,898 98,521
Interest expense 11,434 11,541 29,580 26,673 18,283
Interest income 3,246 1,783 9,093 9,398 4,973
Other income (expense), net (1)(3)(4)(5)(6) 769 8,332 (38,920) (10,092) (25,756)
------------- ------------- ------------- ------------- -------------
Income before provision for income taxes, 42,523 56,057 2,618 79,810 111,376
equity in earnings (losses) of unconsolidated
companies and minority interest
Provision for income taxes(1) 15,591 20,944 12,550 33,266 45,877
Equity in earnings (losses) of unconsolidated 3,133 (449) (3,983) (1,818) (352)
companies and minority interest
============= ============= ============= ============= =============
Net income (loss) $ 30,065 $ 34,664 $ (13,915) $ 44,726 $ 65,147
============= ============= ============= ============= =============
Basic weighted average common shares 37,055 39,690 41,234 41,714 46,390
outstanding(7)
Basic earnings (loss) per share $ 0.81 $ 0.87 $ (0.34) $ 1.07 $ 1.40
Diluted weighted average common shares 37,692 40,529 41,234 42,624 48,374
outstanding(7)
Diluted earnings (loss) per share $ 0.80 $ 0.86 $ (0.34) $ 1.05 $ 1.35
December 31,
-------------------------------------------------------------------
Balance Sheet Data(1): 1996 1997 1998 1999 2000
-------------------------------------------------------------------
(in thousands)
Working capital $ 151,780 $ 124,088 $ 197,587 $ 169,619 $ 233,903
Property and equipment, net 59,602 86,109 137,382 153,527 159,673
Total assets 483,018 630,224 732,221 728,409 964,879
Total debt 155,192 149,057 321,832 279,658 211,845
Total shareholders' equity 103,504 223,697 204,273 256,833 500,328
(1) Includes the results of operations of our Spanish subsidiary from May 1,
1996, 87% of which we sold effective December 31, 1998. Included in 1998
are severance charges relating to our Spanish operations of $13.4 million,
of which $1.9 million is reflected in costs of revenue and $11.5 million in
general and administrative expenses, and a loss of $9.2 million related to
the sale of our Spanish subsidiary. Our effective tax rate for the year
ended December 31, 1998 was mainly affected by a tax liability of
approximately $7.8 million resulting from the sale of 87% of our Spanish
subsidiary, the non-deductibility of the amortization of intangibles and
the non-deductibility of other expenses. Because of the sale, the balance
sheet data as of December 31, 1998 does not include the financial position
of our Spanish operations.
(2) Our Brazilian operations began August 1, 1997. Information for the year
ended December 31, 1997 includes the results of operations of our Brazilian
operations from August 1, 1997.
(3) Included in 1998 a non-recurring charge for payments to operational
management of $33.8 million.
(4) Included in 1997 results of operations is a gain of $7.1 million from the
partial sale of our interest in an Ecuadorian cellular company.
(5) Included in 1999 is a write-down of $10.2 million related to international
assets held for sale.
(6) Included in 2000 is a write-down and other charges of $35.9 related
primarily to non-core assets, offset by a gain on sale of $9.6 million.
(7) Amounts have been adjusted to reflect the three-for-two stock splits
effected on February 28, 1997 and June 19, 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We are a leading end-to-end voice, video, data and energy network
infrastructure solution for a broad range of communications, broadband, energy
and other corporate clients. We have a diverse client base representing all the
major segments of the industries we serve. Our broad suite of services allows
our clients to connect with their customers. We design, build, install, maintain
and monitor internal and external networks, transmission facilities and data
storage centers supporting e-commerce and other communications, computing and
energy systems. We are a national services provider, operating from 200 service
locations throughout the United States and Canada. We also operate in Brazil
through a 51% owned joint venture.
We believe we are one of the few national, multi-disciplinary
infrastructure providers capable of providing a comprehensive solution to our
clients' bandwidth infrastructure needs from basic installation and construction
to sophisticated engineering, design and integration. Our diverse and
long-standing client base, experienced management and integrated value added
service offering provide a stable base of repeat business and enable us to
quickly and efficiently adapt to meet client demands.
Our revenue has increased significantly in the past five years through both
acquisitions and internal growth. We intend to continue to emphasize internal
growth, although we also intend to grow through selected acquisitions following
a disciplined model to take advantage of consolidation opportunities in the
fragmented infrastructure services industry in the United States. We regularly
evaluate potential acquisition opportunities, but we are not currently engaged
in any negotiations to make any material acquisitions. However, current economic
conditions may impact our ability to grow at historical levels.
For the year ended December 31, 2000, our top 10 clients combined account
for approximately 44% of our domestic revenue.
We report our operations in four segments:
- Datacom network services,
- Energy network services,
- International, and
- Other
Datacom network services includes services to:
- Telecommunication companies, - Departments of Transportation,
- Equipment vendors, - Cable TV operators,
- Corporations, - Broadband providers,
- Wireless providers,
to meet their datacom network needs. Energy network services includes
services to public and private energy companies that are substantially similar
to datacom services. International operations currently consist of services
rendered in Brazil where we operate a 51% joint venture which we consolidate net
of a 49% minority interest after tax.
Our primary types of contracts with our clients include:
- design and installation contracts for specific projects,
- master service agreements for all specified design, installation
and maintenance services within a defined geographic territory,
and
- turnkey agreements for comprehensive design, engineering,
installation, procurement and maintenance services.
The majority of our contracts, whether master service agreements or
contracts for specific projects, provide that we will furnish a specified unit
of service for a specified unit of price. We recognize revenue as the related
work is performed. Turnkey agreements are invoiced on a unit basis. A portion of
our work is performed under percentage-of-completion contracts. Under this
method, revenue is recognized on a cost-to-cost method based on the percentage
of total cost incurred to date in proportion to total estimated cost to complete
the contract. We also recognize revenue for monitoring services and for project
management services ratably over the term of the agreement. Clients are billed
with varying frequency-weekly, monthly or upon milestones.
We perform the majority of our services under master service agreements,
which typically are exclusive service agreements to provide all of the client's
network requirements up to a specified dollar amount per job within defined
geographic areas. These contracts are generally for two to three years but are
typically subject to termination at any time upon 90 to 180 days prior notice.
Each master service agreement contemplates hundreds of individual projects
generally valued at less than $100,000 each. These master service agreements are
typically awarded on a competitive bid basis, although clients are sometimes
willing to negotiate contract extensions beyond their original terms without
re-bidding. Master service agreements are invoiced on a unit basis as work is
completed. We currently have 88 master service agreements across all segments.
Revenue from multi-year master service agreements represent approximately 50% of
our annual domestic revenue.
Direct costs include:
- operations payroll and benefits, - fuel,
- subcontractor costs, - equipment rental, and
- materials not provided by our clients, - insurance.
Our clients generally supply materials such as cable, conduit and telephone
equipment, although on some turnkey projects, we supply these materials.
General and administrative costs include all costs of our management
personnel, rent, utilities, travel and business development efforts and back
office administration such as financial services, insurance administration,
professional costs and clerical and administrative overhead.
Many of our contracts require performance and payment bonds. Contracts
often include payment provisions under which 5% to 10% is withheld from payment
until the contract work has been completed. We typically agree to indemnify our
clients against adverse claims and warrant the quality of our services for
specified time periods, usually one year.
Results of Operations
The following tables state for the periods indicated our consolidated
operations in dollar and percentage of revenue terms for 1999 and 2000 and our
combined results for Brazil and North America for 1998 (dollars in thousands):
Year Ended December 31,
1998(1) 1999 2000
--------------- ---------------- ----------------
Revenue $ 811,582 $ 1,059,022 $ 1,330,296
Costs of revenue 619,388 803,799 1,017,878
Depreciation 29,608 46,447 52,413
Amortization 11,025 9,701 11,042
General and administrative expenses 89,402 91,898 98,521
Interest expense, net of interest income 15,265 17,275 13,310
Other expense, net 32,582 10,092 25,756
--------------- ---------------- ----------------
Income before provision for income taxes, equity in 14,312 79,810 111,376
earnings of unconsolidated companies and minority
interest
Provision for income taxes 4,563 33,266 45,877
Equity in earnings of unconsolidated companies 615 - -
Minority interest (5,402) (1,818) (352)
=============== =============== =================
Net income $ 4,962 $ 44,726 $ 65,147
=============== ================ ================
Year Ended December 31,
1998 (1) 1999 2000
--------------- ---------------- ----------------
Revenue 100.0% 100.0% 100.0%
Costs of revenue 76.3 75.9 76.5
Depreciation 3.6 4.4 4.0
Amortization 1.4 0.9 0.8
General and administrative expenses 11.0 8.7 7.4
Interest expense, net of interest income 1.9 1.6 1.0
Other expense, net 4.0 1.0 1.9
--------------- ---------------- ----------------
Income before provision for income taxes, equity in 1.8 7.5 8.4
earnings of unconsolidated companies and minority
interest
Provision for income taxes 0.5 3.1 3.4
Equity in earnings of unconsolidated companies - - -
Minority interest (0.7) (0.2) (0.1)
=============== ================ ================
Net income 0.6% 4.2% 4.9%
=============== ================ ================
(1) Adjusted to exclude our Spanish operations which were sold effective
December 31, 1998.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
The following table states revenue and change in revenue by operating
segments, in dollar and percentage terms (dollars in thousands):
Change
1999 2000 $ %
-------------- -------------- -------------- -------------
Datacom network services $ 849,201 $ 1,132,599 $ 283,398 33.4
Energy network services 153,179 142,386 (10,793) (7.1)
International 55,220 55,311 91 0.2
Other 1,422 - (1,422) (100.0)
-------------- -------------- --------------
$ 1,059,022 $ 1,330,296 $ 271,274
============== ============== ==============
Our revenue was $1.3 billion for the year ended December 31, 2000, compared
to $1.1 billion for the same period in 1999, representing an increase of $271.3
million or 25.6%, primarily from organic growth. The fastest growing operating
segment is our datacom network services segment primarily due to the increased
demand for bandwidth by end-users which has spurred increased network
construction and upgrades by our clients. We also are experiencing growth in
services provided at central office facilities resulting from regulatory
co-location requirements to open these facilities to new competitors. Revenue
generated by our energy network services segment decreased because we did not
pursue certain less profitable work in an effort to improve margins in the
future.
Our costs of revenue were $1.0 billion or 76.5% of revenue for the year
ended December 31, 2000, compared to $803.8 million or 75.9% of revenue for the
same period in 1999. In 2000, margins were impacted by adverse weather.
Depreciation was $52.4 million or 4.0% of revenue for the year ended
December 31, 2000, compared to $46.4 million or 4.4% of revenue for the same
period in 1999. The decline in depreciation as a percentage of revenue in 2000
was due to our ability to more efficiently utilize our equipment.
Amortization was $11.0 million or 0.8% of revenue for the year ended
December 31, 2000, compared to $9.7 million or 0.9% of revenue for the same
period in 1999. Amortization of goodwill net of tax was $7.8 million in 2000 and
$7.3 million in 1999.
General and administrative expenses were $98.5 million or 7.4% of revenue
for the year ended December 31, 2000, compared to $91.9 million or 8.7% of
revenue for the same period in 1999. The decline in general and administrative
expenses as a percentage of revenue in 2000 was due primarily to our ability to
support higher revenue with a comparatively lower administrative base.
Interest expense, net of interest income, was $13.3 million or 1.0% of
revenue for the year ended December 31, 2000, compared to $17.3 million or 1.6%
of revenue for the same period in 1999. The decrease in net interest expense of
$4.0 million was due primarily to the repayment of debt under our revolving
credit facility with a portion of the $126.0 million in net proceeds from our
offering of 3.75 million shares in February 2000.
Other expense in 2000 included primarily write-downs of $35.9 million of
international non-core assets, offset by a gain of $9.6 million on the sale of
our PCS system in Latin America. Reflected in other expense, net for the year
ended December 31, 1999, are charges related to non-core assets of approximately
$13.8 million due to disposal or write-down to net realizable value. We also
reserved $1.0 million for a 1994 lawsuit from a predecessor company following a
$1.1 million judgment awarded in October 1999. Offsetting these amounts was a
fee of $4.8 million collected from a telecommunications client related to
extensions to the maturity date of a client financing arrangement.
For the year ended December 31, 2000, our effective tax rate was
approximately 40.5% for North American operations and 33% for Brazilian
operations, compared to 41.5% and 33% in 1999 for North American and Brazilian
operations, respectively.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
The following table states revenue and change in revenue by operating
segments, in dollar and percentage terms (dollars in thousands):
Change
1998 1999 $ %
------------- -------------- ------------- ----------
Datacom network services $ 545,485 $ 849,201 $ 303,716 55.7
Energy network services 120,218 153,179 32,961 27.4
International 141,954 55,220 (86,734) (61.1)
Other 3,925 1,422 (2,503) (63.8)
------------- -------------- -------------
$ 811,582 $ 1,059,022 $ 247,440
============= ============== =============
Our revenue was $1.06 billion for the year ended December 31, 1999,
compared to $811.6 million for the same period in 1998, representing an increase
of $247.4 million or 30.5%. The fastest growing operating segment is our datacom
network services segment primarily due to the increased demand for bandwidth by
end-users which has spurred increased network construction and upgrades by our
clients. We experienced growth in services provided at central office facilities
resulting from regulatory co-location requirements to open central office
facilities to new competitors. Our energy network services segment grew
primarily through two acquisitions made in March and April of 1998. Brazilian
revenue decreased primarily due to the devaluation of the Brazilian real and to
a reduction in work performed. Revenue in local currency was R$96.0 million real
during the year ended December 31, 1999, compared to R$160.4 million real for
the same period in 1998, representing a decrease of 40.1%.
Our costs of revenue were $803.8 million or 75.9% of revenue for the year
ended December 31, 1999, compared to $619.4 million or 76.3% of revenue for the
same period in 1998. In 1999, margins in our Brazilian operations improved as a
result of amounts paid by a client for costs incurred during prior periods for
which no revenue had been recorded due to the uncertainty of its collection.
North American margins were impacted by increased revenue derived from the sale
of materials on turnkey projects, which carry a lower mark-up. Additionally, our
energy network services segment experienced reduced productivity by unusually
poor weather conditions in the mid-Atlantic states during the third quarter of
1999. Adverse weather conditions impacted productivity during the first quarter
of 1998.
Depreciation was $46.4 million or 4.4% of revenue for the year ended
December 31, 1999, compared to $29.6 million or 3.6% of revenue for the same
period in 1998. The increased depreciation expense as a percent of revenue
resulted from our investment in our fleet to support current and projected
revenue growth.
Amortization was $9.7 million or 0.9% of revenue for the year ended
December 31, 1999, compared to $11.0 million or 1.4% of revenue for the same
period in 1998.
General and administrative expenses were $91.9 million or 8.7% of revenue
for the year ended December 31, 1999, compared to $89.4 million or 11.0% of
revenue for the same period in 1998. The decline in general and administrative
expenses as a percent of revenue for the year ended December 31, 1999 was due
primarily to our ability to support higher revenue with a comparatively lower
administrative base.
Interest expense, net of interest income, was $17.3 million or 1.6% of
revenue for the year ended December 31, 1999, compared to $15.3 million or 1.9%
of revenue for the same period in 1998. The increase in net interest expense of
$2.0 million was due primarily to increased indebtedness to support additional
growth.
Reflected in other expense, net for the year ended December 31, 1999, are
charges related to non-core assets of approximately $13.8 million. We also
reserved $1.0 million for a 1994 lawsuit from a predecessor company following a
$1.1 million judgment awarded in October 1999. Offsetting these amounts was a
fee of $4.8 million collected from a telecommunications client related to
extensions to the maturity date of a vendor financing arrangement. Other expense
in 1998 includes predominantly a $33.8 million charge related to signing bonuses
and extended non-competition payments made under agreements with operating
management that could not be attributed to future services.
For the year ended December 31, 1999, our effective tax rate was
approximately 41.5% for North American operations and 33% for Brazilian
operations, compared to 40% and 33% in 1998 for North American and Brazilian
operations, respectively.
Spain
The following table states the results of operations of our Spanish
operations for the year ended December 31, 1998, in dollar and percentage of
revenue terms (dollars in thousands):
Year Ended December 31,
1998
----------------------------
Revenue $ 237,340 100.0%
Costs of revenue (1) 183,724 77.4
Depreciation 2,680 1.1
General and administrative expenses (1) 51,070 21.5
Interest expense, net of interest income 5,222 2.2
Other expense, net 6,338 2.7
Loss before provision for income taxes, equity in earnings of (11,694) (4.9)
unconsolidated companies and minority interest
Provision from income taxes 7,987 3.2
Equity in earnings of unconsolidated companies 1,291 0.1
Minority interest (487) -
-------------- ----------
Net loss $ (18,877) (8.0)%
============== ==========
(1) Includes a total of $13.4 million of severance charges of which $1.9
million is reflected in costs of revenue and $11.5 million in general and
administrative expenses.
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 and borrowings under revolving lines of credit.
Net cash used in operating activities was $11.9 million for the year ended
December 31, 2000, compared to cash provided by operations of $120.1 million for
the same period in 1999 and cash used of $13.9 million in 1998. Net cash used in
operating activities in 2000 was due principally to increased working capital
needs as a result of growth in revenue and changes in client mix. Cash provided
by operations in 1999 included collections of $81.4 million from prior periods
from a client to which we were providing vendor financing. From time to time, in
exchange for one or more of long-term exclusive infrastructure services
agreements, interest, financing and other fees, and warrants or other equity
interests in the client, we may grant payment terms typically for six to
eighteen months to our clients. At December 31, 2000, we had $31.5 million under
these arrangements.
We have a credit facility that provides for borrowings up to an aggregate
of $100.0 million. Amounts outstanding under the credit facility mature on June
9, 2002. We are required to pay an unused facility fee ranging from .25% to .50%
annually on the facility, depending upon certain financial covenants. The credit
facility contains 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 liens, prepaying other indebtedness, including
our 7.75% senior subordinated 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 financial ratio coverages at the
end of each fiscal quarter such as debt to earnings and earnings to interest
expense.
We also have $200 million, 7.75% senior subordinated notes due in February
2008, with interest due semi-annually.
During 2000, we invested $52.6 million primarily in our fleet to support
revenue growth. We collected $54.1 million in net proceeds related to assets
sold, primarily from the sale of our PCS system in Latin America and our Spanish
operations. We also invested $55.3 million in acquisitions and investments and
contingent consideration from prior acquisitions during the year. We have
reflected in other current liabilities contingent consideration of $35.0 million
that we expect will be paid during 2001.
Seasonality
Our North America operations have historically been seasonally slower in
the first quarter of the year. During the last two years, we have generally
experienced sequential increases in revenue following the first quarter of every
year. This seasonality is primarily the result of client budgetary constraints
and preferences and the effect of winter weather on external network activities.
Some of our U.S. clients, particularly the incumbent local exchange carriers,
tend to complete budgeted capital expenditures before the end of the year and
defer additional expenditures until the following budget year. Revenue in local
currency 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 not experienced significant increases in labor costs to date.
Competition for qualified personnel could increase labor costs for us in the
future. Our Brazilian operations may, at times in the future, be exposed to high
inflation or currency devaluations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Notes 1 and 5 of Notes to Consolidated Financial Statements for
disclosures about market risk.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Report of Independent Certified Public Accountants......................... 20
Consolidated Statements of Operations for the Three Years Ended
December 31, 2000..................................................... 21
Consolidated Balance Sheets as of December 31, 1999 and 2000............... 22
Consolidated Statement of Changes in Shareholders' Equity for the Three Years
Ended December 31, 2000............................................... 23
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 2000..................................................... 24
Notes to Consolidated Financial Statements................................. 26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of MasTec, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows present fairly, in all material respects, the financial position of
MasTec, Inc. and its subsidiaries at December 31, 1999 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the 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 of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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 a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Miami, Florida
January 30, 2001
MASTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
Year Ended December 31,
1998 (1) 1999 2000
--------------- --------------- --------------
Revenue $ 1,048,922 $ 1,059,022 $ 1,330,296
Costs of revenue 803,112 803,799 1,017,878
Depreciation 32,288 46,447 52,413
Amortization 11,025 9,701 11,042
General and administrative expenses 140,472 91,898 98,521
Interest expense 29,580 26,673 18,283
Interest income 9,093 9,398 4,973
Other expense, net 38,920 10,092 25,756
--------------- --------------- --------------
Income before provision for income taxes, equity in 2,618 79,810 111,376
earnings of unconsolidated companies and minority
interest
Provision for income taxes 12,550 33,266 45,877
Equity in earnings of unconsolidated companies 1,906 - -
Minority interest (5,889) (1,818) (352)
=============== =============== ==============
Net (loss) income $ (13,915) $ 44,726 $ 65,147
=============== =============== ==============
Basic weighted average common shares outstanding 41,234 41,714 46,390
Basic (loss) earnings per share $ (0.34) $ 1.07 $ 1.40
Diluted weighted average common shares outstanding 41,234 42,624 48,374
Diluted (loss) earnings per share $ (0.34) $ 1.05 $ 1.35
(1) Includes the results of our Spanish operations which were sold effective
December 31, 1998.
The accompanying notes are an integral part of these consolidated financial
statements.
MASTEC, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
----------------------------------
1999 2000
---------------- ---------------
Assets
Current assets:
Cash and cash equivalents.................................... $ 27,635 $ 18,457
Accounts receivable, unbilled revenue and retainage, net..... 251,576 386,480
Inventories.................................................. 14,264 19,643
Other current assets......................................... 34,634 29,184
---------------- --------------
Total current assets..................................... 328,109 453,764
Property and equipment, net...................................... 153,527 159,673
Intangibles, net................................................. 151,555 262,398
Other assets..................................................... 95,218 89,044
================ ==============
Total assets............................................. $ 728,409 $ 964,879
================ ==============
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of debt................................... $ 12,200 $ 5,685
Accounts payable and accrued expenses........................ 74,408 85,797
Other current liabilities.................................... 71,882 128,379
---------------- --------------
Total current liabilities................................ 158,490 219,861
---------------- --------------
Other liabilities................................................ 45,628 38,530
---------------- --------------
Long-term debt................................................... 267,458 206,160
---------------- --------------
Commitments and contingencies (Note 11)
Shareholders' equity:
Common stock................................................. 4,235 4,770
Capital surplus.............................................. 167,387 346,099
Retained earnings............................................ 101,203 166,350
Foreign currency translation adjustments..................... (15,992) (16,891)
---------------- --------------
Total shareholders' equity............................... 256,833 500,328
================ ==============
Total liabilities and shareholders' equity............... $ 728,409 $ 964,879
================ ==============
The accompanying notes are an integral part of these consolidated financial
statements.
MASTEC, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
Common Stock Foreign Accumulated
------------------- Currency Other
Shares Amount Capital Retained Translation Total Comprehensive
Surplus Earnings Adjustments Income
---------- ---------- ----------- ---------- ---------- ----------- ------------
Balance December 31, 1997 41,370 $ 4,137 $ 152,634 $ 70,392 $ (3,466) $ 223,697 $ 66,926
Net loss........................... (13,915) (13,915) (13,915)
Foreign currency translation (955) (955) (955)
adjustment......................
Stock issued, primarily for 704 70 8,698 8,768 -
acquisitions and stock options
exercised.......................
Tax benefit resulting from stock 403 403 -
option plan.....................
Repurchase of common stock......... (1,001) (100) (13,625) (13,725) -
---------- ---------- ----------- ---------- ---------- ----------- ------------
Balance December 31, 1998 41,073 4,107 148,110 56,477 (4,421) 204,273 52,056
Net income......................... 44,726 44,726 44,726
Foreign currency translation (11,571) (11,571) (11,571)
adjustment......................
Stock issued, primarily for 1,277 128 17,344 17,472 -
acquisitions and stock options
exercised.......................
Tax benefit resulting from stock 1,933 1,933 -
option plan.....................
---------- ---------- ----------- ---------- ---------- ----------- ------------
Balance December 31, 1999.......... 42,350 $ 4,235 $ 167,387 $ 101,203 $ (15,992) $ 256,833 $ 85,211
Net income......................... 65,147 65,147 65,147
Foreign currency translation (899) (899) (899)
adjustment......................
Stock issued, primarily due to 5,352 535 173,804 174,339
offering and acquisitions.......
Tax benefit resulting from stock 4,908 4,908
option plan.....................
========== ========== =========== ========== ========== =========== ============
Balance December 31, 2000.......... 47,702 $ 4,770 $ 346,099 $ 166,350 $ (16,891) $ 500,328 $ 149,459
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
MASTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
-----------------------------------------------
1998 1999 2000
--------------- -------------- --------------
Net (loss) income................................. $ (13,915) $ 44,726 $ 65,147
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization.................. 43,313 56,148 63,455
Minority interest.............................. 5,889 1,818 352
Equity in earnings of unconsolidated companies. (1,906) - -
Deferred tax expense (benefit)................. 6,974 (1,961) 727
Loss on sale or write-down of assets........... 8,918 9,798 22,574
Changes in assets and liabilities net of
effect of acquisitions and divestitures:
Accounts receivable, unbilled revenue and
retainage, net.......................... (34,942) 5,707 (109,470)
Inventories and other current assets........ (16,759) 564 (13,313)
Other assets................................ (27,341) (1,946) (47,699)
Accounts payable and accrued expenses....... (2,017) (2,858) (1,433)
Other current liabilities................... 13,385 5,653 13,159
Other liabilities........................... 4,548 2,486 (5,370)
--------------- -------------- --------------
Net cash (used in) provided by operating activities... (13,853) 120,135 (11,871)
--------------- -------------- --------------
Cash flows from investing activities:
Capital expenditures.............................. (76,445) (69,507) (52,638)
Cash paid for acquisitions and contingent
consideration, net of cash acquired............... (75,745) (18,706) (55,303)
Investments in unconsolidated companies and
distribution to joint venture partner............. (13,384) (25,528) (4,900)
(Advances) repayment of notes receivable, net..... (18,667) 15,667 1,100
Net proceeds from sale of assets.................. 5,600 27,791 54,065
--------------- --------------- --------------
Net cash used in investing activities................. (178,641) (70,283) (57,676)
--------------- --------------- --------------
Cash flows from financing activities:
Proceeds (repayments) from revolving credit....... 5,032 (45,384) (71,538)
facilities, net...................................
Proceeds from senior notes........................ 199,724 - -
Other borrowings.................................. 35,106 - -
Debt repayments................................... (17,946) - -
Proceeds from issuance of common stock............ 3,779 6,593 133,695
Stock repurchased................................. (13,725) - -
Financing costs................................... (4,993) - -
--------------- --------------- -------------
Net cash provided by (used in) financing activities... 206,977 (38,791) 62,157
--------------- --------------- -------------
Net increase (decrease) in cash and cash equivalents.. 14,483 11,061 (7,390)
Net effect of translation on cash..................... (682) (3,290) (1,788)
Cash and cash equivalents--beginning of period........ 6,063 19,864 27,635
=============== =============== =============
Cash and cash equivalents--end of period.............. $ 19,864 $ 27,635 $ 18,457
=============== =============== =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.......................................... $ 21,795 $ 25,510 $ 18,042
=============== =============== =============
Income taxes...................................... $ 6,593 $ 9,726 $ 44,618
=============== =============== =============
(continued)
The accompanying notes are an integral part of these consolidated financial
statements.
MASTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
In 1998, we disposed of our Spanish operations. The book value of the net
assets totaled $65.6 million and was comprised primarily of $137.3 million of
accounts receivable, $17.3 million of property and equipment, other assets and
inventories of $43.3 million and cash of $2.2 million, offset by $134.5 million
of assumed liabilities. We retained a 13% interest valued at $4.1 million
resulting in $61.5 million in net assets sold at $52.3 million resulting in a
loss of $9.2 million. The terms of the sale included $25.0 million in the form
of debt assumed by the buyers and we financed $27.3 million which was
substantially collected in 1999.
In 1998, we issued approximately 0.16 million shares of common stock
primarily as payment for contingent consideration related to 1997 acquisitions.
In addition, we issued approximately 0.1 million shares as bonuses to certain
employees and fees to directors. In 1998, we completed certain acquisitions
which have been accounted for as purchases. The fair value of the net assets
excluding goodwill acquired totaled $36.2 million and was comprised primarily of
$35.2 million of accounts receivable, $27.2 million of property and equipment,
$8.0 million of other assets and $5.0 million in cash, offset by $39.2 million
of assumed liabilities. The excess of the purchase price over the net assets
acquired was $55.3 million and was allocated to goodwill.
In 1999, we completed certain acquisitions which have been accounted for as
purchases. The fair value of the net assets excluding goodwill acquired totaled
$3.75 million and was comprised primarily of $7.0 million of accounts
receivable, $2.4 million of property and equipment, $0.68 million of other
assets and $0.27 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
$7.4 million and was allocated to goodwill. The total purchase price of $11.2
million was primarily paid in cash. We also issued 0.53 million 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. Additionally, $7.8 million of contingent consideration was
paid in cash and was recorded as goodwill.
In 2000, we completed certain acquisitions which have been accounted for as
purchases. The fair value of the net assets acquired excluding goodwill totaled
$16.2 million and was comprised primarily of $26.9 million of accounts
receivable, $9.4 million of property and equipment, $1.1 million of other assets
and $5.8 million in cash, offset by $27.0 million of assumed liabilities. The
excess of the purchase price over the net assets acquired was $73.4 million and
was allocated to goodwill. The total purchase price of $89.6 million was paid by
issuing $36.5 million of common stock (0.6 million shares) and notes and $53.1
million in cash. We also issued 207,171 shares of common stock with a value of
$15.8 million related to the payment of contingent consideration from earlier
acquisitions. Of the $15.8 million, $0.2 million was recorded as a reduction of
other current liabilities and $15.6 million as additional goodwill.
Additionally, $8.0 million of contingent consideration was paid in cash and was
recorded as goodwill.
The accompanying notes are an integral part of these consolidated financial
statements.
Note 1 - Nature of the Business and Summary of Significant Accounting Policies
We are a leading end-to-end voice, video, data and energy network
infrastructure solution for a broad range of communications, broadband, energy
and other corporate clients. We have a diverse client base representing all the
major segments of the industries we serve. Our broad suite of services allows
our clients to connect with their customers. We design, build, install, maintain
and monitor internal and external networks, transmission facilities and data
storage centers supporting e-commerce and other communications, computing and
energy systems. We are a national services provider, operating from 200 service
locations throughout the United States and Canada. We also operate in Brazil
through a 51% owned joint venture.
Revenue generated by North American operations, as a percentage of total
revenue, was 63.8%, 94.8% and 95.8% in 1998, 1999 and 2000, respectively. For
the years ended December 31, 1998, 1999 and 2000, revenue expressed as a
percentage of North American revenue generated by datacom network services was
81.5%, 84.6% and 88.8%, respectively, and by energy network services was 18.0%,
15.3% and 11.2%, respectively. See Note 10. For 1999 and 2000, international
operations consisted primarily of our operations in Brazil. In 1998,
international operations included our Spanish operations. Effective December 31,
1998, we sold 87% of our Spanish operations.
A summary of the significant accounting policies followed in the
preparation of the accompanying consolidated financial statements is presented
below:
Management's estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The more significant estimates relate to our
allowance for doubtful accounts, accrued insurance and the realization of
certain intangibles. Actual results could differ from those estimates.
Principles of consolidation. The consolidated financial statements include
MasTec, Inc. and its subsidiaries including our 51% interest in our Brazilian
operations. All material intercompany accounts and transactions have been
eliminated. Certain prior year amounts have been reclassified to conform to the
current year presentation.
Comprehensive income (loss). As reflected in the consolidated statement of
changes in shareholders' equity, comprehensive income is a measure of net income
and all other changes in equity that result from transactions other than with
shareholders. Comprehensive income (loss) consists of net income (loss) and
foreign currency translation adjustments.
Foreign currency. We operate in Brazil, which is subject to greater
political, monetary, economic and regulatory risks than our domestic operations.
During January 1999, the Brazilian government allowed its currency to trade
freely against other currencies resulting in an immediate devaluation of the
Brazilian real. Assets and liabilities of foreign subsidiaries and equity with a
functional currency other than U.S. dollars are translated into U.S. dollars at
exchange rates in effect at the end of the reporting period. Foreign entity
revenue and expenses are translated into U.S. dollars at the average rates that
prevailed during the period. The resulting net translation gains and losses are
reported as foreign currency translation adjustments in shareholders' equity as
a component of other accumulated comprehensive income. Exchange gains and losses
on transactions and equity investments denominated in a currency other than
their functional currency are included in results of operations as incurred.
Revenue recognition. Revenue and related costs for short-term construction
projects (i.e., generally projects with a duration of less than one month) are
recognized as the services are rendered. Revenue generated by certain long-term
construction contracts are accounted for by the percentage of completion method
under which income is recognized based on the ratio of estimated cost incurred
to total estimated contract cost. Monitoring service and support revenue is
recognized ratably over the term of the agreement. We also provide management,
coordination, consulting and administration services for network infrastructure
projects. Compensation for such services is recognized ratably over the term of
the service agreement.
Note 1 - Nature of the Business and Summary of Significant Accounting Policies
(cont'd)
Losses, if any, on contracts are provided for in full when they become
known. Billings in excess of costs and estimated earnings on uncompleted
contracts are classified as current liabilities. Any costs in excess of billings
are classified as current assets. Work in process on contracts is based on work
performed but not billed to clients as per individual contract terms.
Earnings per share. Basic earnings per common share is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding. Diluted earnings per common share include the dilutive
effect of stock options using the treasury stock method. The difference between
the weighted average common shares outstanding used to calculate basic and
diluted earnings per share relates to stock options assumed exercised under the
treasury method of accounting of approximately 910,000 and 1,984,000 at December
31, 1999 and 2000, respectively. Included in the diluted earnings per share
computation are approximately 167,000 shares for the year ended December 31,
2000, to be issued in connection with an acquisition of a datacom network
service provider. Potentially dilutive shares as of December 31, 1998 totaling
504,000 shares were not included in the diluted per share calculation because
their effect would be anti-dilutive as we incurred a loss that year.
Accordingly, for 1998, diluted net loss per common share is the same as basic
net loss per common share.
Cash and cash equivalent. We consider all short-term investments with
maturities of three months or less when purchased to be cash equivalents. At
December 31, 1999 and 2000, we had cash and cash equivalent denominated in
Brazilian reals that translate to approximately $20.5 million and $6.0 million,
respectively.
Inventories. Inventories (consisting principally of materials and supplies)
are carried at the lower of first-in, first-out cost or market.
Property and equipment. Property and equipment are recorded at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the respective assets. Leasehold improvements are
amortized over the shorter of the term of the lease or the estimated useful
lives of the improvements. Expenditures for repairs and maintenance are charged
to expense as incurred. Expenditures for betterments and major improvements are
capitalized. The carrying amounts of assets sold or retired and related
accumulated depreciation are eliminated in the year of disposal and the
resulting gains and losses are included in other income.
Intangibles and other long lived assets. Assets and liabilities acquired in
connection with business combinations accounted for under the purchase method
are recorded at their respective estimated fair values. Goodwill represents the
excess of the purchase price over the estimated fair value of net assets
acquired, including the recognition of applicable deferred taxes, and is
amortized on a straight-line basis over a period ranging from 5 to 40 years,
with a weighted average amortization period of 33 years. At December 31, 1999
and 2000, we had recorded intangibles primarily consisting of goodwill of $151.6
million and $262.4 million, respectively (net of accumulated amortization of
$24.5 million in 1999 and $35.5 million in 2000). For the year ended December
31, 1999 and 2000, we had goodwill deductible for tax purposes of $5.8 million
and $6.8 million, respectively. As of December 31, 2000, we reflected in other
current liabilities $35.0 million of contingent consideration expected to be
paid during the first six months of 2001.
We review long-lived assets, identifiable intangibles and goodwill and
record an impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be fully recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of the assets to future undiscounted net cash flows expected to be generated by
the assets. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets or expected future cash flows on an
undiscounted basis. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
Note 1 - Nature of the Business and Summary of Significant Accounting Policies
(cont'd)
Accrued insurance. We maintain insurance policies subject to deductibles of
$250,000 per occurrence for certain property and casualty and worker's
compensation claims and, accordingly, accrue the estimated losses. For the year
ended December 31, 2000, we have an aggregate stop loss coverage of $16.1
million adjusted for certain exposures.
Income taxes. We record income taxes using the liability method of
accounting for deferred income taxes. Under this method, deferred tax assets and
liabilities are recognized for the expected future tax consequence of temporary
differences between the financial statement and income tax bases of our assets
and liabilities. A valuation allowance is established when it is more likely
than not that any or all of the deferred tax assets will not be realized.
Stock based compensation. We adopted the disclosure provision of Statement
of Financial Accounting Standard No. 123, Accounting for Stock Based
Compensation ("SFAS 123") and retained the intrinsic value method of accounting
for such stock based compensation (see Note 7).
Fair value of financial instruments. We estimate the fair market value of
financial instruments through the use of public market prices, quotes from
financial institutions and other available information. Judgment is required in
interpreting data to develop estimates of market value and, accordingly, amounts
are not necessarily indicative of the amounts that we could realize in a current
market exchange. Our short-term financial instruments, including cash and cash
equivalents, accounts and notes receivable, accounts payable and other
liabilities, consist primarily of instruments without extended maturities, the
fair value of which, based on management's estimates, equaled their carrying
values. Long-term debt is carried at face value less unamortized discount. The
fair value of our 7.75% senior subordinated notes was approximately $188.0
million at December 31, 2000. We use letters of credit to back certain insurance
policies. The letters of credit reflect fair value as a condition of their
underlying purpose and are subject to fees competitively determined in the
marketplace.
New 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. The application of SAB 101 did not have a material impact
on our financial results. In June 1998, the Financial Accounting Standards Board
(the "FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 requires a company to recognize all derivative
instruments (including certain derivative instruments embedded in other
contracts) as assets or liabilities in its balance sheet and measure them at
fair value. The statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. In June 1999, SFAS No. 137, "Deferral of the Effective Date of FASB
Statement No. 133," was issued and defers the adoption date to the beginning of
an entity's fiscal year-end beginning after June 15, 2000. We do not believe
that the adoption of this statement will have a material impact on our financial
position or results of operations.
Note 1 - Nature of the Business and Summary of Significant Accounting Policies
(cont'd)
Stock split. 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.
Warranty costs. For certain contracts, we warrant labor for new
installations and construction and servicing of existing infrastructure. An
accrual for warranty costs is recorded based upon the historical level of
warranty claims and management's estimate of future costs.
Note 2 - Investing Activities
Since 1999, we have completed 16 acquisitions, all in our datacom network
services group. These acquisitions have been accounted for under the purchase
method of accounting. Accordingly, the results of operations of acquired
companies have been included in our consolidated results of operations from
their respective acquisition dates. If the acquisitions had been made at the
beginning of 1999 or 2000, pro forma results of operations would not have
differed materially from actual results based on historical performance prior to
their acquisition by us. 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. Common stock issued in acquisitions is valued based upon the market
price of the common stock around the date of purchase or the date the purchase
price is determined. Acquisition agreements may include provisions for
contingent payments, depending on future performance. As future performance
goals are met, goodwill is adjusted for the amount of such payments.
From time to time we may invest in our clients or receive securities to
purchase shares in our clients for nominal prices. As of December 31, 2000, we
had recorded approximately $13.0 million related to such investments.
Note 3 - Accounts Receivable
Accounts receivable are presented net of an allowance for doubtful accounts
of $7.3 million, $9.7 million, and $11.0 million at December 31, 1998, 1999 and
2000, respectively. We recorded a provision for doubtful accounts of $4.5
million, $4.7 million and $6.6 million during 1998, 1999 and 2000, respectively.
In addition, we recorded write-offs of $0.3 million, $2.3 million and $5.3
million during 1998, 1999 and 2000, respectively.
Accounts receivable includes retainage which has been billed but is not due
until completion of performance and acceptance by clients, and claims for
additional work performed outside original contract terms. Retainage aggregated
$16.5 million and $24.6 million at December 31, 1999 and 2000, respectively.
Retainage is expected to be collected within one year. Any retainage expected to
be collected beyond a year is recorded in long-term other assets.
Included in accounts receivable is unbilled revenue of $69.6 million and
$98.8 million at December 31, 1999 and 2000, respectively. Such unbilled amounts
represent work performed but not billable to clients as per individual contract
terms, of which $18.6 million and $23.2 million at December 31, 1999 and 2000,
respectively, are related to our Brazilian operations. Unbilled revenue is
typically billed within one to two months.
From time to time, in exchange for one or more of long-term exclusive
infrastructure services agreements, interest, financing and other fees, and
warrants or other equity interests in the client, we may grant payment terms
typically for six to eighteen months to our clients.At December 31, 2000, we had
$31.5 million under these arrangements.
Note 4 - Property and Equipment
Property and equipment is comprised of the following as of December 31,
1999 and 2000 (in thousands):
Estimated
Useful Lives
1999 2000 (In Years)
---------------- -----------------
Land $ 6,905 $ 6,892
Buildings and improvements 11,852 12,624 5 -30
Machinery and equipment 223,378 268,969 3 -10
Office furniture and equipment 13,760 18,734 3 - 5
---------------- -----------------
255,895 307,219
Less-accumulated depreciation (102,368) (147,546)
================ =================
$ 153,527 $ 159,673
================ =================
Note 5 - Debt
Debt is comprised of the following at December 31, 1999 and 2000 (in
thousands):
1999 2000
--------------- ---------------
Revolving credit facility at LIBOR plus 1.25% for 1999 and 1.0% for 2000 $ 64,000 $ 7,000
(6.98% at December 31, 1999 and 7.64% at December 31, 2000)
Other bank facilities at LIBOR plus 1.50% (7.32% at December 31, 1999 and 7,707 517
8.06% at December 31, 2000)
Notes payable for equipment, at interest rates from 7.5% to 8.5% due in 3,920 6,161
installments through the year 2004
Notes payable for acquisitions, at interest rates from 7.0% to 8.0% due in 4,254 2,362
installments through February 2001
7.75% senior subordinated notes due February 2008 199,777 195,805
--------------- ---------------
Total debt 279,658 211,845
Less current maturities (12,200) (5,685)
=============== ===============
Long-term debt $ 267,458 $ 206,160
=============== ===============
Note 5 - Debt (cont'd)
We have a credit facility that provides for borrowings up to an aggregate
of $100 million. 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. As of
December 31, 2000, we had outstanding $8.4 million in standby letters of credit.
The credit facility and the senior subordinated 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
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.
At December 31, 2000, debt matures as follows:
2001 ................................. $ 5,684
2002 ................................. 10,068
2003 ................................. 188
2004.................................. 100
Thereafter (due 2008) ............... 195,805
=============
$ 211,845
=============
Note 6 - Lease Commitments
We have operating lease agreements for our premises and equipment that
expire on various dates. The operating lease agreements are subject to
escalation. Rent expense for the years ended December 31, 1999 and 2000 was
approximately $14.8 million and $14.4 million, respectively.
Minimum future lease commitments under non-cancelable operating leases in
effect at December 31, 2000 were as follows:
2001.................................... $ 15,928
2002.................................... 11,819
2003.................................... 9,586
2004.................................... 6,915
2005.................................... 2,700
Thereafter.............................. 1,234
--------------
Total minimum lease payments........ $ 48,182
==============
Note 7 - Retirement and Stock Option Plans
We have a 401(k) plan covering all eligible employees. Subject to certain
dollar limits, eligible employees may contribute up to 15% of their pre-tax
annual compensation to the plan. We match in stock 50% of the employee
contributions up to 4% of their gross salary and may make discretionary
contributions in amounts determined by the Board of Directors. Prior to January
1, 2000, our match was 25% of the employee contributions up to 4% of their gross
salary. Our matching contributions charged to earnings were approximately
$186,000, $547,000 and $2,077,000 for the years ended December 31, 1998, 1999
and 2000, respectively.
We have three stock option plans currently in effect: the 1994 Stock
Incentive Plan (the "1994 Plan"), the 1994 Stock Option Plan for Non-Employee
Directors (the "Directors' Plan") and the 1999 Non-Qualified Employee Stock
Option Plan (the "Non-Qualified Plan"). Typically, options under these plans are
granted at fair market value at the date of grant, vest between three to five
years and terminate no later than 10 years from the date of grant.
Under these plans there were a total of 1,937,943, 1,030,055 and 2,028,798
options available for grant at December 31, 1998, 1999 and 2000, respectively.
We also have a non-qualified stock purchase plan under which eligible employees
may purchase common stock through payroll deductions or in a lump sum at a 15%
discount from fair market value. In addition, there are 292,100 options
outstanding under individual option agreements with varying vesting schedules at
exercise prices ranging from $2.56 to $17.67 with terms up to 10 years.
The following is a summary of all stock option transactions:
Weighted Average
Stock Weighted Average Fair Value of
Options Exercise Price Options Granted
-------------------- ---------------------- --------------------
Outstanding December 31, 1997 2,411,138 $ 11.37
Granted 1,851,373 12.78 $ 8.86
Exercised (152,985) 7.59
Canceled (165,870) 12.98
-------------------- ----------------------
Outstanding December 31, 1998 3,943,656 12.21
Granted 2,774,933 21.77 $ 10.69
Exercised (610,604) 10.81
Canceled (252,045) 14.84
-------------------- ----------------------
Outstanding December 31, 1999 5,855,940 16.81
Granted 711,820 32.28 $ 20.39
Exercised (584,794) 10.98
Canceled (151,604) 20.44
==================== ======================
Outstanding December 31, 2000 5,831,362 $ 19.07
==================== ======================
The following table summarizes information about stock options outstanding
at December 31, 2000:
Stock Options Outstanding Options Exercisable
------------------------------------------------------------ ---------------------------------------
Weighted
Range of Exercise Number of Stock Average Weighted Average Number of Stock Weighted Average
Prices Options Remaining Exercise Options Exercise
Contractual Life Price Price
- -------------------- ------------------ -------------------- ------------------ ------------------ -------------------
$ 2.56 - 3.53 53,550 3.19 $ 2.71 53,550 $ 2.71
4.78 - 5.94 214,891 4.85 5.20 187,891 5.26
9.75 - 14.56 2,082,025 6.79 13.21 1,768,574 13.09
14.98 - 19.84 1,898,779 8.58 19.24 798,519 19.36
20.79 - 30.41 1,194,740 6.62 26.91 173,704 25.98
31.35 - 45.08 387,377 5.71 35.45 - -
================== ==================== ================== ================== ===================
$ 2.56 - 45.08 5,831,362 7.16 $ 19.07 2,982,238 $ 14.86
================== ==================== ================== ================== ===================
We have elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for our employees' stock options. Pursuant to APB No. 25, no
compensation cost has been recognized.
We have reflected below the 1998, 1999 and 2000 earnings as if compensation
expense relative to the fair value of the options granted had been recorded
under the provisions of SFAS No. 123 "Accounting for Stock- Based Compensation."
The fair value of each option grant was estimated using the BlackScholes
option-pricing model with the following assumptions used for grants in 1998,
1999 and 2000, respectively: a six, five and five year expected life; volatility
factors of 72%, 41% and 60%; risk-free interest rates of 4.3%, 5.9% and 5.75%;
and no dividend payments.
Note 7 - Retirement and Stock Option Plans (cont'd)
1998 1999 2000
----------------- ----------------- -----------------
Net (loss) income (in thousands):
As reported $ (13,915) $ 44,726 $ 65,147
================= ================= =================
Pro forma $ (28,472) $ 32,980 $ 41,707
================= ================= =================
Basic (loss) earnings per share:
As reported $ (0.34) $ 1.07 $ 1.40
Pro forma $ (0.69) $ 0.79 $ 0.90
Diluted (loss) earnings per share:
As reported $ (0.34) $ 1.05 $ 1.35
Pro forma $ (0.69) $ 0.77 $ 0.86
Note 8 - Income Taxes
The provision (benefit) for income taxes consists of the following (in
thousands):
1998 1999 2000
-------------- -------------- -------------
Current:
Federal $ (3,876) $ 32,069 $ 36,669
Foreign 1,376 214 354
State and local 536 3,770 7,873
-------------- -------------- -------------
(1,964) 36,053 44,896
-------------- -------------- -------------
Deferred:
Federal 9,193 (5,889) 727
Foreign 5,430 1,740 -
State and local (109) 1,362 254
-------------- -------------- -------------
14,514 (2,787) 981
-------------- -------------- -------------
Provision for income taxes $ 12,550 $ 33,266 $ 45,877
============== ============== =============
Note 8 - Income Taxes (cont'd)
The tax effects of significant items comprising our net deferred tax
liability as of December 31, 1999 and 2000 are as follows (in thousands):
1999 2000
------------- ------------
Deferred tax assets:
Non-compete $ 6,462 $ 6,661
Bad debts 4,279 4,400
Accrued self insurance 5,468 6,526
Operating loss and tax credit carry forward 1,960 766
All other 1,562 4,087
------------- ------------
Total deferred tax assets 19,731 22,440
------------- ------------
Deferred tax liabilities:
Installment sale 3,902 -
Accounts receivable retainage 5,665 12,092
Property and equipment 15,709 12,755
Asset re-evaluations 4,637 1,968
All other 2,969 4,664
------------- ------------
Total deferred tax liabilities 32,882 31,479
------------- ------------
Net deferred tax liability $ (13,151) $ (9,039)
============= ============
The net deferred tax liability includes deferred items resulting from
acquisitions made during the period which are not reflected as part of the
deferred tax provision. Certain of the acquired entities were S corporations for
income tax purposes and, accordingly, any income tax liabilities for the periods
prior to the acquisitions are the responsibility of the respective shareholders.
A reconciliation of U.S. statutory federal income tax expense on the
earnings from continuing operations is as follows:
1998 1999 2000
----------- ----------- ------------
U.S. statutory federal rate
applied to pretax income 35% 35% 35%
State and local income taxes 10 4 5
Effect of non-U.S. tax rates (23) - -
Amortization of intangibles 58 2 1
Gain on sale of Spanish operations 329 - -
Non-deductible expenses 37 2 1
Other 33 (1) (1)
=========== =========== ============
Provision for income taxes 479% 42% 41%
=========== =========== ============
During 1998, we sold 87% of our Spanish operations which resulted in a tax
liability of $7.8 million.
The Internal Revenue Service ("IRS") examined our federal income tax
returns for the years ended December 31, 1995 and 1996. The IRS has agreed not
to audit the year ended December 31, 1997. Assessments made for the years 1995
through 1997 are presently being negotiated at the appellate level. We believe
we have legal defenses to reduce the proposed deficiency, although there can be
no assurance in this regard. We believe that the ultimate disposition of this
matter will not have a material adverse effect on our consolidated financial
statements.
Note 9 - Capital Stock
We have authorized 100,000,000 shares of common stock, $0.10 par value. At
December 31, 1999 and 2000, approximately 42,350,000 shares and 47,702,000
shares, respectively, of common stock were issued and outstanding. At December
31, 1999 and 2000, we had 5,000,000 shares of authorized but unissued preferred
stock.
Note 10 - Operations by Geographic Areas and Segments
For the year ended December 31, 2000, approximately 7% of our revenue was
derived from services performed for BellSouth. For the year ended December 31,
1999, approximately 12.0% of our revenue was derived from services performed for
BellSouth.
Our operations consist of four segments: datacom network services, energy
network services, international and other.
Datacom Network Services. We design, build, install, maintain and monitor
the physical facilities used to provide end-to-end telecommunications service
from the provider's central office, switching center or cable television
head-end to the ultimate consumer's home or business. We provide these services
both externally on public or private rights-of-ways or in our clients' premises.
Energy Network Services. We provide external network and infrastructure
services to public and private utilities. These services consist of overhead and
underground installation and maintenance of electrical and other utilities'
transmission and distribution networks, substation construction and maintenance,
right-of-way maintenance and restoration of asphalt and concrete surfaces. These
services are substantially similar to the services we provide to our
telecommunications clients, but the work often involves the installation and
splicing of high-voltage transmission and distribution lines.
International. We operate in Brazil through a 51% joint venture which we
consolidate net of a 49% minority interest after tax. Our Brazilian operations
provide datacom infrastructure services to a diverse group of telecommunication
companies primarily in the heavily populated states of southern Brazil.
The following table sets forth, for each of 1998, 1999 and 2000, certain
information about segment results of operations and segment assets (in
thousands).
Datacom Energy International Other (2) Consolidated
Network Network (1)
1998 Services Services
- ---------------------------------------------------------------------------------------------------------------
Revenue $ 545,485 $ 120,218 $ 379,294 $ 3,925 $ 1,048,922
Depreciation 22,822 8,460 - 1,006 32,288
Amortization 3,396 1,634 5,995 - 11,025
Income (loss) before provision
for income taxes, equity in 55,563 10,910 6,372 (70,227) 2,618
unconsolidated companies and
minority interest
Capital expenditures 44,307 25,872 5,003 1,263 76,445
Total assets 361,137 87,181 186,023 97,880 732,221
Datacom Energy International Other (2) Consolidated
Network Network (1)
1999 Services Services
- ---------------------------------------------------------------------------------------------------------------
Revenue $ 849,201 $ 153,179 $ 55,220 $ 1,422 $ 1,059,022
Depreciation 33,126 11,758 - 1,563 46,447
Amortization 4,883 802 4,016 - 9,701
Income (loss) before provision
for income taxes and 112,817 12,069 3,296 (48,372) 79,810
minority interest
Capital expenditures 59,601 8,845 86 975 69,507
Total assets 457,745 84,472 142,672 43,520 728,409
Datacom Energy International Other (2) Consolidated
Network Network (1)
2000 Services Services
- ---------------------------------------------------------------------------------------------------------------
Revenue $ 1,132,599 $ 142,386 $ 55,311 $ - $ 1,330,296
Depreciation 42,187 8,651 - 1,575 52,413
Amortization 6,699 808 3,535 - 11,042
Income (loss) before provision
for income taxes and 158,604 11,459 805 (59,492) 111,376
minority interest
Capital expenditures 48,631 3,138 869 - 52,638
Total assets 741,512 76,485 67,129 79,753 964,879
(1) Revenue, amortization and capital expenditures relate solely to our
Brazilian operations for 1999 and 2000, and include Spanish and Brazilian
operations for 1998. International income before provision for income taxes
and minority interest for the year ended December 31, 2000, primarily
relates to the sale of our PCS system net of a charge for the write-off of
two Latin American operations and write-down of non-core assets. For the
other periods, income was related solely to our Brazilian operations in
1999 and included our Brazilian and Spanish operations in 1998. Total
assets includes $118.2 million, $89.7 million and $50.8 million as of
December 31, 1998, 1999 and 2000, respectively, related to our Brazilian
operations, and the remainder relates to our interest in international
non-core assets.
(2) Consists of non-core construction and corporate operations, which includes
interest expense net of interest income of $18.0 million, $20.1 million and
$14.3 million for the years ended December 31, 1998, 1999 and 2000,
respectively. Additionally, charges of $34.0 million in 1998, $10.2 million
in 1999, and $26.3 million in 2000 are also reflected.
Note 10 - Operations by Geographic Areas and Segments (cont'd)
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, non-core assets held for sale and
notes receivable.
Note 11 - Commitments and Contingencies
We have filed lawsuits in Florida state court against a subsidiary of
Artcom Technologies, Inc., a holding company for a Spanish infrastructure
provider that we formerly owned, to recover more than $5.0 million due under a
promissory note and for breach of contract. We are also pursuing other claims
against Artcom affiliates totalling approximately $4.0 million. Artcom has
responded by suing us in federal court in Florida to recover approximately $6.0
million (subject to trebling) it alleges we received as a result of certain
allegedly unauthorized transactions by two former employees of Artcom that
occurred after we sold the company.
In January 2001, we filed suit in Florida state court against Broward
County, Florida, to recover approximately $5.0 million for work performed to
construct a detention facility for the Broward Sheriff's Office ("BSO"). The BSO
has filed a separate lawsuit in response to our lawsuit claiming $13.0 million
in damages for alleged delays in constructing the facility.
In November 1997, we filed a suit 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 to 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. The county has
counterclaimed against us seeking unspecified damages.
We are a party to other pending legal proceedings arising in the normal
course of business, none of which we believe is material to our financial
position or results of operations.
In connection with certain contracts, we have signed certain agreements of
indemnity in the aggregate amount of approximately $500.0 million, of which
approximately $338.5 million relate to the uncompleted portion of contracts in
process as of December 31, 2000. These agreements are to secure the fulfillment
of obligations and performance of the related contracts.
Our operations in Brazil are 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 Brazilian operations.
Note 12 - Other Expense, net
For the year ended December 31, 1999 other expense, net consists of a $33.8
million charge related to up-front payments pursuant to employment and
non-competition agreements entered into with managers at two of our datacom
units. The up-front payments were paid to resolve issues arising from the
original price paid for the acquisition of their businesses and were not
attributed to future services nor contemplated, included or required under the
original terms of the related acquisition agreements. In addition, other
expense, net also included a loss of $9.2 million on the sale of our Spanish
operations offset by other income of approximately $4.1 million primarily
related to our Spanish operations.
For the year ended December 31, 1999, other expense, net primarily includes
a write-down, based on the results of an analysis performed by management on the
carrying value of certain of our international non-core assets, of $10.2
million, a $3.6 million loss on the sale of a non-core business and parcels of
non-core real estate, $1 million litigation reserve for a 1994 lawsuit from a
predecessor company offset by other income of $4.8 million from a customer
related to extensions to the maturity date of a vendor financing agreement.
For the year ended December 31, 2000 other expense, net is comprised
primarily of a $28.9 million write-down of certain non-core international assets
resulting from management's review of the carrying value of such assets, $7.0
million for severance and litigation accruals offset by a $9.6 million gain on
the sale of our PCS system in Latin America.
Note 13 - Quarterly Information (Unaudited)
The following table presents unaudited quarterly operating results for
the two years ended December 31, 2000. We believe that all necessary adjustments
have been included in the amounts stated below to present fairly the quarterly
results when read in conjunction with the Consolidated Financial Statements and
Notes thereto for the years ended December 31, 1999 and 2000.
1999 2000
Quarter Ended Quarter Ended
----------------------------------------------- ------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
----------- ----------- ---------- ---------- ----------- ---------- ---------- -----------
(in thousands, except per share data)
Revenue $206,796 $ 238,688 $ 301,092 $ 312,446 $272,694 $297,697 $ 382,279 $ 377,626
Net income $ 4,352 $ 12,177 $ 17,146 $ 11,051 $ 11,477 $ 21,342 $ 25,088 $ 7,239
Basic earnings per share $ 0.11 $ 0.29 $ 0.41 $ 0.26 $ 0.26 $ 0.46 $ 0.53 $ 0.15
Diluted earnings per share $ 0.10 $ 0.29 $ 0.40 $ 0.25 $ 0.25 $ 0.44 $ 0.51 $ 0.15
In the fourth quarter of 1999, we recorded a $6.0 million write-down of our
non-core assets net of tax or $0.14 per share.
In the second quarter of 2000, we recorded a net gain of $2.5 million from
the sale and write-down of a non-core asset net of tax or $0.05 per share.
In the third quarter of 2000, we recorded a severance charge of $1.0
million net of tax or $0.02 per share.
In the fourth quarter of 2000, we recorded a $17.3 million charge primarily
to write-down certain non-core international assets net of tax or $0.35 per
share.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding our executive officers is included in this Annual
Report under the caption "Executive Officers." Information regarding our
directors and nominees for directors will be contained in our proxy statement
relating to the 2001 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission on or before April 30, 2001 (the "Proxy
Statement"), and is incorporated in this Annual Report by reference.
EXECUTIVE COMPENSATION
Information regarding compensation of our executive officers will be
contained in the Proxy Statement and is incorporated in this Annual Report by
reference, except the Compensation Committee Report contained in the Proxy
Statement, which is not incorporated in this Annual Report by reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the ownership of our common stock will be contained
in the Proxy Statement and is incorporated in this Annual Report by reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions will
be contained in the Proxy Statement and is incorporated in this Annual Report by
reference.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - The financial statements and the report of our
Certified Public Accountants are listed on page 21 through 39.
2. Financial Statements Schedules - The financial statement schedule
information required by Item 14(a)(2) is included as part of "Note 3 -
Accounts Receivable" of the Notes to Consolidated Financial
Statements.
3. Exhibits including those incorporated by reference:
Exhibit
No. * Description
- --------- ---------------------
3.1 Articles of Incorporation, filed as Appendix B to our definitive Proxy
Statement for our 1998 Annual Meeting of Stockholders dated April 14, 1998
and filed with the Securities and Exchange Commission on April 14, 1998,
and incorporated by reference herein.
3.2 By-laws, filed as Exhibit 3.2 to our Form 8-K dated May 29, 1998 and filed
with the Commission on June 26, 1998, and incorporated by reference herein.
4.1 7.75% Senior Subordinated Notes Due 2008 Indenture dated as of February 4,
1998, filed as Exhibit 4.2 to our Registration Statement on Form S-4 (file
No. 333-46361) and incorporated by reference herein.
10.1 Stock Option Agreement dated March 11, 1994 between MasTec and Arthur B.
Laffer, filed as Exhibit 10.6 to our Form 10-K for the year ended December
31, 1995 and incorporated by reference herein.
10.3 Stock Option Agreement dated December 29, 1997 between MasTec and
Joel-Tomas Citron, filed as Exhibit 10.3 to our Form 10-K for the year
ended December 31, 1997 and incorporated by reference herein.
10.4 Revolving Credit Agreement dated as of June 9, 1997 between MasTec, certain
of its subsidiaries, and Bank Boston, N.A. as agent, filed as Exhibit 10.4
to our Form 10-K for the year ended December 31, 1998 (the "1998 10-K") and
incorporated by reference herein.
10.6 First Amendment to Revolving Credit Agreement, filed as Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and
incorporated by reference herein.
10.7 Second, Third, Fourth and Fifth Amendments to Revolving Credit Agreement
filed as Exhibit 10.7 to our 1998 10-K and incorporated by reference
herein.
10.8 Agreement between Joel-Tomas Citron and MasTec dated as of November 18,
1998 filed as Exhibit 10.8 to our 1998 10-K and incorporated by reference
herein.
Exhibit
No. * Description
- --------- ---------------------
10.10 1994 Stock Option Plan for Non-employee Directors filed as an Appendix
to our definitive Proxy Statement for our 1993 Annual and Special
Meeting of Stockholders, dated February 10, 1994 and filed with the
Commission on February 11, 1994 and incorporated by reference herein.
10.11 Sixth Amendment and Extension Agreement to Revolving Credit Agreement.
10.12 2000 CEO Incentive Compensation Plan.
21.1 Subsidiaries of MasTec.
23.1 Consent of Independent Certified Public Accountants.
- --------------------------------
* Exhibits filed with the Securities and Exchange Commission. The registrant
agrees to provide these exhibits supplementally upon request.
(b) Reports on Form 8-K:
None.
Exhibit 10.11
SIXTH AMENDMENT TO REVOLVING
CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Sixth Amendment")
is made and entered into as of the 11th day of August, 1999, by and among
MASTEC, INC., a Florida corporation (the "Parent"), its Subsidiaries (other than
Excluded Subsidiaries and members of the MasTec International Group) listed on
Schedule 1 to the Credit Agreement defined below (together with the Parent,
collectively the "Borrowers"), BANKBOSTON, N.A. ("BKB"), BANK AUSTRIA
CREDITANSTALT CORPORATE FINANCE, INC., FIRST UNION NATIONAL BANK, SCOTIABANC
INC., COMERICA BANK, GENERAL ELECTRIC CAPITAL CORPORATION and LASALLE BANK
NATIONAL ASSOCIATION (f/k/a LaSalle National Bank) (collectively, the "Banks")
and BANKBOSTON, N.A. as agent (the "Agent") for the Banks.
WHEREAS, the Borrowers, the Banks and the Agent entered into a Revolving
Credit Agreement dated as of June 9, 1997, as amended by a First Amendment to
Revolving Credit Agreement dated as of January 28, 1998, as further amended by a
Second Amendment to Revolving Credit Agreement dated as of July 31, 1998, and as
further amended by a Third Amendment to Revolving Credit Agreement dated as of
September 11, 1998, as further amended by a Fourth Amendment to Revolving Credit
Agreement dated as of September 25, 1998, as further amended by a Fifth
Amendment to Revolving Credit Agreement dated as of December 29, 1998 (as the
same may be further amended and in effect from time to time the "Credit
Agreement"), pursuant to which the Banks extended credit to the Borrowers on the
terms set forth therein;
WHEREAS, the Parent has requested certain revisions to the Credit
Agreement, including an extension of the Maturity Date, and the parties desire
to amend the Credit Agreement on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Definitions. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.
2. Amendment of ss.1 of the Loan Agreement. Section 1 of the Credit
Agreement is hereby amended by deleting the definition of "Maturity
Date" in its entirety and replacing it with the following new
definition, inserted in proper alphabetical order:
"Maturity Date. June 9, 2001; as the same may be extended pursuant to
ss.2.8, but which date shall in no event be later than June 9, 2002."
3. Amendment to ss.7.5 of the Credit Agreement. Section 7.5 of the Credit
Agreement is hereby amended by deleting the figure "$100,000" therein
and substituting in place thereof the figure "$10,000,000".
4. Amendment Fee. Each Bank which executed and delivered its signature
pages by 5:00 p.m. Boston time on August 11, 1999 by facsimile (to be
followed by originals) shall receive from the Parent an amendment fee
equal to 0.10% of such Bank's Commitment payable to such Bank for its
own account.
5. Effectiveness. This Sixth Amendment shall become effective as of the
date hereof, subject to the satisfaction of each of the following
conditions:
(a) receipt by the Agent of this Sixth Amendment duly and properly
authorized, executed and delivered by the respective parties hereto;
(b) receipt by the Agent of the Joinder Agreement and Affirmation No.
3 (the "Third Joinder") executed by M.E. Hunter & Associates, Inc.,
Martin Telephone Contractors, Inc., Barkers CATV Construction, Inc.,
Fiber and Cable Works, Inc., MasTec New York, Inc., Queens Network
Cable Corp., MasTec Real Estate Holdings, Inc., Stackhouse Real Estate
Holdings, Inc., MasTec of Texas, Inc. and Phasecom America, Inc., duly
and properly authorized, executed and delivered by the respective
parties thereto;
(c) the Borrowers shall have delivered to the Agent certified copies
of corporate resolutions of each of the Borrowers satisfactory to the
Agent authorizing this Sixth Amendment and the Third Joinder, and all
related documents;
(d) payment of all fees due to (i) each Bank hereunder, and (ii)
Bingham Dana LLP; and
(e) the Parent shall have delivered to the Agent copies of all
outstanding documentation from prior amendments and joinders.
6. Representations and Warranties. Each of the Borrowers represents and
warrants as follows:
(a) The execution, delivery and performance of each of this Sixth
Amendment and the transactions contemplated hereby are within the
corporate power and authority of such Borrower and have been or will
be authorized by proper corporate proceedings, and do not (a) require
any consent or approval of the stockholders of such Borrower, (b)
contravene any provision of the charter documents or by-laws of such
Borrower or any law, rule or regulation applicable to such Borrower,
or (c) contravene any provision of, or constitute an event of default
or event which, but for the requirement that time elapse or notice be
given, or both, would constitute an event of default under, any other
material agreement, instrument or undertaking binding on such
Borrower.
(b) This Sixth Amendment and the Credit Agreement, as amended as of
the date hereof, and all of the terms and provisions hereof and
thereof are the legal, valid and binding obligations of such Borrower
enforceable in accordance with their respective terms except as
limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors' rights generally, and
except as the remedy of specific performance or of injunctive relief
is subject to the discretion of the court before which any proceeding
therefor may be brought.
(c) The execution, delivery and performance of this Sixth Amendment
and the transactions contemplated hereby do not require any approval
or consent of, or filing or registration with, any governmental or
other agency or authority, or any other party.
(d) The representations and warranties contained in ss.5 of the Credit
Agreement are true and correct in all material respects as of the date
hereof as though made on and as of the date hereof.
(e) After giving effect to this Sixth Amendment, no Default or Event
of Default under the Credit Agreement has occurred and is continuing.
7. Ratification, etc. Except as expressly amended hereby, the Credit
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all
respects and shall continue in full force and effect. This Sixth
Amendment and the Credit Agreement shall hereafter be read and
construed together as a single document, and all references in the
Credit Agreement or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended by
this Sixth Amendment.
8. GOVERNING LAW. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
9. Counterparts. This Sixth Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but
all of which counterparts taken together shall be deemed to constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the undersigned have duly executed this Sixth
Amendment under seal as of the date first set forth above.
The Borrowers:
MASTEC, INC.
By:___________________________________
Name: Arlene Vargas
Title: Vice President & Controller
MASTEC NORTH CAROLINA, INC.
CHURCH & TOWER ENVIRONMENTAL, INC.
CHURCH & TOWER, INC.
CHURCH & TOWER OF FLORIDA, INC.
DESIGNED TRAFFIC INSTALLATION CO.
AIDCO, INC.
AIDCO SYSTEMS, INC.
NORTHLAND CONTRACTING, INC.
WILDE OPTICAL SERVICE, INC.
MASTEC VIRGINIA, INC.
WILDE ACQUISITION CO., INC.
WILDE HOLDING CO., INC.
C & S DIRECTIONAL BORING, INC.
S.S.S. CONSTRUCTION, INC.
MASTEC NORTH AMERICA, INC.
J.C. ENTERPRISES, INC. (d/b/a Cotton & Taylor)
M.E. HUNTER & ASSOCIATES, INC.
MARTIN TELEPHONE CONTRACTORS, INC.
BARKERS CATV CONSTRUCTION, INC.
FIBER & CABLE WORKS, INC.
MASTEC NEW YORK, INC.
QUEENS NETWORK CABLE CORP.
MASTEC REAL ESTATE HOLDINGS, INC.
STACKHOUSE REAL ESTATE HOLDINGS, INC.
MASTEC OF TEXAS, INC.
PHASECOM AMERICA, INC.
By:___________________________________
Name: Arlene Vargas
Title: Vice President & Controller
The Banks:
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:___________________________________
Name:
Title:
SCOTIABANC INC.
By:___________________________________
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
COMERICA BANK
By:___________________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:___________________________________
Name:
Title:
BANKBOSTON, N.A.,
individually and as Agent
By:___________________________________
Name:
Title:
CONSENT TO EXTENSION
THIS CONSENT TO EXTENSION (this "Consent") is made and entered into as of
the 20th day of July, 2000, by and among MASTEC, INC., a Florida corporation
(the "Parent"), its Subsidiaries (other than Excluded Subsidiaries and members
of the MasTec International Group) listed on Schedule 1 to the Credit Agreement
defined below (together with the Parent, collectively the "Borrowers"), FLEET
NATIONAL BANK (f/k/a BankBoston, N.A., "Fleet"), BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC., FIRST UNION NATIONAL BANK, SCOTIABANC INC., COMERICA
BANK, GENERAL ELECTRIC CAPITAL CORPORATION and LASALLE BANK NATIONAL ASSOCIATION
(collectively, the "Banks") and Fleet as agent (the "Agent") for the Banks.
WHEREAS, the Borrowers, the Banks and the Agent entered into a Revolving
Credit Agreement dated as of June 9, 1997, as amended by a First Amendment to
Revolving Credit Agreement dated as of January 28, 1998, as further amended by a
Second Amendment to Revolving Credit Agreement dated as of July 31, 1998, and as
further amended by a Third Amendment to Revolving Credit Agreement dated as of
September 11, 1998, as further amended by a Fourth Amendment to Revolving Credit
Agreement dated as of September 25, 1998, as further amended by a Fifth
Amendment to Revolving Credit Agreement dated as of December 29, 1998, as
further amended by a Sixth Amendment to Revolving Credit Agreement dated as of
August 11, 1999 (as the same may be further amended and in effect from time to
time the "Credit Agreement"), pursuant to which the Banks extended credit to the
Borrowers on the terms set forth therein;
WHEREAS, the Borrowers have requested that the Banks agree to extend the
Maturity Date to June 9, 2002 (the "Final Maturity Date") pursuant to the
provisions of ss.2.8 of the Credit Agreement, and the Banks party hereto have
agreed to such extension on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.
2. Consent to the Maturity Date Extension. Each of the Banks party hereto
hereby consents to extend the Maturity Date to the Final Maturity
Date, provided that (i) the Total Commitment is not less than
$100,000,000, and (ii) all other conditions of the Credit Agreement be
met upon the extension of the Maturity Date to the Final Maturity
Date. References to the Maturity Date in the Credit Agreement shall
hereinafter be deemed to be references to the Final Maturity Date.
3. Representations and Warranties. Each of the Borrowers represents and
warrants as follows:
(a) The execution, delivery and performance of each of this Consent
and the transactions contemplated hereby are within the corporate
power and authority of such Borrower and have been or will be
authorized by proper corporate proceedings, and do not (a) require any
consent or approval of the stockholders of such Borrower, (b)
contravene any provision of the charter documents or by-laws of such
Borrower or any law, rule or regulation applicable to such Borrower,
or (c) contravene any provision of, or constitute an event of default
or event which, but for the requirement that time elapse or notice be
given, or both, would constitute an event of default under, any other
material agreement, instrument or undertaking binding on such
Borrower.
(b) This Consent and the Credit Agreement, as amended as of the date
hereof, and all of the terms and provisions hereof and thereof are the
legal, valid and binding obligations of such Borrower enforceable in
accordance with their respective terms except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally, and except
as the remedy of specific performance or of injunctive relief is
subject to the discretion of the court before which any proceeding
therefor may be brought.
(c) The execution, delivery and performance of this Consent and the
transactions contemplated hereby do not require any approval or
consent of, or filing or registration with, any governmental or other
agency or authority, or any other party.
(d) The representations and warranties contained in ss.5 of the Credit
Agreement are true and correct in all material respects as of the date
hereof as though made on and as of the date hereof.
(e) After giving effect to this Consent, no Default or Event of
Default under the Credit Agreement has occurred and is continuing.
4. Ratification, etc. The Credit Agreement, the other Loan Documents and
all documents, instruments and agreements related thereto are hereby
ratified and confirmed in all respects and shall continue in full
force and effect.
5. GOVERNING LAW. THIS CONSENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
6. Counterparts. This Consent may be executed in any number of
counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but
all of which counterparts taken together shall be deemed to constitute
one and the same instrument.
7. Effectiveness. This Consent shall become effective upon the due and
proper authorization, execution and delivery of the Consent to the
Agent by the respective parties thereto.
IN WITNESS WHEREOF, each of the undersigned have duly executed this Consent
under seal as of the date first set forth above.
The Borrowers:
MASTEC, INC.
By:___________________________________
Name:
Title:
MASTEC NORTH CAROLINA, INC.
CHURCH & TOWER ENVIRONMENTAL, INC.
CHURCH & TOWER, INC.
CHURCH & TOWER OF FLORIDA, INC.
DESIGNED TRAFFIC INSTALLATION CO.
AIDCO, INC.
AIDCO SYSTEMS, INC.
NORTHLAND CONTRACTING, INC.
WILDE OPTICAL SERVICE, INC.
MASTEC VIRGINIA, INC.
WILDE ACQUISITION CO., INC.
WILDE HOLDING CO., INC.
C & S DIRECTIONAL BORING, INC.
S.S.S. CONSTRUCTION, INC.
MASTEC NORTH AMERICA, INC.
J.C. ENTERPRISES, INC. (d/b/a Cotton & Taylor)
M.E. HUNTER & ASSOCIATES, INC.
MARTIN TELEPHONE CONTRACTORS, INC.
BARKERS CATV CONSTRUCTION, INC.
FIBER & CABLE WORKS, INC.
MASTEC NEW YORK, INC.
QUEENS NETWORK CABLE CORP.
MASTEC REAL ESTATE HOLDINGS, INC.
STACKHOUSE REAL ESTATE HOLDINGS, INC.
MASTEC OF TEXAS, INC.
PHASECOM AMERICA, INC.
M.E.H. HOLDING COMPANY, INC.
By:___________________________________
Name:
Title:
The Banks:
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:___________________________________
Name:
Title:
SCOTIABANC INC.
By:___________________________________
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
COMERICA BANK
By:___________________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:___________________________________
Name:
Title:
FLEET NATIONAL BANK (f/k/a
BankBoston, N.A.), individually and as Agent
By:___________________________________
Name:
Title:
Exhibit 10.12
MASTEC, INC.
2000 Chief Executive Officer Incentive Compensation Plan
The 2000 Chief Executive Officer Incentive Compensation Plan provides an
Incentive Award for MasTec, Inc.'s Chief Executive Officer based upon
performance during the Performance Period (as defined below). Performance is
evaluated using the criteria of earnings before interest and taxes (EBIT), as
defined under generally accepted accounting principles consistently applied on a
consolidated basis by MasTec. To be eligible for an Incentive Award, MasTec must
meet at least a minimum EBIT and ROA, as described below.
Performance Period
The Performance Period under this Plan begins January 1, 2000 and ends
December 31, 2000.
Incentive Award
The Chief Executive Officer's 2000 Incentive Award will be calculated based
on budgeted EBIT for 2000 from North American operations only ("Budgeted EBIT").
The Chief Executive Officer will not be entitled to an Incentive Award unless
EBIT from North American operations is at least 97% of Budgeted EBIT ("Minimum
EBIT"). If the Minimum EBIT is achieved in 2000, the Chief Executive Officer
will be entitled to the following bonus:
o If EBIT is equal to or more than the Minimum EBIT but less than 103%
of Budgeted EBIT, the Chief Executive Officer will be entitled to an
Incentive Award equal to 0.75% of actual EBIT from North American
operations for 2000.
o If EBIT is equal to 103% of Budgeted EBIT or more but less than 112%
of Budgeted EBIT, the Chief Executive Officer will be entitled to an
Incentive Award equal to 1.00% of actual EBIT from North American
operations for 2000.
o If EBIT is equal to 112% of Budgeted EBIT or more, the Chief Executive
Officer will be entitled to an Incentive Award equal to 1.25% of
actual EBIT from North American operations for 2000.
After the close of the Performance Period, the Compensation Committee will
determine whether the performance goals have been met based on MasTec's results
for the year. If the performance goals have been met, the Chief Executive
Officer becomes eligible for Incentive Awards as specified in the Plan. The
final Incentive Award must be approved by the Compensation Committee of MasTec's
Board of Directors. The Compensation Committee reserves the right to make
adjustments in Incentive Awards based on extenuating circumstances.
Payment of Awards
Approved Incentive Awards will be paid no later than March 31, 2001.
Incentive Awards will be paid in cash, MasTec common stock, options to purchase
MasTec common stock, or any combination of cash, stock or options, as determined
by the Compensation Committee, except that not less than 50% of the Incentive
Award will be paid in cash. The common stock portion of an Incentive Award may
be restricted from sale or other transfer for such period of time as the
Compensation Committee may determine, not to exceed one (1) year from the date
of award.
All stock options awarded as part of an Incentive Award will be options to
purchase MasTec common stock at an exercise price equal to the fair market value
of the common stock on a date or dates to be determined by the Compensation
Committee, will have a term of not less than seven (7) years, and will vest in
accordance with a vesting schedule to be determined by the Compensation
Committee, not to exceed three (3) years from the date of grant. All common
stock and stock options awarded under the Plan will be issued pursuant to the
MasTec 1994 Stock Incentive Plan or the 1999 Non-Qualified Employee Stock Option
Plan, as in effect on the date of award. Nothing in this Plan will prevent
MasTec from amending the Stock Incentive Plan or the Non-Qualified Stock Option
Plan in its sole discretion.
Employment Termination
If the Chief Executive Officer's employment with the Company or any of its
affiliates terminates prior to December 31, 2000 for "Cause," the Chief
Executive Officer will lose all rights and benefits under the Plan and will not
be entitled to any Incentive Award, any restricted stock granted under the Plan
will be forfeited as of the effective date of termination of employment, and any
unvested stock options granted under the Plan will terminate as of the effective
date of the termination of employment. If the employment of the Chief Executive
Officer with the Company or any of its affiliates terminates prior to December
31, 2000 for any other reason (including termination without "Cause," death or
Disability, as defined in the Plan), then the Chief Executive Officer will not
be entitled to an Incentive Award under this Plan but will receive the bonus
described in the Chief Executive Officer's employment agreement with the
Company. In addition, if the Chief Executive Officer's employment is terminated
without Cause, any restricted common stock portion of an Incentive Award will be
free of any restriction and the vesting of any outstanding stock options granted
under this Plan will be accelerated to the effective date of termination and may
be exercised by the Chief Executive Officer for the full term of the options.
"Cause" for purposes of the Plan means (i) the Chief Executive Officer
being convicted of any felony (whether or not against the Company or its
affiliates), (ii) willful malfeasance in the performance of the Chief Executive
Officer's responsibilities after ten (10) days' written notice to the Chief
Executive Officer and an opportunity to cure; (iii) any material act of
dishonesty by the Chief Executive Officer against the Company or any of its
affiliates, (v) a material violation by the Chief Executive Officer of any of
the policies or rules of the Company or any of its affiliates or (vi) the
voluntary resignation of the Chief Executive Officer from employment with the
Company or any of its affiliates. The determination that Cause has occurred must
be made by unanimous vote of all the members of the Board of Directors of the
Company after forty five (45) days' prior written notice to the Chief Executive
Officer and an opportunity to appear before the Board and contest the
determination of Cause.
"Disability" means the inability to perform the material duties of the
Chief Executive Officer.
Change in Control
In the event of a Change in Control of the Company, the employment of the
Chief Executive Officer will be deemed terminated without "Cause" for purposes
of the Plan. A "Change in Control of the Company" means the occurrence of any of
the following events:
(a) any consolidation or merger of MasTec in which MasTec is not the
continuing or surviving corporation or pursuant to which shares of
Common Stock are to be converted into cash, securities or other
property, provided that the consolidation or merger is not with a
corporation which was a wholly-owned subsidiary of MasTec immediately
before the consolidation or merger; or
(b) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the
assets of MasTec; or
(c) the shareholders of MasTec approve any plan or proposal for the
liquidation or dissolution of MasTec; or
(d) any "person," including a "group" as determined in accordance with
Sections 13(d) and 14(d) of the Exchange Act, becomes the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, of 33% or more of the combined voting power of
MasTec's then outstanding Common Stock, provided that such person,
immediately before it becomes such 33% beneficial owner, is not (i) a
wholly-owned subsidiary of MasTec, (ii) an individual, or a spouse or
a child of such individual, that on January 1, 2000, owned greater
than 20% of the combined voting power of such Common Stock, or (iii) a
trust, foundation or other entity controlled by an individual or
individuals described in the preceding subsection; or
(e) individuals who constitute the Board on January 1, 2000 (the
"Incumbent Board"), cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director
subsequent to January 1, 2000, whose election, or nomination for
election by MasTec's shareholders, was approved by a vote of at least
three quarters of the directors comprising the Incumbent Board (either
by a specific vote or by approval of the proxy statement of MasTec in
which such person is named as a nominee for director, without
objection to such nomination) will be, for purposes of this clause,
considered as though such Person were a member of the Incumbent Board.
Notwithstanding the foregoing, Incumbent Directors may, by a two-thirds
vote of such Directors, declare a given transaction will not constitute a Change
in Control for purposes of the Plan.
Award Non-Transferability
No Incentive Award under the Plan, and no rights or interests herein, are
assignable or transferable by a Chief Executive Officer except by will or the
laws of descent and distribution, subject to the other provisions of the Plan.
During the lifetime of a Chief Executive Officer, Incentive Awards will be paid
only to the Chief Executive Officer or his or her legal representative.
Administration
The Compensation Committee will administer the Plan. The Compensation
Committee is authorized to construe and interpret the Plan, to promulgate, amend
or rescind rules and regulations relating to the implementation of the Plan and
to make all other determinations necessary or advisable for the administration
of the Plan. The Compensation Committee may designate persons other than members
of the Compensation Committee to carry out its responsibilities under such
conditions and limitations as it may prescribe. Any determination, decision or
action of the Compensation Committee in connection with the construction,
interpretation, administration, or application of the Plan will be final,
conclusive and binding upon all Chief Executive Officers.
Amendment and Termination
The MasTec Board of Directors, in its sole discretion, may at any time
terminate the Plan, or from time to time may amend it in such respects as it
deems appropriate.
Tax Withholding
Subject to Section 83 of the Internal Revenue Code, the Company will deduct
from any Incentive Award any federal, state or local taxes of any kind required
by law to be withheld with respect to such payments or to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations of
the payment of such taxes.
Plan Funding
The Plan will be unfunded and the Company will not be required to segregate
any assets that may at any time be represented by Incentive Awards under the
Plan. Any liability of the Company to any person with respect to any Incentive
Award under the Plan will be based solely upon any contractual obligations that
may be effected pursuant to the Plan. No such obligation of the Company will be
secured by any pledge of, or other encumbrance on, any property of the Company.
Other Company Benefit and Compensation Programs
Payments and other benefits received by the Chief Executive Officer
pursuant to the Plan will not be deemed part of the Chief Executive Officer's
regular and recurring compensation for purposes of the termination indemnity or
severance pay law of any jurisdiction and will not be included in nor have any
effect on, the determination of benefits under any other employee benefit plan
or similar arrangements provided by the Company.
Plan Costs
The costs and expenses of administering the Plan will be borne by the
Company.
Governing Law
The Plan and all actions taken thereunder will be interpreted under and
governed by the laws of the State of Florida, without regard to its conflict of
laws rules.
Effective Date
The Plan will be effective when approved by the Compensation Committee.
Definitions
As used in the Plan, the terms below have the following meanings:
"MasTec" or the "Company" means MasTec, Inc., a Florida corporation, or any
successor company or subsidiary company designated by the Board of Directors of
MasTec, Inc.
Exhibit 21.1
Set forth below is a list of the significant subsidiaries of MasTec.
MasTec North America, Inc.
MasTec Inepar S/A Sistemas de Telecomunicaciones
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 333-46067), on Form S-4 (Nos. 333-30645 and
333-79321) and on Form S-8 (Nos. 333-22465, 333-30647, 333-47003, 333-77823,
333-38932 and 333-38940) of MasTec, Inc. of our report dated January 30, 2001
relating to the financial statements, which appear in this Form 10-K.
PricewaterhouseCoopers LLP
Miami, Florida
March 21, 2001
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Miami,
State of Florida, on March 22, 2001.
MASTEC, INC.
--------------------------------------------------
/s/ CARMEN M. SABATER
Carmen M. Sabater
Executive Vice President - Chief Financial Officer
(Principal Financial Officer)
--------------------------------------------------
/s/ ARLENE VARGAS
Arlene Vargas
Vice President and Controller
(Principal Accounting Officer)
POWER OF ATTORNEY
The undersigned directors and officers of MasTec, Inc. hereby constitute
and appoint Carmen M. Sabater and Jose Sariego and each of them with full power
to act without the other and with full power of substitution and resubstitution,
our true and lawful attorneys-in-fact with full power to execute in our name and
behalf in the capacities indicated below this Annual Report on Form 10-K and any
and all amendments thereto and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm all that such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 22, 2001.
/s/ JORGE MAS /s/ JOSEPH P. KENNEDY II
Jorge Mas, Chairman of the Board Joseph P. Kennedy II, Director
/s/ JOEL-TOMAS CITRON /s/ WILLIAM N. SHIEBLER
Joel-Tomas Citron, President William N. Shiebler, Director
and Chief Executive Officer
(Principal Executive Officer)
/s/ OLAF OLAFSSON /s/ JOSE S. SORZANO
Olaf Olafsson, Director Jose S. Sorzano, Director
/s/ ARTHUR B. LAFFER
Arthur B. Laffer, Director