UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-3797
MasTec, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 59-1259279
--------------------------------- ------------------
(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8600 N.W. 36th Street, Miami, FL 33166
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(Address of principal executive offices) (Zip Code)
(305) 599-1800
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X____ No _______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding as of
Class of Common Stock June 30, 1995
----------------------- ------------------
$ 0.10 par value 16,045,180
Page 1 of 22
MasTec, Inc. Form 10-Q
June 30, 1995 Index
PART I FINANCIAL INFORMATION
Item 1 - Unaudited Condensed Consolidated Statements
of Income for the Three Months and Six Months Ended
June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets
as of June 30, 1995 (Unaudited) and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements
of Cash Flows for the Six Months
Ended June 30, 1995 and June 30, 1994 . . . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements (Unaudited) . . . . . . . . . . . . 9
Item 2 - Management's Discussion and Analysis
of Results of Operations and Financial Condition . . . 16
PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 20
Page 2 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Revenues $ 46,454 $ 36,616 $ 90,016 $ 53,773
--------- --------- --------- ---------
Costs and Expenses
Costs of Revenues (exclusive of
depreciation and amortization
shown separately below) 33,403 27,985 65,417 41,175
--------- --------- --------- ---------
Gross Profit 13,051 8,631 24,599 12,598
General and Administrative 4,795 4,245 9,788 6,352
Depreciation and Amortization 1,839 1,709 3,444 2,262
--------- --------- --------- ---------
Operating Income 6,417 2,677 11,367 3,984
Other Expense (Income)
Interest Expense-
Borrowings 1,060 895 2,222 1,222
Notes to Shareholders 66 60 135 120
Interest and Dividend Income (441) (393) (838) (468)
Interest on Notes from Shareholders (95) (81) (193) (141)
Gain on Sale of Theatre Assets 0 0 (2,304) 0
Other, Net (1,604) (88) (1,686) (192)
--------- --------- --------- ---------
(1,014) 393 (2,664) 541
--------- --------- --------- ---------
Income before income taxes, equity
in earnings of unconsolidated
joint ventures and minority interest 7,431 2,284 14,031 3,443
Equity in earnings (losses) of
unconsolidated joint ventures 0 92 (11) 137
Provision for Income Taxes 2,800 793 5,243 395
--------- --------- --------- ---------
Income before minority interest 4,631 1,583 8,777 3,185
Minority interest 22 0 36 0
--------- --------- --------- ---------
NET INCOME $ 4,653 $ 1,583 $ 8,813 $ 3,185
========= ========= ========= =========
Weighted Average Shares Outstanding 16,166 16,051 16,168 16,056
Earnings Per Share $ 0.29 $ 0.10 $ 0.55 $ 0.20
The accompanying notes are an integral part of these financial statements.
Page 3 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
JUNE 30, DECEMBER 31,
1995 1994
(Unaudited) (Audited)
----------- -----------
ASSETS
Current Assets
Cash and Cash Equivalents $ 12,676 $ 5,612
Accounts Receivable-Net and Unbilled
Revenues 41,813 33,837
Inventories 4,491 4,111
Deferred and Refundable Income Taxes 1,308 1,368
Theatre Assets held for Sale 0 7,414
Other 1,685 700
----------- -----------
Total Current Assets 61,973 53,042
----------- -----------
Property and Equipment - At Cost 56,814 50,104
Accumulated Depreciation (8,430) (6,102)
----------- -----------
Property - Net 48,384 44,002
Investment in Preferred Stock 9,000 9,000
Notes Receivable from Shareholders 1,770 3,570
Real Estate Investments 30,732 30,704
Other Assets 1,841 2,134
----------- -----------
TOTAL ASSETS $ 153,700 $ 142,452
=========== ===========
The accompanying notes are an integral part of these financial statements.
Page 4 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
JUNE 30, DECEMBER 31,
1995 1994
(Unaudited) (Audited)
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Debt $ 8,037 $ 8,229
Current Portion of Notes Payable
To Shareholders 0 1,000
Accounts Payable 16,699 8,512
Accrued Insurance 3,503 4,227
Accrued Compensation 1,893 2,193
Accrued Interest 420 631
Accrued Taxes 1,257 0
Other 5,323 5,966
----------- -----------
Total Current Liabilities 37,132 30,758
----------- -----------
Deferred Income Taxes 17,628 17,938
----------- -----------
Accrued Insurance - Non-Current 7,743 6,893
----------- -----------
Other Liabilities 0 33
----------- -----------
Long-Term Debt
Long-Term Debt 19,185 15,206
Notes Payable to Shareholders 0 1,500
Convertible Subordinated Debentures 12,250 19,250
----------- -----------
Total Long-Term Debt 31,435 35,956
----------- -----------
Shareholders' Equity
Common Stock 2,643 2,643
Capital Surplus 134,110 134,094
Retained Earnings 15,085 6,272
Treasury Stock (92,076) (92,135)
----------- -----------
Total Shareholders Equity 59,762 50,874
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 153,700 $ 142,452
=========== ===========
The accompanying notes are an integral part of these financial statements.
Page 5 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
SIX MONTHS ENDED
JUNE 30,
1995 1994
----------- -----------
(Unaudited)
Cash Flows from Operating Activities:
Net Income $ 8,813 $ 3,185
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating Activities:
Minority Interest in Consolidated
Joint Ventures (36) 0
Depreciation and Amortization 3,444 2,262
Equity in (Earnings) Losses of Unconsolidated
Joint Ventures 11 (137)
(Gain) on Sale of Theatre Assets (2,304) 0
(Gain) on Sale of Assets (138) 0
Changes in Assets and Liabilities Net of
Effect of Acquisitions:
Accounts Receivable-Net and Unbilled
Revenues (6,776) (5,702)
Inventories and Other Current Assets (849) 512
Other Assets 160 202
Accounts Payable and Accrued Expenses 6,952 (394)
Accrued and Refundable Income Taxes 1,317 (1,007)
Other-Current Liabilities (643) (750)
Deferred Taxes (310) 87
Other Liabilities 853 (236)
----------- -----------
Net Cash Provided (Used) by
Operating Activities 10,494 (1,978)
----------- -----------
Cash Flows from Investing Activities:
Cash Acquired in Acquisition 0 6,362
Distribution from Unconsolidated Joint Ventures 79 75
Net Proceeds from Sale of Theatre Assets 9,718 0
Proceeds from Sale of Assets 1,218 93
Repayment of Loans to Shareholders 1,800 0
Capital Expenditures (7,170) (2,197)
Investments in Unconsolidated Joint Ventures 0 (140)
Investment in Unconsolidated Subsidiary 0 (1,000)
Loans to Shareholders 0 (3,570)
----------- -----------
Net Cash Provided (Used) by Investing Activities 5,645 (377)
----------- -----------
(Continued)
The accompanying notes are an integral part of these financial statements.
Page 6 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Cash Flows from Financing Activities:
Proceeds from Term Loan 12,000 0
Proceeds from Equipment Loan 2,584 0
Debt Repayments (20,718) (543)
Repayment of Loans from Shareholders (2,500) 0
Financing Costs (516) 0
Net Proceeds from Common Stock
issued from Treasury 75 0
----------- -----------
Net Cash Used in Financing Activities (9,075) (543)
----------- -----------
Net Increase (decrease) in Cash and
Cash Equivalents 7,064 (2,898)
Cash and Cash Equivalents -
Beginning of Period 5,612 8,930
----------- -----------
Cash and Cash Equivalents - End of Period $ 12,676 $ 6,032
=========== ===========
Supplemental disclosures of Cash Flow information:
Cash Paid During the Period:
Interest $ 2,568 $ 1,682
Income Taxes (net of refunds) $ 4,121 $ (30)
(Continued)
The accompanying notes are an integral part of these financial statements.
Page 7 of 22
MasTec, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(In Thousands)
SIX MONTHS ENDED
JUNE 30,
1995 1994
----------- -----------
(Unaudited)
Supplemental Schedule of non-cash investing activities:
Reverse Acquisition of Burnup
Fair Value of Net Assets Acquired:
Accounts Receivables $ 18,274
Inventories and Other Current Assets 7,524
Investment 9,000
Property 40,685
Real Estate Investments and Other Assets 32,645
-----------
Total Non-Cash Assets $ 108,128
-----------
Liabilities 49,559
Long-Term Debt 31,776
-----------
Total Liabilities Assumed $ 81,335
-----------
Net Non-Cash Assets Acquired 26,793
Cash Acquired 6,362
-----------
Net Value of Assets Acquired $ 33,155
-----------
Purchase Price $ 33,155
===========
Property Acquired:
Through Financing Arrangements $ 2,921 $ 142
=========== ===========
Note Payable for Purchase of Unconsolidated
Subsidiary $ 2,244
===========
Property Disposed:
Receivable arising from the sale of
equipment (collected July 11, 1995) $ 1,200
===========
The accompanying notes are an integral part of these financial statements.
Page 8 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
1. CONSOLIDATION AND PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
MasTec, Inc. have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions for Form 10-Q and Rule 10-01 of Regulation S-X. They do not
include all information and notes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1994. The financial information furnished reflects all
adjustments, consisting only of normal recurring accruals which are, in the
opinion of management, necessary for a fair presentation of the financial
position and results of operations for the periods presented. The results
of operations are not necessarily indicative of future results of
operation or financial position of MasTec , Inc.
Under generally accepted accounting principles, the Burnup Acquisition (as
defined in Note 2 below) was accounted for as a purchase by the CT Group
(as defined in Note 2 below) and, therefore, the 1994 financial statements
presented are those of the CT Group during such period and the operations
of Burnup & Sims Inc. ("Burnup") during the period March 11, 1994 through
June 30, 1994.
2. ACQUISITIONS
On March 11, 1994, Church & Tower, Inc. ("CT") and Church & Tower of
Florida, Inc. ("CTF" and, together with CT, "CT Group"), privately held
corporations under common control, were acquired (the "Burnup Acquisition")
through an exchange of stock, by Burnup, a Delaware public company.
Immediately following the Burnup Acquisition, the name of Burnup was
changed to MasTec, Inc. ("MasTec" or the "Company") and its fiscal year end
was changed to December 31.
The following information presents the unaudited pro forma condensed
results of operations for the six months ended June 30, 1994 of MasTec as
if the Acquisitions described in the Company's Annual Report on Form 10-K
had occurred on January 1, 1994. Adjustments have been made related to
purchase accounting and other matters related to the Acquisitions. These
results are presented for informational purposes only and are not
necessarily indicative of the future results of operations or financial
position of MasTec or the results of operations or financial position of
MasTec had the Acquisitions occurred on January 1, 1994.
Page 9 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(In Thousands Except Per Share Amounts)
(Unaudited)
ACTUAL PRO FORMA
1995 1994
Revenues $ 90,016 $ 74,041
Net Income 8,813 107
Earnings Per Share $ 0.55 $ 0.01
Revenues for the six months ended June 30, 1995 are $16 million higher than
pro forma 1994 revenues primarily due to an increase in revenue from new
and existing utilities services contracts.
Actual 1995 results reflect an improvement of $8.7 million from 1994 pro
forma net income of $107,000 to net income of $8.8 million for 1995. The
improved results are directly related to an increase in revenues, improved
efficiencies in core contract areas as a result of cost reductions and
enhanced productivity, a $1.4 million gain, net of tax, from the sale of
theatre assets and an $844,000 favorable settlement of litigation, net of
tax.
3. Related Party Transactions
Notes Receivable from shareholders bear interest at the prime rate plus 2%
(11% at June 30, 1995). On June 30, 1995, the Company collected notes
receivable from shareholders of $1,800,000 plus accrued interest thereon of
$467,000. Further on such date, the Company paid notes payable to
shareholders of $2,500,000 plus accrued interest thereon of $259,000.
Page 10 of 22
MASTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Continued)
4. Debt
Debt is summarized as follows (in thousands):
June 30, December 31,
1995 1994
Term Loan payable to Bank, at LIBOR
plus 2.50% (8.5% at June 30, 1995) $ 10,674 $ 0
Term Loan payable to Bank, at 7.7% fixed 886 1,144
Term Loan payable to Bank at prime rate
plus 1.5% (10% at December 31, 1994) 0 8,294
Term Loan payable to Bank at prime rate
plus 1.5% (10% at December 31, 1994) 0 1,000
Equipment Loan payable to Bank at LIBOR
plus 2.5% (8.5% at June 30, 1995) 2,584 0
Notes Payable to Shareholders, at prime
rate plus 2% (11% at June 30, 1995) 0 2,500
Capital Leases, at interest
rates from 6% to 12% due in
installments through the year 2000 2,272 3,826
Other notes payable for equipment, at
interest rates from 9% to 10% due in
installments through the year 2000 5,973 3,899
Other, at 7% due in four semi-annual
installments through July 10, 1996 1,412 1,851
Other, at 7% due in eight quarterly installments
through July 1, 1996 796 796
12% Convertible Subordinated Debentures
due in year 2000 14,875 21,875
----------- -----------
Total Debt 39,472 45,185
Less Current Maturities (8,037) (9,229)
----------- -----------
Long Term Debt $ 31,435 $ 35,956
=========== ===========
The 12% convertible subordinated debentures (the "Debentures") require an
annual payment to a sinking fund, which commenced on November 15, 1990,
calculated to retire 75% of the issue prior to maturity. The Company has
the option to redeem all or part of the Debentures prior to the due date by
paying the principal amount at face value. The Debentures are convertible
into Common Stock at an adjusted conversion price of $16.79 per share. At
June 30, 1995, approximately 886,000 shares were reserved for conversion.
The terms of the Debentures include certain restrictions on the
Page 11 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
payment of dividends. On April 17, 1995, the Company redeemed $7 million
of the outstanding balance.
On January 26, 1995 the Company entered into a new $39.5 million credit
facility (the Credit Facility ) with Shawmut Capital (the Bank ). The
Credit Facility is comprised of three sub-facilities: a $12 million term
loan (the "Term Loan") secured by certain equipment, a $15 million
revolving loan (the "Revolver") collateralized by receivables and inventory
and a $12.5 million equipment revolver term loan (the "Equipment Loan")
secured by new or used equipment purchased under the Equipment Loan
facility. The Company used a portion of the proceeds of the Term Loan to
repay $10.5 million in term loans outstanding at December 31, 1994. The
remaining portion of the Term Loan was used to primarily finance new
equipment purchases and expenses associated with obtaining the Credit
Facility.
Interest on the Term Loan and Equipment Loan accrue, at the Company's
option, at the rate of prime or 2.5% over LIBOR. Interest on the Revolver
accrues, at the Company's option, at the rate of prime or 2.25% over LIBOR.
The Credit Facility requires the Company to pay a commitment fee of
$162,500 and an unused line fee at an annual rate of one quarter of one
percent of the amount of the unused facility amount less $6,000,000. The
Term Loan is payable in quarterly installments based upon a ten year
amortization.
Borrowings outstanding during the period ended June 30, 1995 under the
Equipment Loan were $2.5 million. The Equipment Loan is payable in
quarterly installments based on a four year amortization commencing January
1996.
No borrowings were outstanding during the period ended June 30, 1995 under
the Revolver. See Note 8 regarding the Devono Transaction and sale of
Lectro.
Debt agreements contain, among other things, restrictions on the payment of
dividends and require the maintenance of certain financial covenants.
5. Earnings Per Share and Capital Stock
Earnings per share is based on the weighted average number of common shares
outstanding. Fully diluted earnings per share is not presented as the
effect is anti-dilutive or not material.
At June 30, 1995 the Company had 50,000,000 shares of $.10 par value common
stock (the "Common Stock") authorized and 16,045,180 shares outstanding,
and 5,000,000 shares of authorized but unissued preferred stock.
Page 12 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
6. Contingencies
In 1990 and 1993 purported class action and derivative complaints were
filed against the Company, members of its Board of Directors, the Company's
then largest stockholders, and CT and CTF. The complaints generally
alleged that the defendants breached their fiduciary duties in connection
with certain corporate transactions which occurred prior to the Burnup
Acquisition and certain other matters which allegedly could have impacted
the terms of the Burnup Acquisition.
The 1993 Complaint also claims derivatively that each member of the Board
of Directors engaged in mismanagement, waste and breach of his fiduciary
duties in managing the Company's affairs. On November 29, 1993, plaintiff
filed a motion for an order preliminarily and permanently enjoining the
Acquisition and the Redemption. On March 7, 1994, the court heard arguments
with respect to plaintiff's motion to enjoin the Burnup Acquisition and on
March 10, 1994, the court denied plaintiff's request for injunctive relief.
The Company believes that the allegations in the complaint, the Amended
Complaint and the 1993 Complaint and the 1993 Amended Complaint are without
merit, and intends to vigorously defend this action.
Trilogy Communications, Inc. V. Excom Realty, Inc., was filed on April 19,
1990 in the Superior Court of New Jersey, Monmouth County, Law Division,
Docket No. L-52787-90. The plaintiff served its complaint for damages and
declatory relief on Excom Realty, Inc. , a wholly owned subsidiary of the
Company. On May 3, 1991, the plaintiff moved for summary judgment. On
January 2, 1992, the Court denied plaintiff s motion for summary judgment
and granted the Company s cross motion for summary judgment and granted the
Company leave to amend and supplement its answer to assert a counterclaim.
On May 1, 1995, the Company settled its claim for $1.3 million which is
recorded as other income in the accompanying financial statements.
The Company is also a defendant in other legal actions arising in the
normal course of business. Management believes, based on consultations
with its legal counsel, that the amount provided in the financial
statements of the Company are adequate to cover the estimated losses
expected to be incurred in connection with these matters.
Page 13 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
7. Sale of Theatre Assets
On March 17, 1995, the Company sold the assets of its indoor theatre chain
for approximately $11.5 million of which $1.8 million was used to pay
liabilities not assumed by the buyer and transaction costs incurred.
Revenues from the indoor theatres included in the general products and
other segment for the six months ended June 30, 1995 and the period March
11, 1994 through June 30, 1994 were approximately $2.6 million and $3.8
million, respectively. A gain on sale of approximately $2.3 million pretax
or $1.4 million, net of tax was realized on the sale.
8. Subsequent Events
Devono Transaction
On July 14, 1995 the Company entered into a loan agreement with Devono
Company Limited, a British Virgin Islands corporation (the "Borrower"),
whereby the Company lent the Borrower $25,000,000 at an annual interest
rate of 15% for a term of 180 days (the "Devono Loan"). The Company
financed the Loan by providing the Borrower with $5,000,000 from its
working capital and drawing upon the Company's existing credit facilities
for the remaining amount. The Borrower may extend the term of the Devono
Loan at an annual interest rate of 17.5% for two additional ninety day
periods. The Devono Loan is non-recourse to the Borrower, and, in the
event of a default, the Company's sole recourse will be to its security
interest in 40% of the outstanding and issued shares of the common stock of
an Ecuadorian company which owns a majority interest in a company licensed
to operate a cellular phone service and an international teleport system in
the Republic of Ecuador.
ULM Acquisition
On July 17, 1995 the Company purchased for $3.25 million the outstanding
stock of Utility Line Maintenance, Inc. ("ULM"), a company engaged in the
right of way clearance business using customized machinery for its
operations. The shareholder of ULM received $1.75 million at closing with
the balance to be paid over the next four years based on future pre-tax
earnings of ULM.
Page 14 of 22
MasTec, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 (Unaudited)
Lectro Sale
On August 9, 1995, the Company sold the stock of Lectro Products, Inc., a
wholly owned subsidiary, for $11.9 million in cash and a note receivable
(the "Note") of $450,000. Cash proceeds,f net of transaction expenses, were
$11.3 million. The Company estimates recording a pre-tax gain of
approximately $8 million after transaction expenses. The proceeds were
used to repay $10 million borrowed to finance the Devono Loan with the
excess invested in short term investments. A portion of the Note
($250,000) is subject to adjustments based upon ultimate collectability of
Lectro's accounts receivables as of June 30, 1995. Any changes in proceeds
as a result of any adjustments are not expected to be material.
Revenues from Lectro included in the general products and other segment for
the six months ended June 30, 1995 and the period March 11, 1994 through
June 30, 1994 were approximately $6.8 million and $3.6 million,
respectively.
Page 15 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
The following discussion of the Company s financial condition and results
of operations should be read in conjunction with the Condensed Consolidated
Financial Statements and notes thereto included elsewhere herein.
RESULTS OF OPERATIONS
The following table sets forth certain historical consolidated earnings
data as a percentage of revenues for the periods indicated.
THREE MONTHS
ENDED JUNE 30
1995 1994
----- -----
Revenues 100.0% 100.0%
Cost of revenues 71.9% 76.4%
Gross Margin 28.1% 23.6%
General and Administrative Expenses 10.3% 11.6%
Depreciation & Amortization 4.0% 4.7%
Interest expense 2.4% 2.6%
Interest Income and Other income(expense), net 4.6% 1.5%
Net income 10.0% 4.3%
Three Months Ended June 30, 1995 vs. Three Months Ended June 30, 1994.
The results for the quarter ended June 30, 1995, include the favorable
settlement of litigation of $1,350,000, pretax, which is included in other
income above. See Note 6 to the Condensed Consolidated Financial
Statements.
Revenues for the three months ended June 30, 1995 were $46.5 million,
representing an increase of $9.8 million or 21% when compared to revenues
for the three months ended June 30, 1994. The increase resulted primarily
from the inclusion of revenues from companies acquired during 1994 ($5.1
million), the expansion into new contract areas ($3.4 million) and
increased revenues ($3.7 million) from existing utilities services
contracts. The increase was offset by a lower revenue base from theatre
operations as a result of the sale of its indoor theatres in March 1995.
Cost of revenues as a percentage of revenues decreased from 76.4% in 1994
to 71.9% in 1995. The resulting increase in gross margin to 28.1% in 1995
from 23.6% in 1994 is primarily due to the increase in volume which
translated into operational efficiencies in contract areas, coupled with
enhanced productivity and cost reductions.
Page 16 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
(continued)
General and administrative expenses for the quarter ended June 30, 1995
were $4.8 million or 10.3% of revenues, compared to $4.2 million or 11.6%
of revenues for the same period in the prior year. Although, as a percent
of revenues, general and administrative expenses have decreased, as a
result of
the Company s continuous evaluation and pursuit of growth opportunities and
business development in the United States and abroad, certain general and
administrative costs are incurred without current economic benefit. See
Liquidity and Capital Resources for a discussion of investments
considered.
Depreciation and amortization expense was $1.8 million for the three months
ended June 30, 1995, or 4.0% of revenues, compared to $1.7 or 4.7% of
revenues for 1994. The increased expenses are primarily a result of
increased equipment capital expenditures for new contract areas as well as
scheduled fleet replacements.
Interest expense was $1,126,000 for 1995 compared to $955,000 for 1994.
The increase is due primarily to new borrowings for equipment of $5.5
million. This increase was offset by the $7 million repayment of the
debentures in April 1995.
Other income includes $1,350,000 related to the favorable settlement of the
Trilogy litigation described in Note 6 to the Condensed Consolidated
Financial Statements.
SIX MONTHS
ENDED JUNE 30
1995 1994
----- -----
Revenues 100.0% 100.0%
Cost of revenues 72.7% 76.6%
Gross Margin 27.3% 23.4%
General and Administrative Expenses 10.9% 11.8%
Depreciation & Amortization 3.8% 4.2%
Interest expense 2.6% 2.5%
Other income(expense), net 5.6% 1.5%
Net income 9.8% 5.9%
Six Months Ended June 30, 1995 vs Six Months Ended June 30, 1994
-----------------------------------------------------------------
The results for the six months ended June 30, 1994 include six months of
operations of the CT Group and operating results of Burnup for the period
March 11, 1994 through June 30, 1994. (See Note 2 to the condensed
Page 17 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
(Continued)
Consolidated Financial Statements.) The results for the six months ended
June 30, 1995 include a gain from the sale of theatre assets of
approximately $2.3 million, pretax, which is included in other income
above. See Note 7 to the Condensed Consolidated Financial Statements.
Revenues for the six months ended June 30, 1995 increased by approximately
$36.2 million from $53.8 million in 1994, primarily resulting from
companies acquired (approximately $19 million), expansion into new contract
areas, and an increase in revenues from existing service utilities
contracts.
Cost of revenues as a percentage of revenues decreased from 76.6% in 1994
to 72.7% in 1995 primarily due to the reason cited in the quarterly
discussion.
General and administrative expenses increased by approximately $3.4 million
due primarily to the impact of the Burnup Acquisition.
Depreciation and amortization decreased as of percentage of revenues from
4.2% in 1994 to 3.8% in 1995, primarily as a result of an increase in
revenue. Depreciation expense increased from $2.3 million to $3.4 million
primarily due to a fleet replacement program and an increased in capital
expenditures resulting from expansion into new contract areas.
Interest expense increased due to debt assumed (see Statement of Cash
Flows- Supplemental Schedule of Non-cash Financing and Investing
Activities) and the incurrence of indebtedness to shareholders pursuant to
the Burnup Acquisition.
The increase in interest and dividend income resulted from the preferred
stock investment acquired as part of the Burnup Acquisition.
On March 17, 1995, the Company sold Floyd Theatres 83 indoor screens to
Carmike Cinemas realizing a gain on sale of $2.3 million.
Upon consummation of the Burnup Acquisition, the CT Group's election to be
treated as an S Corporation was terminated and, accordingly, the Company
recognized a net deferred tax asset of approximately $435,000 related to
deductible temporary differences. This benefit was reduced by a provision
for the results of operations of the consolidated group for the period
March 31, 1994 to June 30, 1994 at an effective tax rate of 35%.
Page 18 of 22
MasTec, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION JUNE 30, 1995
(Continued)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
June 30, 1995 vs December 31, 1994
The Company s primary source of liquidity during the six months ended June
30, 1995 was cash flow from operations of $10.5 million and net proceeds
from the sale of theatre assets of $9.7 million. As of June 30, 1995,
working capital was approximately $24.8 million compared to working capital
of approximately $22.3 million at December 31, 1994. The Company's cash
position was $12.7 million at June 30, 1995 compared to $5.6 million at
December 31, 1994.
In the six months ended June 30,1995, cash of $10.5 million was generated
from operations compared to $2.0 used by operations in the six months ended
June 30,1994. The increase in 1995's operating cash flows represents
improved results in the Company s core utilities services segment.
The Company, as a result of obtaining new contracts and continuing a fleet
replacement program, increased capital expenditures by approximately
$5.0 million during the first six months of 1995 compared to the first six
months of 1994.
It is anticipated that an additional $6 million will be invested in
machinery and equipment for the balance of the year.
A portion of the net proceeds ($7 million) from the sale of the theatre
assets was used to repay the Debentures on April 17, 1995. The reduction
in the outstanding balance of the Debentures reduced interest cost. See
Note 4 to the Condensed Consolidated Financial Statements.
The Company continues to evaluate the feasibility of investing and
participating in the operations of certain telecommunications related
companies in Latin America. External financing, cash generated by
operations and sale of non-core assets are anticipated sources of funding
for these investments. As discussed in Note 8 to the Condensed
Consolidated Financial Statements, on July 14, 1995, the Company made the
Devono Loan. In connection with the Devono Loan, the Company borrowed $20
million under its line of credit, $10 million of which was repaid with
proceeds from the sale of Lectro. Availability under the Company's existing
credit facility is currently $14 million.
Debt agreements to which the Company is a party contain, among other
things, restrictions on the payment of dividends and require the
maintenance of certain financial covenants. Pursuant to such covenants, the
Company is currently prohibited from declaring or paying dividends. See
Note 4 to the Condensed Consolidated Financial Statements.
The Company currently anticipates that operating cash requirements, capital
expenditures, and debt service will substantially be funded from cash flow
generated by operations, sale of non-core assets and investment income, as
well as, existing credit facilities.
Page 19 of 22
MasTec, Inc.
PART II - OTHER INFORMATION
JUNE 30, 1995
Item 1. Legal Proceedings
See Note 6 to the Condensed Consolidated Financial Statements.
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Results of Votes of Security-Holders
The 1994 Annual Meeting of Stockholders of MasTec, Inc. (the
"Meeting") was held on May 16, 1995 for the purpose of electing
two directors for term ending in 1998.
The following summarizes the results of the vote for each
candidate.
Number of Shares Voted
-------------------------------------------
Issue For Withheld Abstaining
-------------------------------------------
Jose S. Sorzano 14,680,988 72,499 0
Arthur B. Laffer 14,681,408 72,079 0
At the meeting, Mr. Jose S. Sorzano and Arthur B. Laffer were
elected as Class III Directors.
Item 5. Other Information
None
Page 20 of 22
MasTec, Inc.
PART II - OTHER INFORMATION
JUNE 30, 1995
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10. Loan Agreement dated July 14, 1995 between
MasTec, Inc. and Devono Company Inc.
Exhibit 27. Article 5 - Financial Data Schedule
(b) Reports on Form 8-K.
On May 12, 1995, the Company filed Form 8-K with the
Securities and Exchange Commission reporting the dismissal
of Price Waterhouse LLP as the Company s independent
certified public accountants.
On June 30, 1995, the Company filed Form 8-K with the
Securities and Exchange Commission reporting the engagement
of Coopers & Lybrand, L.L.P. as the Company's independent
accountant.
On August 10, 1995, the Company filed Form 8-K with the
Securities and Exchange Commission reporting the Company's
loan agreement with Devono Company Limited, a British Virgin
Islands corporation.
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MasTec, Inc.
SIGNATURES
FORM 10-Q
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MasTec, Inc.
Registrant
Date: August 14, 1995 /s/ Carlos A. Valdes
----------------------------
Carlos A. Valdes
Sr. Vice-President - Finance
(Principal Financial Officer)
and
Authorized Officer of the
Registrant
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