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MasTec Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 3, 2012 05:21PM
MasTec Inc. (MTZ) filed Quarterly Report for the period ended 2012-03-31. Mastec Inc has a market cap of $1.39 billion; its shares were traded at around $17.1 with a P/E ratio of 16 and P/S ratio of 0.5. Mastec Inc had an annual average earning growth of 41.1% over the past 5 years.
Highlight of Business Operations:Revenue. Our revenue was $778.5 million for the three months ended March 31, 2012, as compared with $618.5 million for the same period in 2011, representing an increase of $160.0 million or 25.9%. Of this increase, $120.3 million, or approximately 75%, was attributable to businesses acquired in 2011. First quarter 2012 revenues were favorably impacted by demand for our renewable, install-to-the-home and energy transmission services. Key customers driving growth during the first quarter of 2012 included Duke Energy, Mid-American Energy and DIRECTV®. First quarter revenue from renewable projects of $108.5 million increased by $72.3 million as compared to prior year revenue of $36.2 million. The growth in renewable project work has been driven largely by customers seeking to complete both wind and solar installation projects under the current federal production tax credit program, which requires that qualified facilities be placed in service by December 31, 2012. Continued strong demand for install-to-the-home project work (which includes DirectStar), in addition to expansion of the geographic areas in which we provided services, yielded approximately $37 million of higher revenues from install-to-the-home projects in the first quarter of 2012 as compared with 2011. Of this increase, approximately $27 million was from acquired businesses. Energy transmission project activity increased by approximately $44 million, including approximately $40 million of revenue from acquired businesses. First quarter 2012 pipeline project revenues were favorably impacted by our 2011 acquisition of Fabcor, which contributed approximately $46 million of revenue, as well as from approximately $90 million of incremental revenue from project activity in the various natural gas shale basins. This growth was offset, however, by a decline in long-haul pipeline project revenues following completion of the Ruby pipeline project in the third quarter of 2011.
Costs of revenue, excluding depreciation and amortization. Our costs of revenue, excluding depreciation and amortization, were $684.7 million, or 87.9% of revenue, for the three months ended March 31, 2012, compared to $528.6 million, or 85.5% of revenue, for the corresponding period in 2011, a $156.1 million, or 29.5%, increase. The dollar increase is partially attributable to higher costs associated with increased revenues, as described above. As a percentage of revenue, costs of revenue, excluding depreciation and amortization, increased 240 basis points. The basis point increase was driven by several factors. Materials as a percentage of revenue increased by 250 basis points as a result of changes in our project mix. Wages, including subcontractor costs, increased as a percent of revenue by approximately 150 basis points, due, in large part to, certain of our pipeline and wireless projects. Our pipeline projects continue to be negatively impacted by the effect of severe flooding conditions that occurred in the second half of 2011 and affected projects in the Marcellus Shale basin. Severe flooding in the northeastern United States, caused by above average rainfall, coupled with the effects of Hurricane Irene in August and Tropical Storm Lee in September of 2011, have hurt our productivity on pipeline projects in this region. Lower work order volumes on our wireless projects in the first quarter of 2012 contributed to lower levels of overhead utilization on certain wireless projects. The increases in material and labor costs as a percentage of revenue were partially offset by a 150 basis point decrease in equipment rental costs as a percent of revenue due to changes in project mix, as well as from leverage of recent capital expenditures, as discussed in depreciation and amortization below. Also impacting our first quarter 2012 costs of revenue, excluding depreciation and amortization, is approximately $5 million of higher costs from new commission arrangements that became effective in March 2011.
General and administrative expenses. General and administrative expenses were $40.8 million, or 5.2% of revenue, for the three months ended March 31, 2012 as compared with $32.5 million, or 5.2% of revenue, for the same period in 2011, representing an increase of $8.3 million, or 25.6%. The dollar increase resulted largely from incremental costs of approximately $5.7 million in support of businesses acquired in 2011.
Interest expense, net. Interest expense, net of interest income, was $9.0 million, or 1.2% of revenue, for the three months ended March 31, 2012, as compared with $7.9 million, or 1.3% of revenue, for the same period in 2011, an increase of $1.1 million. The increase was largely attributable to an increase in interest expense of approximately $0.6 million related to our credit facility, as well as $0.3 million of incremental discount accretion associated with our New Convertible Notes.
Operating Activities. Cash flow from operations is primarily influenced by demand for our services, operating margins and the type of services we provide, but can also be influenced by working capital needs such as the timing of billings and collections of receivables and the settlement of payables and other obligations. A portion of working capital assets is typically converted to cash in the first quarter. Conversely, working capital needs generally increase from April through October due to the seasonality of our business. Net cash provided by operating activities of $43.4 million for the three months ended March 31, 2012 decreased by $6.9 million from $50.3 million of cash provided by operating activities in 2011. The decrease in cash provided by operating activities was principally driven by lower net income. Accounts receivable and unbilled revenue increased by $1.7 million during the three months ended March 31, 2012, representing a use of cash, as compared with a decrease in accounts receivable and unbilled revenue of $42.9 million for the three months ended March 31, 2011, representing a source of cash. This decrease in cash was largely offset by an increase of $37.7 million from net changes in billings in excess of costs and earnings, which decreased from $52.0 million in the first quarter of 2011 to $14.3 million in the first quarter of 2012.
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