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MasTec Inc. Reports Operating Results (10-Q)

July 29, 2009 | About:
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MasTec Inc. (MTZ) filed Quarterly Report for the period ended 2009-06-30.

MASTEC INC. is one of the largest providers of construction services to thetelecommunications industry in the United States. The Company\'s principalbusiness consists of the installation and maintenance of aerial underground and buried copper and fiber optic cable underground conduit manhole systems and relatessed construction for local telephone companies including Regional Bell Operating Companies such as BellSouth Telecommunications Inc. U.S. West Inc. and SBC Communications Inc. and non-Bell local telephone companies such as Sprint Corp. and GTE Corp. MasTec Inc. has a market cap of $703.1 million; its shares were traded at around $9.29 with a P/E ratio of 8.7 and P/S ratio of 0.6.

Highlight of Business Operations:

Costs of Revenue. Our costs of revenue were $328 million or 84.6% of revenue for the three months ended June 30, 2009, compared to $259.6 million or 85.1% of revenue for the corresponding period in 2008, a $68.4 million increase or 26.4%. The increase is attributable to a $93.1 million increase in costs of revenue incurred in new business activities, primarily acquisition related, partially offset by a 9.5% decrease in costs of revenue on historical businesses associated with lower revenues. As a percentage of revenue, costs of revenue improved 50 basis points, reflecting productivity gains in a number of operating expense categories, plus lower fuel costs, offset by higher requirements for labor and materials.

Depreciation and amortization. Depreciation and amortization was $10.7 million for the three months ended June 30, 2009, compared to $6.6 million for the same period in 2008, representing an increase of $4.1 million or 62.1%. The increase was due to new business activities, primarily acquisition related, which resulted in the addition of $1.8 million in depreciation and $1.6 million in amortization.

Interest expense, net. Interest expense, net of interest income was $5.8 million or 1.5% of revenue for the three months ended June 30, 2009, compared to $3.7 million or 1.2% of revenue for the same period in 2008, representing an increase of approximately $2.1 million. This increase is primarily due to interest expense on the $55 million 8% convertible notes issued in connection with the Wanzek acquisition and on the $115 million 4% senior convertible notes issued in June 2009, as well as interest on the revolving Credit Facility related to outstanding draws since December 2008 in connection with the Wanzek acquisition. Interest expense, net, also increased as a result of reduced interest income due to lower interest rates and lower cash balances.

Depreciation and amortization. Depreciation and amortization was $21.4 million for the six months ended June 30, 2009, compared to $11.6 million for the same period in 2008, representing an increase of $9.8 million or 84.5%. The increase was due to new business activities, primarily acquisition related, which resulted in the addition of $4.9 million in depreciation and $3.8 million in amortization.

General and administrative expenses. General and administrative expenses were $47.9 million or 6.6% of revenue for the six months ended June 30, 2009, compared to $39.2 million or 6.9% of revenue for the same period in 2008, representing an increase of $8.7 million but a decrease as a percentage of revenue of 30 basis points. The increase was primarily due to a $9.9 million increase in labor and information technology costs to support new business activities, primarily acquisition related, offset by a $3 million reduction in legal expenses.

Interest expense, net. Interest expense, net of interest income was $11.5 million or 1.6% of revenue for the six months ended June 30, 2009, compared to $6.2 million or 1.1% of revenue for the same period in 2008, representing an increase of approximately $5.3 million. This increase is primarily due to interest expense on the $55 million 8% convertible notes issued in connection with the Wanzek acquisition and on the $115 million 4% senior convertible notes issued in June 2009, as well as interest on the revolving Credit Facility related to outstanding draws since December 2008 in connection with the Wanzek acquisition. Interest expense, net, also increased as a result of reduced interest income due to lower interest rates and lower cash balances.

Read the The complete Report

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