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MasTec Inc. Reports Operating Results (10-Q)

October 28, 2009 | About:
10qk

10qk

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MasTec Inc. (MTZ) filed Quarterly Report for the period ended 2009-09-30.

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 $928.2 million; its shares were traded at around $12.26 with a P/E ratio of 11.5 and P/S ratio of 0.7.

Highlight of Business Operations:

Costs of Revenue. Our costs of revenue were $335.2 million or 84.4% of revenue for the three months ended September 30, 2009, compared to $338 million or 85% of revenue for the corresponding period in 2008, a $2.8 million decrease or 0.8%. The decrease is attributable to a $58.0 million increase in costs of revenue incurred in new business activities, primarily driven by recent acquisitions, for acquisitions since September 30, 2008, offset by an 18% decrease in costs of revenue on organic businesses associated with lower revenues, as discussed above. As a percentage of revenue, costs of revenue improved 60 basis points, reflecting productivity gains in a number of operating expense categories and lower fuel costs, partially offset the net impact of changes in business mix, resulting in higher labor costs as percentage revenue with an offsetting decrease in material costs as a percentage of revenue.

Depreciation and amortization. Depreciation and amortization was $10.7 million for the three months ended September 30, 2009, compared to $7.8 million for the same period in 2008, representing an increase of $2.9 million or 37.3%. The increase was primarily driven by recent acquisitions, which resulted in the addition of $1.2 million in depreciation and $1.3 million in amortization, for acquisitions since September 30, 2008.

Interest expense, net. Interest expense, net of interest income was $5.8 million or 1.5% of revenue for the three months ended September 30, 2009, compared to $4.0 million or 1.0% of revenue for the same period in 2008, representing an increase of approximately $1.8 million. This increase is primarily due higher average debt balances from the $115 million 4% senior convertible notes issued in June 2009 and as a result of reduced interest income due to lower interest rates.

Costs of Revenue. Our costs of revenue were $954.2 million or 84.7% of revenue for the nine months ended September 30, 2009, compared to $824.5 million or 85.5% of revenue for the corresponding period in 2008, a $129.7 million increase or 15.7%. The increase is attributable to a $242.1 million increase in costs of revenue, primarily driven by recent acquisitions, which was partially offset by a 13.6% decrease in costs of revenue on organic businesses associated with lower revenues. As a percentage of revenue, costs of revenue improved 80 basis points, reflecting productivity gains in a number of operating expense categories, plus lower fuel costs, partially offset by the net impact of changes in business mix, resulting in higher labor costs as a percentage of revenue with an offsetting decrease in material costs as a percent of revenue.

Depreciation and amortization. Depreciation and amortization was $32.1 million for the nine months ended September 30, 2009, compared to $19.4 million for the same period in 2008, representing an increase of $12.7 million or 65.3%. The increase was due to new business activities, primarily acquisition related, which resulted in the addition of $6.3 million in depreciation and $4.9 million in amortization.

Interest expense, net. Interest expense, net of interest income was $17.3 million or 1.5% of revenue for the nine months ended September 30, 2009, compared to $10.1 million or 1.0% of revenue for the same period in 2008, representing an increase of approximately $7.2 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 in the first half of 2009 as a result of outstanding draws 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 average cash balances during the nine months ended September 30, 2009 as compared with the same period in 2008.

Read the The complete Report

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