MTZ 09.30.13 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
Form 10-Q
_____________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
Commission File Number 001-08106
_____________________________________________
MasTec, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Florida | 65-0829355 |
(State or Other jurisdiction of | (I.R.S. Employer |
Incorporation or Organization) | Identification No.) |
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800 S. Douglas Road, 12th Floor, | |
Coral Gables, FL | 33134 |
(Address of Principal Executive Offices) | (Zip Code) |
(305) 599-1800
(Registrant’s Telephone Number, Including Area Code)
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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer | þ | | Non-accelerated filer | ¨ |
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Accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is shell company (as defined in Rule 12b-2 of the Act.) Yes ¨ No þ
As of October 28, 2013, MasTec, Inc. had 77,242,037 shares of common stock, $0.10 par value, outstanding.
MASTEC, INC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2013
TABLE OF CONTENTS
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Item 5 | Other Information | |
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PART I. FINANCIAL INFORMATION
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ITEM 1. | FINANCIAL STATEMENTS |
MASTEC, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
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| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Revenue | $ | 1,269,385 |
| | $ | 1,067,300 |
| | $ | 3,165,657 |
| | $ | 2,794,431 |
|
Costs of revenue, excluding depreciation and amortization | 1,081,132 |
| | 924,304 |
| | 2,695,287 |
| | 2,445,056 |
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Depreciation and amortization | 37,756 |
| | 22,645 |
| | 103,111 |
| | 65,125 |
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General and administrative expenses | 58,976 |
| | 42,514 |
| | 159,761 |
| | 118,192 |
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Interest expense, net | 12,666 |
| | 9,446 |
| | 34,549 |
| | 27,883 |
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Loss on extinguishment of debt | — |
| | — |
| | 5,624 |
| | — |
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Other (income) expense, net | (2,778 | ) | | 8,815 |
| | (3,283 | ) | | 7,989 |
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Income from continuing operations before provision for income taxes | $ | 81,633 |
| | $ | 59,576 |
| | $ | 170,608 |
| | $ | 130,186 |
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Provision for income taxes | (31,698 | ) | | (23,478 | ) | | (65,822 | ) | | (51,229 | ) |
Net income from continuing operations before non-controlling interests | $ | 49,935 |
| | $ | 36,098 |
| | $ | 104,786 |
| | $ | 78,957 |
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Discontinued operations: | | | | | | | |
Net loss from discontinued operations, including loss on disposal and impairment charges (See Note 4) | $ | (3,735 | ) | | $ | (9,281 | ) | | $ | (5,165 | ) | | $ | (7,881 | ) |
Net income | $ | 46,200 |
| | $ | 26,817 |
| | $ | 99,621 |
| | $ | 71,076 |
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Net income (loss) attributable to non-controlling interests | 62 |
| | (4 | ) | | 172 |
| | (9 | ) |
Net income attributable to MasTec, Inc. | $ | 46,138 |
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| $ | 26,821 |
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| $ | 99,449 |
| | $ | 71,085 |
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Earnings per share: (1) (See Note 2) | | | | | | | |
Basic earnings (loss) per share: | | | | | | | |
Continuing operations | $ | 0.65 |
| | $ | 0.47 |
| | $ | 1.36 |
| | $ | 1.00 |
|
Discontinued operations | (0.05 | ) | | (0.12 | ) | | (0.07 | ) | | (0.10 | ) |
Total basic earnings per share | $ | 0.60 |
| | $ | 0.35 |
| | 1.29 |
| | 0.90 |
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Basic weighted average common shares outstanding | 77,093 |
| | 76,194 |
| | 76,816 |
| | 79,009 |
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Diluted earnings (loss) per share: |
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| | | | |
Continuing operations | $ | 0.59 |
| | $ | 0.45 |
| | $ | 1.24 |
| | $ | 0.97 |
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Discontinued operations | (0.04 | ) | | (0.12 | ) | | (0.06 | ) | | (0.10 | ) |
Total diluted earnings per share | $ | 0.54 |
| | $ | 0.34 |
| | $ | 1.18 |
| | $ | 0.87 |
|
Diluted weighted average common shares outstanding | 85,464 |
| | 79,526 |
| | 84,733 |
| | 81,982 |
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(1) | Earnings per share tables may contain slight summation differences due to rounding. |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
MASTEC, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
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| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Net income | $ | 46,200 |
| | $ | 26,817 |
| | $ | 99,621 |
| | $ | 71,076 |
|
Changes in foreign currency items (See Note 14) | 2,936 |
| | 2,176 |
| | (3,839 | ) | | 2,304 |
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Changes in value of available for sale securities, net of tax (See Note 14) | $ | (92 | ) | | $ | 388 |
| | $ | (558 | ) | | $ | 339 |
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Comprehensive income | $ | 49,044 |
| | $ | 29,381 |
| | $ | 95,224 |
| | $ | 73,719 |
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Comprehensive income (loss) attributable to non-controlling interests | $ | 62 |
| | $ | (4 | ) | | $ | 172 |
| | $ | (9 | ) |
Comprehensive income attributable to MasTec, Inc. | $ | 48,982 |
| | $ | 29,385 |
| | $ | 95,052 |
| | $ | 73,728 |
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The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
MASTEC, INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
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| | | | | | | |
| September 30, 2013 | | December 31, 2012 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 2,848 |
| | $ | 26,382 |
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Accounts receivable, net of allowance | 1,225,122 |
| | 877,214 |
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Inventories | 63,255 |
| | 83,939 |
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Prepaid expenses and other current assets, including discontinued operations (See Note 4) | 41,091 |
| | 62,106 |
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Total current assets | $ | 1,332,316 |
| | $ | 1,049,641 |
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Property and equipment, net | 504,313 |
| | 350,192 |
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Goodwill | 891,266 |
| | 824,953 |
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Other intangible assets, net | 172,833 |
| | 137,020 |
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Other long-term assets, including discontinued operations (See Note 4) | 53,610 |
| | 54,160 |
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Total assets | $ | 2,954,338 |
| | $ | 2,415,966 |
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Liabilities and Shareholders’ Equity | | | |
Current liabilities: | | | |
Current maturities of long-term debt | $ | 53,343 |
| | $ | 52,596 |
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Accounts payable | 475,742 |
| | 400,833 |
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Accrued salaries and wages | 81,587 |
| | 31,522 |
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Other accrued expenses | 64,645 |
| | 45,814 |
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Acquisition-related contingent consideration, current | 57,821 |
| | 19,216 |
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Billings in excess of costs and earnings | 109,655 |
| | 123,435 |
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Other current liabilities, including discontinued operations (See Note 4) | 39,436 |
| | 40,377 |
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Total current liabilities | $ | 882,229 |
| | $ | 713,793 |
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Acquisition-related contingent consideration, net of current portion | 119,502 |
| | 135,712 |
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Long-term debt | 779,920 |
| | 546,323 |
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Long-term deferred tax liabilities, net | 151,044 |
| | 119,388 |
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Other liabilities | 42,556 |
| | 38,875 |
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Total liabilities | $ | 1,975,251 |
| | $ | 1,554,091 |
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Commitments and Contingencies (See Note 17) |
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Shareholders’ equity: | | | |
Preferred stock, $1.00 par value; authorized shares - 5,000,000; issued and outstanding shares – none | $ | — |
| | $ | — |
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Common stock, $0.10 par value; authorized shares - 145,000,000; issued shares - 86,686,385 and 85,915,552 as of September 30, 2013 and December 31, 2012, respectively | 8,669 |
| | 8,592 |
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Capital surplus | 819,073 |
| | 803,166 |
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Contributed shares (See Note 12) | 6,002 |
| | — |
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Retained earnings | 300,366 |
| | 200,915 |
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Accumulated other comprehensive loss | (9,898 | ) | | (5,501 | ) |
Treasury stock, at cost; 9,467,286 shares as of both September 30, 2013 and December 31, 2012 | (150,000 | ) | | (150,000 | ) |
Total MasTec, Inc. shareholders’ equity | $ | 974,212 |
| | $ | 857,172 |
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Non-controlling interests | $ | 4,875 |
| | $ | 4,703 |
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Total shareholders’ equity | $ | 979,087 |
| | $ | 861,875 |
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Total liabilities and shareholders’ equity | $ | 2,954,338 |
| | $ | 2,415,966 |
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The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
MASTEC, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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| | | | | | | |
| For the Nine Months Ended September 30, |
| 2013 | | 2012 |
Cash flows from operating activities: | | | |
Net income | $ | 99,621 |
| | $ | 71,076 |
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Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 103,111 |
| | 65,767 |
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Non-cash stock-based compensation expense | 9,647 |
| | 3,351 |
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Non-cash interest expense | 6,890 |
| | 6,424 |
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Write-off of unamortized financing costs on redeemed debt | 1,508 |
| | — |
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Provision for losses on construction projects, net | 2,125 |
| | (10,331 | ) |
Provisions for losses on assets | 6,300 |
| | 4,226 |
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Gains on sales of assets | (4,884 | ) | | (1,569 | ) |
Excess tax benefit from non-cash stock-based compensation | (4,446 | ) | | (302 | ) |
Loss on disposal and impairment charges, discontinued operations | 6,036 |
| | 12,922 |
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Changes in assets and liabilities, net of assets acquired and liabilities assumed: | | | |
Accounts receivable | (271,010 | ) | | (233,220 | ) |
Inventories | 20,484 |
| | 8,243 |
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Deferred tax assets and liabilities, net | 9,783 |
| | (3,555 | ) |
Other assets, current and non-current portion | 19,117 |
| | (6,383 | ) |
Accounts payable and accrued expenses | 126,784 |
| | 176,289 |
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Billings in excess of costs and earnings | (19,776 | ) | | (3,367 | ) |
Other liabilities, current and non-current portion | 13,701 |
| | 25,099 |
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Net cash provided by operating activities | $ | 124,991 |
| | $ | 114,670 |
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Cash flows (used in) provided by investing activities: | | | |
Cash paid for acquisitions, net, including contingent consideration | (159,446 | ) | | (17,496 | ) |
Capital expenditures | (101,411 | ) | | (50,331 | ) |
Proceeds from sale of property and equipment | 8,288 |
| | 5,808 |
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Proceeds from sale or redemption of investments | 5,025 |
| | — |
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Proceeds from disposal of business, net of cash divested | (4,332 | ) | | 97,728 |
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Payments for other investments, net | (1,174 | ) | | (284 | ) |
Net cash (used in) provided by investing activities | $ | (253,050 | ) | | $ | 35,425 |
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Cash flows provided by (used in) financing activities: | | | |
Proceeds from issuance of 4.875% senior notes | 400,000 |
| | — |
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Repayment of 7.625% senior notes | (150,000 | ) | | — |
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Proceeds from credit facility | 766,154 |
| | 631,815 |
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Repayments of credit facility | (860,070 | ) | | (681,815 | ) |
Repayments of other borrowings | (24,246 | ) | | (15,510 | ) |
Proceeds from (repayments of) book overdrafts | 2,791 |
| | (5,645 | ) |
Payments of capital lease obligations | (32,214 | ) | | (14,806 | ) |
Proceeds from stock option exercises and other share-based awards | 9,231 |
| | 1,445 |
|
Excess tax benefit from non-cash stock-based compensation | 4,446 |
| | 302 |
|
Purchases of treasury stock | — |
| | (75,000 | ) |
Payments for debt extinguishment, call premiums | (4,116 | ) | | — |
|
Payments of financing costs | (7,718 | ) | | (113 | ) |
Net cash provided by (used in) financing activities | $ | 104,258 |
| | $ | (159,327 | ) |
Net decrease in cash and cash equivalents | (23,801 | ) | | (9,232 | ) |
Net effect of currency translation on cash | (118 | ) | | 135 |
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Cash and cash equivalents - beginning of period | 26,767 |
| | 20,279 |
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Cash and cash equivalents - end of period | $ | 2,848 |
| | $ | 11,182 |
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Cash and cash equivalents of discontinued operations | $ | — |
| | $ | 710 |
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Cash and cash equivalents of continuing operations | $ | 2,848 |
| | $ | 10,472 |
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Supplemental cash flow information: | | | |
Interest paid | $ | 30,851 |
| | $ | 20,879 |
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Income taxes paid, net of refunds | $ | 49,722 |
| | $ | 37,219 |
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Receipt of inventory prepaid in prior year | $ | — |
| | $ | 12,005 |
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Supplemental disclosure of non-cash investing and financing information: | | | |
Equipment acquired under capital lease | $ | 82,737 |
| | $ | 29,917 |
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Equipment acquired under financing arrangements | $ | 24,100 |
| | $ | 4,887 |
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Equipment sold for receivable | $ | 9,683 |
| | $ | — |
|
Value of shares contributed by shareholder, former owner of acquired business | $ | 6,002 |
| | $ | — |
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
MASTEC, INC.
NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Business, Basis of Presentation and Significant Accounting Policies
Nature of the Business
MasTec, Inc. (collectively with its subsidiaries, “MasTec” or the “Company”) is a leading infrastructure construction company operating mainly throughout North America across a range of industries. The Company’s primary activities include the engineering, building, installation, maintenance and upgrade of energy, utility and communications infrastructure, such as: electrical utility transmission and distribution; natural gas and petroleum pipeline infrastructure; wireless, wireline and satellite communications; power generation, including renewable energy infrastructure; and industrial infrastructure. MasTec’s customers are primarily in these industries.
Basis of Presentation
The accompanying condensed unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated balance sheet as of December 31, 2012 is derived from the Company’s audited financial statements as of that date. Because certain information and footnote disclosures have been condensed or omitted, these condensed unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2012 contained in the Company’s most recent Annual Report on Form 10-K. In management’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. Certain prior year amounts have been reclassified to conform to the current period presentation. Interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. The Company believes that the disclosures made in these condensed unaudited consolidated financial statements are adequate to make the information not misleading.
Principles of Consolidation
The accompanying condensed unaudited consolidated financial statements include MasTec, Inc. and its subsidiaries and include the accounts of all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. Other parties’ interests in companies for which MasTec exercises control and has a controlling financial interest are reported as non-controlling interests within shareholders’ equity. Net income or loss attributable to non-controlling interests is reported as a separate line item below net income. The Company’s investments in entities in which the Company does not have a controlling interest, but has the ability to exert significant influence, are accounted for using the equity method of accounting. Equity method investments are recorded as long-term assets in the condensed unaudited consolidated balance sheets. Income or loss from these investments is recorded within other income or expense, net, in the condensed unaudited consolidated statements of operations. The cost method is used for investments in entities over which the Company does not have the ability to exert significant influence. All significant intercompany balances and transactions have been eliminated in consolidation.
Management Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Key estimates include: the recognition of revenue, in particular, on long-term construction contracts, including estimates of costs to complete projects and provisions for contract losses; allowances for doubtful accounts; accrued self-insured claims; estimated fair values of goodwill and intangible assets, acquisition-related contingent consideration, assets and liabilities classified as held-for-sale, convertible debt obligations, available for sale securities and investments in cost and equity method investees; asset lives used in computing depreciation and amortization, including amortization of intangible assets; accounting for income taxes; and the estimated impact of contingencies and ongoing litigation. While management believes that such estimates are fair when considered in conjunction with the consolidated financial position and results of operations taken as a whole, actual results could differ from those estimates and such differences may be material to the condensed unaudited consolidated financial statements.
Significant Accounting Policies
Except for adoption of the accounting pronouncements discussed below, there have been no material changes to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
New accounting pronouncements
Recently Issued Accounting Standards, Not Adopted as of September 30, 2013
In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-05”). The objective of ASU 2013-05 is to resolve diversity in practice regarding the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. ASU 2013-05 is effective prospectively for fiscal years, and interim reporting periods within those years,
beginning after December 15, 2013. The Company is currently evaluating the potential impact of this ASU on its condensed unaudited consolidated financial statements.
In February 2013, the FASB issued ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-04”). ASU 2013-04 provides guidance related to the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in ASU 2013-04 also requires an entity to disclose the nature and amount of the obligation. ASU 2013-05 is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. Retrospective application is required for all periods presented. The Company is currently evaluating the potential impact of this ASU on its condensed unaudited consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-11”). ASU 2013-11 provides guidance on the presentation in the financial statements of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, and explains that unrecognized tax benefits should be presented as a reduction to deferred tax assets for net operating loss carryforwards, similar tax losses or tax credit carryforwards. To the extent a net operating loss carryforward, similar tax loss or tax credit carryforward is not available as of the reporting date under the tax law of the applicable jurisdiction, or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists as of the reporting date. ASU 2013-11 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. Retrospective application is permitted. The Company is currently evaluating the potential impact of this ASU on its condensed unaudited consolidated financial statements.
Recently Adopted Accounting Pronouncements
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). The amendment requires disclosure of information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, disclosure is required, either on the face of the statement where net income is presented, or in the notes, of significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. The new requirements are effective for public companies in interim and annual reporting periods beginning after December 15, 2012. The Company adopted ASU 2013-02 as of January 1, 2013. See Note 14 - Shareholders' Equity for related disclosures.
Note 2 – Earnings Per Share
Basic earnings per share is computed by dividing earnings available to MasTec’s common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing earnings by the number of fully diluted shares, which includes the effect of dilutive potential issuances of common shares as determined using earnings from continuing operations. The potential issuance of common shares upon the exercise, conversion or vesting of outstanding stock options and unvested restricted share awards, as calculated under the treasury stock method, as well as shares associated with the Company’s outstanding convertible debt securities, may be dilutive.
The following table provides details underlying the Company’s earnings per share calculations for the periods indicated (in thousands):
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| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Net income attributable to MasTec: | | | | | | | |
Basic net income from continuing operations (1) | $ | 49,960 |
| | $ | 36,098 |
| | $ | 104,702 |
| | $ | 78,957 |
|
Interest expense, net of tax, 2009 Convertible Notes | 79 |
| | 78 |
| | 235 |
| | 234 |
|
Diluted net income from continuing operations | $ | 50,039 |
| | $ | 36,176 |
| | $ | 104,937 |
| | $ | 79,191 |
|
Net loss from discontinued operations (1) | (3,822 | ) | | (9,277 | ) | | (5,252 | ) | | (7,872 | ) |
Diluted net income attributable to MasTec | $ | 46,217 |
| | $ | 26,899 |
| | $ | 99,685 |
| | $ | 71,319 |
|
Weighted average shares outstanding: |
|
| |
|
| | | | |
Basic weighted average shares outstanding | 77,093 |
| | 76,194 |
| | 76,816 |
| | 79,009 |
|
Dilutive common stock equivalents | 775 |
| | 887 |
| | 774 |
| | 842 |
|
Dilutive premium shares, 2011 Convertible Notes | 6,790 |
| | 1,639 |
| | 6,337 |
| | 1,325 |
|
Dilutive shares, 2009 Convertible Notes | 806 |
| | 806 |
| | 806 |
| | 806 |
|
Diluted weighted average shares outstanding | 85,464 |
| | 79,526 |
| | 84,733 |
| | 81,982 |
|
(1) Calculated as total net income less amounts attributable to non-controlling interests.
During the nine month period ended September 30, 2012, the Company repurchased 4.9 million shares of its common stock for an aggregate purchase price of $75.0 million. Repurchased shares are held in the Company's treasury.
Outstanding Convertibles Notes - Diluted Share Impact
The Company has $215 million principal amount of senior convertible notes outstanding, composed of $202.3 million of senior convertible notes issued in 2011 (the "2011 Convertible Notes") and approximately $12.6 million of senior convertible notes issued in 2009 (the "2009 Convertible Notes"). Dilutive shares associated with the 2009 Convertible Notes are attributable to the underlying principal amounts. As the Company’s weighted average stock price for the three and nine month periods ended September 30, 2013 and 2012 exceeded the conversion prices of the 2011 Convertible Notes, dilutive shares associated with the 2011 Convertible Notes, which are attributable to the weighted average premium value, in shares, of the conversion shares underlying the 2011 Convertible Notes in excess of the respective principal amounts thereof, have been included in the Company's share count for the corresponding periods.
The 2011 Convertible Notes consist of $105.3 million principal amount of 4.0% senior convertible notes, convertible at $15.76 per share (the "2011 4.0% Notes") and $97.0 million principal amount of 4.25% senior convertible notes, convertible at $15.48 per share (the "2011 4.25% Notes"). The calculations underlying the number of premium shares included in the Company’s diluted share count for the periods indicated are as follows (in thousands, except per share amounts):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of and for the Three Months Ended September 30, | | As of and for the Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
| 2011 4.0% Notes | | 2011 4.25% Notes | | 2011 4.0% Notes | | 2011 4.25% Notes | | 2011 4.0% Notes | | 2011 4.25% Notes | | 2011 4.0% Notes | | 2011 4.25% Notes |
Number of conversion shares, principal amount | 6,683 |
| | 6,268 |
| | 6,683 |
| | 6,268 |
| | 6,683 |
| | 6,268 |
| | 6,683 |
| | 6,268 |
|
Weighted average actual per share price | $ | 32.84 |
| | $ | 32.84 |
| | $ | 17.89 |
| | $ | 17.89 |
| | $ | 30.59 |
| | $ | 30.59 |
| | $ | 17.40 |
| | $ | 17.40 |
|
Weighted average premium value | $ | 114,176 |
| | $ | 108,864 |
| | $ | 14,208 |
| | $ | 15,106 |
| | $ | 99,104 |
| | $ | 94,728 |
| | $ | 10,975 |
| | $ | 12,073 |
|
Weighted average equivalent premium shares | 3,476 |
| | 3,314 |
| | 794 |
| | 845 |
| | 3,240 |
| | 3,097 |
| | 631 |
| | 694 |
|
See Note 10 - Debt for additional information.
Note 3 – Acquisitions
Allocations of purchase prices for acquisitions are based on estimates of the fair value of consideration paid and of the net assets acquired and are subject to adjustment upon finalization of these fair value estimates. In the second and third quarters of 2013 and in December 2012, the Company acquired certain businesses, as discussed below and in Note 3 - Acquisitions and Other Investments of the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012. As of September 30, 2013, the allocations of purchase prices to the fair values of tangible and intangible assets and liabilities, including the estimated values of contingent earn-out obligations and the estimated useful lives of acquired assets for these acquisitions, are provisional and remain preliminary as management continues to assess the valuation of these items and any ultimate purchase price adjustments that may result based on the final net assets and net working capital of the acquired businesses, as prescribed in the corresponding purchase agreements.
During the three and nine month periods ended September 30, 2013, the Company revised its preliminary allocations for certain of the 2013 and 2012 acquisitions based on new information about the facts and circumstances existing as of the respective dates of such acquisitions, or, for purchase price adjustments, based on the final net assets and net working capital of the businesses acquired, as prescribed in the relevant purchase agreements. These adjustments resulted in the recognition of, or adjusted the fair values of, certain acquired assets and assumed liabilities, which, for the 2012 acquisitions, resulted in the revision of comparative prior period financial information. Such measurement period adjustments are presented as if the adjustments had been taken into account as of the dates of the respective acquisitions. All changes that do not qualify as measurement period adjustments are included in current period earnings.
2013 Acquisitions
Big Country
Effective May 1, 2013, MasTec acquired all of the issued and outstanding interests of Big Country Energy Services, Inc. and its affiliated operating companies (collectively, "Big Country"). Big Country is a North American oil and gas pipeline and facility construction services company, headquartered in Calgary, Alberta, Canada. Big Country also has construction offices in Alberta, British Columbia and Saskatchewan, as well as in Wyoming and North Dakota. Big Country's services include oil, natural gas and natural gas liquids gathering systems and pipeline construction; pipeline modification and replacement services; compressor and pumping station construction; and other related services supporting the oil and gas production, processing and transportation industries. Big Country is expected to significantly expand MasTec's ability to take advantage of the rapidly expanding opportunities anticipated for energy infrastructure work in North America in the coming years. Big Country is reported within the Company's oil and gas segment.
The following table summarizes the preliminary estimated fair value of consideration paid and the identifiable assets acquired and liabilities assumed, as adjusted, as of the date of acquisition (in millions):
|
| | | |
Purchase price consideration: | May 1, 2013 |
Cash | $ | 103.5 |
|
Fair value of contingent consideration (earn-out liability) | 22.8 |
|
Total consideration transferred | $ | 126.3 |
|
Identifiable assets acquired and liabilities assumed: | |
Current assets | $ | 69.0 |
|
Property and equipment | 44.0 |
|
Pre-qualifications | 29.6 |
|
Finite-lived intangible assets | 10.7 |
|
Current liabilities | (21.7 | ) |
Long-term debt | (24.4 | ) |
Deferred income taxes | (13.1 | ) |
Total identifiable net assets | $ | 94.1 |
|
Goodwill | $ | 32.2 |
|
Total net assets acquired, including goodwill | $ | 126.3 |
|
The fair values and weighted average useful lives of Big Country's acquired finite-lived intangible assets, as adjusted, as of the date of acquisition were assigned as follows:
|
| | | | | |
| Fair Value | | Weighted Average Useful Life |
| (in millions) | | (in years) |
Backlog | $ | 1.9 |
| | 1 |
Non-compete agreements | 1.8 |
| | 8 |
Customer relationships | 7.0 |
| | 6 |
Total acquired amortizing intangibles | $ | 10.7 |
| | 5 |
Finite-lived intangible assets will be amortized in a manner consistent with the pattern in which the related benefits are expected to be consumed. The intangible asset related to Big Country's pre-qualifications with companies in the oil and gas industry has been assigned an indefinite life as the pre-qualifications do not expire or diminish in value, and the companies to which they relate have extremely long operating histories. Goodwill arising from the acquisition represents the estimated value of Big Country's geographic presence in key high growth Canadian markets, its assembled workforce, its management team's industry-specific project management expertise and synergies expected to be achieved from the combined operations of Big Country and MasTec. As of the date of acquisition, the total amount of goodwill expected to be deductible for tax purposes was $4.0 million.
The contingent earn-out obligation is equal to 25% of the excess, if any, of Big Country’s annual earnings before interest, taxes, depreciation
and amortization ("EBITDA") above certain thresholds for a five-year period, as set forth in the purchase agreement, and is payable annually in cash. The fair value of the earn-out liability was estimated using an income approach and incorporates significant inputs not observable in the market. Key assumptions in the estimated valuation include the discount rate and probability-weighted EBITDA projections. The range of potential undiscounted payments that MasTec could be required to make under the earn-out arrangement is estimated to be between $1 million and $110 million; however, there is no maximum earn-out payment amount.
Other 2013 Acquisitions
Effective April 1, 2013, MasTec acquired a former subcontractor to its wireless business, which will provide self-perform communications tower construction, installation, maintenance and other services in support of telecommunications infrastructure construction in the Company's communications segment. In addition, effective August 1, 2013, MasTec acquired an electrical transmission services company, which focuses primarily on substation construction activities within the Company's electrical transmission segment.
Unaudited Pro Forma Information - 2013 Acquisitions
The following unaudited supplemental pro forma results of operations include the results of operations of each of the companies acquired in 2013 as if each had been consolidated as of January 1, 2012 and have been provided for illustrative purposes only. These unaudited pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented, or of the results that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following unaudited pro forma financial information because of future events and transactions, as well as other factors, many of which are beyond MasTec’s control.
The unaudited pro forma combined results of operations presented below for three and nine month periods ended September 30, 2013 and 2012, respectively, have been prepared by adjusting the historical results of MasTec to include the historical results of the acquisitions described above as if they occurred on January 1, 2012. The unaudited pro forma combined historical results were then adjusted (i) to remove one-time acquisition costs; (ii) to increase amortization expense resulting from incremental intangible assets acquired in such acquisitions; (iii) to increase interest expense as a result of the cash consideration paid; and (iv) to reduce interest expense from the repayment of acquired debt. The unaudited pro forma results of operations do not include any adjustments to reflect the impact of cost savings or other synergies that may result from these acquisitions. As noted above, the unaudited pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined company in the future.
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
| (unaudited, in millions) | | (unaudited, in millions) |
Revenue | $ | 1,273.6 |
| | $ | 1,158.7 |
| | $ | 3,284.9 |
| | $ | 3,026.2 |
|
Net income from continuing operations | $ | 50.0 |
| | $ | 42.7 |
| | $ | 113.4 |
| | $ | 88.9 |
|
Results of Businesses Acquired in 2013
Revenues and net income from the Company's 2013 acquisitions for the periods indicated are as follows (in millions):
|
| | | | | | | |
| For the Three Months Ended September 30, 2013 | | For the Nine Months Ended September 30, 2013 |
Revenue | $ | 101.8 |
| | $ | 141.4 |
|
Net income | $ | 6.2 |
| | $ | 7.7 |
|
The above results do not include acquisition costs of $0.3 million and $1.5 million for the three and nine month periods ended September 30, 2013, respectively, and also do not include interest expense associated with consideration paid for these acquisitions.
2012 Acquisitions
Effective December 1, 2012, MasTec acquired all of the issued and outstanding interests of Bottom Line Services, LLC ("BLS"), a natural gas and petroleum pipeline infrastructure services company for an aggregate purchase price composed of approximately $67.6 million in cash and a five year earn-out, valued at $11.1 million as of the date of acquisition. BLS's services include pipeline and facilities construction, painting and maintenance services, primarily in eastern Texas. Additionally, effective December 1, 2012, MasTec acquired a former subcontractor to MasTec's oil and gas business, which provides self-perform clearing and trenching services for natural gas and petroleum pipeline infrastructure construction, and also acquired a former subcontractor to MasTec's wireless business, which provides self-perform communications tower construction, installation, maintenance and other services in support of telecommunications infrastructure construction.
Results of Businesses Acquired in 2012
Revenues and net income from the Company's 2012 acquisitions for the periods indicated are as follows (in millions):
|
| | | | | | | |
| For the Three Months Ended September 30, 2013 | | For the Nine Months Ended September 30, 2013 |
Revenue | $ | 39.9 |
| | $ | 129.0 |
|
Net income | $ | 1.4 |
| | $ | 5.2 |
|
The above results do not include interest expense associated with consideration paid for these acquisitions.
Measurement Period Adjustments
Measurement period adjustments associated with the Company's 2012 acquisitions have been reflected in the Company's December 31, 2012 consolidated balance sheet as follows (in millions):
|
| | | | | | | | | | | | |
As of December 31, 2012 | | As Previously Reported | | Measurement Period Adjustments/Reclassifications | | As Revised |
Current assets | | $ | 1,047.1 |
| | $ | 2.5 |
| | $ | 1,049.6 |
|
Property and equipment, net | | $ | 350.4 |
| | $ | (0.2 | ) | | $ | 350.2 |
|
Goodwill | | $ | 820.3 |
| | $ | 4.7 |
| | $ | 825.0 |
|
Other long-term assets, including discontinued operations | | $ | 53.1 |
| | $ | 1.1 |
| | $ | 54.2 |
|
Current liabilities | | $ | 705.7 |
| | $ | 8.1 |
| | $ | 713.8 |
|
Note 4 – Discontinued Operations
Globetec
In September 2012, the Company's board of directors approved a plan of sale for its Globetec business. Accordingly, Globetec's projects and assets are reflected as assets and liabilities of discontinued operations in the condensed unaudited consolidated balance sheets for all periods presented, and Globetec's results of operations are presented as discontinued operations in the condensed unaudited consolidated statements of operations for all periods presented.
Effective August 31, 2013, the Company sold all of its membership interests in Globetec Construction, LLC ("Globetec") for nominal consideration and retained certain assets, including two pre-closing, intercompany loans of $2.0 million and $5.6 million. The loans bear interest at 0.25% and 5% per annum, respectively, and mature on October 3, 2014, or earlier if Globetec collects certain amounts from its customers. The $5.6 million note has an option to extend the maturity by an additional year at an increased interest rate of 10% per annum. The $2.0 million and $5.6 million notes are classified as current assets and long-term assets, respectively. The sale agreement provides that the Company would retain certain contingent assets and liabilities of the Globetec business, which are reported in discontinued operations as set forth below.
The Company believes the notes receivable represent a variable interest in Globetec. The Company holds no power to control the primary activities of Globetec, owns no equity interests in Globetec and is not the primary beneficiary of the Globetec business. In addition to the loans described above, the Company has issued surety bonds totaling $41.8 million that remain outstanding as of September 30, 2013 for projects that Globetec has completed as of September 30, 2013 or expects to complete before May 2014. The Company believes an immaterial amount is at risk under these surety bonds as of September 30, 2013. The Company is not obligated and does not intend to support Globetec in the future.
The following table contains a summary of assets and liabilities associated with Globetec as of December 31, 2012, and, as of September 30, 2013, a summary of the contingent assets and liabilities, as described above, that were retained by the Company (in millions):
|
| | | | | | | |
| September 30, 2013 | | December 31, 2012 |
Assets: | | | |
Current assets | $ | 3.1 |
| | $ | 18.6 |
|
Long-term assets | 11.3 |
| | 7.7 |
|
Assets of discontinued operations | $ | 14.4 |
| | $ | 26.3 |
|
Liabilities: | | | |
Current liabilities of discontinued operations | $ | 1.3 |
| | $ | 10.7 |
|
The following table presents results from discontinued operations associated with the Globetec operation for the periods indicated (in millions):
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Revenue | $ | 4.8 |
| | $ | 4.8 |
| | $ | 18.0 |
| | $ | 13.5 |
|
Loss from operations, before tax | (0.5 | ) | | (2.6 | ) | | (2.7 | ) | | (5.8 | ) |
Loss on disposal and impairment charges, before tax | (5.7 | ) | | (12.7 | ) | | (6.0 | ) | | (12.7 | ) |
Benefit from income taxes | 2.5 |
| | 6.0 |
| | 3.5 |
| | 6.9 |
|
Net loss from discontinued operations | $ | (3.7 | ) | | $ | (9.3 | ) | | $ | (5.2 | ) | | $ | (11.6 | ) |
DirectStar
In May 2012, Red Ventures exercised its option to acquire from the Company the equity interests in DirectStar, which provides marketing and sales services on behalf of DIRECTV®. The Company consummated the sale of DirectStar to Red Ventures in June 2012 for a net sale price of $98.9 million in cash. DirectStar is presented as a discontinued operation in the Company’s condensed unaudited consolidated financial statements for all periods presented. Net income from discontinued operations for DirectStar was $3.7 million for the nine month period ended September 30, 2012. There was no activity for the three month period ended September 30, 2012.
Note 5 - Goodwill and Other Intangible Assets
The following table provides a reconciliation of changes in goodwill by reportable segment (in millions):
|
| | | | | | | | | | | | | | | | | | | |
| Communications | | Oil and Gas | | Electrical Transmission | | Power Generation and Industrial | | Total Goodwill |
Balance as of December 31, 2012 | $ | 305.8 |
| | $ | 272.1 |
| | $ | 129.5 |
| | $ | 117.6 |
| | $ | 825.0 |
|
Additions from new business combinations | 10.0 |
| | 32.3 |
| | 19.2 |
| | — |
| | 61.5 |
|
Accruals of acquisition-related contingent consideration (1) | 6.5 |
| | — |
| | — |
| | — |
| | 6.5 |
|
Currency translation adjustments | — |
| | (1.7 | ) | | — |
| | — |
| | (1.7 | ) |
Balance as of September 30, 2013 | $ | 322.3 |
| | $ | 302.7 |
| | $ | 148.7 |
| | $ | 117.6 |
| | $ | 891.3 |
|
(1) Represents contingent consideration for acquisitions prior to January 1, 2009, which is only accrued as earned, in accordance with U.S. GAAP.
The following table provides a reconciliation of changes in other intangible assets, net (in millions):
|
| | | | | | | | | | | | | | | | | | | | |
| | Other Intangible Assets |
| | Non-amortizing | | Amortizing | | |
| | Trade Names | | Pre-Qualifications | | Customer Relationships and Backlog | | Other (1) | | Total |
Other intangible assets, gross carrying amount as of December 31, 2012 | | $ | 34.8 |
| | $ | 31.3 |
| | $ | 109.6 |
| | $ | 19.8 |
| | $ | 195.5 |
|
Accumulated amortization | | | | | | $ | (48.2 | ) | | $ | (10.3 | ) | | $ | (58.5 | ) |
Other intangible assets, net, as of December 31, 2012 | | $ | 34.8 |
| | $ | 31.3 |
| | $ | 61.4 |
| | $ | 9.5 |
| | $ | 137.0 |
|
Additions from new business combinations | | — |
| | 29.6 |
| | 19.9 |
| | 2.5 |
| | 52.0 |
|
Amortization expense | | | | | | (14.4 | ) | | (0.8 | ) | | (15.2 | ) |
Currency translation adjustments | | — |
| | (0.7 | ) | | (0.3 | ) | | — |
| | (1.0 | ) |
Other intangible assets, net, as of September 30, 2013 | | $ | 34.8 |
| | $ | 60.2 |
| | $ | 66.6 |
| | $ | 11.2 |
| | $ | 172.8 |
|
(1) Consists principally of trade names and non-compete agreements.
Amortization expense associated with amortizing intangible assets for the three month periods ended September 30, 2013 and 2012 was $5.8 million and $2.8 million, respectively. Amortization expense associated with amortizing intangible assets for the nine month periods ended September 30, 2013 and 2012 was $15.2 million and $8.5 million, respectively.
Note 6 – Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, accounts and notes receivable, cash collateral deposited with insurance carriers, life insurance assets, auction rate securities, cost and equity method investments, deferred compensation plan assets and liabilities, accounts payable and other current liabilities, acquisition-related contingent consideration and debt obligations.
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs that may be used are:
Level 1 - Quoted market prices in active markets for identical assets or liabilities.
Level 2 - Observable market based inputs or other observable inputs.
Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data. These values are generally determined using valuation models incorporating management’s estimates of market participant assumptions.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of September 30, 2013, the Company held certain assets and liabilities required to be measured at fair value on a recurring basis. The fair values of financial assets and liabilities measured on a recurring basis were determined using the following inputs as of the dates indicated (in millions): |
| | | | | | | | | | | | | |
| | | Fair Value Measurements Using Inputs Considered as Significant |
| Fair Value as of September 30, 2013 | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | |
Life insurance surrender values | $ | 5.0 |
| | $ | 5.0 |
| | | | |
Auction rate securities (See Note 7) | $ | 9.2 |
| | | | | | $ | 9.2 |
|
| | | | | | | |
Liabilities | | | | | | | |
Acquisition-related contingent consideration (1) | $ | 169.8 |
| | | | | | $ | 169.8 |
|
| | | | | | | |
| | | Fair Value Measurements Using Inputs Considered as Significant |
| Fair Value as of December 31, 2012 | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | |
Life insurance surrender values | $ | 11.9 |
| | $ | 11.9 |
| | | | |
Auction rate securities (See Note 7) | $ | 14.4 |
| | | | | | $ | 14.4 |
|
| | | | | | | |
Liabilities | | | | | | | |
Acquisition-related contingent consideration (1) | $ | 143.6 |
| | | | | | $ | 143.6 |
|
(1) For acquisitions that closed after January 1, 2009.
Changes in Acquisition-Related Contingent Consideration Measured at Fair Value on a Recurring Basis
For the nine month period ended September 30, 2013, the Company made $2.7 million of payments for acquisition-related contingent consideration obligations. Foreign currency translation gains included in other comprehensive income totaled $1.1 million for the nine month period ended September 30, 2013. Additions from the Company's 2013 acquisitions totaled $30.0 million for the nine month period ended September 30, 2013.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis, which are initially measured at fair value, and are subsequently remeasured in the event of an impairment or other measurement event, include items such as cost and equity method investments, goodwill and other intangible assets, long-lived assets and debt instruments.
Carrying amounts and estimated fair values of selected financial instruments measured on a non-recurring basis as of the dates indicated were as follows (in millions): |
| | | | | | | | | | | | | | | |
| September 30, 2013 | | December 31, 2012 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
4.875% senior notes | $ | 400.0 |
| | $ | 378.0 |
| | $ | — |
| | $ | — |
|
7.625% senior notes | $ | — |
| | $ | — |
| | $ | 150.0 |
| | $ | 154.9 |
|
2009 Convertible Notes | $ | 12.6 |
| | $ | 24.7 |
| | $ | 12.7 |
| | $ | 21.0 |
|
2011 Convertible Notes | $ | 197.0 |
| | $ | 397.8 |
| | $ | 193.0 |
| | $ | 338.3 |
|
The estimated fair values of the Company’s 4.875% senior notes, 7.625% senior notes, 2009 Convertible Notes and 2011 Convertible Notes are based on quoted market prices, a Level 1 input. During the first quarter of 2013, the Company repurchased and redeemed its 7.625% senior notes. A debt extinguishment loss of $5.6 million was recorded in connection with the transaction. See Note 10 - Debt for additional information.
Note 7 - Auction Rate Securities
The Company has available-for-sale auction rate securities, which, as of September 30, 2013, represent interests in pools of student loans guaranteed by the U.S. government under the Federal Family Education Loan Program. In May 2013, the issuer of one of the Company's student loan auction rate securities redeemed its security at the security's par value of $2.6 million. Additionally, the Company sold its structured finance security for $2.4 million in May 2013, which had a par value of $5.0 million and a cost basis of $1.7 million. A gain of $0.7 million, which is included in other income, was realized in connection with the sale.
As of September 30, 2013, estimated fair value and unrealized losses associated with the Company’s auction rate securities, which are classified as other long-term assets in the condensed unaudited consolidated financial statements, totaled $9.2 million and $1.1 million, respectively. As of December 31, 2012, estimated fair value and unrealized losses, net of unrealized gains, associated with the Company’s auction rate securities totaled $14.4 million and $0.2 million, respectively
Fair values of the Company's auction rate securities are estimated by an independent valuation firm, Houlihan Capital Advisors, LLC, using a probability weighted discounted cash flow model. The valuation of these securities is sensitive to market conditions and management’s judgment and can change significantly based on the assumptions used.
As of September 30, 2013, contractual maturities of the Company’s auction rate securities ranged from 14.5 to 34.1 years.
Note 8 - Accounts Receivable, Net of Allowance
The following table provides details of accounts receivable, net of allowance, for our continuing operations as of the dates indicated (in millions):
|
| | | | | | | |
| September 30, 2013 | | December 31, 2012 |
Contract billings | $ | 711.4 |
| | $ | 522.0 |
|
Retainage | 134.7 |
| | 113.5 |
|
Costs and earnings in excess of billings | 393.9 |
| | 253.0 |
|
Accounts receivable, gross | $ | 1,240.0 |
| | $ | 888.5 |
|
Less allowance for doubtful accounts | (14.9 | ) | | (11.3 | ) |
Accounts receivable, net | $ | 1,225.1 |
| | $ | 877.2 |
|
Provisions for doubtful accounts were $1.9 million and $1.2 million, respectively for the three month periods ended September 30, 2013 and September 30, 2012, respectively, and $4.4 million and $2.5 million for the nine month periods ended September 30, 2013 and September 30, 2012, respectively.
Note 9 - Property and Equipment, Net
The following table provides details of property and equipment, net, including property and equipment held under capital leases, for our continuing operations as of the dates indicated (in millions):
|
| | | | | | | |
| September 30, 2013 | | December 31, 2012 |
Land | $ | 4.8 |
| | $ | 4.8 |
|
Buildings and leasehold improvements | 18.1 |
| | 15.4 |
|
Machinery and equipment | 728.7 |
| | 521.5 |
|
Office furniture and equipment | 105.4 |
| | 89.4 |
|
Total property and equipment | $ | 857.0 |
| | $ | 631.1 |
|
Less accumulated depreciation and amortization | (352.7 | ) | | (280.9 | ) |
Property and equipment, net | $ | 504.3 |
| | $ | 350.2 |
|
Depreciation and amortization expense associated with property and equipment of the Company's continuing operations for the three month periods ended September 30, 2013 and 2012 was $32.0 million and $19.8 million, respectively. Depreciation and amortization expense associated with property and equipment of the Company's continuing operations for the nine month periods ended September 30, 2013 and 2012 was $87.9 million and $56.6 million, respectively.
Note 10 - Debt
The following table provides details of the carrying value of debt as of the dates indicated (in millions):
|
| | | | | | | | | | |
Description | | Maturity Date | | September 30, 2013 | | December 31, 2012 |
Credit facility | | August 22, 2016 | | $ | 36.4 |
| | $ | 134.0 |
|
4.875% senior notes | | March 15, 2023 | | 400.0 |
| | — |
|
7.625% senior notes | | February 1, 2017 | | — |
| | 150.0 |
|
2011 4.0% senior convertible notes | | June 15, 2014 | | 103.1 |
| | 100.9 |
|
2011 4.25% senior convertible notes | | December 15, 2014 | | 93.9 |
| | 92.1 |
|
2009 4.0% senior convertible notes | | June 15, 2014 | | 9.6 |
| | 9.7 |
|
2009 4.25% senior convertible notes | | December 15, 2014 | | 3.0 |
| | 3.0 |
|
Capital lease obligations, weighted average interest rate of 2.8% | | In installments through March 2020 | | 133.3 |
| | 79.0 |
|
Notes payable for equipment and other debt, weighted average interest rate of 3.5% | | In installments through May 2018 | | 53.9 |
| | 30.2 |
|
Total debt | | $ | 833.2 |
| | $ | 598.9 |
|
Less current maturities | | (53.3 | ) | | (52.6 | ) |
Long-term debt | | $ | 779.9 |
| | $ | 546.3 |
|
Issuance of 4.875% Senior Notes and Repurchase and Redemption of 7.625% Senior Notes
On March 18, 2013, the Company issued $400 million of 4.875% senior notes due March 15, 2023 (the “4.875% Senior Notes”) in a registered public offering. The 4.875% Senior Notes bear interest at a rate of 4.875% per annum, payable on March 15 and September 15 of each year. Interest payments commenced on September 15, 2013. The 4.875% Senior Notes are senior unsecured unsubordinated obligations and rank equal in right of payment with existing and future unsubordinated debt, and rank senior in right of payment to existing and future subordinated debt. The 4.875% Senior Notes, as well as the Company's 2011 Convertible Notes and 2009 Convertibles Notes are effectively junior to MasTec's secured debt, including the Company's credit facility, to the extent of the value of the assets securing that debt. The 4.875% Senior Notes are guaranteed on an unsecured unsubordinated basis by MasTec's direct and indirect 100%-owned domestic subsidiaries that guarantee the Company's credit facility.
The Company has the option to redeem all or a portion of the 4.875% Senior Notes at any time on or after March 15, 2018 at the redemption prices set forth in the indenture that governs the 4.875% Senior Notes (the “4.875% Senior Notes Indenture”) plus accrued and unpaid interest, if any, to the redemption date. At any time prior to March 15, 2018, the Company may redeem all or a part of the 4.875% Senior Notes at a redemption price equal to 100% of the principal amount of 4.875% Senior Notes redeemed plus an applicable premium, as defined in the 4.875% Senior Notes Indenture, together with accrued and unpaid interest, if any, to the redemption date. In addition, at any time prior to March 15, 2016, the Company may redeem up to 35% of the principal amount of the 4.875% Senior Notes using the net cash proceeds of one or more sales of the Company's capital stock, as defined in the 4.875% Senior Notes Indenture, at a redemption price of 104.875% of the principal amount, plus accrued and unpaid interest to the redemption date.
The 4.875% Senior Notes Indenture, among other things, generally limits the ability of the Company and certain of its subsidiaries, subject to certain exceptions, to (i) incur additional debt and issue preferred stock, (ii) create liens, (iii) pay dividends, acquire shares of capital stock, make payments on subordinated debt or make investments, (iv) place limitations on distributions from certain subsidiaries, (v) issue guarantees, (vi) issue or sell the capital stock of certain subsidiaries, (vii) sell assets, (viii) enter into transactions with affiliates and (ix) effect mergers. The 4.875% Senior Notes Indenture provides for customary events of default, as well as customary remedies upon an event of default, as defined in the 4.875% Senior Notes Indenture, including acceleration of repayment of outstanding amounts.
Approximately $7.7 million in financing costs were incurred in connection with the issuance of the 4.875% Senior Notes. These deferred financing costs are included in other long-term assets in the condensed unaudited consolidated financial statements and will be amortized over the term of the 4.875% Senior Notes using the effective interest method. The Company used a portion of the proceeds from the 4.875% Senior Notes offering to fund the repurchase and redemption of the Company's $150 million principal amount of 7.625% senior notes due 2017 (the “7.625% Senior Notes”), discussed below, and to repay the outstanding balance of the Company's credit facility. The remaining net proceeds were used for working capital and other general corporate purposes.
In connection with the issuance of the 4.875% Senior Notes, the Company repurchased approximately $121.1 million of its 7.625% Senior Notes on March 18, 2013 in a tender offer at a price of 102.792% of the principal amount, which included an early tender payment of $30.00 per $1,000 principal amount of notes tendered. The holders of the tendered 7.625% Senior Notes also received accrued interest from the most recent interest payment date to, but not including, the date of repurchase. In addition, on March 29, 2013, the Company redeemed the remaining outstanding $28.9 million aggregate principal amount of the 7.625% Senior Notes in accordance with their terms at a price of 102.542% of the principal amount plus accrued interest from the most recent interest payment date to, but not including, the date of redemption.
A pre-tax debt extinguishment loss of $5.6 million was recognized during the first quarter of 2013 in connection with the repurchase and redemption of the 7.625% Senior Notes, including $4.1 million of early payment premiums and $1.5 million of unamortized deferred financing costs. This loss is separately disclosed within the condensed unaudited consolidated statements of operations.
Credit Facility
As of September 30, 2013, the Company had outstanding revolving loans under its senior secured revolving credit facility (the "Credit Facility") of $36.4 million, which accrued interest at a weighted average rate of approximately 3.93% per annum. As of December 31, 2012, the Company had outstanding revolving loans under its Credit Facility of $134.0 million, which accrued interest at a weighted average rate of approximately 3.95% per annum. Letters of credit of approximately $138.5 million and $120.8 million were outstanding under the Credit Facility as of September 30, 2013 and December 31, 2012, respectively. The remaining borrowing capacity under the Credit Facility of $425.2 million and $345.2 million as of September 30, 2013 and December 31, 2012, respectively, was available for revolving loans or up to $211.5 million and $229.2 million, respectively, of new letters of credit. Outstanding letters of credit mature at various dates and most have automatic renewal provisions, subject to prior notice of cancellation. As of September 30, 2013, interest on outstanding letters of credit accrued at either 1.125% or 2.25% per annum, based on the type of letter of credit issued. As of December 31, 2012, interest on outstanding letters of credit accrued at either 1% or 2% per annum. The unused facility fee was 0.40% and 0.35% as of September 30, 2013 and December 31, 2012, respectively. See Note 21 - Subsequent Events regarding the October 2013 amendment of the Company's Credit Facility.
2011 Convertible Notes
Unamortized debt discount and financing costs associated with the 2011 Convertible Notes totaled $5.3 million and $9.3 million as of September 30, 2013 and December 31, 2012, respectively. The 2011 4.0% Notes mature in June 2014. The Company expects to refinance the $105.3 million principal amount of the 2011 4.0% Notes on a long-term basis either through its Credit Facility or through other sources of funding available to the Company, and therefore, has included the carrying amount of the 2011 4.0% Notes within long-term debt in the condensed unaudited consolidated balance sheet as of September 30, 2013.
For additional information regarding the accounting treatment of the 2011 Convertible Notes, see Note 10 - Debt in the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2012.
Debt Guarantees and Covenants
The Company’s 2011 Convertible Notes and 2009 Convertible Notes are, and, through March 29, 2013, the Company's 7.625% Senior Notes were, fully and unconditionally guaranteed on an unsecured, unsubordinated, joint and several basis by certain of the Company's existing and future 100%-owned direct and indirect domestic subsidiaries that are guarantors of the Company's Credit Facility or other outstanding indebtedness. The Company's 4.875% Senior Notes are guaranteed on an unsecured, unsubordinated, joint and several basis by the Company's 100%-owned domestic subsidiaries that guarantee the Credit Facility. See Note 20 - Supplemental Guarantor Condensed Unaudited Consolidating Financial Information.
MasTec was in compliance with all provisions and covenants pertaining to its outstanding debt instruments as of September 30, 2013 and December 31, 2012.
Interest Expense, Net
The following table provides details of interest expense, net, classified within continuing operations for the periods indicated (in millions):
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Interest expense: | | | | | | | |
Contractual and other interest expense | $ | 10.4 |
| | $ | 7.4 |
| | $ | 27.9 |
| | $ | 21.8 |
|
Accretion of senior convertible note discount | 1.3 |
| | 1.2 |
| | 3.9 |
| | 3.7 |
|
Amortization of deferred financing costs | 1.0 |
| | 0.9 |
| | 3.0 |
| | 2.7 |
|
Total interest expense | $ | 12.7 |
| | $ | 9.5 |
| | $ | 34.8 |
| | $ | 28.2 |
|
Interest income | — |
| | (0.1 | ) | | (0.3 | ) | | (0.3 | ) |
Interest expense, net | $ | 12.7 |
| | $ | 9.4 |
| | $ | 34.5 |
| | $ | 27.9 |
|
Note 11 - Lease Obligations
Capital Leases
MasTec enters into agreements that expire on various dates, which provide financing for certain machinery and equipment. Assets held under capital leases, net of accumulated depreciation, totaled $142.2 million and $102.2 million as of September 30, 2013 and December 31, 2012, respectively.
Operating Leases
In the ordinary course of business, the Company enters into non-cancelable operating leases for certain of its facility, vehicle and equipment needs, including related party leases. Rent expense relating to operating leases, including short term rentals, reflected within continuing operations, was approximately $75.6 million and $69.4 million for the three month periods ended September 30, 2013 and 2012, respectively, and $176.0 million and $168.2 million for the nine month periods ended September 30, 2013 and 2012, respectively.
Note 12 – Stock-Based Compensation and Other Employee Benefit Plans
The Company has certain stock-based compensation plans, under which stock options and restricted share awards are available for issuance or outstanding, including the MasTec, Inc. 2013 Incentive Plan (the "2013 Incentive Plan"), which became effective in May 2013. As of September 30, 2013, the 2013 Incentive Plan had 4,926,681 shares available for issuance. In addition, the Company has certain employee stock purchase plans under which shares of the Company's common stock are available for purchase by eligible employees. In March 2013, the Company authorized the issuance of up to 1,000,000 new shares of MasTec, Inc. common stock to eligible employees under the MasTec, Inc. Bargaining Units Employee Stock Purchase Plan (the "2013 Bargaining Units ESPP"). The 2013 Bargaining Units ESPP became effective on July 1, 2013. The MasTec, Inc. 2011 Employee Stock Purchase Plan (the “2011 ESPP" and, together with the 2013 Bargaining Units ESPP, the "ESPPs") also provides for the issuance of up to 1,000,000 shares of MasTec, Inc. common stock for eligible employees.
Under all stock-based compensation plans in effect as of September 30, 2013, there were a total of 6,383,118 shares available for grant or issuance.
Restricted Share Awards
MasTec grants restricted share awards, which are valued based on the market price of MasTec common stock on the date of grant. Total unearned compensation related to restricted share awards as of September 30, 2013 was approximately $17.4 million, which is expected to be recognized over a weighted average period of approximately 1.4 years. The total intrinsic value, or fair value, of restricted share awards that vested, which is based on the market price on the date of vesting, was $0.9 million and $2.0 million for the three and nine month periods ended September 30, 2013 and $0.7 million and $2.9 million for the three and nine month periods ended September 30, 2012, respectively.
During the second quarter of 2013, the Company entered into an agreement with the previous owners of EC Source to establish an incentive program for its employees and granted 350,000 restricted share awards (the “EC Source Share Award”). The former owners of EC Source contributed cash and shares of MasTec common stock to the Company in connection with the EC Source Share Award. In the event that shares granted under the EC Source Share Award are forfeited prior to vesting, the former owners of EC Source will be re-issued the pro-rata percentage of the former owners' contributed shares to total shares awarded under the EC Source share grant. As of September 30, 2013, the Company did not anticipate the occurrence of any such forfeitures.
|
| | | | | | |
Activity, restricted share awards: | Restricted Shares | | Per Share Weighted Average Grant Date Fair Value |
Non-vested restricted shares, as of December 31, 2012 | 782,281 |
| | $ | 19.10 |
|
Granted | 428,262 |
| | 31.04 |
|
Vested | (64,288 | ) | | 18.22 |
|
Canceled/forfeited | (15,187 | ) | | 15.35 |
|
Non-vested restricted shares, as of September 30, 2013 | 1,131,068 |
| | $ | 23.72 |
|
Stock Options
The Company has granted options to purchase its common stock to employees and members of the Board of Directors and affiliates under various stock option plans at not less than the fair market value of the underlying stock on the date of grant. All outstanding stock options are fully vested.
|
| | | | | | | | | | | | |
Activity, stock options: | Stock Options | | Per Share Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (years) | | Aggregate Intrinsic Value (1) (in millions) |
Options outstanding as of December 31, 2012 | 1,043,825 |
| | $ | 10.50 |
| | 2.33 | | $ | 15.1 |
|
Exercised | (498,123 | ) | | 9.91 |
| | | | |
Canceled/forfeited | (35,000 | ) | | 7.74 |
| | | | |
Options outstanding as of September 30, 2013 | 510,702 |
| | $ | 11.27 |
| | 2.19 | | $ | 9.7 |
|
Options exercisable as of September 30, 2013 | 510,702 |
| | $ | 11.27 |
| | 2.19 | | $ | 9.7 |
|
| |
(1) | Amount represents the difference between the exercise price and the market price of the Company’s stock on the last trading day of the corresponding period, multiplied by the number of in-the-money options. |
The total intrinsic value of options exercised during the three month periods ended September 30, 2013 and 2012, which is based on the difference between the exercise price and the market price of the Company’s stock at the date of exercise, was $4.6 million and $0.4 million, respectively. The intrinsic value of options exercised during the nine month periods ended September 30, 2013 and 2012 totaled $10.4 million and $0.7 million, respectively. Proceeds from options exercised during the three month periods ended September 30, 2013 and 2012 totaled $0.4 million and $0.3 million, respectively, and totaled $3.8 million and $0.6 million for the nine months periods ended September 30, 2013 and 2012, respectively.
Employee Stock Purchase Plan
The Company's ESPPs allow qualified employees to purchase MasTec, Inc. common stock at 85% of the fair market value of the common stock at the lower of (i) the date of commencement of the offering period or (ii) the last day of the exercise period, as defined in the plan document. Through June 30, 2013, the offering period was an annual period, composed of four interim exercise periods. Effective July 1, 2013, the offering period became quarterly.
|
| | | | | | | |
| Nine Months Ended September 30, |
Activity, employee stock purchase plan: | 2013 | | 2012 |
Cash proceeds (in millions) | $ | 6.0 |
| | $ | 0.9 |
|
Number of common shares | 436,925 |
| | 67,073 |
|
Weighted average price per share | $ | 13.69 |
| | $ | 13.43 |
|
Weighted average grant date fair value per share | $ | 5.55 |
| | $ | 3.96 |
|
The fair value of purchases under the Company's ESPP is estimated using the Black-Scholes option-pricing valuation model.
Stock Based Compensation Expense and Tax Benefits
Details of stock based compensation expense and related tax benefits for the periods indicated are as follows (in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Stock based compensation expense | $ | 3.0 |
| | $ | 1.2 |
| | $ | 9.6 |
| | $ | 3.4 |
|
Income tax benefit from stock based compensation | 4.5 |
| | 0.7 |
| | 7.7 |
| | 1.6 |
|
Excess tax benefit from stock based compensation (1) | $ | 3.0 |
| | $ | 0.2 |
| | $ | 4.4 |
| | $ | 0.3 |
|
| |
(1) | Excess tax benefits, which represent cash flows from tax deductions in excess of the tax effect of compensation expense recognized for stock options exercised and vested restricted shares, are classified as financing cash flows in the Company’s condensed unaudited consolidated statements of cash flows. |
Shares Withheld for Payroll Taxes
In connection with the issuance of shares under share-based compensation awards, at the employees' election, the Company withholds shares of common stock for tax withholding obligations. These shares are repurchased or withheld in conjunction with net share settlement of the related awards upon vesting, for restricted stock awards, or upon exercise, for stock options. Withheld shares, which are valued at the share price on the date of vesting or exercise, as applicable, are classified as a reduction to additional paid-in capital. The value of shares withheld for payroll taxes under share-based compensation arrangements was $2.4 million for the nine month period ended September 30, 2013.
Note 13 – Other Retirement Plans
Multi-Employer Pension Plans. Certain of MasTec’s subsidiaries contribute amounts to multi-employer pension and other multi-employer benefit plans and trusts. Multi-employer plan contribution rates are determined annually and assessed on a “pay-as-you-go” basis based on union employee payrolls. Union payrolls cannot be determined for future periods because the number of union employees employed at any given time, and the plans in which they may participate, vary depending upon the location and number of ongoing projects at a given time and the need for union resources in connection with those projects.
Total contributions to multi-employer pension plans, and the related number of employees covered by these plans, for the periods indicated ranged as follows (dollars in millions):
|
| | | | | | | | | | | | | | | | | |
| Number of Employees | | Contributions (in millions) |
For the Three Months Ended September 30, | Low | | High | | Pension | | Post-Retirement Benefit | | Total |
2013 | 2,392 |
| | 2,734 |
| | $ | 14.8 |
| | $ | 1.0 |
| | $ | 15.8 |
|
2012 | 1,575 |
| | 2,509 |
| | $ | 8.7 |
| | $ | 0.3 |
| | $ | 9.0 |
|
For the Nine Months Ended September 30, | Low | | High | | Pension | | Post-Retirement Benefit | | Total |
2013 | 778 |
| | 2,734 |
| | $ | 29.6 |
| | $ | 2.9 |
| | $ | 32.5 |
|
2012 | 308 |
| | 2,509 |
| | $ | 21.1 |
| | $ | 0.8 |
| | $ | 21.9 |
|
The Company's contributions to multi-employer pension plans have increased for the nine month period ended September 30, 2013 as a result of higher activity levels, primarily in its oil and gas business.
Note 14 – Shareholders' Equity
Treasury Stock and Share Activity (in thousands):
|
| | | | | |
| Common Shares Outstanding | | Treasury Shares |
Balance as of December 31, 2012 | 76,448 |
| | 9,467 |
|
Shares issued for stock option exercises | 498 |
| | |
Shares issued for restricted stock awards | 64 |
| | |
Other shares issued, net | 409 |
| | |
Shares contributed by shareholder, former owner of acquired business (1) | (200 | ) | | |
Balance as of September 30, 2013 | 77,219 |
| | 9,467 |
|
(1) See Note 12 - Stock-Based Compensation and Other Employee Benefit Plans for contributed share details.
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive (loss) income by component during the periods indicated are as follows (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, |
| | 2013 | | 2012 |
| | Unrealized (Losses) Gains | | Unrealized (Losses) Gains |
| | Available-for-Sale Securities | | | Foreign Currency Items | | Total | | Available-for-Sale Securities | | Foreign Currency Items | | Total |
Balance as of January 1 | | $ | (5,395 | ) | | | $ | (106 | ) | | $ | (5,501 | ) | | $ | (5,917 | ) | | $ | (2,029 | ) | | $ | (7,946 | ) |
Activity before reclassifications, net of tax | | (118 | ) | | | (3,839 | ) | | (3,957 | ) | | 339 |
| | 2,304 |
| | 2,643 |
|
Reclassifications, net of tax | | (440 | ) | | (1) | — |
| | (440 | ) | | — |
| | — |
| | — |
|
Activity, net of tax | | (558 | ) | | | (3,839 | ) | | (4,397 | ) | | 339 |
| | 2,304 |
| | 2,643 |
|
Balance as of September 30 | | $ | (5,953 | ) | | | $ | (3,945 | ) | | $ | (9,898 | ) | | $ | (5,578 | ) | | $ | 275 |
| | $ | (5,303 | ) |
(1) Represents the reclassification adjustment for gains on securities sold, which was recognized as a component of other income. See Note 7 - Auction Rate Securities.
Foreign currency activity is primarily related to the Company's Canadian operations. The Company's Canadian presence has grown in recent years due to acquisitions. See Note 3 - Acquisitions.
Note 15 - Income Taxes
The Company’s consolidated tax rates on income from continuing operations for the three month periods ended September 30, 2013 and 2012 were 38.8% and 39.4%, respectively, and for the nine month periods ended September 30, 2013 and 2012 were 38.6% and 39.4%, respectively. In determining the quarterly provision for income taxes, management uses an estimated annual effective tax rate based on forecasted annual pre-tax income, permanent tax differences, statutory tax rates and tax planning opportunities in the various jurisdictions in which the Company operates. The impact of significant discrete items is separately recognized in the quarter(s) in which they occur.
Note 16 - Segments and Operations by Geographic Area
Segment Discussion
MasTec presents its continuing operations under five reportable segments: (1) Communications; (2) Oil and Gas; (3) Electrical Transmission; (4) Power Generation and Industrial and (5) Other. This structure is generally focused on broad end-user markets for MasTec's labor-based construction services and has been determined in accordance with the criteria in Accounting Standards Codification ("ASC") 280, Segment Reporting. All five reportable segments derive their revenues from the engineering, installation and maintenance of infrastructure, primarily in North America.
Income from continuing operations before non-controlling interests before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting. As appropriate, the Company supplements the reporting of consolidated financial information determined in accordance with U.S. GAAP with certain non-U.S. GAAP financial measures, including EBITDA. The Company believes these non-U.S. GAAP measures provide meaningful information that helps investors understand the Company's financial results and assess its prospects for future performance. The Company uses EBITDA to evaluate its performance, both internally and versus its peers, because it excludes certain items that may not be indicative of the Company's reportable segment results, as well
as items that can vary widely across different industries or among companies within the same industry. Segment EBITDA is calculated in a manner consistent with consolidated EBITDA.
Summarized financial information for MasTec’s reportable segments is presented and reconciled to consolidated continuing operations financial information for total MasTec in the following tables (in millions).
As of and for the three month period ended September 30, 2013:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Communications | | Oil and Gas | | Electrical Transmission | | Power Generation and Industrial | | Other | | Corporate | | Eliminations |
| | Continuing Operations Consolidated |
Revenue | $ | 543.0 |
| | $ | 519.1 |
| | $ | 118.8 |
| | $ | 85.1 |
| | $ | 3.5 |
| | $ | — |
| | $ | (0.1 | ) | | $ | 1,269.4 |
|
EBITDA | $ | 71.8 |
| | $ | 68.1 |
| | $ | 12.1 |
| | $ | (6.4 | ) | | $ | 0.1 |
| | $ | (13.6 | ) | | $ | — |
| | $ | 132.1 |
|
Depreciation | $ | 8.0 |
| | $ | 19.3 |
| | $ | 2.6 |
| | $ | 1.2 |
| | $ | — |
| | $ | 0.9 |
| | $ | — |
| | $ | 32.0 |
|
Amortization | $ | 1.5 |
| | $ | 3.2 |
| | $ | 0.6 |
| | $ | 0.5 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5.8 |
|
As of and for the three month period ended September 30, 2012:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Communications | | Oil and Gas | | Electrical Transmission | | Power Generation and Industrial | | Other | | Corporate | | Eliminations |
| | Continuing Operations Consolidated |
Revenue | $ | 490.0 |
| | $ | 284.0 |
| | $ | 74.8 |
| | $ | 211.7 |
| | $ | 7.5 |
| | $ | — |
| | $ | (0.7 | ) | | $ | 1,067.3 |
|
EBITDA | $ | 59.5 |
| | $ | 29.0 |
| | $ | 10.5 |
| | $ | 9.9 |
| | $ | 1.2 |
| | $ | (18.4 | ) | | $ | — |
| | $ | 91.7 |
|
Depreciation | $ | 6.9 |
| | $ | 9.5 |
| | $ | 1.6 |
| | $ | 1.0 |
| | $ | — |
| | $ | 0.8 |
| | $ | — |
| | $ | 19.8 |
|
Amortization | $ | 0.4 |
| | $ | 0.5 |
| | $ | 1.2 |
| | $ | 0.7 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2.8 |
|
As of and for the nine month period ended September 30, 2013:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Communications | | Oil and Gas | | Electrical Transmission | | Power Generation and Industrial | | Other | | Corporate | | Eliminations |
| | Continuing Operations Consolidated |
Revenue | $ | 1,464.5 |
| | $ | 1,134.8 |
| | $ | 321.9 |
| | $ | 237.3 |
| | $ | 9.2 |
| | $ | — |
| | $ | (2.0 | ) | | $ | 3,165.7 |
|
EBITDA | $ | 181.6 |
| | $ | 161.7 |
| | $ | 27.0 |
| | $ | (14.6 | ) | | $ | 0.5 |
| | $ | (47.9 | ) | | $ | — |
| | $ | 308.3 |
|
Depreciation | $ | 22.8 |
| | $ | 51.8 |
| | $ | 7.1 |
| | $ | 3.6 |
| | $ | — |
| | $ | 2.6 |
| | $ | — |
| | $ | 87.9 |
|
Amortization | $ | 4.0 |
| | $ | 8.4 |
| | $ | 1.3 |
| | $ | 1.5 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 15.2 |
|
As of and for the nine month period ended September 30, 2012:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Communications | | Oil and Gas | | Electrical Transmission | | Power Generation and Industrial | | Other | | Corporate | | Eliminations |
| | Continuing Operations Consolidated |
Revenue | $ | 1,311.1 |
| | $ | 715.3 |
| | $ | 228.2 |
| | $ | 527.4 |
| | $ | 14.1 |
| | $ | — |
| | $ | (1.7 | ) | | $ | 2,794.4 |
|
EBITDA | $ | 139.4 |
| | $ | 57.3 |
| | $ | 31.1 |
| | $ | 28.2 |
| | $ | 1.7 |
| | $ | (34.5 | ) | | $ | — |
| | $ | 223.2 |
|
Depreciation | $ | 19.9 |
| | $ | 27.2 |
| | $ | 4.3 |
| | $ | 3.0 |
| | $ | — |
| | $ | 2.2 |
| | $ | — |
| | $ | 56.6 |
|
Amortization | $ | 1.3 |
| | $ | 1.4 |
| | $ | 3.8 |
| | $ | |