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Technology Stocks : MasTec, Inc. (MTZ) -- Ignore unavailable to you. Want to Upgrade?

To: jas cooper who wrote (1125)	1/30/2000 7:04:00 AM
From: Johnny Canuck	Respond to of 1126

James, I don't have time to look up the proper spelling for the company names mentioned in the CC, but here are my notes. ************************************** ************************************ Mastec Conference call Q4 1999: -Revenue for the year greater than 1 billion on $1.78 EPS per share. -Profit margin 10.6 percent -Internal rev. growth 47 percent -Rev breakdown: Telecom - 76 percent Power - 13 percent Enterprise Networks - 11 percent -46 percent of revenues due to major customers: BLS 12 percent, Telergy - 6.5 percent North American margins 11.8 percent vs 6.9 percent last year -SGA 19 percent -Received 5.1 million dollar payout from Brazil operation this month. -$730 million total assets made up of $575 mil North America, Receivables $233 mil, equipment $152 mil, intangibles $139 mil, -DSO's 72 days -Used $120 mil in cash flow to pay down debt. -Have $103 mil in credit facility not used -employee head count up 23 percent, 9100 vs 7400 in at the end of Dec -comfortable with EPS growth exceeding Rev. growth. Question: 25 percent revenue growth guidance for next year or better? Answer: Comfortable with 25 percent (seems they were being cautious) Question: Comment on new relationships. margins and revenues as a result? Answer: Telergy is a 5 year contract. This is an end to end relationship involving head ends, connection to ILECs and construction of private networks Scamsca - Participating in the RCN build out IBM - Preferred provider. Part of rapid deployment program. Will be installing routers and switches. LU- Allows us to provide a full spectrum of broadband network and broadband cable services including monitoring, construction and electronic parts. Question: Pipeline for new customer deals: Answer: We are pleased with discussions we are having. Question: Breakdown of external revenues? Answer: For Year: Telecom 33 percent Broadband 14 percent Traffic 5 percent Energy 13 percent Enterprise Networks 11 percent For the Q: Telecom 35 percent Broadband 13 percent Traffic 4 to 5 percent Energy 13 percent Enterprise Networks 11 percent Question:Operating margins for the segments? Answer: Don't have all of them now. Energy 8.5 percent, Enterprise Networks 7.8 percent Question: Any problems attracting new employees? Answer: No. Strong name recognition and training and incentive programs have helped. We have strong head count growth last quarter. Question: International operations. Backlog in Brazil? Network in Paraguay? Sintel lawsuit? Answer: Expect Sintel lawsuit to be resolved in our favor. Paraguay network was recently turned on. The work has been certified. We expect more investment to be made, but the bulk of it has been done. We expect a deal on this asset soon. Brazil is in concentrating on maintenance contracts, so the backlog is not important. We are looking at wireless deals in Brazil. We expect this opportunity to grow. Question: What about the FCC problem with the accounting? Brazil revenues going forward? Answer: No change in Brazil guidance (9 to 13 mil in rev projected). FCC decision has been delayed due to weather the East coast. No time estimate on the decision. We and Price Waterhouse believe we did the accounting properly. Question: Master Service Agreements (MSA). How does the MSA's affect the revenue mix? Backlogs? Answer: We have 1 billion in contracts with multi-year commitments so backlogs are hard to calculate. We have 87 MSA's. 50 percent of rev's are MSA's. This does not include preferred vendor agreements. Question: But the strategic relationships have no contributed to revenues yet? Answer: Yes. They should start in the second half of next year. Question Effect of weather? Answer: No effect due to good weather. Demand is very strong. Question: Cap Ex spending? Head Count? Answer: Cap Ex was 6.8 percent of rev or 69 mil. We expect the same dollar amount next year. [SO CAP EX WILL BE DOWN AS A PERCENTAGE]. It should be down due to the shift to network business. Question: 6 mil charge in international? Answer: Conasel relationship with a international carrier which wants to invest in the company, caused a write down on the asset. We are valuing it at the low end of the value range. Question: Compensation charge for subsidiary management? Answer: There was a charge of 33.8 mil for the managers of a subsidiary in order to get a commitment. Question: What about BLS and incumbent announcement of build outs? Answer: There have been a lot of announcements. We are positioned well to benefit. Announcement are usually revised upwards as the deployment occurs. Question: Profitability on the external side? Will new contracts affect margins? Answer: New negotiated works should not affect margins. We will focus on quality contracts for quality work. Question: Effect of weather in Q1? Answer: Too early to tell. Question: Has a shortage of fiber affected the completion of contracts? Answer: We have been able to come back and install fiber after other work has been done if a shortage causes a problem. The shortage of fiber has had no productivity effect. Question:Acquisitions in 2000. Projected rev's from acquisitions. Answer: No major acquisitions last year. No impact from revs for the one minor one last year. Expect 2 to 3 minor ones this year. Some in first 6 months. All accretive. Question: Scalability of the business? Margins as the business grows? Answer: No slip in margins. We expect there can be still some margin improvement to 12 to 13 percent level. We will grow head count, but expect no impact on margins. The business is scalable due to the value added services. Question: The internal rev grow is 15 percent above the head count growth (47 ver 23). Sustainable? Answer: It is hard to tell. There is no fixed ratio. Question: Charges in the Q. Answer: Ecaudor: Major carrier bought a stake in Conasel for wireless. We have stake in the company. We had a 6 mil or 12 cents per share write down. The other 5 cent was Paraguay. The licenses required a payment. We expect positive news soon on the asset. Question: Assets for sale? 56 mil left? Answer: Conasel (12. mil low end), Supercanal (17.9 mil), Paraguay(20 mil), 4 to 5 mil in real estate. We wrote down real estate by 1 mil earlier this year. Question: Organic growth 50 percent? Telecom 63 percent? Answer: Yes. Yes. Comments: It looks like they final have their cost under control. They are doing fewer acquisitions and concentrating on improving the bottom line. Demand still looks strong. The value added services should increase gross margins. New short term negotiated contracts under the strategic realtionships though harder to predict appears to have higher margins. It looks like they have a good backlog of scheduled work. Growth of last mile demand looks good for the company. Weather may be a wild card for next quarter's earnings. They expect 25 percent rev growth and EPS growth north of that number. ********************************* *********************************** From the last 10Q: During 1999, we acquired three external telecommunications network services providers for $11.1 million in cash and $2.4 million in seller financing and invested $57.7 million primarily in our fleet to support revenue growth which we financed from cash provided by operations and from financing activities. We have also sold certain assets and investments for which we have received approximately $28.4 million in cash, $15.9 million of which was attributable to the sale of our Spanish operations. We anticipate that available cash, cash flows from operations and proceeds from the sale of assets and investments and borrowing availability under the Credit Facility will be sufficient to satisfy our working capital requirements for the foreseeable future. However, to the extent that we should desire to increase our financial flexibility and capital resources or choose or be required to fund future capital commitments from sources other than operating cash or from borrowings under its existing Credit Facility, we may consider raising additional capital by increasing the Credit Facility or through the offering of equity and/or debt securities in the public or private markets. There can be no assurance, however, that additional capital will be available to us on acceptable terms, if at all. We have a $28.4 million investment in a PCS wireless system in Paraguay which is held for sale and are committed to spend an additional $5.0 million to complete the system. In September 1999, the Paraguayan telecommunications regulatory agency rescinded its previous revocation of our license to develop the system, reaffirmed the grant of the license to us and extended the deadline for us to complete the system. The terms of our license now require us to complete the system by January 31, 2000. Our Paraguayan subsidiary is under a preliminary investigation for alleged improper conduct by certain of its employees in connection with the license. Although we believe that the allegations are baseless, we are fully cooperating with the investigations. Included in assets held for sale at September 30, 1999 is approximately $34.0 million of investments in Argentina and Ecuador, which have defaulted on their third party debt obligations. We do not guarantee any of their indebtedness. We are monitoring our investments in Argentina, Ecuador and Paraguay and have determined that the carrying values of these assets as of September 30, 1999 have not been impaired. There can be no assurance that future transactions or events will not result in a permanent impairment of these assets. We sold 87% of our Spanish operations effective December 31, 1998 for $27.2 million in cash, payable in four installments and $25.0 million of assumed debt. As of September 30, 1999, $12.5 million of the cash purchase price plus accrued interest has not been paid when due, however we received $1.8 million subsequently (a portion of which is in escrow), which has reduced the outstanding balance to $10.7 million. We have posted a $3.0 million letter of credit for the benefit of the Spanish operations to be used for working capital.