AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1998
REGISTRATION NO. 333-46361
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MASTEC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 1623 59-1259279
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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<TABLE>
<S> <C>
JOSE M. SARIEGO, ESQ.
SENIOR VICE PRESIDENT--GENERAL COUNSEL
MASTEC, INC.
3155 N.W. 77TH AVENUE 3155 N.W. 77TH AVENUE
MIAMI, FLORIDA 33122-1205 MIAMI, FLORIDA 33122-1205
(305) 599-1800 (305) 599-2314
ADDRESS, INCLUDING ZIP CODE, (NAME, ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE, AND TELEPHONE NUMBER, INCLUDING
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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COPIES TO:
STEVEN D. RUBIN, ESQ.
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
150 WEST FLAGLER STREET, SUITE 2200
MIAMI, FLORIDA 33130
(305) 789-3517
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7 3/4% Series B Senior Subordinated
Notes Due 2008 .................. $200,000,000 100% $200,000,000 $59,000
=============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(1).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED APRIL 21, 1998
OFFER TO EXCHANGE
7 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL
OUTSTANDING 7 3/4% SENIOR SUBORDINATED NOTES DUE 2008
OF
MASTEC, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
MasTec, Inc. ("MasTec" or the "Company") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange $1,000 principal amount of 7 3/4% Series B Senior Subordinated Notes
due 2008 of the Company (the "New Notes") for each $1,000 principal amount of
the issued and outstanding 7 3/4% Senior Subordinated Notes due 2008 (the "Old
Notes," and collectively with the New Notes, the "Notes"). Interest on the
Notes is payable semi-annually commencing August 1, 1998 with a final maturity
date of February 1, 2008. As of the date of this Prospectus, $200.0 million
aggregate principal amount of the Old Notes is outstanding. The terms of the
New Notes and the Old Notes are substantially identical in all material
respects, except for certain transfer restrictions and registration rights; and
except that holders of Old Notes are entitled to receive Liquidated Damages (as
defined) if (a) the Company fails to file any of the registration statements
required by the Registration Rights Agreement (as defined) on or before the
date specified for such filing, (b) any of such registration statements is not
declared effective by the Securities and Exchange Commission (the "Commission")
on or prior to the date specified for such effectiveness (the "Effectiveness
Target Date"), (c) the Company fails to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the registration
statement of which this Prospectus forms a part (the "Exchange Offer
Registration Statement"), or (d) a shelf registration statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities (as defined) during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above is a
"Registration Default"). In the event of a Registration Default, the Company is
required to pay Liquidated Damages to each holder of Transfer Restricted
Securities with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.05 per week
per $1,000 principal amount of Old Notes held by such holder. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Old Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.20 per week per $1,000 principal amount of Old Notes.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease. See "Description of Notes--Registration Rights; Liquidated
Damages."
(Continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE>
The Exchange Offer is being made to satisfy certain obligations of the
Company under the Registration Rights Agreement, dated as of February 4, 1998,
among the Company and the Initial Purchasers (the "Registration Rights
Agreement"). Upon consummation of the Exchange Offer, holders of Old Notes that
were not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and, accordingly,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon.
Based on interpretations by the staff of the Commission with respect to
similar transactions, including no-action letters, the Company believes that
the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any holder of
such New Notes (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act")) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes and neither the holder nor any other person
is engaging in or intends to engage in a distribution of the New Notes. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes must acknowledge that it will deliver a prospectus in connection with any
resale of its New Notes. A broker-dealer who acquired Old Notes directly from
the Company can not exchange such Old Notes in the Exchange Offer. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of the New Notes received in exchange for the Old Notes acquired
by the broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that they will make this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of 180 days after the Exchange Date (as defined) or, if earlier, until
all participating broker-dealers have so resold. See "Plan of Distribution."
The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture (as defined). For a more complete
description of the terms of the new Notes, see "Description of Notes." There
will be no cash proceeds to the Company from the Exchange Offer. The New Notes
will be subordinated in right of payment to all current and future Senior Debt
(as defined) of the Company. The New Notes will also be effectively
subordinated to all indebtedness and other liabilities and commitments
(including trade payables and lease obligations) of the Company's subsidiaries.
As of December 31, 1997, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the New Notes would have been
subordinated to approximately $66.0 million of Senior Debt of the Company and
indebtedness and other obligations of the Company's subsidiaries. In addition,
the Company would have had $121.5 million of borrowings available under the
Credit Facility (as defined). The Indenture will permit the Company and its
subsidiaries to incur additional indebtedness, including additional Senior
Debt, in the future. At December 31, 1997, the Company had no indebtedness
which provided that it was to be expressly subordinated to the Senior Notes.
The Old Notes were originally issued and sold on February 4, 1998 in an
offering of $200.0 million aggregate principal amount (the "Offering," as
defined). The Offering was exempt from registration under the Securities Act in
reliance upon the exemptions provided by Rule 144A and Section 4(2) of the
Securities Act. Accordingly, the Old Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an exemption from the registration requirements of the
Securities Act and applicable state securities laws is available.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and to
the best of the Company's information and
i
<PAGE>
belief, each person participating in the Exchange Offer is acquiring the New
Notes in its ordinary course of business and has no arrangement or
understanding with any person to participate in the distribution of the New
Notes to be received in the Exchange Offer. Any person participating in the
Exchange Offer who does not acquire the Exchange Notes in the ordinary course
of business: (i) cannot rely on the above referenced no-action letters; (ii)
cannot tender its Old Notes in the Exchange Offer; and (iii) must comply with
the registration and prospectus delivery requirements of the Securities Act.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. However, the Exchange Offer is
subject to certain customary conditions which may be waived by the Company. The
Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998,
unless extended (as it may be so extended, the "Expiration Date"), provided
that the Exchange Offer shall not be extended beyond 30 business days from the
date of this Prospectus. The date of acceptance for exchange of the Old Note
for the New Notes (the "Exchange Date") will be the first business day
following the Expiration Date or as soon as practicable thereafter. Old Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date; otherwise such tenders are irrevocable.
There has not previously been any public market for the Notes. If a market
for the New Notes should develop, the New Notes could trade at a discount from
their initial offering price. The Company does not intend to apply for listing
of the New Notes on any securities exchange or in any automated quotation
system. There can be no assurance that an active trading market for the New
Notes will develop.
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-4 under the Securities Act with respect to the
Exchange Offer. This Prospectus, which is part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
the Company and the Exchange Offer, reference is made to such Registration
Statement and the exhibits and schedules filed as part thereof. The
Registration Statement and the exhibits and schedules thereto filed with the
Commission may be inspected without charge at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and will also be available for inspection and copying
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048, and the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of
the Registration Statement may be obtained from the Public Reference Section of
the Commission upon payment of certain prescribed fees. Electronic registration
statements made through the Electronic Data Gathering, Analysis, and Retrieval
system are publicly available through the Commission's web site
(http://www.sec.gov.), which is maintained by the Commission and which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES LAWS OF SUCH JURISDICTION.
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<PAGE>
INCORPORATION BY REFERENCE
The following documents, filed with the Commission by the Company pursuant
to the Exchange Act (Commission File No. 0-3797), are incorporated herein by
reference and made a part of this Prospectus:
1. the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the Commission on March 31, 1998 (the "1997
10-K");
2. the portions of the Company's definitive Proxy Statement for its 1998
Annual Meeting of Stockholders dated April 14, 1998 that have been
incorporated by reference into the 1997 10-K and was filed with the
Commission on April 14, 1998;
3. the Company's Current Report on Form 8-K, dated January 14, 1998, filed
with the Commission on January 20, 1998, its Current Report on Form 8-K,
dated January 26, 1998, filed with the Commission on February 2, 1998, and
its Current Report on Form 8-K, dated February 3, 1998, filed with the
Commission on February 20, 1998.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the respective date of filing of each such document.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM NANCY J. DAMON, CORPORATE SECRETARY, MASTEC, INC., 3155 N.W. 77TH
AVENUE, SUITE 135, MIAMI, FLORIDA 33122-1205, TELEPHONE NUMBER 305-599-1800. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NO
LATER THAN 5 BUSINESS DAYS PRIOR TO THE EXPIRATION OF THE EXCHANGE OFFER.
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SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE OR INCORPORATED BY REFERENCE HEREIN. UNLESS OTHERWISE SPECIFIED, ALL
REFERENCES TO "MASTEC" OR THE "COMPANY" INCLUDE MASTEC, INC., ITS CONSOLIDATED
SUBSIDIARIES AND ITS 50%-OWNED AFFILIATES IN ARGENTINA, CHILE AND PERU.
THE COMPANY
MasTec is one of the world's largest contractors specializing in the
design, installation and maintenance of infrastructure for the
telecommunications and other utilities industry. The Company's business
consists of the installation of aerial and underground copper, coaxial and
fiber optic cable networks as well as wireless antenna networks ("outside plant
services"). The Company believes it is the largest independent contractor for
these systems in the United States and Spain, and one of the largest in
Argentina, Brazil, Chile and Peru. The Company also installs central office
switching equipment, and designs, installs and maintains integrated voice, data
and video local and wide area networks inside buildings ("inside wiring").
Clients for the Company's services include major domestic and international
telecommunications service providers such as the regional bell operating
companies ("RBOCs"), other local exchange carriers, competitive access
providers, cable television operators, long-distance operators and wireless
phone companies. The Company also provides infrastructure construction services
to the electric power industry and other public utilities.
MasTec has experienced significant and consistent growth as a result of
favorable trends in the telecommunications industry, its ability to identify
and integrate strategic acquisitions and its competitive position as one of the
largest providers of infrastructure services. The Company's revenue has
increased from $142.6 million in 1994 to $703.4 million in 1997. The Company
expects to continue to grow through additional strategic acquisitions as well
as through internal expansion. Since January 1996, the Company has completed 16
domestic and three foreign acquisitions and actively continues to pursue
complimentary acquisitions in the highly fragmented infrastructure services
industry. Internal growth is expected to be driven by the expansion of the
global telecommunications and power distribution industries resulting from (i)
continued global deregulation, which is allowing numerous new service providers
to enter the marketplace and is increasing the competitive pressure on existing
participants to upgrade and expand their networks; (ii) increasing consumer
demand for advanced communications services which require the upgrading of
existing infrastructure to handle increased bandwidth needs; and (iii)
increasing reliance on outsourcing of infrastructure needs to full service
contractors by service providers in an effort to reduce costs and focus on
their core competencies.
COMPETITIVE STRENGTHS
The Company seeks to differentiate itself from its competitors through the
following characteristics:
STRONG CUSTOMER RELATIONSHIPS. Founded in 1929, the Company has developed
strong relationships with numerous telecommunications service providers by
providing high quality services in a cost and time efficient manner. The
Company has been providing services to Telefonica de Espana, S.A.
("Telefonica") and BellSouth Telecommunications, Inc. ("BellSouth"), its two
largest customers, since 1950 and 1969, respectively, and maintains similar
long-term relationships with many of its other customers. For the year ended
December 31, 1997, the Company derived approximately 26% and 12% of its revenue
from services performed for Telefonica and Bellsouth, respectively. MasTec
currently has 23 multi-year service contracts with Telefonica, the RBOCs and
other telecommunications service providers for certain of their outside plant
requirements up to a specific dollar amount per job and within certain
geographic areas.
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DIVERSE CUSTOMER BASE. MasTec provides a full range of infrastructure
services to a diverse customer base. Domestically, the Company provides outside
plant services to local exchange customers such as BellSouth, US West
Communications, Inc., SBC Communications, Inc., United Telephone Company of
Florida, Inc. (a subsidiary of Sprint Corporation ("Sprint")) and GTE
Corporation. The Company also provides outside plant services to competitive
local exchange carriers such as MFS Communications Company, Inc., Sprint
Metropolitan Networks, Inc. and MCI Metro, Inc. (the local telephone
subsidiaries of Sprint and MCI Communications Corporation ("MCI"),
respectively), cable television operators such as Time Warner Inc., Cox
Communications, Inc. and Marcus Cable Company, long distance carriers such as
MCI and Sprint, and wireless communications providers such as PrimeCo Personal
Communications LP and Sprint Spectrum, L.P. Internationally, the Company
provides outside plant services, turn-key switching systems installation and
inside wiring services primarily to Telefonica, the principal telephone company
in Spain, and Telefonica's affiliates in Argentina, Chile and Peru. The Company
also services the local telephone subsidiaries of Telecomunicacoes Brasileiras
S.A., the Brazilian government-owned telecommunications system ("Telebras"), in
Sao Paulo, Rio de Janeiro, Parana and other states in the more populous and
developed Southern region of Brazil, as well as Companhia Riograndense de
Telecommunicacoes, S.A. ("CRT"), the local telephone company in Rio Grande do
Sul which is partly owned by Telefonica. For the year ended December 31, 1997,
the Company derived approximately 11% of its revenue from services performed
for Telebras.
The Company renders inside wiring services nationwide to large corporate
customers with multiple locations such as First Union National Bank,
International Business Machines Corporation ("IBM") and Dean Witter Reynolds
Inc., and to universities and health care providers.
TURN-KEY CAPABILITIES. The Company believes it is one of the few
contractors capable of providing all of the design, installation and
maintenance services necessary for a cable or wireless network starting from a
transmission point, such as a central office or head-end, and running
continuously through aerial and underground cables to the ultimate end users'
voice and data ports, cable outlets or cellular stations. The Company can also
install the switching devices at a central office or set up local and wide area
voice, data and video networks to expand a business' telecommunications
infrastructure both inside a specific structure or between multiple structures.
The Company believes that its customers increasingly are seeking
comprehensive solutions to their infrastructure needs by turning to fewer
qualified contractors who have the size, financial capability and technical
expertise to provide a full range of infrastructure services. The Company
believes that this trend will accelerate as industry consolidations increase
and as these consolidated entities begin to provide bundled services to end
users. The Company believes it has positioned itself, through acquisitions and
internal growth, as a full service provider of outside plant and inside wiring
infrastructure services to take advantage of this trend.
BROAD GEOGRAPHIC PRESENCE. The Company has significantly broadened its
geographic presence in recent years through strategic acquisitions.
Domestically, MasTec has expanded beyond its historical base in the
Southeastern United States and currently has operations in more than 30 states
in the Southeast, mid-Atlantic, Southwest, West and upper Midwest regions of
the country. The Company also substantially increased its international
operations through the acquisition, in April 1996, of Sistemas e Instalaciones
de Telecomunicacion, S.A. ("Sintel"), the largest telecommunications
infrastructure contractor in Spain, and through the acquisition, in July 1997,
of a majority interest in MasTec Inepar S.A. Sistemas de Telecomunicacoes
("MasTec Inepar"), a leading telecommunications construction company in Brazil.
Due to its broad geographic presence, the Company believes that it is well
suited to service customers with operations across the United States as well as
companies that are active in multiple areas of the world such as multinational
corporations and telecommunications service providers that are expanding into
international markets. In addition, by developing business in many geographic
regions, the Company believes it is less susceptible to changes in the market
dynamics in any one region.
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GROWTH STRATEGY
The Company is pursuing a disciplined strategy of growth and
diversification in its core business through strategic acquisitions and
internal expansion as follows:
STRATEGIC ACQUISITIONS. The Company plans to continue to pursue strategic
acquisitions in the fragmented telecommunications and utilities infrastructure
industry that either expand its geographic coverage and customer base or
broaden the range of services it can offer to clients. The Company focuses its
acquisition efforts primarily on companies with successful track records and
strong management. The Company has acquired 19 companies since January 1996 and
has significant experience in identifying, purchasing and integrating
telecommunications infrastructure businesses both domestically and
internationally. Management believes that MasTec is able to improve the
acquired companies' operating performance by providing strategic guidance,
administrative support, greater access to capital and savings in the cost of
capital, purchasing and insurance costs.
INTERNAL EXPANSION. The Company believes it is poised to capitalize on the
anticipated growth in its industry due to its status as one of the world's
largest telecommunications infrastructure contractors and its strong customer
relationships. The International Telecommunications Union estimates that
between 1996 and 2000 telecommunications infrastructure investment will exceed
$50 billion in the United States and $600 billion worldwide. In addition, the
Company believes that the RBOCs and other utilities in the United States, which
still conduct a significant portion of their construction work in-house, will
out-source more infrastructure construction in the future in response to
competitive pressures to cut costs, streamline their operations and focus on
their core competencies. The Company believes that its reputation for quality
and reliability, operating efficiency, financial strength, technical expertise,
presence in key geographic areas and ability to offer a full range of
construction services make it well positioned to compete for this business,
particularly the larger, more technically complex infrastructure projects.
The Company also anticipates that its Brazilian operations will become a
more significant part of its operations. The Brazilian government has estimated
that approximately $75 billion will need to be invested over a seven year
period in order to modernize and expand Brazil's telecommunications
infrastructure. To accomplish this objective, the government has stated its
intention of deregulating and privatizing Brazil's telecommunications system.
The Company believes that, through MasTec Inepar, it is well positioned to
participate in this anticipated expansion.
In addition to focusing on its core telecommunications customers, the
Company plans to achieve incremental growth by continuing to develop
complementary lines of businesses. These businesses include the provision of
premise wiring services to corporations and infrastructure construction
services to the electric power industry and other public utilities.
----------------
The Company's principal executive offices are located at 3155 N.W. 77th
Avenue, Suite 135, Miami, Florida 33122-1205. The telephone number at that
location is (305) 599-1800.
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<PAGE>
THE INITIAL OFFERING
Pursuant to a Purchase Agreement dated as of January 30, 1998 (the
"Purchase Agreement"), the Company sold Old Notes in an aggregate principal
amount of $200.0 million to the Initial Purchasers on February 4, 1998. The
Initial Purchasers subsequently resold the Old Notes purchased from the Company
to qualified institutional buyers pursuant to Rule 144A under the Securities
Act and to certain institutional accredited investors (as defined in Rule
501(A)(1), (2), (3) or (7) under the Securities Act). A portion of the net
proceeds from the Initial Offering, estimated to have been approximately $194.2
million after deducting discounts to the Initial Purchasers and estimated
Offering expenses, were used to repay approximately $82.4 million of
outstanding indebtedness under the Credit Facility (as defined), under which
borrowings bore interest at LIBOR (London Interbank Offered Rate) plus the
applicable LIBOR margin, currently 1.00%. The remaining net proceeds from the
Offering will be used by the Company for general corporate purposes, including
acquisitions, working capital needs and capital expenditures.
THE EXCHANGE OFFER
Securities Offered......... Up to $200.0 million aggregate principal amount
of 7 3/4% Series B Senior Notes due 2008 of the
Company (the "New Notes," and collectively with
the Old Notes, the "Notes"). The terms of the New
Notes and the Old Notes are substantially
identical in all material respects, except for
certain transfer restrictions, registration rights
and liquidated damages ("Liquidated Damages") for
Registration Defaults relating to the Old Notes
which will not apply to the New Notes. See
"Description of Notes."
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of New Notes for each $1,000
principal amount of Old Notes. See "The Exchange
Offer" for a description of the procedures for
tendering Old Notes. The Exchange Offer satisfies
the registration obligations of the Company under
the Registration Rights Agreement. Upon
consummation of the Exchange Offer, holders of Old
Notes that were not prohibited from participating
in the Exchange Offer and did not tender their Old
Notes will not have any registration rights under
the Registration Rights Agreement with respect to
such nontendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the
restrictions on transfer contained in the legend
thereon.
Tenders, Expiration Date;
Withdrawal; Exchange Date... The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, or such later
date and time to which it is extended (as it may
be so extended, the "Expiration Date"), provided
that the Exchange Offer shall not be extended
beyond 30 business days from the date of this
Prospectus. Tender of Old Notes pursuant to the
Exchange Offer may be withdrawn and retendered at
any time prior to the Expiration Date. Any Old
Notes not accepted for exchange for any reason
will be returned without expense to the tendering
holder as
4
<PAGE>
promptly as practicable after the expiration or
termination of the Exchange Offer. The date of
acceptance for exchange of all Old Notes properly
tendered and not withdrawn for New Notes (the
"Exchange Date") will be the first business day
following the Expiration Date or as soon as
practicable thereafter.
Accrued Interest on the
New Notes.................. Each New Note will bear interest from the most
recent date to which interest has been paid on the
Old Note or, if no such payment has been made,
from February 4, 1998.
Federal Income
Tax Considerations......... The Exchange Offer will not result in any income,
gain or loss to the holders of Notes or the
Company for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Use of Proceeds............ There will be no proceeds to the Company from
the exchange of New Notes for the Old Notes
pursuant to the Exchange Offer.
Exchange Agent............. First Trust National Association, the Trustee
under the Indenture, is serving as exchange agent
(the "Exchange Agent") in connection with the
Exchange Offer.
CONSEQUENCES OF EXCHANGING OR FAILURE TO
EXCHANGE OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Generally, holders of Old Notes (other than any holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who exchange their Old Notes for New Notes pursuant to the Exchange Offer
may offer their New Notes for resale, resell their New Notes, and otherwise
transfer their New Notes without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided such New Notes
are acquired in the ordinary course of the holder's business, such holders have
no arrangement with any person to participate in a distribution of such New
Notes and neither the holder nor any other person is engaging in or intends to
engage in a distribution of the New Notes. A broker-dealer who acquired Old
Notes directly from the Company can not exchange such Old Notes in the Exchange
Offer. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of its New Notes. See "Plan of Distribution." To
comply with the securities laws of certain jurisdictions, it may be necessary
to qualify for sale or register the New Notes prior to offering or selling such
New Notes. The Company is required, under the Registration Rights Agreement, to
register the New Notes in any jurisdiction requested by the holders, subject to
certain limitations. Upon consummation of the Exchange Offer, holders that were
not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes, and accordingly,
such old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. See "The Exchange Offer--Consequences of
Failure to Exchange."
5
<PAGE>
SUMMARY DESCRIPTION OF THE NOTES
Issuer..................... MasTec, Inc.
Securities Offered......... $200.0 million aggregate principal amount of
7 3/4% Series B Senior Subordinated Notes due 2008
(the "New Notes," and collectively with the Old
Notes, the "Notes"). The terms of the New Notes
and the Old Notes are substantially identical in
all material respects, except for certain transfer
restrictions, registration rights and Liquidated
Damages for Registration Defaults relating to the
Old Notes which will not apply to the New Notes.
See "Description of Notes."
Maturity Date.............. February 1, 2008.
Interest Rate and
Payment Dates.............. The Notes bear interest at a rate of 7 3/4% per
annum, payable semi-annually in arrears on
February 1 and August 1 of each year, commencing
August 1, 1998.
Ranking.................... The Notes are subordinated in right of payment
to all existing and future Senior Debt of the
Company. In addition, the Notes are effectively
subordinated to all indebtedness and other
liabilities and commitments (including trade
payables and lease obligations) of the Company's
subsidiaries. As of December 31, 1997, after
giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the
Notes would have been subordinated to
approximately $66.0 million of Senior Debt of the
Company and indebtedness and other obligations of
the Company's subsidiaries. In addition, the
Company would have had $121.5 million of
borrowings available under the Credit Facility.
The Indenture will permit the Company and its
subsidiaries to incur additional indebtedness,
including additional Senior Debt, in the future.
Optional Redemption........ The Notes will be redeemable, at the option of
the Company, in whole or in part, at any time
after February 1, 2003, at the redemption prices
set forth herein, plus accrued and unpaid
interest, if any, to the redemption date. In
addition, on or prior to February 1, 2001, the
Company may redeem up to one-third of the
aggregate principal amount of the Notes at a
redemption price of 107.750% of the principal
amount thereof, plus accrued and unpaid interest,
if any, thereon to the redemption date with the
net cash proceeds of an offering of Equity
Interests (other than Disqualified Stock) of the
Company; PROVIDED, that at least $133.3 million in
principal amount of the Notes remain outstanding
immediately after the occurrence of such
redemption.
Change of Control.......... In the event of a Change of Control, the Company
will be required to make an offer to each holder
of Notes to repurchase such holder's Notes at a
repurchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest,
if
6
<PAGE>
any, thereon to the repurchase date. There can be
no assurance that sufficient funds will be
available at the time of any Change of Control to
make any required purchases of Notes tendered or
that restrictions in the Credit Facility or other
indebtedness of the Company will allow the
Company to make such required purchases.
Certain Covenants.......... The indenture pursuant to which the Notes were
or will be issued (the "Indenture") contains
certain covenants that, among other things, limit
the ability of the Company and its Restricted
Subsidiaries (as defined) to incur additional
Indebtedness (as defined) and issue preferred
stock, pay dividends or make other distributions,
repurchase Equity Interests or make other
Restricted Payments (as defined), create certain
Liens (as defined), enter into certain
transactions with Affiliates (as defined), sell
assets or enter into certain mergers and
consolidations.
Exchange Offer;
Registration Rights........ Pursuant to a Registration Rights Agreement (the
"Registration Rights Agreement") between the
Company and the Initial Purchasers, the Company
agreed (i) to file a registration statement,
within 60 days after the consummation of the
Offering (the "Exchange Offer Registration
Statement"), with respect to an offer to exchange
the Old Notes for a new issue of debt securities
of the Company (the "Exchange Notes") registered
under the Securities Act with terms substantially
identical to those of the Old Notes (the "Exchange
Offer") and (ii) to use its best efforts to cause
such registration statement to be declared
effective by the Commission within 120 days after
the consummation of the Offering. In addition,
under certain circumstances, the Company may be
required to file a shelf registration statement
(the "Shelf Registration Statement") to cover
resales of the Notes by the holders thereof. If
the Company fails to satisfy these registration
obligations, it will be required to pay liquidated
damages ("Liquidated Damages") to the holders of
Notes under certain circumstances. See
"Description of Notes--Registration Rights;
Liquidated Damages."
RISK FACTORS
Prospective participants in the Exchange Offer should take into account
the specific considerations set forth under "Risk Factors" as well as the other
information set forth in this Prospectus. See "Risk Factors."
7
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary financial information for each of the years in the
three year period ended December 31, 1997 has been derived from the Company's
consolidated financial statements. The information presented below should be
read in conjunction with, and is qualified in its entirety by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and the notes
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,(1)
-----------------------------------
1995 1996(2) 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue ...................................... $218,859 $534,068 $703,369
Operating income ............................. 23,165 53,493 65,777
Income from continuing operations(3) ......... 1,500 36,054 42,535
OTHER DATA:
Depreciation and amortization ................ $ 8,178 $ 13,686 $ 24,127
Capital expenditures ......................... 17,202 8,386 23,585
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
--------------------------
ACTUAL AS ADJUSTED(4)
---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .......... $ 6,063 $117,277
Total assets ....................... 587,598 704,312
Total debt ......................... 149,057 265,771
Total stockholders' equity ......... 180,731 180,731
</TABLE>
- ---------------
(1) Amounts have been restated to reflect the 1997 acquisitions of Wilde
Construction, Inc. and two related companies, and AIDCO, Inc. and one
related company, which were accounted for as poolings of interest. See
Note 2 of Notes to Consolidated Financial Statements.
(2) Includes the results of Sintel from May 1, 1996.
(3) Income from continuing operations excludes a pro forma adjustment for
income taxes related to companies which were S corporations and therefore
not subject to corporate federal income taxes.
(4) As adjusted to give effect to the Offering and the application of the net
proceeds therefrom as if they had occurred on December 31, 1997.
8
<PAGE>
RISK FACTORS
THIS PROSPECTUS AND OTHER REPORTS AND STATEMENTS FILED BY THE COMPANY FROM
TIME TO TIME WITH THE COMMISSION (COLLECTIVELY, "COMMISSION FILINGS") CONTAIN
OR MAY CONTAIN FORWARD-LOOKING STATEMENTS, SUCH AS STATEMENTS REGARDING THE
COMPANY'S GROWTH STRATEGY AND ANTICIPATED TRENDS IN THE INDUSTRIES AND
ECONOMIES IN WHICH THE COMPANY OPERATES. THESE FORWARD-LOOKING STATEMENTS ARE
BASED ON THE COMPANY'S CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF
RISKS, UNCERTAINTIES AND ASSUMPTIONS RELATING TO THE COMPANY'S OPERATIONS AND
RESULTS OF OPERATIONS, COMPETITIVE FACTORS, SHIFTS IN MARKET DEMAND, AND OTHER
RISKS AND UNCERTAINTIES, INCLUDING IN ADDITION TO THOSE DESCRIBED BELOW AND
ELSEWHERE IN THIS PROSPECTUS OR ANY COMMISSION FILING, UNCERTAINTIES WITH
RESPECT TO CHANGES OR DEVELOPMENTS IN SOCIAL, BUSINESS, ECONOMIC, INDUSTRY,
MARKET, LEGAL AND REGULATORY CIRCUMSTANCES AND CONDITIONS AND ACTIONS TAKEN OR
OMITTED TO BE TAKEN BY THIRD PARTIES, INCLUDING THE COMPANY'S CONTRACTORS,
CUSTOMERS, SUPPLIERS, COMPETITORS, STOCKHOLDERS, LEGISLATIVE, REGULATORY AND
JUDICIAL AND OTHER GOVERNMENTAL AUTHORITIES. SHOULD ONE OR MORE OF THESE RISKS
OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM RESULTS EXPRESSED OR
IMPLIED IN ANY FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY IN THIS
PROSPECTUS OR ANY COMMISSION FILING. THE COMPANY DOES NOT UNDERTAKE ANY
OBLIGATION TO REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS
OR CIRCUMSTANCES. THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE PARTICIPATING IN
THE EXCHANGE OFFER.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Notes that were
not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and, accordingly,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act and applicable state
securities laws, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
Based on interpretations by the staff of the Commission with respect to similar
transactions, the Company believes that the New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
any holder of such New Notes (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder has no arrangement
or understanding with any person to participate in the distribution of such New
Notes and neither the holder nor any other person is engaging in or intends to
engage in a distribution of the New Notes. A broker-dealer who acquired Old
Notes directly from the Company can not exchange such Old Notes in the Exchange
Offer. Each broker-deal that receives New Notes for its own account in exchange
for Old Notes must acknowledge that it will deliver a prospectus in connection
with any resale of its New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of the New
Notes received in exchange for the Old Notes acquired by the broker-dealer as a
result of market-making activities or other trading activities. The Company has
agreed that it will make this Prospectus available to any broker-dealer for use
in connection with any such resale for a period of 180 days after the Exchange
Date or, if earlier, until all participating broker-dealers have so resold. See
"Plan of Distribution." The New Notes may not be offered or sold unless they
have been registered or qualified for sale under applicable state securities
laws or an exemption from registration or qualification is available and is
complied with. The Company is required, under the Registration Rights
Agreement, to register the New Notes in any jurisdiction requested by the
holders, subject to certain limitations.
9
<PAGE>
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT; INCREASED VULNERABILITY TO
ADVERSE ECONOMIC CONDITIONS
At December 31, 1997, after giving pro forma effect to the Offering and
the application of the net proceeds as set forth herein under "Use of
Proceeds," the Company would have had approximately $265.8 million in total
indebtedness and approximately $121.5 million of available borrowings under the
Credit Facility. Interest expense for 1997 was approximately $11.9 million.
Interest expense will increase as a result of the issuance of the Notes, with
annual interest expense on the Notes alone equalling $15.5 million per year. In
addition, subject to certain restrictions set forth in the Indenture, the
Company may incur additional indebtedness, including Senior Debt, in the future
for acquisitions, capital expenditures and other corporate purposes. See "Risk
Factors--Subordination". The Company's level of indebtedness will have several
important effects on its future operations, including, without limitation, (i)
a portion of the Company's cash flow from operations must be dedicated to the
payment of interest and principal on its indebtedness, (ii) the Company's
leveraged position will increase its vulnerability to adverse changes in
general economic and industry conditions, as well as to competitive pressure,
and (iii) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate and other
purposes may be limited. The Company's ability to meet its debt service
obligations and to reduce its total indebtedness will be dependent upon the
Company's future performance, which will be subject to general economic
conditions, industry cycles and financial, business and other factors affecting
the operations of the Company, many of which are beyond its control. There can
be no assurance that the Company's business will continue to generate cash flow
at or above current levels. If the Company is unable to generate sufficient
cash flow from operations in the future to service its debt, it may be
required, among other things, to seek additional financing in the debt or
equity markets, to refinance or restructure all or a portion of its
indebtedness, including the Notes, to sell selected assets or to reduce or
delay planned capital expenditures or acquisitions. There can be no assurance
that any such measures would be sufficient to enable the Company to service its
debt or that any such financing, refinancing or sale of assets would be
available on economically favorable terms.
RESTRICTIONS IMPOSED BY CREDIT FACILITY AND INDENTURE
The Credit Facility and the Indenture contain a number of covenants that
restrict the ability of the Company to, among other things, dispose of assets,
merge or consolidate with another entity, incur additional indebtedness, create
liens, make capital expenditures, pay dividends or make other investments or
acquisitions. The Credit Facility also contains requirements that the Company
maintain certain financial ratios and restricts the ability of the Company to
prepay the Company's other indebtedness, including the Notes. The ability of
the Company to comply with such provisions may be affected by events that are
beyond the Company's control. The breach of any of these covenants could result
in a default under the Credit Facility and the Indenture and a subsequent
acceleration of such indebtedness. In the event of acceleration of such
indebtedness, payments to holders of the Notes could be limited by the
subordination provisions of the Indenture. See "Description of Notes--
Subordination." In addition, as a result of these covenants, the ability of the
Company to respond to changing business and economic conditions and to secure
additional financing, if needed, may be restricted significantly, and the
Company may be prevented from engaging in transactions that might otherwise be
considered beneficial to the Company. See "Description of Certain Indebtedness"
and "Description of Notes--Certain Covenants."
SUBORDINATION
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes are subordinated to the prior payment in
full of all existing and future Senior Debt of the Company, including all
amounts owing under the Credit Facility. The Notes are also effectively
subordinated to all Indebtedness and other liabilities and commitments
(including trade payables and lease obligations) of the Company's subsidiaries.
As of December 31, 1997, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the Notes would have been
10
<PAGE>
subordinated to approximately $66.0 million of Senior Debt of the Company and
indebtedness and other obligations of the Company's subsidiaries. In addition,
the Company would have had approximately $121.5 million of available borrowings
under the Credit Facility. Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Company, assets of the Company will be available to pay obligations under
the Notes only after all of its Senior Debt has been paid in full, and there
can be no assurance that there will be sufficient assets to pay amounts due on
all or any of the Notes. In addition, under certain circumstances, the Company
may be prohibited by the Indenture from paying amounts due in respect of the
Notes, or from purchasing, redeeming or otherwise acquiring the Notes, if a
default exists with respect to Senior Debt. See "Description of
Notes--Subordination."
HOLDING COMPANY STRUCTURE
The Company is a holding company that conducts substantially all of its
operations through its subsidiaries and the Company's only significant asset is
the capital stock of its subsidiaries. The Notes will be obligations
exclusively of the Company and will not be guaranteed by any of the Company's
subsidiaries, except under certain limited circumstances. See "Description of
Notes--Certain Covenants--Limitations on Guarantees of Company Indebtedness by
Restricted Subsidiaries." As a result, the Company is dependent on dividends or
other intercompany transfers of funds from its subsidiaries to meet the
Company's debt service and other obligations, including its obligations under
the Notes, which may be restricted by applicable law. In addition, to the
extent that any such subsidiary incurs indebtedness and becomes insolvent or is
liquidated, creditors of such subsidiary would be entitled to payment from the
proceeds of such subsidiary's assets before the Company and its creditors would
derive any value from such subsidiary's assets.
DEPENDENCE ON KEY CUSTOMERS AND RISKS ASSOCIATED WITH THE TELECOMMUNICATIONS
INDUSTRY AND TECHNOLIGICAL CHANGE
The Company derives a substantial portion of its revenue from providing
telecommunications infrastructure services to Telefonica and its affiliates,
BellSouth and Telebras, the Brazilian government-owned telecommunications
system. For the year ended December 31, 1996, approximately 31% and 13% of the
Company's revenue was derived from services performed for Telefonica and its
affiliates and for BellSouth, respectively. For the year ended December 31,
1997, approximately 26%, 12% and 11% of the Company's revenue was derived from
services performed for Telefonica, BellSouth and Telebras, respectively. The
Company anticipates that it will continue to derive a significant portion of
its revenue from services performed for Telefonica and its affiliates,
BellSouth and Telebras. The loss of any of these customers or a significant
reduction in the amount of business generated by these customers could have a
material adverse effect on the Company's results of operations.
In addition, there are a number of factors that could adversely affect
these and the Company's other customers and their ability or willingness to
fund capital expenditures in the future, which in turn could have a material
adverse effect on the Company's results of operations. These factors include
the potential adverse nature of, or the uncertainty caused by, changes in
governmental regulation, technological changes, increased competition, adverse
financing conditions for the industry and economic conditions generally.
Further, the volume of work awarded under contracts with the Company's public
utility customers is subject to periodic appropriations during the term of the
contract, and a failure by the customer to receive sufficient appropriations
could result in a reduction in the volume of work under these contracts or a
delay in payments, which in turn could negatively affect the Company. The
telecommunications industry is subject to rapid changes in technology. Wireline
systems used for the transmission of video, voice and data are subject to
potential displacement by various technologies, including wireless
technologies. In addition, the demand for the Company's services could be
adversely affected in the event that alternative technologies are developed and
implemented that enable telecommunications providers or other organizations to
provide enhanced telecommunications services without significantly upgrading
their existing networks.
11
<PAGE>
CANCELLATION CLAUSES IN CONTRACTS; FAILURE TO WIN PUBLIC BIDS
Many of the Company's contracts with its customers, including most of its
master contracts and contracts with its public utility customers, are subject
to cancellation by the customer without notice or on relatively short notice,
typically 90 to 180 days, even if the Company is not in default under the
contract. There can be no assurance that the Company's customers will not
terminate the Company's contracts pursuant to these termination clauses even if
the Company is in compliance with the contract. Many of the Company's
contracts, including master contracts, also are opened to public bid at the
expiration of the contract term, and there can be no assurance that the Company
will be the successful bidder on existing contracts that come up for bid.
Cancellation of a significant number of contracts by the Company's customers or
the failure of the Company to win a significant number of existing contracts
upon re-bid could have a material adverse effect on the Company.
RISK INHERENT IN GROWTH STRATEGY
The Company has grown rapidly through the acquisition of other companies
and its growth strategy is dependent in part on additional acquisitions. The
Company anticipates that it will make additional acquisitions and is actively
seeking and evaluating new acquisition candidates. There can be no assurance
that the Company will be able to continue to identify and acquire appropriate
businesses or obtain financing for acquisitions on satisfactory terms or that
acquired companies will perform as expected. The Company's growth strategy
presents the risks inherent in assessing the value, strengths and weaknesses of
growth opportunities, in evaluating the costs and uncertain returns of
expanding the operations of the Company and in integrating existing operations
with new acquisitions. Future competition for acquisition candidates could
raise prices for these targets and lengthen the time period required to recoup
the Company's investment. The Company's growth strategy also assumes there will
be a significant increase in demand for telecommunications and other
infrastructure services, which may not materialize. The Company's anticipated
growth may place significant demands on the Company's management and its
operational, financial and marketing resources. The Company's operating results
could be adversely affected if it is unable to integrate and manage acquired
companies successfully. Future acquisitions by the Company could also result in
the incurrence of additional debt and contingent liabilities, and amortization
expenses related to goodwill and other intangible assets, which could
materially adversely affect the Company's financial condition and results of
operations.
RISK OF FOREIGN OPERATIONS
During 1996 and 1997, approximately 37% and 40%, respectively, of the
Company's revenue was derived from international operations. Some of the
countries in which the Company conducts business have, in the past, experienced
political, economic or social instability, including expropriations, currency
devaluations, hyper-inflation, confiscatory taxation or other adverse
regulatory or legislative developments, or have limited the repatriation of
investment income, capital and other assets. There can be no assurance that
some of these circumstances will not occur in the future or that, if they
occur, they will not have a material adverse effect on the Company's financial
condition and results of operations.
The Company conducts business in several foreign currencies that are
subject to fluctuations in the exchange rate relative to the U.S. dollar. The
Company's results of operations from foreign activities are translated into
U.S. dollars at the average prevailing rates of exchange during the period
reported, which average rates may differ from the actual rates of exchange in
effect at the time of actual conversion into U.S. dollars. The Company monitors
its currency exchange risk but currently does not hedge against this risk. At
December 31, 1997, the Company had recorded a $3.5 million cumulative negative
currency translation adjustment on its balance sheet to account for currency
fluctuations in the foreign countries in which it does business. There can be
no assurance that currency exchange fluctuations will not adversely affect the
Company's financial condition or results of operations. Additionally, although
the Company currently has no plans to repatriate significant earnings from its
international operations, there is no assurance that the Company could
repatriate such earnings without incurring significant tax liabilities.
12
<PAGE>
SINTEL LABOR RELATIONS
Substantially all of Sintel's work force in Spain is unionized. On
September 3, 1997, Sintel filed a petition with the Spanish labor authorities
to approve a restructuring of Sintel's work force. Following the filing of this
labor petition, Sintel's labor unions commenced half-day work stoppages which
continued through the first week of October 1997. In March 1998, Sintel entered
into a definitive collective bargaining agreement with its unions providing for
the reduction of its workforce, reductions in certain non-wage compensation and
increases in productivity benchmarks. The agreement also contemplates an
increase in base wage rates for remaining union workers. Any future work
stoppages or the failure to negotiate future labor agreements on competitive
terms could have a material adverse effect on Sintel and on the Company's
results of operations.
DEPENDENCE ON LABOR FORCE
The Company's business is labor intensive with high employee turnover in
many operations. The low unemployment rate in the United States has made it
more difficult to find qualified personnel at low cost in some areas where the
Company operates. Shortages of labor or increased labor costs could have a
material adverse effect on the Company's operations. There can be no assurance
that the Company will be able to continue to hire and retain a sufficient labor
force of qualified persons.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's businesses are managed by a small number of key executive
officers, including Jorge Mas, the Company's Chairman, President and Chief
Executive Officer. The loss of services of certain of these executives could
have a material adverse effect on the Company. The Company does not maintain
key person life insurance on the lives of any of its executives. The Company's
growth strategy also is dependent on its ability to hire and retain additional
qualified management personnel. There can be no assurance that the Company will
be able to hire and retain such personnel.
COMPETITION
The industry in which the Company competes is highly competitive and
fragmented. The Company competes with a number of contractors in the markets in
which it operates, ranging from small independent firms servicing local markets
to larger firms servicing regional markets, as well as with large national and
international equipment vendors on turn-key projects who subcontract
construction work to contractors other than the Company. These equipment
vendors typically are better capitalized and have greater resources than the
Company. There are relatively few barriers to entry into these markets and, as
a result, any business that has access to persons who possess technical
expertise and adequate financing may become a competitor of the Company.
Because of the highly competitive bidding environment in the United States for
the services provided by the Company, the price of a contractor's bid is often
the deciding factor in determining whether such contractor is awarded a
contract for a particular project. Internationally, the Company expects that
there will be increasing price competition as a result of privatization and
deregulation of previously monopolistic markets. There can be no assurance that
the Company's competitors will not develop the expertise, experience and
resources to provide services that achieve greater market acceptance or that
are superior in both price and quality to the Company's services, or that the
Company will be able to maintain and enhance its competitive position. In
addition, many turn-key infrastructure projects require vendor-financing, and
there can be no assurance that the Company will be able to provide such
financing on satisfactory terms or at all.
The Company also faces competition from the in-house service organizations
of RBOCs and other customers and potential customers, which employ personnel
who perform some of the same types of services as those provided by the
Company. The Company's growth strategy is dependent in part on increased
outsourcing by these customers of their infrastructure construction work. There
can be no assurance that existing or prospective customers of the Company will
continue to outsource telecommunication or other infrastructure services or
increase their outsourcing of these services in the future.
13
<PAGE>
POSSIBLE INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required repurchases
of Notes tendered or that restrictions in the Credit Facility or other
indebtedness of the Company will allow the Company to make such required
repurchases. Notwithstanding these provisions, the Company could enter into
transactions, including certain recapitalizations, that would not constitute a
Change of Control but would increase the amount of debt outstanding at such
time. See "Description of Notes--Repurchase at the Option of Holders."
CONTROLLING STOCKHOLDERS
Jorge Mas, the Company's Chairman, President and Chief Executive Officer,
together with other family members beneficially own more than 50% of the
outstanding shares of Common Stock of the Company. Accordingly, they have the
power to control the affairs of the Company.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
The New Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to apply for listing of
the New Notes on any securities exchange. The Initial Purchasers have informed
the Company that they currently intend to make a market in the New Notes.
However, they are not obligated to do so, and any such market making may be
discontinued at any time without notice. In addition, any such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer or the pendency of
the Shelf Registration Statement. Accordingly, no assurance can be given that
an active public or other market will develop for the New Notes or as to the
liquidity of or the trading market for the New Notes. If a trading market does
not develop or is not maintained, holders of the New Notes may experience
difficulty in reselling the New Notes or may be unable to sell them at all. If
a market for the New Notes develops, any such market may be discontinued at any
time.
If a public trading market develops for the New Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Notes may trade at a discount from their
principal amount.
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the
Company, at the time it incurred the indebtedness evidenced by the Notes (i)
(a) was or is insolvent or rendered insolvent by reason of such occurrence or
(b) was or is engaged in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital or (c)
intended or intends to incur, or believed or believes that it would incur,
debts beyond its ability to pay such debts as they mature, and (ii) the Company
received or receives less than reasonably equivalent value or fair
consideration for the incurrence of such indebtedness, then the Notes could be
voided, or claims in respect of the Notes could be subordinated to all other
debts of the Company. In addition, the payment of interest and principal by the
Company pursuant to the Notes could be voided and required to be returned to
the person making such payment, or to a fund for the benefit of the creditors
of the Company.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company would be considered insolvent if (i)
the sum of its debts, including contingent liabilities, were greater than the
saleable value of all of its assets at a fair valuation or if the present fair
saleable value of its
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<PAGE>
assets were less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they
become absolute and mature or (ii) it could not pay its debts as they become
due. On the basis of historical financial information, recent operating history
and other factors, the Company believes that, after giving effect to the
indebtedness incurred in connection with the Offering, it will not be
insolvent, will not have unreasonably small capital for the business in which
it is engaged and will not incur debts beyond its ability to pay such debts as
they mature. There can be no assurance, however, as to what standard a court
would apply in making such determinations or that a court would agree with the
Company's conclusions in this regard.
15
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On February 4, 1998, the Company issued $200.0 million aggregate principal
amount of Old Notes to Jefferies & Company, Inc., BancBoston Securities Inc.,
CIBC Oppenheimer Corp. and NationsBanc Montgomery Securities LLC (collectively,
the "Initial Purchasers"). The issuance was not registered under the Securities
Act in reliance upon the exemption under Rule 144A and Section 4(2) of the
Securities Act. In connection with the issuance and sale of the Old Notes, the
Company entered into a Registration Rights Agreement with the Initial
Purchasers dated as of February 4, 1998 (the "Registration Rights Agreement"),
which requires the Company to cause the Old Notes to be registered under the
Securities Act or to file with the Commission a registration statement under
the Securities Act with respect to an issue of new notes of the Company
identical in all material respects to the Old Notes, and use its best efforts
to cause such registration statement to become effective under the Securities
Act and, upon the effectiveness of that registration statement, to offer to the
holders of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, which will be issued without a restrictive
legend and may be reoffered and resold by the holder without restrictions or
limitations under the Securities Act. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The Exchange Offer is being made pursuant to the
Registration Rights Agreement to satisfy the Company's obligations thereunder.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder of such New Notes (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes and neither the holder nor any other person
is engaging in or intends to engage in a distribution of the New Notes. A
broker-dealer who acquired Old Notes directly from the Company can not exchange
such Old Notes in the Exchange Offer. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the New Notes
cannot rely on such interpretations by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration
Date (as defined herein). The Company will issue a principal amount of New
Notes in exchange for an equal principal amount of outstanding Old Notes
tendered and accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. The date of acceptance for
exchange of the Old Notes for the New Notes (the "Exchange Date") will be the
first business day following the Expiration Date or as soon as practicable
thereafter.
The terms of the New Notes and the Old Notes are substantially identical
in all material respects, except for certain transfer restrictions,
registration rights and Liquidated Damages for Registration Defaults relating
to the Old Notes which will not apply to the New Notes. See "Description of
Notes." The New Notes will evidence the same debt as the Old Notes. The New
Notes will be issued under and entitled to the benefits of the Indenture
pursuant to which the Old Notes were issued.
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<PAGE>
As of the date of this Prospectus, $200.0 million aggregate principal
amount of the Old Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Old Notes.
Holders of Old Notes do not have any appraisal or dissenters' rights under
state law or the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Exchange
Act, and the rules and regulations of the Commission thereunder. Old Notes
which are not tendered and were not prohibited from being tendered for exchange
in the Exchange Offer will remain outstanding and continue to accrue interest
and to be subject to transfer restrictions, but will not be entitled to any
rights or benefits under the Registration Rights Agreement.
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
on the Exchange Date the Company will accept all Old Notes properly tendered
and not withdrawn and will issue New Notes in exchange therefor. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company had given oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders for the purposes of receiving the New Notes
from the Company.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents; provided, however, that
the Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offer. If any tendered Old Notes
are not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or nonexchanged Old Notes
or substitute Old Notes evidencing the unaccepted portion, as appropriate, will
be returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "Fees and Expenses."
EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended; provided that the Exchange Offer
shall not be extended beyond 30 business days after the date of this
Prospectus.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, prior to 9:00 a.m., New York City
time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holder of Old Notes
of such amendment.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no
17
<PAGE>
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to an appropriate news
agency.
INTEREST ON THE NEW NOTES
New Notes will bear interest at the rate of 7 3/4% per annum, payable
semi-annually, in cash, on February 1 and August 1 of each year, from the most
recent date to which interest has been paid on the Old Notes or, if no such
payment has been made, from February 4, 1998.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to exchange any new Notes for any Old Notes, and may terminate or
amend the Exchange Offer before the acceptance of any Old Notes for exchange,
if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer which
seeks to restrain or prohibit the Exchange Offer or, in the Company's judgment,
would materially impair the ability of the Company to proceed with the Exchange
Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule, order or regulation is interpreted, by any
government or governmental authority which, in the Company's judgment, would
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(c) the Exchange Offer or the consummation thereof would otherwise violate
or be prohibited by applicable law.
If any of these conditions is not satisfied, the Company may (i) refuse to
accept any Old Notes and return all tendered Old Notes to the tendering
holders, (ii) extend the Exchange Offer and retain all Old Notes tendered prior
to the expiration of the Exchange Offer, subject, however, to the rights of
holders who tendered such Old Notes to withdraw their tendered Old Notes, or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Old Notes which have not been withdrawn. If such
waiver constitutes a material change to the Exchange Offer, the Company will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in their sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right, and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
PROCEDURES FOR TENDERING
The tender of Old Notes by a holder as set forth below (including the
tender of Old Notes by book-entry delivery pursuant to the procedures of the
Depository Trust Company ("DTC")) and the acceptance thereof by the Company
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. To tender in the Exchange Offer, a holder must (i) complete, sign and
date the Letter of Transmittal, or a facsimile
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<PAGE>
thereof, have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile, together with the Old Notes (unless such tender is being effected
pursuant to the procedure for book-entry transfer described below) and any
other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date, or (ii) comply with the guaranteed delivery
procedures described below. Delivery of all documents must be made to the
Exchange Agent at its address set forth herein.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owners' own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering of
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any Eligible Institution (as defined) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes,
with the signature thereon guaranteed by an Eligible Institution. If the Letter
of Transmittal or any Old Notes or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
Any financial institution that is a participant in the book-entry transfer
facility for the Old Notes, DTC, may make book-entry delivery of Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with DTC's procedures for such transfer,
including if applicable the procedures under the Automated Tender Offer Program
("ATOP"). Although delivery of Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be, or be deemed to be, transmitted to and received
and confirmed by the Exchange Agent at its address set forth below on or prior
to the Expiration Date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such procedures.
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<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel of the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth below under "Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder will also represent to the Company (i) that the
New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is the holder, (ii) that neither the holder nor any such person
has an arrangement or understanding with any person to participate in the
distribution of such New Notes and (iii) that neither the holder nor any such
other person is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company, or that if it is an "affiliate," it will comply with the
registration and prospective delivery requirements of the Securities Act to the
extent applicable.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or (iii) who cannot complete the procedures for book-entry
transfer of Old Notes to the Exchange Agent's account with DTC prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) On or prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of such Old
Notes (if possible) and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business trading days after the Expiration Date, (i) the Letter of Transmittal
(or facsimile thereof) together with the certificate(s) representing the Old
Notes and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, or (ii) that
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC
will be effected and confirmation of such book-entry transfer will be delivered
to the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered Old
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal, or confirmation of book-entry transfer of the Old Notes
into the Exchange Agent's account at DTC, are received by the Exchange Agent
within five
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business trading days after the Expiration Date. Upon request to the Exchange
Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to
tender their Old Notes according to the guaranteed delivery procedures set
forth above.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Exchange Offer:
The holder tendering Old Notes exchanges, assigns and transfers the Old
Notes to the Company and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
assigned, transferred and exchanged. The holder represents and warrants to the
Company and the Exchange Agent that (i) its has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire the New
Notes in exchange for the Old Notes, (ii) when the Old Notes are accepted for
exchange, the Company will acquire good and unencumbered title to the Old
Notes, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, (iii) it will, upon request, execute and
deliver any additional documents deemed by the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes and (iv) acceptance of any tendered Old Notes by the Company and the
issuance of New Notes in exchange therefor will constitute performance in full
by the Company of its obligations under the Registration Rights Agreement and
the Company will have no further obligations or liabilities thereunder to such
holders (except with respect to accrued and unpaid Liquidated Damages, if any).
All authority conferred by the holder will survive the death or incapacity of
the holder and every obligation of the holder will be binding upon the heirs,
legal representatives, successors, assigns, executors and administrators of the
holder.
Each holder will also certify that it (i) is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or that, if it
is an "affiliate," it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (ii) is acquiring
the New Notes in the ordinary course of its business and (iii) has no
arrangement with any person or intent to participate in, and is not
participating in, the distribution of the New Notes.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram telex,
facsimile transmission or letter indicating notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at DTC to be
credited with the withdrawn Old Notes or otherwise comply with DTC's
procedures. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for payment will be returned to the holder
thereof without cost to such holder as soon as practicable
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<PAGE>
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "Procedures for Tendering" at any time prior
to the Expiration Date.
UNTENDERED OLD NOTES
Holders of Old Notes whose Old Notes are not tendered or are tendered but
not accepted in the Exchange Offer will continue to hold such Old Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no
further obligations to such holders, other than the Initial Purchasers, to
provide for the registration under the Securities Act of the Old Notes held by
them. To the extent that Old Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Old Notes
could be adversely affected.
EXCHANGE AGENT
First Trust National Association, the Trustee under the Indenture, has
been appointed as Exchange Agent of the Exchange Offer. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail, By Facsimile:
by hand or by Overnight Courier:
First Trust National Association
First Trust National Association Attention: Corporate Trust Administration
180 East Fifth Street (612) 244-1145
St. Paul, Minnesota 55101 Confirm by Telephone:
Attention: Corporate Trust Administration (612) 244-0444
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers, regular employees
or agents of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and will pay the reasonable fees and expenses of holders in delivering their
Old Notes to the Exchange Agent.
The cash expenses of the Company to be incurred in connection with the
Company's performance and completion of the Exchange Offer will be paid by the
Company. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a
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<PAGE>
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Notes that were
not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and, accordingly,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act and applicable state
securities laws, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
Based on interpretations by the staff of the Commission with respect to similar
transactions, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder of such New Notes (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes and neither the holder nor any other person
is engaging in or intends to engage in a distribution of the New Notes. If any
holder has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, the holder (i)
could not rely on the applicable interpretations of the staff of the Commission
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account in exchange for Old Notes
must acknowledge that it will deliver a prospectus in connection with any
resale of its New Notes. See "Plan of Distribution." The New Notes may not be
offered or sold unless they have been registered or qualified for sale under
applicable state securities laws or an exemption from registration or
qualification is available and is complied with. The Company is required, under
the Registration Rights Agreement, to register the New Notes in any
jurisdiction requested by the holders, subject to certain limitations.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
Upon consummation of the Exchange Offer, holders of the Old Notes that
were not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and, accordingly,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. However, in the event the Company fails to
consummate the Exchange Offer or a holder of Old Notes notifies the Company in
accordance with the Registration Rights Agreement that it will be unable to
participate in the Exchange Offer due to circumstances delineated in the
Registration Rights Agreement, then the holder of the Old Notes will have
certain rights to have such Old Notes registered under the Securities Act
pursuant to the Registration Rights Agreement and subject to conditions
contained therein.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in it ordinary course of business
and has no arrangement or understanding with any person to participate in the
distribution
23
<PAGE>
of the New Notes to be received in the Exchange Offer. In this regard, the
Company will make each person participating in the Exchange Offer aware
(through this Prospectus or otherwise) that if the Exchange Offer is being
registered for the purpose of secondary resale, any holder using the Exchange
Offer to participate in a distribution of New Notes to be acquired in the
registered Exchange Offer (i) may not rely on the staff position enunciated in
Morgan Stanley and Co. Incorporated (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988) or similar letters and (ii) must
comply with registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in the Company's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company. The expenses of the Exchange Offer will be expensed over the term of
the New Notes.
24
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Old Notes in the Offering were
approximately $194.2 million (after deducting discounts to the Initial
Purchasers and estimated Offering expenses). The Company will not receive any
proceeds from the Exchange Offer. Approximately $82.4 million of the net
proceeds from the sale of the Old Notes in the Offering was used to repay
outstanding indebtedness under the Credit Facility and the remainder will be
used by the Company for general corporate purposes, including acquisitions,
working capital needs and capital expenditures. See "Description of Certain
Indebtedness."
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1997 on an actual basis and as adjusted to give effect to the
Offering and the application of the net proceeds therefrom. The following table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
-----------------------------
ACTUAL AS ADJUSTED
---------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ................................... $ 6,063 $ 117,277
======== ==========
Total debt:
Current maturities of debt ................................ $ 54,562 $ 54,562
Credit Facility(1) ........................................ 83,010 --
7 3/4% Series B Senior Subordinated Notes due 2008 ......... -- 199,724(2)
Other long-term debt ...................................... 11,485 11,485
-------- ------------
Total debt ............................................... 149,057 265,771
-------- ------------
Total stockholders' equity .................................. 180,731 180,731
-------- ------------
Total capitalization ........................................ $329,788 $ 446,502
======== ============
</TABLE>
- ----------------
(1) The Credit Facility provides for borrowings in a principal amount at any
time outstanding of up to $125.0 million. As of December 31, 1997,
borrowings under the Credit Facility bore interest at LIBOR (London
Interbank Offered Rate) plus 1.00% (6.96% at December 31, 1997).
Borrowings under this facility have been used for working capital
purposes, for capital expenditures and to fund acquisitions. See
"Description of Certain Indebtedness" and Note 5 of Notes to Consolidated
Financial Statements.
(2) Reflects the issuance of $200.0 million of Notes, net of $276,000 of
original issue discount.
25
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial information for each of the years in the
three year period ended December 31, 1997 has been derived from the Company's
consolidated financial statements. The information presented below should be
read in conjunction with, and is qualified in its entirety by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and the notes
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,(1)
---------------------------
1993 1994(2)
------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenue ............................................................ $ 74,728 $ 142,583
Cost of revenue .................................................... 51,763 105,451
Depreciation and amortization ...................................... 1,520 5,545
General and administrative expenses ................................ 15,681 20,595
-------- ---------
Operating income ................................................... 5,764 10,992
Interest expense ................................................... 302 3,846
Interest and dividend income ....................................... 359 1,550
Special charges--real estate and investment write-downs(4) ......... -- --
Other income, net(5) ............................................... 355 1,348
Equity in earnings (losses) of unconsolidated companies and minority
interest .......................................................... 1,177 247
Provision (benefit) for income taxes(6) ............................ 135 2,058
-------- ---------
Income from continuing operations(6) ............................... 7,218 8,233
Discontinued operations ............................................ -- 825
-------- ---------
Net income ......................................................... $ 7,218 $ 9,058
======== =========
OTHER DATA:
Capital expenditures ............................................... 3,120 6,028
Ratio of earnings to fixed charges(7) .............................. 25.3x 3.1x
<CAPTION>
YEARS ENDED DECEMBER 31,(1)
-----------------------------------
1995 1996(3) 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue ............................................................ $218,859 $534,068 $703,369
Cost of revenue .................................................... 158,598 394,497 522,470
Depreciation and amortization ...................................... 8,178 13,686 24,127
General and administrative expenses ................................ 28,918 72,392 90,995
-------- -------- --------
Operating income ................................................... 23,165 53,493 65,777
Interest expense ................................................... 5,306 11,940 11,920
Interest and dividend income ....................................... 3,501 3,480 1,921
Special charges--real estate and investment write-downs(4) ......... 23,086 -- --
Other income, net(5) ............................................... 2,250 2,553 8,221
Equity in earnings (losses) of unconsolidated companies and minority
interest .......................................................... (139) 3,133 (449)
Provision (benefit) for income taxes(6) ............................ (1,115) 14,665 21,015
-------- -------- --------
Income from continuing operations(6) ............................... 1,500 36,054 42,535
Discontinued operations ............................................ 2,531 (111) 129
-------- -------- --------
Net income ......................................................... $ 4,031 $ 35,943 $ 42,665
======== ======== ========
OTHER DATA:
Capital expenditures ............................................... 17,202 8,386 23,585
Ratio of earnings to fixed charges(7) .............................. 1.1x 4.7x 4.3x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ..................... $12,192 $ 26,233 $ 53,028 $165,211 $123,748
Property and equipment, net ......... 8,038 44,157 50,572 67,177 86,109
Total assets ........................ 32,988 155,969 191,272 511,154 587,598
Total debt .......................... 5,545 46,977 77,668 164,934 149,057
Total stockholders' equity .......... 16,396 52,271 60,614 116,983 180,731
</TABLE>
- ----------------
(1) Amounts have been restated to reflect the 1997 acquisitions of Wilde
Construction, Inc. and two related companies, and AIDCO, Inc. and one
related company, which were accounted for as poolings of interest. See
Note 2 of Notes to Consolidated Financial Statements.
(2) Includes the results of Burnup & Sims Inc. from March 11, 1994.
(3) Includes the results of Sintel from May 1, 1996.
(4) As a result of the disposal of non-core real estate assets and other
investments, the Company recorded $23.1 million in special charges in the
year ended December 31, 1995. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(5) In 1997, the Company sold a portion of its indirect interest in Conecel for
a gain of $7.1 million. See Note 2 of Notes to Consolidated Financial
Statements.
(6) Income from continuing operations excluded a pro forma adjustment for
income taxes related to companies which were S corporations and therefore
not subject to corporate federal income taxes.
(7) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income from continuing operations before income
taxes, plus fixed charges. Fixed charges consist of interest expense,
amortization of debt expense and the estimated interest component of
rental expense.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
MasTec is one of the world's largest contractors specializing in the
build-out of telecommunications and other utilities infrastructure. The
Company's business consists of the design, installation and maintenance of the
outside physical plant for telephone and cable television communications
systems and of integrated voice, data and video local and wide area networks
inside buildings, and the installation of central office telecommunications
equipment. The Company also provides infrastructure construction services to
the electric power industry and other public utilities.
MasTec was formed in March 1994 through the combination of Church & Tower
Inc. and Church & Tower of Florida, Inc. (collectively, "Church & Tower") and
Burnup & Sims Inc. ("Burnup & Sims"), two established names in the U.S.
telecommunications construction services industry. In April 1996, the Company
purchased Sintel, a company engaged in telecommunications infrastructure
construction services in Spain, Argentina, Chile and Peru, from Telefonica. The
Sintel acquisition gave the Company a significant international presence and
more than doubled the size of the Company in terms of revenue and number of
employees. In Argentina, Chile and Peru, the Company operates through
unconsolidated joint ventures in which it holds a 50% interest. See Notes 2 and
9 of Notes to Consolidated Financial Statements for pro forma financial
information and geographic information, respectively.
In July and August 1997, the Company acquired Wilde Construction, Inc. and
two related companies and AIDCO, Inc. and one related company (collectively,
the "Pooled Companies") through an exchange of common stock. The acquisitions
were accounted for as poolings of interest. Accordingly, the Company's
consolidated financial statements include the results of the Pooled Companies
for all periods presented. See Note 2 of Notes to Consolidated Financial
Statements.
In July 1997, the Company acquired a 51% interest in MasTec Inepar, a
Brazilian telecommunications infrastructure construction company. At the time
of the acquisition, MasTec Inepar had a backlog of construction contracts of
approximately $280.0 million. The results of MasTec Inepar are consolidated in
the results of the Company, net of a 49% minority interest, beginning August
1997.
During the year ended December 31, 1997, the Company completed nine other
acquisitions that have been accounted for under the purchase method of
accounting and the results of operations of which have been included in the
Company's consolidated financial statements from the respective acquisition
dates. The Company's pro forma results of operations for 1997, giving effect to
these acquisitions, would not differ materially from actual results.
On September 3, 1997, Sintel filed a petition with the Spanish labor
authorities to approve a restructuring of its workforce. In response to the
Company's petition, the unionized employees declared work stoppages during the
latter part of September 1997 and continued with half day strikes through the
first week in October 1997.
In March 1998, Sintel entered into an agreement with its unions to resolve
the labor dispute. Under, the agreement, the Company is entitled to permanently
reduce its workforce, beginning with the placement of 209 employees on
unemployment partly paid by the Spanish government for up to six months.
Additional voluntary terminations and the results of certain agreed upon
restructuring activities will allow the Company to quantify final severance
arrangements over that period. In addition, the agreement calls for reductions
in certain non-wage compensation and increases in productivity benchmarks. The
agreement also contemplates an increase in base wage rates for remaining union
workers. While management anticipates a reduction in ongoing operating costs to
result from these negotiations, the Company recognizes that it services an
increasingly competitive telephony industry in the Spanish market and a
substantial portion of any savings may be offset by more competitive prices to
27
<PAGE>
Telefonica and other communication service customers. As of December 31, 1997,
the Company had not reserved for possible restructuring costs associated with a
settlement of the Sintel labor situation in its consolidated financial
statements. The Company is currently negotiating with its unions to determine
the final number of employees and related severance amounts. The ultimate
amount to be paid, which is expected to be significant, cannot be presently
quantified.
RESULTS OF OPERATIONS
Revenue is generated primarily from telecommunications and other utilities
infrastructure services. Infrastructure services are provided to telephone
companies, public utilities, cable television operators, other
telecommunications providers, governmental agencies and private businesses.
Costs of revenue includes subcontractor costs and expenses, materials not
supplied by the customer, fuel, equipment rental, insurance, operations payroll
and employee benefits. General and administrative expenses include management
salaries and benefits, rent, travel, telephone and utilities, professional fees
and clerical and administrative overhead.
The following table sets forth certain historical consolidated financial
data as a percentage of revenue for the years ended December 31, 1995, 1996 and
1997.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue .................................................................. 100.0% 100.0% 100.0%
Costs of revenue ......................................................... 72.5 73.9 74.3
Depreciation and amortization ............................................ 3.7 2.6 3.4
General and administrative expenses ...................................... 13.2 13.6 12.9
----- ----- -----
Operating income ......................................................... 10.6 9.9 9.4
Interest expense ......................................................... 2.4 2.2 1.7
Interest and dividend income, other income, net, equity in earnings of
unconsolidated companies
and minority interest .................................................. 2.6 1.7 1.4
Special charges--real estate and investment
write-downs ............................................................ 10.6 -- --
----- ----- -----
Income from continuing operations before provision for income taxes ...... 0.2 9.4 9.1
Provision for income taxes(1) ............................................ 0.1 3.2 3.4
----- ----- -----
Income from continuing operations ........................................ 0.1% 6.2% 5.7%
===== ===== =====
</TABLE>
- ----------------
(1) Provision for income taxes has been adjusted to reflect a tax provision for
companies which were S corporations and therefore not subject to corporate
federal income taxes.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Revenue from domestic operations increased $75.1 million, or 21.7%, to
$421.0 million in 1997 as compared to $345.9 million in 1996. Domestic growth
was generated by acquisitions. Revenue generated by international operations
increased $94.2 million, or 50.1%, to $282.4 million in 1997 as compared to
$188.2 million in 1996 due primarily to the inclusion of Sintel's results for
the entire period in 1997 compared to eight months in the 1996 period and the
results of MasTec Inepar for five months ended December 31, 1997, which totaled
$74.9 million. Sintel's revenue was negatively impacted in 1997 by an 18%
devaluation in the Spanish peseta and by work stoppages in the second half of
1997 as discussed in "Overview."
Gross profit (revenue less cost of revenue), excluding depreciation and
amortization, increased $41.3 million, or 29.6%, to $180.9 million, or 25.7% of
revenue in 1997 as compared to $139.6 million, or 26.1% of revenue in 1996. The
decrease in gross profit as a percentage of revenue was due primarily to lower
margins generated by international operations. Domestic gross margins (gross
profit as a
28
<PAGE>
percentage of revenue) increased to 27.4% in 1997 from 25.1% in 1996 primarily
due to the performance of certain higher margin domestic jobs during 1997 and
domestic costs reductions. There can be no assurance that the Company will be
able to obtain higher margin jobs and implement further costs reductions in the
future. International gross margins decreased to 23.2% in 1997 as compared to
28.0% in 1996 due to overall lower margins from the Company's newly formed
Brazilian operations (15%) and lower productivity in the second half of 1997
from the Company's Spanish operations.
Depreciation and amortization increased $10.4 million, or 75.9%, to $24.1
million in 1997 from $13.7 million in 1996. The increase in depreciation and
amortization was a result of increased capital expenditures in the latter part
of 1996, as well as depreciation and amortization associated with acquisitions.
As a percentage of revenue, depreciation and amortization was 3.4% and 2.6% of
revenue for 1997 and 1996, respectively.
General and administrative expenses increased $18.6 million, or 25.7%, to
$91.0 million, or 12.9% of revenue for 1997 from $72.4 million, or 13.6% of
revenue for 1996. Domestic general and administrative expenses were $49.9
million, or 11.9% of domestic revenue in 1997, compared to $41.4 million, or
12.0% of domestic revenue for 1996. The increase in dollar amount of domestic
general and administrative expenses is due primarily to acquisitions. The
decline as a percentage of domestic revenue is due primarily to the higher
revenue volume. International general and administrative expenses increased
$10.1 million, or 32.6%, to $41.1 million, or 14.6% of international revenue in
1997 from $31.0 million, or 16.5% of international revenue for 1996. The
increase in international general and administrative expenses was due to the
inclusion of Sintel's results for the entire 1997 period, compared to only
eight months during the 1996 period. The decline in international general and
administrative expenses as a percentage of international revenue is due to a
lower general and administrative expense for the Brazilian operation, which was
2.2% of Brazilian revenue.
Operating income increased $12.3 million, or 23.0%, to $65.8 million, or
9.4% of revenue in 1997 from $53.5 million, or 9.9% of revenue in 1996.
Interest expense remained constant at $11.9 million for both periods,
primarily due to the lower interest rates on Spanish and domestic borrowings
and the conversion of the Company' s 12% Subordinated Convertible Debentures
into Common Stock on June 30, 1996. Offsetting the decline was the inclusion of
interest expense associated with Sintel's working capital needs for the entire
1997 period compared to eight months for the 1996 period. The Company
anticipates increased interest expense as a result of its recently completed
bond offering. See "--Financial Condition, Liquidity and Capital Resources."
Included in other income for 1997, is a $7.1 million gain on sale of the
Company's indirect interest in Conecel (See Note 2 of Notes to Consolidated
Financial Statements).
Provision for income taxes on a pro forma basis was $23.6 million, or
36.9% of income from continuing operations before equity in earnings of
unconsolidated companies, taxes and minority interests in 1997, compared to
$17.5 million, or 36.8% of income from continuing operations before equity in
earnings of unconsolidated companies, taxes and minority interests in 1996.
Income from continuing operations on a pro forma basis increased $6.7
million, or 20.2%, from $33.2 million in 1996 to $39.9 million in 1997. Income
from continuing operations on a pro forma basis as a percentage of revenue
decreased to 5.7% in 1997 from 6.2% in 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenue increased $315.2 million, or 144.0%, to $534.1 million for the
year ended December 31, 1996 from $218.9 million for the year ended December
31, 1995. Domestic revenue increased $127.0 million, or 58.0%, to $345.9
million for 1996 from $218.9 million for 1995, primarily due to growth in
revenue generated from existing contracts and to domestic acquisitions
completed in 1996 which
29
<PAGE>
generated $23.5 million in revenue. International revenue, comprised of revenue
from Sintel, which the Company acquired in April 1996, contributed $188.2
million of revenue for the year ended December 31, 1996.
Gross profit (revenue less cost of revenue), excluding depreciation and
amortization, increased $79.3 million, or 131.5%, to $139.6 million, or 26.1%
of revenue, for the year ended December 31, 1996 from $60.3 million, or 27.5%
of revenue, for the year ended December 31, 1995. Domestic gross margins (gross
profit as a percentage of revenue) decreased to 25.1% for the year ended
December 31, 1996 from 27.5% for the year ended December 31, 1995. The decline
in domestic gross margins was primarily due to additional start-up and
expansion costs relating to the rapid growth in revenue. International gross
margins were 28.0% for the year ended December 31, 1996.
Depreciation and amortization increased $5.5 million, or 67.1%, to $13.7
million for the year ended December 31, 1996 from $8.2 million for the year
ended December 31, 1995. Domestic depreciation and amortization as a percentage
of domestic revenue decreased to 3.4% for 1996 from 3.7% for 1995 due to
economies of scale obtained over a larger domestic revenue base. International
depreciation and amortization was 1.1% of international revenue for the year
ended December 31, 1996, as the Company's international operations are less
capital intensive than the Company's domestic operations.
General and administrative expenses increased $43.5 million, or 150.5%, to
$72.4 million, or 13.6% of revenue, for the year ended December 31, 1996 from
$28.9 million, or 13.2% of revenue for the year ended December 31, 1995.
Domestic general and administrative expenses increased $12.5 million, or 43.3%,
to $41.4 million, or 12.0% of domestic revenue, for 1996 from $28.9 million, or
13.2% of domestic revenue in 1995. The decrease in domestic general and
administrative expenses as a percentage of domestic revenue is primarily the
result of spreading overhead expenses over a broader revenue base. Included in
domestic general and administrative expenses for 1996 and 1995 are salaries and
bonuses for employees of the Pooled Companies of approximately $6.1 million and
$3.8 million, respectively. International general and administrative expenses
were $31.0 million, or 16.5% of international revenue, for the year ended
December 31, 1996.
Operating income increased $30.3 million, or 130.6%, to $53.5 million, or
9.9% of revenue, for the year ended December 31, 1996 from $23.2 million, or
10.6% of revenue, for the year ended December 31, 1995. The decline in
operating income as a percentage of revenue was due to the decline in domestic
gross margins in 1996 and bonuses earned by employees of the Pooled Companies.
Interest expense increased $6.6 million, or 124.5%, to $11.9 million for
the year ended December 31, 1996 from $5.3 million for the year ended December
31, 1995 primarily due to borrowings used for equipment purchases and to fund
investments in unconsolidated companies, offset in part by the conversion of
the Company's 12% Subordinated Convertible Debentures into Common Stock on June
30, 1996.
As a result of the decision to accelerate the disposal of certain non-core
real estate assets and other investments, the Company recorded $23.1 million in
special charges during the year ended December 31, 1995. The Company recorded a
special charge of $15.4 million in the third quarter of 1995 to adjust the
carrying values of its real estate investments to estimated net realizable
value based on offers received by the Company to dispose of certain real estate
in bulk transaction. The original value assigned to the real estate investments
contemplated the disposition of the properties on an individual basis and no
consideration had previously been given to a bulk sale. In the fourth quarter
of 1995, the Company recorded an additional charge of $7.7 million to reflect
the value realized upon a sale of certain real estate and the Company's
preferred stock investment in early 1996. These assets were sold at prices and
in a manner designed to facilitate their immediate disposal so that the Company
could concentrate its resources on its core telecommunications construction
business.
Income from continuing operations after a pro forma tax provision
increased to $33.2 million, or 6.2% of revenue, for the year ended December 31,
1996 from $0.2 million for the year ended December 31, 1995 which included a
special charge of $23.1 million.
30
<PAGE>
In the third quarter of 1995, the Company adopted a plan to dispose of
certain non-core businesses acquired as a result of the acquisition of Burnup &
Sims in March 1994. See Note 13 of Notes to Consolidated Financial Statements.
These businesses included the operations of a printing company, a theater chain
and an uninterrupted power supply assembler. During 1995, the Company sold the
assets of the theater chain and the assembler. The two transactions netted a
gain of $7.4 million after tax. The remaining theater operations have been
closed and are currently being marketed for sale for the underlying real estate
value. Based on the estimated net realizable value of these businesses, a loss
on disposition of approximately $6.4 million, net of tax, relating to the
remaining discontinued operations was recorded in 1995. The Company sold the
printing company in January 1997 for its carrying value.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenue increased $76.3 million, or 53.5%, to $218.9 million for the year
ended December 31, 1995 from $142.6 million for the year ended December 31,
1994, primarily due to expansion into new contract areas and the full year's
effect in 1995 of acquisitions completed in 1994.
Gross profit (revenue less costs of revenue), excluding depreciation and
amortization, increased $23.2 million, or 62.5%, to $60.3 million, or 27.5% of
revenue, for the year ended December 31, 1995 from $37.1 million, or 26.0% of
revenue, for the year ended December 31, 1994 primarily due to improved
operating efficiencies, improved productivity due to the use of more modern
equipment and the renegotiation of an unprofitable master contract assumed in
one of the Company's acquisitions.
Depreciation and amortization increased $2.7 million, or 49.1%, to $8.2
million for the year ended December 31, 1995 from $5.5 million for the year
ended December 31, 1994 due to a fleet replacement program and an increase in
capital expenditures resulting from expansion into new contract areas. As a
percentage of revenue, depreciation and amortization expense was 3.7% for 1995
and 3.9% for 1994.
General and administrative expenses increased $8.3 million, or 40.3%, to
$28.9 million, or 13.2% of revenue, for the year ended December 31, 1995 from
$20.6 million, or 14.4% of revenue, for the year ended December 31, 1994.
General and administrative expenses decreased as a percentage of revenue as a
result of spreading overhead expenses over a broader revenue base.
Operating income increased $12.2 million, or 110.9%, to $23.2 million, or
10.6% of revenue, for the year ended December 31, 1995 from $11.0 million, or
7.7% of revenue, for the year ended December 31, 1994.
Interest expense increased $1.5 million, or 39.5%, to $5.3 million for the
year ended December 31, 1995 from $3.8 million for the year ended December 31,
1994 primarily due to borrowings used for equipment purchases, to fund a loan
to the holding company of an Ecuadorian cellular phone company and to make
investments in unconsolidated companies.
As a result of the disposal of non-core real estate assets and other
investments, the Company recorded $23.1 million in special charges during the
year ended December 31, 1995.
Income from continuing operations after a pro forma tax provision was $0.2
million for the year ended December 31, 1995, compared to income from
continuing operations of $6.8 million, or 4.7% of revenue, for the year ended
December 31, 1994.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are for working capital, to finance
acquisitions and capital expenditures and to service the Company's
indebtedness. The Company's primary sources of liquidity have been cash flow
from operations, borrowings under revolving lines of credit and the proceeds
from the sale of investments and non-core assets.
Net cash provided by operating activities for the year ended December 31,
1997 was $23.1 million, compared to $41.9 million for the year ended December
31, 1996. This decrease was due to fluctuations
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in working capital, particularly a reduction of accounts payable balances
company-wide and an increase in accounts receivable and unbilled revenue from
Brazilian operations, offset by an increase in net income to $42.7 million for
the year ended December 31, 1997 as compared to net income of $35.9 million in
the comparative 1996.
Net cash provided by the sale of investments and non-core assets amounted
to $29.6 million for 1997 compared to $9.4 million for 1996. The Company
invested cash, net of cash acquired, in acquisitions and investments in
unconsolidated companies totaling $50.2 million during 1997 compared to $6.2
million in 1996. During 1997, the Company made capital expenditures of $23.6
million, primarily for machinery and equipment used in the production of
revenue, compared to $8.4 million in 1996.
As of December 31, 1997, working capital totaled $123.7 million, compared
to working capital of $136.2 million at December 31, 1996, excluding a note
receivable of $29.0 million which was converted into an investment, a portion
of which was sold in December 1997. See Note 2 of Notes to Consolidated
Financial Statements. Included in working capital are net assets of
discontinued operations of $4.2 million and real estate held for sale totaling
$10.9 million.
In December 1997, the Company sold its indirect investment in Consorcio
Ecuatoriano de Telecomunicaciones, S.A. ("Conecel"), an Ecuadorian cellular
phone company, for $20.0 million in cash and the right to receive shares of
Conecel non-voting common stock. The Company will have certain registration
rights with respect to the Conecel common stock that it receives. A gain of
$4.4 million, net of tax, was recognized based on the percent of cash received
to the total transaction value. In September 1997, the Company agreed to sell a
portion of its interest in Supercanal for $20.0 million in cash. In January
1998, the Company elected to retain its entire interest in Supercanal and
terminated the agreement.
The Company continues to pursue a strategy of growth through acquisitions
and internal expansion. In July 1997, the Company closed its acquisition of 51%
of MasTec Inepar for stock and $29.4 million in cash payable over eleven
months. In addition, in connection with its acquisition of Sintel, the Company
is required to make payments of 1.8 billion pesetas (approximately $11.8
million at the exchange rate in effect at December 31, 1997) on each of
December 31, 1997 and 1998. The Company has paid a portion of the December 31,
1997 payment, with the remaining amounts to be paid pending resolution of
offsetting amounts between the Company and Telefonica. See Note 2 of Notes to
Consolidated Financial Statements. The Company believes that cash generated
from operations, borrowings under its Credit Facility and proceeds from the
sale of investments and non-core assets will be sufficient to finance these
payments, as well as the Company's working capital needs, capital expenditures
and debt service obligations for the foreseeable future. Future acquisitions
are expected to be financed from these sources, as well as other external
financing sources to the extent necessary, including the issuance of equity
securities and additional borrowings.
In June 1997, the Company refinanced its domestic credit facility with the
$125.0 million Credit Facility. Borrowings under this facility may be used for
domestic acquisitions, working capital, capital expenditures and general
corporate purposes. At December 31, 1997, borrowings under this facility
totaled $83.0 million and standby letters of credit issued pursuant to this
facility totaled approximately $3.5 million. The Company used a portion of the
proceeds from the Offering to repay all outstanding borrowings under the Credit
Facility other than outstanding letters of credit. After giving effect to the
Offering and the application of the net proceeds therefrom, the Company had
approximately $121.5 million of borrowing available under the Credit Facility.
The Credit Facility contains certain covenants which, among other things,
restrict the payment of dividends, limit the Company's ability to incur
additional debt, create liens, dispose of assets, merge or consolidate with
another entity or make other investments or acquisitions, and provide that the
Company must maintain minimum amounts of stockholders' equity and financial
ratio coverages requiring, among other things, minimum ratios at the end of
each fiscal quarter of debt to earnings, earnings to interest expense and
accounts receivable to trade payables. See "Description of Certain
Indebtedness" and Note 5 of Notes to Consolidated Financial Statements.
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The Company conducts business in several foreign currencies that are
subject to fluctuations in the exchange rate relative to the U.S. dollar. The
Company does not enter into foreign exchange contracts. It is the Company's
intent to utilize foreign earnings in the foreign operations for an indefinite
period of time. In addition, the Company's results of operations from foreign
activities are translated into U.S. dollars at the average prevailing rates of
exchange during the period reported, which average rates may differ from the
actual rates of exchange in effect at the time of the actual conversion into
U.S. dollars. The Company currently has no plans to repatriate significant
earnings from its international operations.
The Company's current and future operations and investments in certain
foreign countries are generally subject to the risks of political, economic or
social instability, including the possibility of expropriation, confiscatory
taxation, hyper-inflation or other adverse regulatory or legislative
developments, or limitations on the repatriation of investment income, capital
and other assets. The Company cannot predict whether any of such factors will
occur in the future or the extent to which such factors would have a material
adverse effect on the Company's international operations.
YEAR 2000
The Company believes that a significant portion of its computer systems
are year 2000 compliant and is in the process of assessing the balance of its
systems. The Company intends to communicate with its customers, suppliers,
financial institutions and others with which it does business to ensure that
any year 2000 issue will be resolved timely. This issue affects computer
systems that have time-sensitive programs that may not properly recognize the
year 2000. If necessary modifications and conversions by those with which the
Company does business are not completed timely or if all of the Company's
systems are not year 2000 compliant, the year 2000 issue may have a material
adverse effect on the Company's consolidated financial position, results of
operations or liquidity.
SEASONALITY
The Company's domestic operations have historically been seasonally weaker
in the first and fourth quarters of the year and have produced stronger results
in the second and third quarters. Sintel has experienced seasonal weakness in
the first quarter, but has produced relatively strong results in the fourth
quarter. This seasonality is primarily the result of customer budgetary
constraints and preferences and, to a lesser extent, the effect of winter
weather on outside plant activities. Certain U.S. customers, particularly the
RBOCs, tend to complete budgeted capital expenditures before the end of the
year and defer additional expenditures until the following budget year.
Telefonica, the Company's principal international customer, has historically
rushed to complete budgeted expenditures in the last quarter. Revenue from
MasTec Inepar is not expected to fluctuate seasonally.
IMPACT OF INFLATION
The primary inflationary factor affecting the Company's operations is
increased labor costs. The Company has not experienced significant increases in
labor costs to date. Competition for qualified personnel could increase labor
costs for the Company in the future. As a result of the Company's recent
increase in international activities, it may, at times in the future, operate
in countries that may experience high inflation.
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BUSINESS
GENERAL
MasTec is one of the world's largest contractors specializing in the
design, installation and maintenance of infrastructure for the
telecommunications and other utilities industry. The Company's business
consists of the installation of aerial and underground copper, coaxial and
fiber optic cable networks as well as wireless antenna networks ("outside plant
services"). The Company believes it is the largest independent contractor for
these systems in the United States and Spain, and one of the largest in
Argentina, Brazil, Chile and Peru. The Company also installs central office
switching equipment, and designs, installs and maintains integrated voice, data
and video local and wide area networks inside buildings ("inside wiring").
Clients for the Company's services include major domestic and international
telecommunication service providers such as the RBOCs, other incumbent and
competitive local exchange carriers, cable television operators, long-distance
operators and wireless phone companies. The Company also provides
infrastructure construction services to the electric power industry and other
public utilities.
MasTec has experienced significant and consistent growth as a result of
favorable trends in the telecommunications industry, its ability to identify
and integrate strategic acquisitions and its competitive position as one of the
largest providers of infrastructure services. The Company's revenue has
increased from $142.6 million in 1994 to $703.4 million in 1997. The Company
expects to continue to grow through additional strategic acquisitions as well
as through internal expansion. Since January 1996, the Company has completed 16
domestic and three foreign acquisitions and actively continues to pursue
complimentary acquisitions in the highly fragmented infrastructure services
industry. Internal growth is expected to be driven by the expansion of the
global telecommunications and power distribution industries resulting from (i)
continued global deregulation, which is allowing numerous new service providers
to enter the marketplace and is increasing the competitive pressure on existing
participants to upgrade and expand their networks; (ii) increasing consumer
demand for advanced communications services which require the upgrading of
existing infrastructure to handle increased bandwidth needs; and (iii)
increasing reliance on outsourcing of infrastructure needs to full service
contractors by service providers in an effort to reduce costs and focus on
their core competencies.
COMPETITIVE STRENGTHS
The Company seeks to differentiate itself from its competitors through the
following characteristics:
STRONG CUSTOMER RELATIONSHIPS. Founded in 1929, the Company has developed
strong relationships with numerous telecommunications service providers by
providing high quality services in a cost and time efficient manner. The
Company has been providing services to Telefonica and BellSouth, its two
largest customers, since 1950 and 1969, respectively, and maintains similar
long-term relationships with many of its other customers. For the year ended
December 31, 1997, the Company derived approximately 26% and 12% of its revenue
from services performed for Telefonica and BellSouth, respectively. MasTec
currently has 23 multi-year service contracts with Telefonica, the RBOCs and
other telecommunications service providers for certain of their outside plant
requirements up to a specific dollar amount per job and within certain
geographic areas.
DIVERSE CUSTOMER BASE. MasTec provides a full range of infrastructure
services to a diverse customer base. Domestically, the Company provides outside
plant services to local exchange customers such as BellSouth, US West
Communications, Inc., SBC Communications, Inc., United Telephone Company of
Florida, Inc. (a subsidiary of Sprint) and GTE Corporation. The Company also
provides outside plant services to competitive local exchange carriers such as
MFS Communications Company, Inc., Sprint Metropolitan Networks, Inc. and MCI
Metro, Inc. (the local telephone subsidiaries of Sprint and MCI, respectively),
cable television operators such as Time Warner Inc., Cox Communications, Inc.
and Marcus Cable Company, long distance carriers such as MCI and Sprint, and
wireless
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communications providers such as PrimeCo Personal Communications LP and Sprint
Spectrum, L.P. Internationally, the Company provides outside plant services,
turn-key switching systems installation and inside wiring services primarily to
Telefonica, the principal telephone company in Spain, and Telefonica's
affiliates in Argentina, Chile and Peru. The Company also services the local
telephone subsidiaries of Telebras, the Brazilian government-owned
telecommunications system, in Sao Paulo, Rio de Janeiro, Parana and other
states in the more populous and developed Southern region of Brazil, as well as
CRT, the local telephone company in Rio Grande do Sul which is partly owned by
Telefonica. For the year ended December 31, 1997, the Company derived
approximately 11% of its revenue from services performed for Telebras.
The Company renders inside wiring services nationwide to large corporate
customers with multiple locations such as First Union National Bank, IBM and
Dean Witter Reynolds Inc., and to universities and health care providers.
TURN-KEY CAPABILITIES. The Company believes it is one of the few
contractors capable of providing all of the design, installation and
maintenance services necessary for a cable or wireless network starting from a
transmission point, such as a central office or head-end, and running
continuously through aerial and underground cables to the ultimate end users'
voice and data ports, cable outlets or cellular stations. The Company can also
install the switching devices at a central office or set up local and wide area
voice, data and video networks to expand a business' telecommunications
infrastructure both inside a specific structure or between multiple structures.
The Company believes that its customers increasingly are seeking
comprehensive solutions to their infrastructure needs by turning to fewer
qualified contractors who have the size, financial capability and technical
expertise to provide a full range of infrastructure services. The Company
believes that this trend will accelerate as industry consolidations increase
and as these consolidated entities begin to provide bundled services to end
users. The Company believes it has positioned itself through acquisitions and
internal growth as a full service provider of outside plant and inside wiring
infrastructure services to take advantage of this trend.
BROAD GEOGRAPHIC PRESENCE. The Company has significantly broadened its
geographic presence in recent years through strategic acquisitions.
Domestically, MasTec has expanded beyond its historical base in the
Southeastern United States and currently has operations in more than 30 states
in the Southeast, mid-Atlantic, Southwest, West and upper Midwest regions of
the country. The Company also substantially increased its international
operations through the acquisition, in April 1996, of Sintel, the largest
telecommunications infrastructure contractor in Spain, and through the
acquisition, in July 1997, of a majority interest in MasTec Inepar, a leading
telecommunications construction company in Brazil. Due to its broad geographic
presence, the Company believes that it is well suited to service customers with
operations across the United States as well as companies that are active in
multiple areas of the world such as multinational corporations and
telecommunications service providers that are expanding into international
markets. In addition, by developing business in many geographic regions, the
Company believes it is less susceptible to changes in the market dynamics in
any one region.
GROWTH STRATEGY
The Company is pursuing a disciplined strategy of growth and
diversification in its core business through strategic acquisitions and
internal expansion as follows:
STRATEGIC ACQUISITIONS. The Company plans to continue to pursue strategic
acquisitions in the fragmented telecommunications and utilities infrastructure
industry that either expand its geographic coverage and customer base or
broaden the range of services it can offer to clients. The Company focuses its
acquisition efforts primarily on companies with successful track records and
strong management. The Company has acquired 19 companies since January 1996 and
has significant experience in identifying, purchasing and integrating
telecommunications infrastructure businesses both domestically and
internationally. Management believes that MasTec is able to improve the
acquired
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companies' operating performance by providing strategic guidance,
administrative support, greater access to capital and savings in the cost of
capital purchasing and insurance costs.
INTERNAL EXPANSION. The Company believes it is poised to capitalize on the
anticipated growth in its industry due to its status as one of the world's
largest telecommunications infrastructure contractors and its strong customer
relationships. The International Telecommunications Union estimates that
between 1996 and 2000 telecommunications infrastructure investment will exceed
$50 billion in the United States and $600 billion worldwide. In addition, the
Company believes that the RBOCs and other utilities in the United States, which
still conduct a significant portion of their construction work in-house, will
out-source more infrastructure construction in the future in response to
competitive pressures to cut costs, streamline their operations and focus on
their core competencies. The Company believes that its reputation for quality
and reliability, operating efficiency, financial strength, technical expertise,
presence in key geographic areas and ability to offer a full range of
construction services make it well positioned to compete for this business,
particularly the larger, more technically complex infrastructure projects.
The Company also anticipates that its Brazilian operations will become a
more significant part of its operations. The Brazilian government has estimated
that approximately $75 billion will need to be invested over a seven year
period in order to modernize and expand Brazil's telecommunications
infrastructure. To accomplish this objective, the government has stated its
intention of deregulating and privatizing Brazil's telecommunications system.
The Company believes that, through MasTec Inepar, it is well positioned to
participate in this anticipated expansion.
In addition to focusing on its core telecommunications customers, the
Company plans to achieve incremental growth by continuing to develop
complementary lines of businesses. These businesses include the provision of
premise wiring services to corporations and infrastructure construction
services to the electric power industry and other public utilities.
SERVICES, MARKETS AND CUSTOMERS
The Company's principal business is the provision of telecommunications
and other utilities infrastructure construction services, consisting of both
outside plant services and inside wiring services. For the years ended,
December 31, 1995, 1996 and 1997, the percentage of the Company's total revenue
generated by outside plant services was 91%, 84%, and 84%, respectively, and by
inside wiring services was 9%, 16% and 16%, respectively. The Company operates
in North America, Spain, Argentina, Chile, Peru, and Brazil. See Note 9 of
Notes to Consolidated Financial Statements for a description of revenue,
operating profit and indentifiable assets attributable to the Company's North
American and International operations.
TELECOMMUNICATIONS CONSTRUCTION--NORTH AMERICAN/OPERATIONS
OUTSIDE PLANT CONSTRUCTION. The Company's principal domestic business
consists of outside plant services for telecommunications providers, including
incumbent and competitive local exchange carriers, cable television operators,
long-distance carriers and wireless communications providers. Outside plant
services consist of all of the services necessary to design, install and
maintain the physical facilities used to provide telecommunications services
from the provider's central office, switching center or cable headend to the
ultimate consumer's home or business. These services include the placing and
splicing of cable, the excavation of trenches in which to place the cable, the
placing of related structures such as poles, anchors, conduits, manholes,
cabinets and closures, the placing of drop lines from the main transmission
lines to the customer's home or business, and the maintenance and removal of
these facilities. The Company has developed expertise in directional boring, a
highly specialized and increasingly common method of placing buried cable
networks in congested urban markets without digging a trench.
The Company provides a full range of outside plant services to its
telecommunications company customers, although certain of the Company's
customers, principally the RBOCs, handle certain of
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these services in-house. The Company's customers generally supply materials
such as cable, conduit and telephone equipment, and the Company provides the
expertise, personnel, tools and equipment necessary to perform the required
installation and maintenance services.
The Company currently provides outside plant services primarily to
customers in Alabama, Alaska, Arizona, California, Colorado, Florida, Georgia,
Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, North Carolina, North
Dakota, South Dakota, South Carolina, Tennessee, Texas, Virginia and Wyoming,
as well as Ontario, Canada. Principal customers for telecommunications outside
plant services include BellSouth, US West Communications, Inc., SBC
Communications, Inc., the long distance and local exchange subsidiaries of both
MCI and Sprint, GTE Corp., MFS Communications Company, Inc., Time Warner Inc.,
Cox Communications, Inc. and Marcus Cable Company.
Services rendered to the Company's incumbent local exchange customers,
including BellSouth, are performed primarily under master contracts, which
typically are exclusive service contracts to provide all of the carrier's
outside plant requirements up to a specified dollar amount per job and within
certain geographic areas. These contracts generate revenue ranging between $3.0
million and $30.0 million over their respective terms, generally two to three
years. Such contracts are typically subject to termination at any time upon 90
to 180 days prior notice to the Company. Each master contract contemplates
hundreds of individual construction and maintenance projects generally valued
at less than $100,000 each. These contracts typically are awarded on a
competitive bid basis, although customers are sometimes willing to negotiate
contract extensions beyond their original terms without opening them up to bid.
The Company currently has 20 master contracts with telecommunications customers
covering defined regions within the United States, including 12 with BellSouth.
In addition to services rendered pursuant to master contracts, the Company
provides outside plant services on individual projects awarded on a competitive
bid basis or through individual negotiation. While such projects generally are
substantially larger than the individual projects covered by master contracts,
they typically require the provision of services identical to those rendered
under master contracts.
The Company also provides turn-key site acquisition, design, installation
and maintenance services to the wireless communications industry, including
site acquisition and preparation, design and construction of communications
towers, placement of antennas and associated wiring, and construction of
equipment huts.
The Company provides outside plant construction services to electric power
companies and other public utilities, including the City of Austin Electric
Department, City Public Service of San Antonio, Duke Energy Corporation,
Florida Power and Light Company, Florida Power Corporation, Jacksonville
Electric Authority, Memphis Light, Gas and Water Division, Texas Utilities
Company, Carolina Power & Light Co., and Georgia Power Co., and a number of
regional electrical cooperatives. These services, which are substantially
similar to the outside plant services provided to telecommunications companies,
include directional boring for conduit and pipes, trenching, placing of
electric cables, and restoring asphalt and concrete surfaces. Services to many
of these customers are provided under exclusive master contracts with two to
three year initial terms expiring at various dates.
INSIDE PREMISES CONSTRUCTION. The Company provides design, installation
and maintenance of integrated voice, data and video networks inside buildings
for large companies with multiple locations such as First Union National Bank,
IBM and Dean Witter Reynolds Inc., for college campuses such as the University
of California at Riverside and the University of Miami and for health care
providers such as Carolina Medical Center and Kaiser Permanente. The Company
provides these services primarily on the east and west coasts of the United
States although the Company is capable of providing these services nationwide.
Inside wiring services consist of designing, installing and maintaining
local area networks and wide area networks linking the customers' voice
communications networks at multiple locations with their
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data and video services. This type of work is similar to outside plant
construction; both involve the placing and splicing of copper, coaxial and
fiber optic cables. Inside wiring is less capital intensive than outside plant
construction but requires a more technically proficient work force.
The Company contracts with primary contractors to provide services to
First Union National Bank and IBM under subcontracts that are similar to master
contracts in the outside plant business because they grant the Company the
exclusive right to provide inside wiring services to these customers within
certain geographic regions. The Company also provides inside wiring services on
individual projects that are awarded on a competitive bid basis or through
individual negotiation. The Company intends to take advantage of the
fragmentation of the inside wiring industry by marketing a full range of inside
wiring services to large corporations with multiple locations across the
country. The Company believes that these types of customers increasingly are
seeking a single vendor to provide all of their inside wiring.
The Company is one of two distributors in the United States, Canada and
Mexico of a fiber optic cable installation technology known as FutureFlex. This
technology allows the installation of individual strands of optical fiber by
means of compressed gas blown through flexible tubing without the necessity of
cutting or splicing the cable except at the terminal points. As a result, the
network can be expanded, changed or moved more easily and cost-effectively.
TELECOMMUNICATIONS CONSTRUCTION--INTERNATIONAL OPERATIONS
OVERVIEW. The Company is engaged in the telecommunications and other
utilities construction business internationally primarily in Argentina, Brazil,
Chile, Peru and Spain through Sintel and its affiliates and MasTec Inepar.
Sintel is a Spanish company, wholly-owned by the Company, that has provided
telecommunications construction services to Telefonica and Telefonica's
affiliates since 1950. Telefonica is the principal provider of local and long
distance telephony in Spain. Through its affiliate, Telefonica Internacional,
S.A., Telefonica owns interests in certain local telephone companies in
Argentina, Brazil, Chile and Peru. Through Sintel, the Company is the leading
provider of telecommunications infrastructure services to Telefonica and its
affiliates in Spain, and one of the leading providers of these services to
Telefonica's affiliates in Argentina, Chile and Peru.
The Company renders telecommunications construction services in Brazil
through MasTec Inepar, a Brazilian company owned 51% by the Company and 49% by
Inepar SA Industrias e Construcoes ("Inepar"), a leading telecommunications and
power infrastructure and equipment company in Brazil. MasTec Inepar was formed
in July 1997 to take advantage of construction opportunities created by the
privatization, de-monopolization and deregulation of the Brazilian
telecommunications market.
SPANISH OPERATIONS. In Spain, Sintel's principal business is providing
outside plant services, inside wiring services and equipment installation to
Telefonica and its affiliates. These services are substantially similar to
those provided by the Company in the United States. Sintel also installs
Telefonica telephone equipment in residences and businesses. Sintel's Spanish
operations are concentrated in Spain's largest commercial centers, Madrid,
Barcelona, Seville and Valencia, and surrounding areas, although Sintel
maintains a presence throughout Spain.
Sintel provides the largest percentage of Telefonica's outside plant
services requirements. Sintel provides the bulk of these services under three
separate multi-year comprehensive services contracts, which are similar to
master contracts in the United States, for distinct types of outside plant
services: (i) placement and splicing of communications lines; (ii) trenching
and placing of conduits; and (iii) placing of drop lines to residences and
businesses. These agreements set the unit prices at which Sintel will render
services to Telefonica and establish the percentage of Telefonica's
requirements in these categories that will be satisfied by Sintel in particular
geographic areas of Spain. These three contracts expire at the end of 1998; the
Company expects to negotiate new comprehensive services contracts with
Telefonica beginning in October 1998. Telefonica enters into similar agreements
with Sintel's principal competitors in Spain. The Company believes that
Telefonica considers various factors in awarding these contracts and setting
their terms, including price, quality, technical proficiency and the
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contractor's relationship with Telefonica. Telefonica also awards individual
projects through a competitive bidding process or through individual
negotiation.
In addition to outside plant services, Sintel provides inside wiring
services to Telefonica that are substantially similar to those provided by the
Company in the United States. Sintel also installs transmission equipment,
central office switching equipment, power generating equipment and cellular
equipment for telecommunications systems for Telefonica. This equipment
includes multiplexers, carrier systems and microwave systems, and central
office equipment such as frames, protectors, connector blocks, batteries and
power systems, and cellular antennas and cell sites. The contracts for this
work are awarded on a competitive bid basis or through individual negotiation.
Telefonica is the principal provider of local and long distance telephony
in Spain. As a result of European Union initiatives, Spain must liberalize its
telecommunications industry by December 1, 1998 to permit competitors to
Telefonica. In July 1997, a second license to provide public switched telephony
was awarded to Retevision, S.A. ("Retevision"), which is owned partly by the
Spanish government, Societa Finanziaria Telefonica per Azioni SpA ("STET"), an
Italian telephone company, and Empresa Nacional de Electricidad, S.A., a
Spanish electric utility company. Retevision has begun providing local
telephony in Spain in 1998 and a third local and long distance telephony
license is expected to be awarded by May 30, 1998. By December 1, 1998, it is
expected that the industry will be completely open to competition. The Company
believes that the increased competition in the Spanish telephony market will
increase demand for outside plant services in Spain as new service providers
build competing networks. The Company has commenced providing
telecommunications construction services to Retevision.
Sintel also installs and maintains cable television networks for
Telefonica and its affiliates and for Retevision. The Spanish cable television
market has been underdeveloped due to the lack of a legal structure for the
provision of cable telecommunications services in Spain. In 1997, a legal
structure for the provision of these services was completed and 21 new licenses
to provide cable television services have been awarded and applications for an
additional 13 licenses are pending. In addition, as of January 1, 1998, cable
operators are entitled to provide local telephony within their service areas as
well as long distance telephony. The Company anticipates that the demand for
construction services to the cable television industry will increase
significantly as new networks are constructed and existing networks are
upgraded. Sintel also has begun providing infrastructure services to the
electric power industry through a recently found joint venture with a Portugese
electrical contractor.
ARGENTINA, CHILE, PERU OPERATIONS. The Company operates in Argentina,
Chile and Peru through unconsolidated subsidiaries in which the Company holds a
50% interest. The other 50% interests in these subsidiaries are held by
established local infrastructure construction companies and operational control
is shared by the Company and its local partner. In Argentina and Chile, the
Company's partner is a subsidiary of Sociedad Macri, one of the largest
commercial groups in Argentina. In Peru, the Company's partner is a subsidiary
of Grana y Montero, S.A., a leading construction company in Peru. The principal
shareholder of Grana y Montero, S.A., is a shareholder and a director of
Telefonica del Peru. The Company's Latin American affiliates primarily provide
outside plant services, cable television installation and similar services to
Telefonica's local telephone company affiliate in each of the countries in
which the Sintel affiliate is located: Telefonica de Argentina in Argentina;
Compania de Telefonos de Chile in Chile; and Telefonica del Peru in Peru. As
part of the agreement with Sociedad Macri for the acquisition of its interest
in Sintel's Argentine affiliate, Sociedad Macri has contributed to the
affiliate certain of its telecommunications construction contracts with Telecom
de Argentina, S.A., the principal provider of local telephony in northern
Argentina.
BRAZILIAN OPERATIONS. MasTec Inepar, a Brazilian company, was formed in
July 1997 by the Company and Inepar. As part of the formation, Inepar
transferred the personnel, qualifications and other assets of its
telecommunications construction division to MasTec Inepar together with
contracts for specific projects with prices totalling approximately $280
million. These contracts cover the provision of outside plant services for the
local exchange subsidiaries of Telebras, the Brazilian government-owned
telecommunications company, particularly in Sao Paulo, Rio de Janeiro, Parana
and other states
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in the more populous and developed southern region of Brazil. MasTec Inepar
also provides services to CRT, the local telephone company in Rio Grande do Sul
which is partly owned by Telefonica. These services provided are principally
for wireless communications networks.
TELECOMMUNICATIONS INVESTMENTS AND OTHER ASSETS
The Company has invested in certain telecommunications businesses located
in or servicing Latin America. These include minority interests in Supercanal
Holding, S.A. ("Supercanal") and related entities, which operate a cable
television system in Argentina, and in Conecel, an Ecuadorian cellular company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company also recently acquired a license in Paraguay to
construct and operate a nationwide personal communication system ("PCS"), and
has reached agreement with Inepar, its partner in MasTec Inepar, and with
Sociedad Macri, its partner in Argentina and Chile, to share in development of
the system. The agreement with Inepar and Sociedad Macri regarding Paraguay
provides that MasTec Inepar will construct the system.
SALES AND MARKETING
Executives of the Company's outside plant subsidiaries market outside
plant services to existing and potential telecommunications and other utility
customers in order to negotiate new contracts or be placed on lists of vendors
invited to submit bids for master contracts and individual construction
projects. Inside premises services are marketed both by the executives of the
subsidiaries that provide these services and through commissioned salespeople
employed by the Company. The Company is developing a company-wide marketing
plan to emphasize the "MasTec" brand name to national and international
customers.
SUPPLIERS
The Company's customers supply the majority of the raw materials and
supplies necessary to carry out the Company's contracted work. The Company is
not dependent on any one supplier for any raw materials or supplies that the
Company obtains for its own account other than the FutureFlex airblown fiber
product that the Company distributes for Sumitomo Electric Lightwave Co.
COMPETITION
The industry in which the Company competes is highly competitive and
fragmented. The Company competes with a number of contractors in the markets in
which it operates, ranging from small independent firms servicing local markets
to larger firms servicing regional markets as well as with large national and
international equipment vendors on turn-key projects who subcontract
construction work to contractors other than the Company. These equipment
vendors typically are better capitalized and have greater resources than the
Company. Most companies engaged in the same or similar business tend to operate
in a specific, limited geographic area, although larger competitors may bid on
a particular project without regard to location. Although the Company believes
it is the largest provider of infrastructure services to the telecommunications
and other utilities industry in the United States and Spain and one of the
largest in Argentina, Brazil, Chile and Peru, neither the Company nor any of
its competitors can be considered dominant in the industry on a national or
international basis. The Company also faces competition from the in-house
construction and maintenance departments of RBOCs and other customers and
potential customers, which employ personnel who perform some of the same types
of services as those provided by the Company.
EMPLOYEES
As of December 31, 1997, the Company (excluding its unconsolidated
companies) had approximately 7,850 employees, 4,600 of whom are employed in
domestic operations and 3,250 of whom are employed in international operations.
Approximately 100 of the Company's domestic employees
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<PAGE>
and approximately 3,200 of Sintel's employees are unionized. See "Risk
Factors--Sintel Labor Relations" for a description of the current state of
labor relations at Sintel.
PROPERTIES
The Company's corporate headquarters are located in a 60,000 square foot
building owned by the Company in Miami, Florida. The Company also has regional
offices in owned facilities located in Tampa, Florida, Austin, Texas and
Charlotte, North Carolina. Sintel's principal executive offices are located in
leased premises in Madrid, Spain and MasTec Inepar's principal executive
offices are located in leased premises in Sao Paulo, Brazil.
The Company's principal operations are conducted from field offices,
equipment yards and temporary storage locations, none of which the Company
believes is material to its operations because most of the Company's services
are performed on the customers' premises or on public rights of way. In
addition, the Company believes that equally suitable alternative locations are
available in all areas where it currently does business.
LEGAL PROCEEDINGS
In December 1990, Albert H. Kahn, a stockholder of the Company, filed a
class action and derivative suit in Delaware state court against the Company,
the then-members of its Board of Directors and National Beverage Corporation
("NBC"), the Company's then-largest stockholder. The complaint alleges, among
other things, that the Company's Board of Directors and NBC breached their
respective fiduciary duties in approving certain transactions. The lawsuit
seeks to rescind these transactions and to recover damages in an unspecified
amount.
In November 1993, Mr. Kahn filed a class action and derivative complaint
against the Company, the then-members of its Board of Directors, and Jorge L.
Mas, Jorge Mas and Juan Carlos Mas, the principal shareholders of the Company.
The lawsuit alleges, among other things, that the Company's Board of Directors
and NBC breached their respective fiduciary duties by approving the terms of
the acquisition of the Company by the Mas family, and that the Mas family had
knowledge of the fiduciary duties owed by NBC and the Company's Board of
Directors and knowingly and substantially participated in the breach of these
duties. The lawsuit also claims derivatively that each member of the Company's
Board of Directors engaged in mismanagement, waste and breach of fiduciary
duties in managing the Company's affairs prior to the acquisition by the Mas
family.
There has been no activity in either of these lawsuits in more than one
year. The Company believes that the allegations in each of these lawsuits are
without merit and intends to defend these lawsuits vigorously.
In November 1997, Church & Tower, Inc., a wholly-owned subsidiary of the
Company ("Church & Tower"), filed a lawsuit against Miami-Dade County (the
"County") in the Circuit Court of the Eleventh Judicial Circuit in and for Dade
County, Florida alleging breach of contract and seeking damages exceeding $3.0
million in connection with the County's refusal to pay amounts due to Church &
Tower under a multi-year agreement to perform road restoration work for the
Miami-Dade Water and Sewer Department ("MWSD"), a department of the County, and
the County's wrongful termination of the agreement. The County has refused to
pay amounts due to Church & Tower under the agreement until alleged
overpayments under the agreement have been resolved, and has counterclaimed
against Church & Tower seeking damages. The Company believes the counterclaim,
if succesful, will not exceed $2.1 million. The County has also refused to
award a new road restoration agreement for MWSD to Church & Tower, which was
the low bidder for the new agreement. The Company believes that any amounts due
to the County under the existing agreement are not material and may be
recoverable in whole or in part from Church & Tower subcontractors who actually
performed the work and whose bills were submitted directly to the County.
The Company is a party to other pending legal proceedings arising in the
normal course of business, none of which the Company believes is material to
the Company's financial position or results of operations.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information with respect to the directors and
executive officers of the Company. The Board of Directors is divided into three
classes, the terms of which expire successively over a three year period.
Messrs. Laffer's and Sorzano's terms expire in 1998, Messrs. Mas' and Citron's
terms expire in 1999 and Mr. Abbott's term expires in 2000. Officers serve at
the discretion of the Company's Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------- ----- -----------------------------------------------
<S> <C> <C>
Jorge Mas 35 Chairman of the Board of Directors, President
and Chief Executive Officer
Henry N. Adorno 50 Executive Vice President and Special Counsel
Ismael Perera 49 Senior Vice President--Operations
Edwin D. Johnson 41 Senior Vice President--Chief Financial Officer
Carlos A. Valdes 34 Senior Vice President--Corporate Development
Jose M. Sariego 43 Senior Vice President--General Counsel
Eliot C. Abbott 47 Director
Joel-Tomas Citron 35 Director
Arthur B. Laffer 56 Director
Jose S. Sorzano 56 Director
</TABLE>
JORGE MAS has been President, Chief Executive Officer and a director of
the Company since March 1994 and was elected Chairman of the Board of Directors
of the Company in January 1998. Prior to that time and during the preceding
five years, Mr. Mas served as the President and Chief Executive Officer of
Church & Tower. In addition, Mr. Mas is the Chairman of the Board of Directors
of Neff Corporation, a company that sells and leases construction equipment,
Atlantic Real Estate Holding Corp., a real estate holding company, U.S.
Development Corp., a real estate development company and Santos Capital, Inc.,
a merchant banking firm (all private companies controlled by Mr. Mas) and,
during all or a portion of the past five years, has served as the President and
Chief Executive Officer of these corporations.
HENRY N. ADORNO was elected Executive Vice President and Special Counsel
of the Company in January 1998. Prior to joining the Company, Mr. Adorno was
President and Chief Executive Officer of Adorno & Zeder, P.A., a Miami law firm
that he co-founded in 1986.
ISMAEL PERERA has been Senior Vice President--Operations of the Company
since March 1994. From August 1993 until March 1994, he served as the Vice
President--Operations of Church & Tower. From 1970 until July 1993, Mr. Perera
served in various capacities in network operations for BellSouth, including
most recently as a Senior Director of Network Operations from 1985 to 1993.
EDWIN D. JOHNSON has been Senior Vice President--Chief Financial Officer
of the Company since March 1996. During the 10 years prior to joining the
Company, Mr. Johnson served in various capacities with Attwoods plc, a British
waste services company, including Chief Financial Officer and member of the
Board of Directors during the final three years of his employment with
Attwoods.
CARLOS A. VALDES has been Senior Vice President--Corporate Development of
the Company since March 1996. Prior to that time, Mr. Valdes was Senior Vice
President--Finance of the Company from March 1994 to March 1996 and Chief
Financial Officer of Church & Tower, Inc. from 1991 to 1994.
JOSE M. SARIEGO has been Senior Vice President--General Counsel of the
Company since September 1995. Prior to joining the Company, Mr. Sariego was
Senior Corporate Counsel and
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Secretary of Telemundo Group, Inc., a Spanish language television network, from
August 1994 to August 1995. From January 1990 to August 1994, Mr. Sariego was a
partner in the Miami office of Kelley Drye & Warren, an international law firm.
ELIOT C. ABBOTT has been a member of the Board of Directors since March
1994. From 1976 until September 1995, Mr. Abbott was a stockholder in the Miami
law firm of Carlos & Abbott. From October 1995 to January 1997, Mr. Abbott was
a member of the international law firm of Kelley Drye & Warren. Since February
1997, Mr. Abbott has been a partner in the firm of Kluger, Peretz, Kaplan,
Berlin, P.A.
JOEL-TOMAS CITRON was elected to the Board of Directors in January 1998.
Mr. Citron has been the managing partner of Triscope Capital LLC, a private
investment partnership, since January 1998. In addition, Mr. Citron has been
Chairman of the United States subsidiary of Proventus AB, a privately held
investment company based in Stockholm since 1992.
ARTHUR B. LAFFER has been a member of the Board of Directors since March
1994. Mr. Laffer has been Chairman of the Board of Directors of Laffer
Associates, an economic research and financial consulting firm, since 1979;
Chief Executive Officer, Laffer Advisors Inc., an investment advisor and
broker-dealer, since 1981; and Chairman of the Board of Directors, Calport
Asset Management, a money management firm, since 1992. Mr. Laffer is a director
of U.S. Filter Corporation, Nicholas Applegate mutual funds, and Coinmach
Laundry Corporation.
JOSE S. SORZANO has been a member of the Board of Directors since October
1994. Mr. Sorzano has been Chairman of the Board of Directors of The Austin
Group, Inc., an international corporate consulting firm, since 1989. Mr.
Sorzano was also Special Assistant to the President for National Security
Affairs from 1987 to 1988; Associate Professor of Government, Georgetown
University, from 1969 to 1987; President, Cuban American National Foundation,
from 1985 to 1987; and Ambassador and U.S. Deputy to the United Nations from
1983 to 1985.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company.
CREDIT FACILITY
The Company and its principal domestic subsidiaries maintain a $125.0
million revolving credit facility with a syndicate of banks led by BankBoston,
N.A. (the "Credit Facility"). The Company may use borrowings under the Credit
Facility for acquisitions, capital expenditures, working capital and general
corporate purposes, subject to certain restrictions. The Credit Facility
expires on June 9, 2000 unless extended until no later than June 9, 2002 as
provided in the Credit Facility. Interest on amounts outstanding under the
Credit Facility bear interest at a rate per annum equal to the prime rate, as
announced by BankBoston, N.A., or at the Company's option, LIBOR plus the
applicable LIBOR margin, currently 1.00%. The Credit Facility is secured by a
pledge of the stock of the Company's principal domestic subsidiaries as well as
a portion of the stock of Sintel. At December 31, 1997, borrowings under this
facility totaled $83.0 million. The Company used a portion of the proceeds of
the Offering to repay all outstanding borrowings under the Credit Facility, as
a result of which approximately $121.5 million of borrowings were available
under the Credit Facility.
The Credit Facility contains certain covenants which, among other things,
restrict the payment of dividends, limit the Company's ability to incur
additional debt, create liens, dispose of assets, merge or consolidate with
another entity or make other investments or acquisitions, and provide that the
Company must maintain minimum amounts of stockholders' equity and financial
ratio coverages requires, among other things, ratios at the end of each fiscal
quarter of debt to earnings, earnings to interest expense and accounts
receivable to trade payables.
SPANISH PESETA DENOMINATED DEBT
Sintel maintains a revolving credit facility denominated in pesetas with a
wholly-owned finance subsidiary of Telefonica (the "Sintel Facility"). At
December 31, 1997, borrowings under the Sintel Facility totaled approximately
1.7 billion pesetas ($10.9 million at the exchange rate on December 31, 1997).
Sintel may use borrowings under this facility for working capital and other
general corporate purposes. Amounts outstanding under the Sintel Facility bear
interest at a rate per annum equal to the Madrid Interbank Offered Rate plus
0.30%. The Sintel Facility is unsecured. Sintel also maintains other peseta
denominated credit facilities with certain other Spanish financial
institutions. At December 31, 1997, borrowings under these facilities totaled
approximately 2.6 billion pesetas ($17.4 million at the exchange rate on
December 31, 1997), and bore interest at rates ranging from 5.65% to 6.75% per
annum. These facilities are also unsecured.
OTHER INDEBTEDNESS
At December 31, 1997, the Company had notes payable totaling $14.5 million
outstanding, secured by interests in certain of the Company's equipment.
Interest rates on these notes range from 7.50% to 8.50% per annum and mature in
installments through the year 2000.
In connection with the acquisition of Sintel, the Company currently is
indebted to Telefonica for 3.4 billion pesetas ($22.3 million at the exchange
rate on December 31, 1997), which indebtedness bears interest at 7.87% per
annum. A payment of 1.8 billion pesetas ($12.0 million at the exchange rate on
December 31, 1997) was due on December 31, 1997, with the balance due on
December 31, 1998. The Company has paid a portion of the December 31, 1997
payment, with the remaining amounts to be paid pending resolution of offsetting
amounts between the Company and Telefonica. The Telefonica indebtedness is
unsecured.
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<PAGE>
DESCRIPTION OF NOTES
GENERAL
The New Notes, like the Old Notes, will be issued pursuant to the
Indenture dated February 4, 1998, between the Company and First Trust National
Association, as trustee (the "TRUSTEE"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (the "TRUST INDENTURE ACT"). The terms of the
New Notes are substantially identical to the Old Notes in all material respects
(including interest rate and maturity), except that (i) the New Notes will not
be subject to the restrictions on transfer (other than with respect to holders
that are broker-dealers, persons who participated in the distribution of the
Old Notes or affiliates) and (ii) the Registration Rights Agreement covenants
regarding registration and the related Liquidated Damages (other than those
that have accrued and were not paid, if any) with respect to Registration
Defaults will have been deemed satisfied. The Notes are subject to all such
terms, and Holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following is a description of the
material provisions of the Indenture. This description does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
proposed form of Indenture and Registration Rights Agreement will be made
available to prospective investors as set forth under "--Additional
Information." The definitions of certain terms used in the following summary
are set forth below under "--Certain Definitions." For purposes of this
"Description of Notes," the term "COMPANY" refers only to MasTec, Inc. and not
to any of its Subsidiaries.
The Notes will be subordinated in right of payment to all existing and
future Senior Debt of the Company. The Notes will also be effectively
subordinated to all Indebtedness and other liabilities and commitments
(including trade payables and lease obligations) of the Company's Subsidiaries.
As of December 31, 1997, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the Notes would have been
subordinated to approximately $66.0 million of Senior Debt of the Company and
indebtedness and other obligations of the Company's subsidiaries. In addition,
the Company would have had $121.5 million of additional borrowings available
under the Credit Facility. The Indenture will permit the Company and its
Restricted Subsidiaries to incur additional indebtedness, including additional
Senior Debt, subject to certain restrictions. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. Any right of
the Company to receive assets of any of its Subsidiaries upon the latter's
liquidation or reorganization (and the consequent right of the Holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of that Subsidiary's creditors, except to the extent that the Company is
itself recognized as a creditor of such Subsidiary, in which case the claims of
the Company would still be subordinate to any security interest in the assets
of such Subsidiary and any indebtedness of such Subsidiary senior to that held
by the Company. See "Risk Factors--Holding Company Structure."
As of the date of the Indenture, all of the Company's Subsidiaries were
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $250.0 million, of
which $200.0 million was outstanding as of the date of this Prospectus, and
will mature on February 1, 2008. Interest on the Notes will accrue at the rate
of 7 3/4% per annum and will be payable semi-annually in arrears on February 1
and August 1 of each year, commencing on August 1, 1998, to Holders of record
on the immediately
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<PAGE>
preceding January 15 and July 15. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal of and
premium, interest and Liquidated Damages, if any, on the Notes will be payable
at the office or agency of the Company maintained for such purpose or, at the
option of the Company, payment of interest and Liquidated Damages may be made
by check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; PROVIDED that all payments of
principal, premium, interest and Liquidated Damages with respect to Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of
$1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of and premium, interest and Liquidated Damages,
if any, on the New Notes will be subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of Notes will be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive Permitted Junior
Securities and payments made from the trust described under "--Legal Defeasance
and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
"--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal of or premium, or interest on any Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any
other default occurs and is continuing with respect to any Designated Senior
Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "PAYMENT BLOCKAGE NOTICE") from the Company or the holders of
such Designated Senior Debt. Payments on the Notes may and shall be resumed (a)
in the case of a payment default, upon the date on which such default is cured
or waived and (b) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 180 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new Payment Blockage
Notice may be delivered unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such nonpayment default shall have been cured
for a period of at least 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt.
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<PAGE>
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to February
1, 2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on February 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------- -------------
<S> <C>
2003 ......................... 103.875%
2004 ......................... 102.583%
2005 ......................... 101.292%
2006 and thereafter .......... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to February 1, 2001, the Company may
redeem up to one-third of the aggregate principal amount of Notes at a
redemption price of 107.750% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the redemption date,
with the net cash proceeds of an offering of Equity Interests (other than
Disqualified Stock) of the Company; PROVIDED that (i) at least $133.3 million
in principal amount of the Notes remain outstanding immediately after the
occurrence of such redemption and (ii) such redemption shall occur within 90
days of the date of the consummation of such offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
PROVIDED that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional. If any Note
is to be redeemed in part only, the notice of redemption that relates to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. Notes called for redemption become due on the date fixed for redemption.
On and after the redemption date, interest ceases to accrue on Notes or
portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company
will be obligated to make an offer (a "CHANGE OF CONTROL OFFER") to each Holder
of Notes to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such Holder's Notes at an offer price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase (the "CHANGE OF CONTROL
PAYMENT"). Within 30 days following a Change of Control, the Company will mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "CHANGE OF CONTROL
PAYMENT DATE"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of Rule
14e-1 under the
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<PAGE>
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; PROVIDED that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture will
provide that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this covenant.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable; PROVIDED,
HOWEVER, that the Company shall not be obligated to repurchase the Notes upon a
Change of Control if the Company has irrevocably elected to redeem all of the
Notes under the provisions described under "--Optional Redemption." Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Credit Facility prohibits, and future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
prohibit, the Company from purchasing any Notes following a Change of Control
and/or provide that certain change of control events with respect to the
Company would constitute a default thereunder. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to the purchase of Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. The Company's failure to purchase
tendered Notes following a Change of Control would constitute an Event of
Default under the Indenture which would, in turn, constitute a default under
the Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes. See
"--Subordination" and "Description of Certain Indebtedness--Credit Facility."
The Company will not be required to make a Change of Control Offer
following a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
ASSET SALES. The Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; PROVIDED that the amount
of (a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or such Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
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<PAGE>
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets and for which the Company or such Restricted
Subsidiary is released from further liability and (b) any securities, notes or
other obligations received by the Company or such Restricted Subsidiary from
such transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash
Equivalents received) shall be deemed to be cash for purposes of this
provision.
Within 365 days of the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds, at its option, (i) to repay Senior Debt of
the Company or Indebtedness of any Restricted Subsidiary (and, in each case, to
correspondingly reduce commitments with respect thereto in the case of
revolving borrowings) or (ii) to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other long-term assets. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce Senior Debt or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "EXCESS
PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company will be required to make an offer to all Holders of Notes (an
"ASSET SALE OFFER") to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of an Asset Sale Offer, the amount of Excess Proceeds shall be reset
at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS. The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution on
account of the Company's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to any direct or indirect holders of the Company's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions (a) payable in Equity Interests (other than
Disqualified Stock) of the Company, (b) to the Company or any Wholly Owned
Restricted Subsidiary of the Company, (c) paid by a Restricted Subsidiary of
the Company pro rata to the holders of its Capital Stock or (d) payable in
Equity Interests of Supercanal or Conecel); (ii) purchase, redeem or otherwise
acquire or retire for value (including without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company, any of its Subsidiaries or any direct or indirect parent of the
Company (other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary of the Company); (iii) make any payment on
or with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness of the Company or any Restricted Subsidiary that is
subordinated to the Notes, except a payment of interest, a payment of principal
at Stated Maturity or a scheduled repayment or scheduled sinking fund payment;
or (iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable
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four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described below under
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Closing Date (excluding Restricted Payments
permitted by clauses (ii) through (vi) of the next succeeding paragraph),
is less than the sum, without duplication, of (i) 50% of the cumulative
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the Closing Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) 100% of
the aggregate net cash proceeds received by the Company from the issue or
sale since the Closing Date of Equity Interests of the Company (other than
Equity Interests sold to a Subsidiary of the Company and other than
Disqualified Stock), plus (iii) 50% of any dividends received by the
Company or a Wholly Owned Restricted Subsidiary after the Closing Date from
an Unrestricted Subsidiary of the Company, to the extent that such
dividends were not otherwise included in Consolidated Net Income of the
Company for such period, plus (iv) $50.0 million, plus (v) the amount by
which Indebtedness of the Company is reduced on the Company's balance sheet
upon the conversion or exchange (other than by a Restricted Subsidiary)
subsequent to the Closing Date of any Indebtedness of the Company
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash or other property
distributed by the Company upon such conversion or exchange), plus (vi) an
amount equal to the sum of the net reduction in Investments in Unrestricted
Subsidiaries resulting from (A) dividends, repayments of the principal of
loans or advances or other transfers of assets to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries or (B) the sale or
liquidation of any Unrestricted Subsidiaries, plus (vii) to the extent that
any Unrestricted Subsidiary of the Company is designated to be a Restricted
Subsidiary, the sum of (A) the lesser of (1) 100% of the Company's
Investment in such Subsidiary, as shown on the Company's most recent
balance sheet, and (2) the fair market value of the Company's Investment in
such Subsidiary, plus (B) 50% of the amount, if any, by which the fair
market value of the Company's Investment in such Subsidiary exceeds the
amount determined in the preceding clause (A).
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at the date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
or any Restricted Subsidiary in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); PROVIDED that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by employees, former employees,
directors or former directors of the Company (or any of its Subsidiaries)
pursuant to any agreement or plan approved by the Company's Board of Directors;
PROVIDED that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1.0 million in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; (v) the purchase, repurchase
or acquisition of Capital Stock of the Company, in an amount not to exceed $5.0
million, for distribution, contribution or payment to, or for the benefit of,
any employee benefit plan of the Company or any of its Subsidiaries or any
trust established by the Company or any of its Subsidiaries for the benefit of
its employees; and (vi) any Restricted Payment utilizing cash or other
consideration received by the Company by virtue of
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its investment in Supercanal or Conecel; PROVIDED that clauses (a) and (b) of
the preceding paragraph are satisfied at the time of such payment.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined in
good faith by the Board of Directors whose resolution with respect thereto
shall be delivered to the Trustee. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, which calculations may be based upon the Company's
latest available financial statements.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions. If, at any time, any
Unrestricted Subsidiary would fail to meet the definition of an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (ii) no Default or
Event of Default would be in existence following such designation.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Indenture
will provide that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "INCUR") any
Indebtedness (including Acquired Debt) and that the Company will not permit any
of its Restricted Subsidiaries to issue any shares of preferred stock;
PROVIDED, HOWEVER, that the Company and its foreign Restricted Subsidiaries may
incur Indebtedness (including Acquired Debt) and the Restricted Subsidiaries
may issue preferred stock if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such preferred stock is issued would
have been at least 2.0 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the preferred stock had been issued at the
beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following (collectively, "PERMITTED DEBT"):
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(i) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under the Credit Facility in an aggregate amount not to exceed
$150.0 million at any one time outstanding, less the aggregate amount of all
Net Proceeds of Asset Sales applied to permanently reduce the amount of such
Indebtedness;
(ii) the incurrence by the Company of Indebtedness represented by the
Notes and any guarantee of the Notes by any Restricted Subsidiary of the
Company, in each case in an aggregate amount not to exceed $200.0 million;
(iii) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Existing Indebtedness or
Indebtedness that was permitted to be incurred by the first paragraph, or by
clause (ii) of the second paragraph of this covenant;
(iv) the incurrence of Indebtedness between or among the Company and any
of its Restricted Subsidiaries; PROVIDED, HOWEVER, that any subsequent issuance
or transfer of Equity Interests that results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Company or a Restricted Subsidiary or a pledge or
other transfer thereof intended to create a security interest therein), and any
sale or other transfer of any such Indebtedness to a Person that is not either
the Company or a Wholly Owned Restricted Subsidiary, shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are (a) incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Indenture to be outstanding or (b) incurred for
the purpose of fixing or hedging currency exchange rates or prices of
commodities used in the business of the Company and its Restricted
Subsidiaries;
(vi) the guarantee by the Company or any Restricted Subsidiary of
Indebtedness that was permitted to be incurred by another provision of this
covenant, subject to the covenant described under "Limitation on Guarantees of
Company Indebtedness by Restricted Subsidiaries"; and
(vii) other Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount at any time outstanding not to exceed $25.0 million.
For purposes of determining compliance with this covenant, in the event
that (a) an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described above or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Company shall, in its
sole discretion, classify such item of Indebtedness in any manner that complies
with this covenant and shall only be required to include such item of
Indebtedness in one of such clauses or pursuant to the first paragraph hereof
and (b) an item of Indebtedness may be divided and classified in more than one
of the types of Indebtedness described above. Accrual of interest, the
accretion of accredit value and the payment of interest in the form of
additional Indebtedness will not be deemed to be an incurrence of Indebtedness
for purposes of this covenant.
LIENS. The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien securing Indebtedness or trade
payables on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except
Permitted Liens, unless contemporaneously therewith effective provision is made
to secure the Notes equally and ratably with such Indebtedness or trade
payables for so long as such Indebtedness or trade payables are unsecured by a
Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture will provide that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly,
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create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the Closing
Date, (b) the Credit Facility as in effect as of the Closing Date, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, PROVIDED that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Credit
Facility as in effect on the Closing Date, (c) the Indenture and the Notes, (d)
applicable law, (e) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), (f)
by reason of customary non-assignment provisions or other restrictions in
leases, licenses and other contracts entered into in the ordinary course of
business, (g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (h) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced,
(i) in the case of clause (iii) above, any encumbrance or restriction (A) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture or (B) contained in
security agreements, mortgages or Capitalized Lease Obligations securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restrictions restrict the transfer of the property subject to such security
agreements, mortgages or Capitalized Lease Obligations; (j) any restriction
with respect to a Restricted Subsidiary imposed pursuant to an agreement
entered into for the sale or disposition of Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition; and (k)
customary net worth provisions contained in leases and other agreements entered
into by a Restricted Subsidiary in the ordinary course of business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Indenture will provide that
the Company may not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
consolidated properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company, under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Restricted Subsidiary, or the merger of a Wholly Owned Restricted Subsidiary
with or into the Company, the Company or the Person formed by or surviving any
such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (a) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company, immediately preceding the
transaction and (b) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge
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Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
LIMITATION ON GUARANTEES OF COMPANY INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES. The Company will not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Notes (the "Other Company Indebtedness"), unless such Restricted Subsidiary
contemporaneously executes and delivers a supplemental indenture to the
Indenture providing for a Guarantee of payment of the Notes by such Restricted
Subsidiary to the same extent as the guarantee (the "Other Company Indebtedness
Guarantee") of the Other Company Indebtedness (including waiver of subrogation,
if any). The Guarantee of a Restricted Subsidiary will be subordinated in right
of payment to all existing and future Senior Debt of such Restricted Subsidiary
to the same extent as the Notes are subordinated to Senior Debt of the Company.
See "--Subordination."
Each Guarantee of the Notes created by a Restricted Subsidiary pursuant to
the provisions described in the foregoing paragraph shall be in form and
substance satisfactory to the Trustee and shall provide, among other things,
that it shall be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer permitted by the Indenture of (a) all of the
Company's Capital Stock in such Restricted Subsidiary, or (b) the sale of all
or substantially all of the assets of the Restricted Subsidiary and upon the
application of the Net Proceeds from such sale in accordance with the
requirements of the "Asset Sales" provisions described herein; or (ii) the
release or discharge of the Other Company Indebtedness Guarantee that resulted
in the creation of such guarantee of the Notes, except a discharge or release
by or as a result of payment under such Other Company Indebtedness Guarantee.
TRANSACTIONS WITH AFFILIATES. The Indenture will provide that the Company
will not, and will not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "AFFILIATE TRANSACTION"), unless (i) such Affiliate Transaction
is on terms that are no less favorable to the Company or such Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$15 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing.
The foregoing provisions will not prohibit: (i) transactions between or
among the Company and/or its Restricted Subsidiaries; (ii) any Restricted
Payment that is permitted by the provisions of the Indenture described above
under the caption "--Restricted Payments"; (iii) any issuance of securities or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors of the Company; (iv) any fees,
indemnities, loans or advances to employees in the ordinary course of business;
(v) any payment approved by the Board of Directors in connection with the
registration for sale or distribution by any Affiliate of the Company of any
Equity Interests of the Company, including reimbursements for offering
expenses, underwriting discounts and commissions; (vi) payments made to the
Federal Trade Commission or other foreign or domestic governmental agency on
behalf of any Affiliate by virtue of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or other similar federal, state or
foreign laws in connection with the acquisition by such Affiliate of additional
Equity Interests in the Company or the acquisition by the Company or any
Restricted Subsidiary of the Capital Stock or assets of another Person or the
merger by the Company or
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any Restricted Subsidiary with another Person; and (vii) any Affiliate
Transaction with Conecel or Supercanal not involving the payment of
consideration by the Company or any Restricted Subsidiary.
LIMITATION ON OTHER SENIOR SUBORDINATED DEBT. The Indenture will provide
that the Company will not incur any Indebtedness that is subordinate or junior
in right of payment to any Senior Debt of the Company and senior in any respect
in right of payment to the Notes.
PAYMENTS FOR CONSENT. The Indenture provides that neither the Company nor
any of its Restricted Subsidiaries will, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid or is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
REPORTS. The Indenture provides that, whether or not required by the rules
and regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results
of operations of the Company and its consolidated Subsidiaries and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. To the extent there is a material difference
between the consolidated financial condition and results of operations of (i)
the Company and (ii) the Company and its Restricted Subsidiaries separate from
the financial condition and results of operations of the Unrestricted
Subsidiaries of the Company, the Company shall also include, either on the face
of the financial statements or in a footnote thereto, the Consolidated Cash
Flow and Fixed Charge Coverage Ratio of the Company and its Restricted
Subsidiaries. In addition, whether or not required by the rules and regulations
of the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company and
its Restricted Subsidiaries will agree that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company to comply with the provisions described under the
caption "--Merger, Consolidation or Sale of Assets;" (iv) failure by the
Company for 30 days after written notice by the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes to comply with any
of its obligations in the covenants described above under the captions
"--Change of Control," "--Asset Sales," "--Restricted Payments," or
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; (v) the failure
by the Company for 60 days after written notice by the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes the Company
with any of its other agreements in the Indenture or the Notes; (vi) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Significant Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Significant Subsidiaries), whether
such Indebtedness or guarantee now exists or is created after the Closing Date,
which default (a) is caused by a failure to pay principal of or premium, if
any, or interest on such
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Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "PAYMENT DEFAULT") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$15.0 million or more; (vii) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $15.0 million and
either (a) any creditor commences enforcement proceedings upon any such
judgment or (b) such judgments are not paid, discharged or stayed for a period
of 60 days; (viii) except as permitted by the Indenture, any Guarantee of the
Notes by any Restricted Subsidiary which is a Significant Subsidiary shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect, or any Restricted Subsidiary
which is a Significant Subsidiary, or any Person acting on behalf of any
Restricted Subsidiary which is a Significant Subsidiary, shall deny or
disaffirm its obligations under any Guarantee of the Notes; and (ix) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
February 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required within 30
days after becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Restricted Subsidiary (other than the Company and its Restricted
Subsidiaries), as such, shall have any liability for any obligations of the
Company or such Restricted Subsidiary under the Notes, the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("LEGAL
DEFEASANCE") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on the Notes when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("COVENANT DEFEASANCE") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and premium, interest and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (a) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (b) since
the Closing Date, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company shall have delivered
to the Trustee an Officers' Certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
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TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture
and the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, interest or
Liquidated Damages, if any, on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal
amount of the Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, interest or Liquidated Damages, if any, on the
Notes, (vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders"), or (viii) make any change in the
foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of all holders of Senior Debt, and the consent of the
Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other
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transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Circular may obtain a copy of the
Indenture and Registration Rights Agreement without charge by writing to
MasTec, Inc., 3155 N.W. 77th Avenue, Miami, Florida 33122, Attention: Corporate
Secretary.
BOOK-ENTRY, DELIVERY AND FORM
The Notes were initially offered and sold (i) to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) in reliance on the
exemption from the registration requirements of the Securities Act provided by
Rule 144A, (ii) to other institutional "accredited investors" (as defined in
rule 501(a)(1), (2), (3) or (7) under the Securities Act) that executed and
delivered a letter containing certain representations and agreements and (iii)
outside the United States in reliance on Regulation S under the Securities Act.
Except as set forth below, the New Notes will initially be issued in the form
of one or more registered Notes in global form without interest coupons (each a
"Global Note"). Each Global Note will be deposited with, or on behalf of, the
Depositary and will be registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "GLOBAL NOTE HOLDER"),
in each case for credit to an account of a direct or indirect participant as
described below.
New Notes that are issued as described below under "--Certificated
Securities" will be issued in the form of registered definitive certificates
(the "CERTIFICATED SECURITIES"). Such Certificated Securities may, unless the
Global Notes have previously been exchanged for Certificated Securities, be
exchanged for an interest in a Global Note representing the principal amount of
Notes being transferred.
The Depositary has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its participating organizations
(collectively, the "PARTICIPANTS" or the "DEPOSITARY'S PARTICIPANTS") and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "INDIRECT PARTICIPANTS" or the "DEPOSITARY'S
INDIRECT PARTICIPANTS") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Persons who are not
Participants may beneficially own securities held by or on behalf of the
Depositary only thorough the Depositary's Participants or the Depositary's
Indirect Participants.
The Company expects that, pursuant to procedures established by the
Depositary, (i) upon deposit of the Global Notes, the Depositary will credit
the accounts of Participants designated by the Exchange Agent with portions of
the principal amount of the Global Notes and (ii) ownership of the Notes
evidenced by the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective
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purchasers are advised that the laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer Notes evidenced by the Global Notes will
be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Notice to Investors."
Beneficial interests in the one Global Note may be transferred to a person
who takes delivery in the form of a beneficial interest in another Global Note
only upon receipt by the Trustee of a written certification (in the form
provided in the Indenture) to the effect that such transfer is being made in
accordance with the Indenture and with the Securities Act and any applicable
securities laws of any state of the United States or any other jurisdiction.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of a beneficial interest in another
Global Note will, upon transfer, cease to be a beneficial interest in such
Global Note and become a beneficial interest in the other Global Note and
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Note for as long as it remains such a beneficial interest.
So long as the Global Note Holder is the registered owner of any Notes,
the Global Note Holder will be considered the sole Holder under the Indenture
of any Notes evidenced by the Global Notes. Beneficial owners of Notes
evidenced by the Global Notes will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of the Depositary or for maintaining, supervising
or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the policy
of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES. Subject to certain conditions, any person having
a beneficial interest in a Global Note may, upon request to the Trustee,
exchange such beneficial interest for Notes in the form of Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). All such certificated
Notes will bear any applicable restrictive legends. In addition, if (i) the
Company notifies the Trustee in writing that the Depositary is no longer
willing or able to act as a depositary and the Company is unable to locate a
qualified successor within 90 days or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the
form of Certificated Securities under the Indenture, then, upon surrender by
the Global Note Holder of the Global Notes, Notes in such form will be issued
to each person that the Global Note Holder and the Depositary identify as being
the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT. The Indenture will require that payments
in respect of the Notes represented by the Global Notes (including principal,
premium, interest and Liquidated
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Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, interest
and Liquidated Damages, if any, by wire transfer of immediately available funds
to the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holder's registered address.
The Notes represented by the Global Notes are expected to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Securities will also be settled in
immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback), excluding sales and dispositions of services and ancillary products
in the ordinary course of business (PROVIDED that the sale, lease, conveyance
or other disposition of all or substantially all of the assets of the Company
and its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption "--Change of
Control" and/or the provisions described above under the caption "--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Subsidiaries
of Equity Interests of any of the Company's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $5.0 million or (b)
for net proceeds in excess of $5.0 million. Notwithstanding the foregoing, the
following will be deemed not to be Asset Sales: (i) a transfer of assets by the
Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary; (ii) an issuance of Equity Interests by a
Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary; (iii) a Restricted Payment that is permitted by the
covenant described above under the caption "--Restricted Payments;" (iv) the
disposition of obsolete, worn out or excess equipment; and (v) the sale or
other disposition of the Company's Equity Interests in Supercanal or Conecel.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents
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(however designated) of corporate stock, (iii) in the case of a partnership or
limited liability company, partnership or membership interests (whether general
or limited) and (iv) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) any evidence of Indebtedness issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than one year
from the date of acquisition, (ii) certificates of deposit and eurodollar time
deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $250.0 million and a Thompson Bank Watch Rating of "B" or
better, or whose short-term debt has the highest rating obtainable from Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"),
(iii) any money market deposit account issued or offered by a domestic
commercial bank having capital and surplus in excess of $250.0 million and a
Thompson Bank Watch Rating of "B" or better, or whose short-term debt has the
highest rating obtainable from Moody's or S&P, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (i) and (ii) above entered into with any financial
institution meeting the qualifications specified in clause (ii) above, and (v)
commercial paper having the highest rating obtainable from Moody's or S&P, and
in each case maturing within one year after the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principals or any Wholly Owned Restricted
Subsidiary of the Company; (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company; (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly or
indirectly, of more than 40% of the Voting Stock of the Company (measured by
voting power rather than number of shares); or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"CLOSING DATE" means February 4, 1998.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary, nonrecurring or unusual loss or charge plus any net loss
realized in connection with an Asset Sale, (ii) provision for taxes based on
income or profits (less the tax effect attributable to minority interests),
(iii) consolidated interest expense (net of interest income) whether paid or
accrued and whether or not capitalized (including, without limitation,
prepayment penalties, premiums on Indebtedness, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), and (iv) depreciation and amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes based on the income or profits of, and the depreciation
and amortization of, a Restricted Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Restricted Subsidiary
was included in calculating the
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Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior approval (that has not been obtained)
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (i) the Net Income (but not loss) of any Person that
is not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interest transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded, and (v) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Restricted Subsidiaries.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (a) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date, plus (b)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the Closing Date
in the book value of any asset owned by such Person or a consolidated
Restricted Subsidiary of such Person, (ii) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Restricted Subsidiaries
and (iii) all unamortized debt discount and expense and unamortized deferred
charges as of such date, in each case determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Closing Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"CREDIT FACILITY" means that certain credit agreement, dated as of June 9,
1997, by and among the Company, certain Subsidiaries of the Company named
therein, the lenders party thereto and BankBoston, N.A., as Agent, and all
agreements ancillary thereto, as such credit agreement and ancillary agreements
may be amended, restated, extended, modified, renewed, refunded, replaced,
substituted, restructured or refinanced in whole or in part from time to time
(including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements or
modifications of the foregoing), whether with the present lenders or any other
lenders.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) any Indebtedness now or hereafter
outstanding under the Credit Facility and (ii) any other Senior Debt permitted
under the Indenture the principal amount of which is $10.0 million or more and
that has been designated by the Company as "Designated Senior Debt."
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"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness in existence on the Closing
Date, until such Indebtedness is repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense (net of interest
income) of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries held by Persons other than the
Company or a Wholly Owned Restricted Subsidiary of the Company, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person and its Restricted Subsidiaries for such
period. In the event that the Company or any of its Restricted Subsidiaries
incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues preferred stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
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Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect from time to time.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, currency exchange rates or commodity prices.
"INDEBTEDNESS" means, with respect to any Person, (i) any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, (ii) all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and (iii) to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
Notwithstanding the foregoing, none of the following shall constitute
Indebtedness: (i) indebtedness arising from agreements providing for
non-competition payments, earn-out payments, indemnification or adjustment of
purchase price or from guarantees securing any obligations of the Company or
any of its Subsidiaries pursuant to such agreements, incurred or assumed in
connection with the acquisition or disposition of any business, assets or
Subsidiary of the Company, other than guarantees or similar credit support by
the Company or any of its Subsidiaries of indebtedness incurred by any Person
acquiring all or any portion of such business, assets or Subsidiary for the
purpose of financing such acquisition; (ii) any trade payables and other
accrued current liabilities incurred in the ordinary course of business as the
deferred purchase price of property; (iii) obligations arising from Guarantees
to suppliers, lessors, licensees, contractors, or customers incurred in the
ordinary course of business; (iv) obligations (other than express Guarantees of
indebtedness for borrowed money) in respect of Indebtedness of other Persons
arising in connection with (A) the sale or discount of accounts receivable, (B)
trade acceptances and (C) endorsements of instruments for deposit in the
ordinary course of business; (v) obligations in respect of performance bonds
provided by the Company or its Subsidiaries in the ordinary course of business;
(vi) obligations arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business, PROVIDED, HOWEVER, that such
obligation is extinguished within two business days of its incurrence; and
(vii) any obligations under workers' compensation laws and other similar
legislation.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding payroll, commission, travel and
similar advances to officers and employees made in the ordinary course of
business and excluding advances to customers or joint venture partners of the
Company or any Restricted Subsidiary in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender ),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment" shall exclude extensions of trade credit by the Company and its
Restricted Subsidiaries on commercially reasonable terms in accordance with
such Person's normal trade practices.
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If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale or (b) the disposition of
any securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness: (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness) or (b) is directly or indirectly liable (as a
guarantor or otherwise); and (ii) no default with respect to which (including
any rights that the holders thereof may have to take enforcement action against
an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness (other than the Notes being offered
hereby) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.; and (iii) as to which the
lenders will not have any recourse to the stock or assets of the Company or any
of its Restricted Subsidiaries.
"OBLIGATIONS" means all principal of and premium, interest (including
interest accruing after the filing of a petition initiating any proceeding
under any state, federal or foreign bankruptcy or insolvency laws, whether or
not allowable as a claim in such proceedings), penalties, fees,
indemnifications, reimbursements, gross-ups, damages and other liabilities
payable under the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company or (b) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (iv) any Restricted Investment made as a
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result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales;" (v) any
Investment acquired solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (vi) loans or advances to
employees made in the ordinary course of business of the Company or such
Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (viii)
Guarantees permitted to be made pursuant to the covenant "Incurrence of
Indebtedness and Issuance of Preferred Stock"; (ix) Investments in securities
of trade creditors received in settlement of obligations or pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of any creditors of customers; (x) Hedging Obligations; and (xi) any Investment
existing on the date of the Indenture.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or
debt securities that are subordinated to all Senior Debt and any debt
securities issued in exchange for Senior Debt to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to Article 10 of the Indenture.
"PERMITTED LIENS" means (i) Liens securing Senior Debt of the Company and
its Restricted Subsidiaries that was permitted by the terms of the Indenture to
be incurred; (ii) Liens in favor of the Company or any of its Restricted
Subsidiaries; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; PROVIDED that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, PROVIDED that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens existing on the Closing Date; (vii)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, PROVIDED that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefore; (viii) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (ix)
statutory Liens or landlords', carriers', warehousemen's, mechanics',
suppliers' or similar Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company; (x) easements, minor title
defects, irregularities in title or other charges or encumbrances on property
not interfering in any material respect with the use of such property by the
Company or a Restricted Subsidiary of the Company; (xi) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or good
faith deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which the Company or any Restricted
Subsidiary is a party; (xii) Liens securing industrial revenue bonds or other
tax-favored financing; (xiii) deposit arrangements entered into in connection
with acquisitions or in the ordinary course of business.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
PROVIDED that: (i) the principal amount (or accredit value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accredit value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
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Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity at least
equal to the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness is subordinated in right of payment to the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Restricted Subsidiary that is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PRINCIPALS" means (a) the estate of Jorge L. Mas, Jorge Mas and any
spouse or lineal descendant of Jorge L. Mas or Jorge Mas or any spouse of any
such lineal descendant and (b) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
the Persons referred to in clause (a).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SENIOR DEBT" of a Person means (i) all Indebtedness of such Person
outstanding under the Credit Facility and all Hedging Obligations with respect
thereto, whether outstanding on the date of the Indenture or thereafter
incurred, (ii) any other Indebtedness of such Person permitted to be incurred
under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is subordinated in right of
payment to any Senior Debt of such Person and (iii) all Obligations of such
Person with respect to the foregoing. Notwithstanding anything to the contrary
in the foregoing, Senior Debt of a Person will not include (a) any liability
for federal, state, local or other taxes owed or owing by such Person, (b) any
Indebtedness of such Person to any of its Subsidiaries or other Affiliates, (c)
any trade payables or (d) any Indebtedness that is incurred in violation of the
Indenture.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (a) is not party to
any agreement, contract, arrangement or understanding with the Company or any
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Restricted Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable, in any material
respect, to the Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company; (b) is
a Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (1) to subscribe for
additional Equity Interests or (2) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (c) has not guaranteed or otherwise has not obligated itself
directly or indirectly to provide credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (d) has no Indebtedness
other than Non-Recourse Debt.
"VOTING STOCK" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain United States federal income and
estate tax consequences to U.S. Holders and Non-U.S. Holders of owning and
disposing of the Notes. Hereinafter, the terms "U.S. Holder" and "Non-U.S.
Holder" refer, respectively, to holders of Notes that are or are not classified
as United States persons for United States federal income and estate tax
purposes.
This discussion does not deal with all aspects of United States federal
income and estate taxation that may be relevant to holders of Notes and does
not deal with tax consequences arising under the laws of any foreign, state or
local jurisdiction. It is, moreover, based upon the provisions of existing law
on the date hereof, including, in particular, the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations promulgated thereunder and
other administrative and judicial interpretations thereof, all of which are
subject to change at any time, with or without retroactive effect. Provisions
of existing law are also unclear in certain respects. This discussion does not
address the tax consequences to subsequent purchasers of Notes and is limited
to purchasers who hold the Notes as capital assets, within the meaning of
section 1221 of the Code. This discussion also does not address the tax
consequences to Non-U.S. Holders that are subject to United States federal
income tax on a net basis on income realized with respect to a Note because
such income is effectively connected with the conduct of a United States trade
or business. Such Non-U.S. Holders are generally taxed in a similar manner to
U.S. Holders, but certain special rules do apply. Moreover, this discussion is
for general information only and does not address all of the tax consequences
that may be relevant to particular initial purchasers in light of their
personal circumstances or to certain types of initial purchasers (such as
certain financial institutions, insurance companies, tax-exempt entities,
dealers in securities or persons who have hedged the risk of owning a Note).
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS
OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES)
IN APPLICABLE TAX LAWS OR INTERPRETATIONS THEREOF.
U.S. HOLDERS
INTEREST ON NOTES. Interest on a Note will be taxable to a U.S. Holder as
ordinary interest income in accordance with the U.S Holder's method of tax
accounting at the time that such interest is accrued or (actually or
constructively) received.
DISPOSITION OF NOTES. In general, a U.S. Holder of a Note will recognize
gain or loss upon the sale, redemption, retirement or other disposition of the
Note measured by the difference between the amount of cash and fair market
value of other property received (except to the extent attributable to the
payment of accrued interest) and the U.S. Holder's adjusted tax basis in the
Note. A U.S. Holder's adjusted tax basis in a Note generally will equal the
cost of the Note to the U.S. Holder, less any principal payments received by
such U.S. Holder with respect to the Note. Any portion of the amount realized
on the sale or other disposition of a Note that represents accrued but unpaid
interest will be treated as a payment of such interest. The gain or loss on
such disposition of Notes will be a long-term capital gain or loss taxed at
lower rates than items of ordinary income if Notes have been held as capital
assets for more than one year but not more than 18 months (28%) or 18 months
(20%) at the time of such disposition and short-term capital gain or loss if
the Notes have been held for not more than 12 months.
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NON-U.S. HOLDERS
PAYMENT OF INTEREST. A Non-U.S. Holder will not be subject to United
States federal income tax by withholding or otherwise on the accrual (or
payment) of interest on a Note (provided that the beneficial owner of the Note
fulfills the statement requirements set forth in applicable Treasury
Regulations on Form W-8 or a substitute Form W-8 (or a successor form)) unless
(A) such Non-U.S. Holder actually or constructively owns 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, or (B) such interest is effectively connected with the conduct of a trade
or business by the Non-U.S. Holder in the United States. A Non-U.S. Holder that
is not exempt from tax under such rules will be subject to United States
federal income tax withholding (provided Form 4224 is properly provided) at a
rate of 30% unless the interest is effectively connected with the conduct of a
United States trade or business.
GAIN ON DISPOSITION OF NOTES. A Non-U.S. Holder will not be subject to
United States federal income tax by withholding or otherwise on gain realized
on the disposition of a Note unless (i) in the case of a Non-U.S. Holder who is
an individual, such Non-U.S. Holder is present in the United States for a
period or periods aggregating 183 days or more during the taxable year of the
disposition (in which case such individual may be taxed as a U.S. Holder) and
certain other conditions are met, or (ii) the gain is effectively connected
with the conduct of a trade or business by the Non-U.S. Holder in the United
States.
EFFECTIVELY CONNECTED INCOME. To the extent that interest income or gain
on the disposition of Notes is effectively connected with the conduct of a
trade or business of the Non-U.S. Holder in the United States, such income will
be subject to United States federal income tax at the same rates generally
applicable to United States persons. Additionally, in the case of a non-U.S.
Holder which is a corporation, such effectively connected income may be subject
to the United States branch profits tax at the rate of 30% (or lower treaty
rates).
ESTATE TAX. Notes held at the time of death by an individual Non-U.S.
Holder will not be subject to United States federal estate tax, provided that
at such time, (i) such holder did not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote, and (ii) the Notes were not held in connection with such
holder's trade or business in the United States.
TREATIES. Applicable treaties between the United States and a country in
which a Non-U.S. Holder is a resident may alter the tax consequences described
above.
NEW FINAL WITHHOLDING REGULATIONS. The Treasury Department recently
promulgated final regulations regarding the withholding rules described above
and backup withholding and information reporting rules described below that are
applicable to Non-U.S. Holders ("New Final Withholding Regulations"). In
general, the New Final Withholding Regulations do not significantly alter the
substantive withholding and information reporting requirements but rather unify
current certification procedures and forms and clarify reliance standards. The
New Final Withholding Regulations are generally effective for payments made
after December 31, 1998, subject to certain transition rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In addition to the withholding rules described above, interest and
payments of proceeds from the disposition by certain non-corporate holders of
the Notes may be subject to backup withholding at a rate of 31%. Such a U.S.
Holder generally will be subject to backup withholding at a rate of 31% unless
the recipient of such payment supplies an accurate taxpayer identification
number, as well as certain other information, or otherwise establishes, in the
manner prescribed by law, an exemption from backup withholding. Any amount
withheld under backup withholding is allowable as a credit against the U.S.
Holder's federal income tax, upon furnishing the required information.
71
<PAGE>
Generally, backup withholding of United States federal income tax at a
rate of 31% and information reporting may apply to payments of principal,
interest and premium (if any) to Non-U.S. Holders that are not "Exempt
Recipients" and that fail to provide certain information as may be required by
United States law and applicable regulations. Under currently effective United
States Treasury regulations, the payment of the proceeds of the disposition of
the Notes to or through the United States office of a broker will be subject to
information reporting and backup withholding at a rate of 31% unless the owner
certifies its status as a Non-U.S. Holder under penalties of perjury or
otherwise establishes an exemption. The proceeds of the disposition by a
Non-U.S. Holder of the Notes to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if such broker is
a U.S. person, a controlled foreign corporation for United States tax purposes,
or a foreign person 50% or more of whose gross income from all sources for a
specified three-year period is from activities that are effectively connected
with a United States trade or business, information reporting will apply unless
such broker has documentary evidence (other than merely a foreign address) in
its files of the owner's status as a Non-U.S. Holder and has no actual
knowledge to the contrary. Both backup withholding and information reporting
will apply to the proceeds from such dispositions if the broker has actual
knowledge that the payee is a U.S. Holder.
Holders should consult their tax advisors regarding the application of
withholding tax, information reporting and backup withholding in their
particular situation and the availability of an exemption therefrom, and the
procedures for obtaining any such exemption including the impact of the New
Final Withholding Regulations.
LIQUIDATED DAMAGES
As more fully described under "Description of Notes--Registration Rights;
Liquidated Damages," the Company may be required to pay Liquidated Damages to
U.S. Holders of the Notes. Although the matter is not free from doubt, the
Company intends to take the position that a U.S. Holder of a Note should be
required to report any Liquidated Damages as ordinary income for United States
federal income tax purposes only at the time it accrues or is received in
accordance with such holder's method of accounting. It is possible, however,
that the Internal Revenue Service may take a different position, in which case
the timing and amount of income may be different.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
will have no United States federal income tax consequences to U.S. Holders of
Old Notes and the holding period of the New Notes will include the holding
period of the Old Notes and the basis of the New Notes will be the same as the
basis of the Old Notes immediately before the exchange.
72
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes
acquired as a result of market-making activities or other trading activities.
The Company has agreed that it will make this prospectus available to any
broker-dealer for use in connection with any such resale for a period of 180
days after the Expiration Date or until all participating broker-dealers have
so resold.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concession from any such
broker-dealer and/or the purchasers of any New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker-dealer that participates in a distribution of New
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in its ordinary course of
business and has no arrangement or understanding with any person to participate
in the distribution of the New Notes to be received in the Exchange Offer.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Miami,
Florida.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997, incorporated by
reference in this Prospectus, have, to the extent and for the periods indicated
in their reports, been incorporated herein in reliance on the reports of
Coopers & Lybrand, L.L.P., independent accountants and Arthur Andersen LLP,
independent accountants, given on the authority of that Firm as experts in
accounting and auditing.
73
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL CONSTITUTES AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL NOR ANY SALE MADE HEREIN SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
-------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information ........................
Incorporation of Certain Documents
by Reference ..............................
Summary ......................................
Risk Factors .................................
The Exchange Offer ...........................
Use of Proceeds ..............................
Capitalization ...............................
Selected Financial Information ...............
Management's Discussion and Analysis
of Financial Condition and Results
of Operations .............................
Business .....................................
Management ...................................
Description of Certain Indebtedness ..........
Description of Notes .........................
Certain Federal Income Tax
Considerations ............................
Plan of Distribution .........................
Legal Matters ................................
Experts ......................................
</TABLE>
================================================================================
================================================================================
$200,000,000
[MASTEC LOGO]
7 3/4% SERIES B SENIOR
SUBORDINATED NOTES
DUE 2008
----------
PROSPECTUS
----------
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that the Company shall indemnify to the fullest extent
authorized by the Delaware General Corporation Law (the "DGCL"), each person
who is involved in any litigation or other proceeding because such person is or
was a director or officer of the Company, against all expense, loss or
liability reasonably incurred or suffered in connection therewith. The
Company's By-laws provide that a director or officer may be paid expenses
incurred in defending any proceeding in advance of its final disposition upon
receipt by the Company of an undertaking, by or on behalf of the director or
officer, to repay all amounts so advanced if it is ultimately determined that
such director or officer is not entitled to indemnification.
Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding brought by reason of
the fact that such person is or was a director or officer of the corporation,
if such person acted in good faith and in a manner that he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, if he had no reason to believe
his conduct was unlawful. In a derivative action, (I.E., one brought by or on
behalf of the corporation), indemnification may be made only for expenses,
actually and reasonably incurred by any director or officer in connection with
the defense or settlement of such an action or suit, if such person acted in
good faith and in a manner that he reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification shall
be made if such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which the action
or suit was brought shall determine that the defendant is fairly and reasonably
entitled to indemnity for such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the DGCL, the Company's Certificate
eliminates the liability of a director to the corporation or its stockholders
for monetary damages for such breach of fiduciary duty as a director, except
for liabilities arising (i) from any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) from acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL, or (iv) from any transaction from which
the director derived an improper personal benefit.
The Company has obtained primary and excess insurance policies insuring
the directors and officers of the Company and its subsidiaries against certain
liabilities they may incur in their capacity as directors and officers. Under
such policies, the insurer, on behalf of the Company, may also pay amounts for
which the Company has granted indemnification to the directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as exhibits to this Registration
Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------
<S> <C>
4.1 Purchase Agreement, dated as of January 30, 1998, by and among MasTec, Inc., Jefferies &
Company, Inc., BancBoston Securities Inc., CIBC Oppenheimer Corp. and NationsBanc
Montgomery Securities LLC.*
4.2 Indenture, dated as of February 4, 1998, between MasTec, Inc. and First Trust National
Association, as trustee.*
II-1
<PAGE>
4.3 Registration Rights Agreement, dated as of February 4, 1998, by and among MasTec, Inc.,
Jefferies & Company, Inc., BancBoston Securities Inc., CIBC Oppenheimer Corp. and
NationsBanc Montgomery Securities LLC .*
5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.*
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP.
23.2 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. (included in Exhibit 5.1
above).*
24.1 Power of Attorney*
25.1 Form T-1 Statement of Eligibility of Trustee.*
99.1 Form of Letter of Transmittal and Notice of Guaranteed Delivery of Notes.*
</TABLE>
- ----------------
* Previously filed.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
reports pursuant to section 13(a) or section 15(d) of the Securities Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Miami, State of Florida,
on April 21, 1998.
MASTEC, INC.
/s/ Edwin D. Johnson
------------------------------------------------
Edwin D. Johnson
Senior Vice President--Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------- -------------------------------------- ---------------
<S> <C> <C>
/s/ Jorge Mas Chairman of the Board of Directors, April 21, 1998
Jorge Mas President and Chief Executive
Officer (Principal Executive Officer)
/s/ * Director April 21, 1998
Eliot C. Abbott
/s/ * Director April 21, 1998
Joel-Tomas Citron
/s/ * Director April 21, 1998
Arthur B. Laffer
/s/ * Director April 21, 1998
Jose S. Sorzano
By: /s/ Jose M. Sariego
(Attorney-in-fact pursuant
to Power of Attorney)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------
<S> <C>
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP.
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
MASTEC, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ----------- ---------- ----------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income from continuing
operations before income
taxes........................... $7,353 $10,291 $385 $50,719 $63,550
Fixed Charges:
Interest expense............... 302 3,846 5,306 11,940 11,920
Interest portion of rent
expense........................ -- 1,157 1,362 1,681 7,338
---------- ----------- ---------- ----------- ------------
Total fixed charges............. 302 5,003 6,668 13,621 19,258
---------- ----------- ---------- ----------- ------------
Earnings (for purposes of
fixed charges).................. 7,655 15,294 7,053 64,340 82,808
---------- ----------- ---------- ----------- ------------
Ratio of earnings to fixed
charges......................... 25.3x 3.1x 1.1x 4.7x 4.3x
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of MasTec, Inc. and subsidiaries on Form S-4 (No. 333-46361) of our
report dated March 10, 1998, on our audits of the consolidated financial
statements of MasTec, Inc. and subsidiaries as of December 31, 1997 and 1996,
and for the years ended December 31, 1997, 1996 and 1995, which report is
included in the Annual Report on Form 10-K for the year ended December 31, 1997.
We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Miami, Florida
April 20, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of MasTec, Inc. and subsidiaries on Form S-4 (No. 333-46361) of our
report dated February 25, 1998, on our audit of the consolidated financial
statements of Sistemas e Instalaciones de Telecomunicacion, S.A. (Sintel) and
subsidiaries as of December 31, 1997, and for the year then ended, which report
is included in Mastec, Inc's Annual Report on Form 10-K for the year ended
December 31, 1997. We also consent to the reference to our firm under the
caption "Experts."
ARTHUR ANDERSEN LLP
Madrid, Spain
April 20, 1998
