MASTEC INC — Interim / Quarterly Report 2000

May 2, 2000

============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 Commission File Number 001-08106 MasTec MASTEC, INC. (Exact name of registrant as specified in its charter) Florida 65-0829355 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3155 N.W. 77th Avenue, Miami, FL 33122-1205 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (305) 599-1800 Former name, former address and former fiscal year, if changed since last report: Not Applicable Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . As of April 26, 2000, MasTec, Inc. had 31,054,087 shares of common stock, $0.10 par value, outstanding. ================================================================================ MasTec, Inc. TABLE OF CONTENTS Part I. Financial Information Item 1. Financial Statements Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and March 31, 1999.................................. 3 Consolidated Balance Sheets as of March 31, 2000 (Unaudited) and December 31, 1999....................................................... 4 Unaudited Consolidated Statement of Changes in Shareholders' Equity for the Three Months Ended March 31, 2000.................................................... 5 Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and March 31, 1999 ........................................................ 6 Notes to Consolidated Financial Statements (Unaudited) ................. 8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition........................................ 11 Item 3 Quantitative and Qualitative Disclosures About Market Risk..... 17 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K............................... 17 Signatures .............................................................. 18 2 MASTEC, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)

The accompanying notes are an integral part of these consolidated financial statements. 3 MASTEC, INC. CONSOLIDATED BALANCE SHEETS (In thousands)

The accompanying notes are an integral part of these consolidated financial statements. 4 MASTEC, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands) (Unaudited)

5 MASTEC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

The accompanying notes are an integral part of these consolidated financial statements. 6 MASTEC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In thousands) (Unaudited) Supplemental disclosure of non-cash investing and financing activities: During the three months ended March 31, 2000, we paid approximately $2.1 million related to contingent consideration from earlier acquisitions which was recorded as additional goodwill. During the three months ended March 31, 1999, we acquired certain assets from Directional Advantage Boring, Inc., headquartered in Minnesota, in a transaction accounted for as a purchase. The fair value of the assets acquired amounted to $0.6 million, $0.3 million paid in cash with the remainder financed. We also paid approximately $2.7 million related to contingent consideration from earlier acquisitions which was recorded as additional goodwill. The accompanying notes are an integral part of these consolidated financial statements. 7 MASTEC, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis for Presentation of Consolidated Financial Statements The accompanying unaudited consolidated financial statements of MasTec, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements and should be read together with the audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 1999. The balance sheet data as of December 31, 1999 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. Certain reclassifications have been made to conform to the 2000 presentation. The financial information furnished reflects all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the quarterly periods presented. The results of operations for the periods presented are not necessarily indicative of our future results of operations for the entire year. Our comprehensive income for the three months ended March 31, 2000 and 1999 was $11.9 million and $6.4 million, respectively. The components of comprehensive income are net income and foreign currency translation adjustments. Note 2 - Debt Debt is comprised of the following (in thousands):

We have a credit facility that provides for borrowings up to an aggregate amount of $125.0 million, which we reduced from $165.0 million following our public offering in March 2000. Amounts outstanding under the revolving credit facility mature on June 9, 2001. Upon written request by us and at the bank's sole discretion, the maturity date of the credit facility may be extended to June 9, 2002. We are required to pay an unused facility fee ranging from .25% to .50% per annum on the facility, depending upon certain financial covenants. The credit facility is secured by a pledge of shares of certain of our subsidiaries. Interest under the credit facility accrues at rates based, at our option, on the agent bank's base rate plus a margin of up to .50% depending on certain financial covenants or 1% above the overnight federal funds effective rate, whichever is higher, or its LIBOR Rate (as defined in the credit facility) plus a margin of 1.00% to 2.25%, depending on certain financial covenants. We also have $200.0 million, 7.75% senior subordinated notes due in February 2008 with interest due semi-annually. 8 MASTEC, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The credit facility and the senior notes contain customary events of default and covenants which prohibit, among other things, making investments in excess of a specified amount, incurring additional indebtedness in excess of a specified amount, paying dividends in excess of a specified amount, making capital expenditures in excess of a specified amount, creating certain liens, prepaying other indebtedness, including the senior notes, and engaging in certain mergers or combinations without the prior written consent of the lenders. The credit facility also provides that we must maintain certain financial ratio coverages, requiring, among other things, minimum ratios at the end of each fiscal quarter of debt to earnings and earnings to interest expense. Note 3 - Operations by Segments and Geographic Areas The following table sets forth, for the three months ended March 31, 2000 and 1999, certain information about segment results of operations and segment assets (in thousands):

(1) For the three months ended March 31, 2000 and 1999, revenue, depreciation, amortization income before provision for income taxes and minority interest and capital expenditures related to our Brazilian operations. As of March 31, 2000 and 1999, total assets for Brazil consisted of $47.9 million and $66.3 million, respectively and the remainder relates to our interest in international assets not related to our core business. (2) Consists of non-core construction and corporate operations, which includes interest expense net of interest income of $4.3 million and $4.1 million for 2000 and 1999, respectively. There are no significant transfers between geographic areas and segments. Total assets are those assets used in our operations in each segment. Corporate assets include domestic cash and cash equivalents, real estate assets held for sale and notes receivable. 9 MASTEC, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Commitments and Contingencies The Delaware court in which two shareholder class action and derivative lawsuits were pending approved a settlement entered into in the fourth quarter of 1999 that dismisses both lawsuits and releases all parties in the first suit. We are not required to make any payments or to contribute to any amounts paid by other parties. In November 1997, we filed a lawsuit against Miami-Dade County in Florida state court alleging breach of contract and seeking damages exceeding $3.0 million in connection with the county's refusal to pay amounts due to us 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 unspecified damages. MasTec is vigorously pursuing this lawsuit. We are a party to other pending legal proceedings arising in the normal course of business, none of which we believe is material to our financial position or results of operations. We own minority interests in Argentina and Ecuador. Our investment in Argentina is a minority interest with a carrying value of $17.9 million as of March 31, 2000 in Supercanal Holding, S.A., a holding company of numerous cable television operators in western Argentina ("Supercanal"). We also own a minority interest in and have made a $3.0 million working capital loan to Sistemas e Instalaciones de Telecomunicacion S.A. ("Sintel"), a Spanish telecommunications infrastructure services provider. Supercanal has defaulted on its third party debt and has filed a petition under Argentine law seeking protection from its creditors. We do not guarantee any of this indebtedness. In January 2000, the majority shareholder of Supercanal approved a capital increase that would have required us to contribute approximately $5.9 million to maintain our interest, but the capital increase has been enjoined by an Argentine judge and we cannot determine whether or when the capital increase will be effected. We have determined that the carrying value of this asset held for sale has not been impaired, but we are monitoring developments to determine whether a charge is warranted in the future. Our 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. We 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 our international operations. 10 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Except for historical information, the matters discussed below are forward looking statements made pursuant to the safe harbor provisions for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. 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, financial condition and results of operations. 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 Quarterly Report. These and other risks are detailed in documents filed by the Company with the Securities and Exchange Commission. The Company does not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances. General We design, build, install and maintain internal and external networks supporting the Internet, Internet-related applications, e-commerce and other communications and energy facilities for leading telecommunications, cable television, energy and other Fortune 500 companies. Based on revenue, we are the largest end-to-end communications and energy infrastructure service provider in North America. We offer comprehensive network infrastructure solutions to a diverse group of customers, enabling our customers to connect with their customers. Currently, we operate from approximately 200 locations throughout North America, which accounted for 96% of our revenue for the period ended March 31, 2000. Internationally we operate in Brazil through a 51% joint venture which we consolidate net of a 49% minority interest after tax. For the three months ended March 31, 2000, approximately 12.9% of our domestic revenue was derived from services performed for BellSouth Telecommunications, Inc. Our top 10 customers combined accounted for approximately 50% of our domestic revenue in the quarter. We report our operations in four segments: * External Communication Services, * External Energy Services, * Internal Communication Services and * International. External Communication Services represents our core business and is divided into five service lines: * inter-exchange networks, * local exchange networks, * broadband networks, * wireless networks, and * intelligent transportation networks. Internal Communication Services includes: * switching and transmission services, and * structured cabling services. 11 Results of Operations North America The following tables state for the periods indicated our North American operations in dollar and percentage of revenue terms (in thousands):

Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 The following table sets forth the revenue and change in revenue by North American operating segments, in dollar and percentage terms (in thousands):

Our North American revenue was $262.3 million for the three months ended March 31, 2000, compared to $188.2 million for the same period in 1999, representing an increase of $74.1 million or 39.4%. The fastest growing operating segment is our external communication services segment primarily due to the increased demand for bandwidth by end-users which has spurred increased network construction and upgrades by our customers. The growth we are experiencing in our internal communication services segment is primarily due to growth in services provided at central office facilities resulting from regulatory co-location requirements to open central office facilities to new competitors. During the three months ended March 31, 2000, we had no acquisitions compared to one acquisition for the three months ended March 31, 1999 in our external communication services segment. Internal growth in revenue from our North American operations, as adjusted to exclude acquisitions, approximated 35.8% for the three months ended March 31, 2000, and was primarily driven by growth in external communication services. Our North American costs of revenue were $200.7 million or 76.5% of revenue for the three months ended March 31, 2000, compared to $147.1 million or 78.1% of revenue for the same period in 1999. In 2000, margins improved due to increased productivity in our external and internal communication services groups offset by a slight decline in our external energy services group due to poor weather conditions experienced in the month of January. Depreciation expense was $13.5 million or 5.1% of revenue for the three months ended March 31, 2000, compared to $10.4 million or 5.5% of revenue for the same period in 1999. The increased depreciation expense of $3.1 million resulted from our investment in our fleet to support revenue growth. The decline as a percentage of revenue was due to an increase in revenue from our internal communication segment which is less capital intensive. 12 General and administrative expenses were $21.7 million or 8.3% of revenue for the three months ended March 31, 2000, compared to $17.5 million or 9.3% of revenue for the same period in 1999. The decline in general and administrative expenses as a percentage of revenue for the three months ended March 31, 2000 was due primarily to our ability to support higher revenue with a reduced administrative base. Brazil The following tables set forth for the periods indicated our Brazilian operations in dollar and percentage terms (in thousands):

Three Months Ended March 31, 2000 compared to Three Months Ended March 31, 1999 Our Brazilian operations' functional currency is the Brazilian reals. Brazilian revenue was $10.3 million for the three months ended March 31, 2000, compared to $18.6 million for the same period in 1999, representing a decrease of $8.3 million or 44.6%. Brazilian revenue decreased primarily due to the completion of prior existing contracts. Brazil had revenue of R$18.0 million reals during the three months ended March 31, 2000, compared to R$32.0 million reals for the same period in 1999, representing a decrease of 43.8%. The average currency exchange rate was 1.7434 reals per US dollar for the period ended March 31, 2000 compared to 1.7220 reals per US dollar for the same period in 1999. Amortization expense was $2.0 million or 19.7% of revenue for the three months ended March 31, 2000 compared to $0.9 million or 4.7% of revenue for the same period in 1999. Amortization relates primarily to an intangible asset resulting from one acquisition completed in early 1998 that is being amortized over a five year period relative to the volume of work under specified contracts. During the quarter, amortization related to this contract was accelerated due to a change in volume. General and administrative expenses were $1.4 million or 13.9% of revenue for the three months ended March 31, 2000, compared to $1.9 million or 10.1% of revenue for the same period in 1999. General and administrative expenses were R$2.5 million reals or 13.9% of reals revenue during the three months ended March 31, 2000, compared to R$3.2 million reals or 10.0% of reals revenue for the same period in 1999. The decline in general and administrative expenses in both dollar and reals terms was due to an effort to reduce overhead as the revenue base has declined. 13 Consolidated Results The following table sets forth for the periods indicated certain consolidated income statement data for North America and Brazil and the related percentage of consolidated revenue.

Interest expense declined from $6.2 million to $5.6 million primarily due to the repayment of debt under our revolving credit facility with a portion of the proceeds of our offering of 2.5 million shares which raised approximately $126.0 million in net proceeds. Interest income for the three months ended March 31, 1999 includes interest accrued and collected from a customer financing arrangement which terminated in September 1999. Interest income for the three months ended March 31, 2000 was mainly comprised of interest earned on temporary investments as a result of our 2.5 million equity offering completed on March 3, 2000. Our effective tax rate for North American and Brazil operations approximates 42% and 33% respectively, for the three months ended March 31, 2000 and 1999. Financial Condition, Liquidity and Capital Resources Our primary liquidity needs are for working capital, capital expenditures, acquisitions and investments, and debt service. Our primary sources of liquidity are cash flows from operations, borrowings under revolving lines of credit, issuances of stock and the proceeds from the sale of assets held for sale. Net cash used in operating activities was $20.6 million for the three months ended March 31, 2000, compared to $14.5 million for the same period in 1999. The increase in net cash used in operating activities in 2000 was due primarily to increased working capital needs related to our growth. Our working capital at March 31, 2000, excluding assets held for sale of $57.6 million, was $235.2 million compared to $169.6 million at December 31, 1999. Our North American working capital as of March 31, 2000 was $212.8 million (net of $7.5 million in assets held for sale), comprised primarily of $244.3 million in accounts receivable, $31.5 million in inventories and other current assets and $45.4 million in cash, net of $108.4 million in current liabilities. As of December 31, 1999, our North American working capital was $124.7 million (net of $7.5 million in assets held for sale), comprised primarily of $233.2 million in accounts receivable, $25.4 million in inventories and other current assets and $7.2 million in cash, net of $141.1 million in current liabilities. We have a credit facility that provides for borrowings up to an aggregate amount of $125.0 million, which we reduced from $165.0 million following our public offering in March 2000. Amounts outstanding under the revolving credit facility mature on June 9, 2001. Upon written request by us and at the bank's sole discretion, the maturity date of the credit facility may be extended to June 9, 2002. We are required to pay an unused facility fee ranging from .25% to .50% per annum on the facility, depending upon certain financial covenants. The credit facility is secured by a pledge of shares of certain of our subsidiaries. Interest under the credit facility accrues at rates based, at our option, on the agent bank's base rate plus a margin of up to .50% depending on certain financial covenants or 1% above the overnight federal funds effective rate, whichever is higher, or its LIBOR Rate (as defined in the credit facility) plus a margin of 1.00% to 2.25%, depending on certain financial covenants. 14 We also have $200.0 million, 7.75% senior subordinated notes due in February 2008 with interest due semi-annually. The credit facility and the senior notes contain customary events of default and covenants which prohibit, among other things, making investments in excess of a specified amount, incurring additional indebtedness in excess of a specified amount, paying dividends in excess of a specified amount, making capital expenditures in excess of a specified amount, creating certain liens, prepaying other indebtedness, including the senior notes, and engaging in certain mergers or combinations without the prior written consent of the lenders. The credit facility also provides that we must maintain certain financial ratio coverages, requiring, among other things, minimum ratios at the end of each fiscal quarter of debt to earnings and earnings to interest expense. During 2000, we acquired and invested $13.7 million primarily in our fleet to support revenue growth. We collected $13.4 million related to assets sold, primarily related to the sale of our Spanish operations. We anticipate that available cash, cash flows from operations and from the sale of assets and investments and borrowing availability under the Credit Facility will be sufficient to satisfy our working capital requirements for the foreseeable future. We own 100% of a PCS wireless system in Paraguay in which we have invested $33.7 million and which is held for sale. We have entered into an agreement to sell the system to an unaffiliated telecommunications company. The agreement is subject to certain conditions and there can be no assurance that the sale will be consummated. We also own minority interests in Argentina and Ecuador. Our investment in Argentina is a minority interest with a carrying value of $17.9 million as of March 31, 2000 in Supercanal Holding, S.A., a holding company of numerous cable television operators in western Argentina ("Supercanal"). We also own a minority interest in and have made a $3.0 million working capital loan to Sistemas e Instalaciones de Telecomunicacion S.A. ("Sintel"), a Spanish telecommunications infrastructure services provider. Supercanal has defaulted on its third party debt and has filed a petition under Argentine law seeking protection from its creditors. We do not guarantee any of this indebtedness. In January 2000, the majority shareholder of Supercanal approved a capital increase that would have required us to contribute approximately $5.9 million to maintain our interest, but the capital increase has been enjoined by an Argentine judge and we cannot determine whether or when the capital increase will be effected. We have determined that the carrying value of this asset held for sale has not been impaired, but we are monitoring developments to determine whether a charge is warranted in the future. In Ecuador, we hold an indirect minority interest with a carrying value of $12.0 million as of March 31, 2000 in Consorcio Ecuatoriano de Telecomunicaciones, S.A. ("Conecel"), one of the two cellular phone operators in the Republic of Ecuador. In the first quarter of 2000, Telefonos de Mexico S.A. ("Telmex") acquired 60% of Conecel. In connection with the acquisition, Conecel's defaulted debt was either satisfied or brought current and all defaults cured. We exchanged our direct interest in Conecel for a minority interest in a Delaware holding company for Conecel and received certain shareholder rights, including a six-year put of our interest to Telmex for $12.0 million and registration rights. While we do not currently anticipate taking an additional impairment charge on any of these assets, there can be no assurance that future transactions or events will not result in any further impairment of these assets. If we were to take a charge, however, it could adversely affect our earnings for the period in which we incurred the charge. Seasonality Our North America 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. This seasonality is primarily the result of customer budgetary constraints and preferences and the effect of winter weather on external network activities. Some of our U.S. customers, particularly the incumbent local exchange carriers, tend to complete budgeted capital expenditures before the end of the year and defer additional expenditures until the following budget year. Revenue in reals from our Brazilian operations is not expected to fluctuate seasonally. 15 Impact of Inflation The primary inflationary factor affecting our operations is increased labor costs. We have experienced some increases in labor costs. Competition for qualified personnel could increase labor costs for us further in the future. Our international operations may, at times in the future, be exposed to high inflation in certain foreign countries. During the first quarter of 2000, we generated approximately 4% of our total revenue from our Brazilian operations that are susceptible to currency devaluation. We anticipate that revenue from our Brazilian operations will be less significant to our operations in the foreseeable future due to our continued focus on domestic operations. In addition, any deterioration in economic conditions in Brazil and other Latin American countries could adversely impact our results of operations, financial position and cash flows. 16 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Notes 2 and 4 of Notes to Consolidated Financial Statements for disclosure about market risk. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit No.* Description 27 Financial Data Schedule - ------------------------- * Exhibit filed with the Securities and Exchange Commission. MasTec agrees to provide this exhibit supplementally upon request. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MASTEC, INC. Date: May 1, 2000 /s/ CARMEN M. SABATER ----------------------------- Carmen M. Sabater Senior Vice President - Chief Financial Officer (Principal Financial Officer) Date: May 1, 2000 /s/ ARLENE VARGAS ----------------------------- Arlene Vargas Vice President and Controller (Principal Accounting Officer) 18