MasTec CFO notes de-levering, efficient working capital management

By Paul Deckelman

New York, June 15 – MasTec, Inc. is in what company executives feel is solid shape on the debt and liquidity front, following improved performance last year and recent changes to its credit agreements both expanding the size of its facility and extending the maturity.

Its chief financial officer said Thursday that the company was also helped by a more efficient management of its working capital, giving the company more flexibility in deploying its cash flow.

The Coral Gables, Fla.-based company – which builds facilities for the oil and natural gas, telecommunications and power generation and transmission industries – has greatly expanded the scope of its operations over the past decade.

In 2007, it generated 99% of its $900 million of revenues building and maintaining telecom infrastructure, with a small business in electrical transmission infrastructure.

Fast-forward to 2016 – when total revenues had swelled to $5.1 billion, as the company diversified, moving into higher growth-margin business – communications had shrunk to around 45% of total revenues, while oil and natural gas pipelines and other infrastructure now accounted for 39% of sales, electrical transmission had grown to about 7% and power generation and other industrial infrastructure around 8% of revenues.

CFO and executive vice president George L. Pita told participants at the Stifel 2017 Industrials Conference in New York that in 2016 alone, “we grew [revenues] from $4.2 billion to $5.1 [billion] – so we grew by $900 million, and we de-levered and we significantly lowered our leverage ratio.”

Some debt reduction

As of the end of the fiscal 2017 first quarter on March 31, the company’s total debt stood at $971.2 million, down from $1.08 billion on June 30, 2016.

The biggest piece of that was $400 million of 4 3/8% senior notes due 2023, unchanged during the period – but it also had $186.7 million of outstanding revolving credit facility borrowings, down from $308 million at June 30, $250 million of term loan debt, up slightly from $244 million during the earlier period, and $119.4 million of capital lease obligations, up from $107 million, and small amounts of other debt.

The company had brought its leverage ratio of net debt as a multiple of adjusted EBITDA down to around 1.7 times at March 30 – below its previously stated target estimates – versus the mid-2 times area a year ago.

And in February, MasTec and its lenders agreed to upsize the credit facility and term loan size to $1.5 billion. They also agreed to extend the maturity dates of both facilities to February of 2022 from October of 2018 for the revolver and November 2019 for the term loan, giving the company more flexibility – other than a small amount of notes payable in 2018, the company has no significant maturities due until February 2022.

The weighted average interest rate on the debt in its capital structure is a manageable 3.71%.

The company ended the first quarter with cash flow from operations of $154 million and what it termed “ample’ liquidity of over $650 million.

Working capital management

Pita – who spoke to the conference attendees along with company chief executive and president Jose R. Mas – also noted that “one of the things I think we did well, in addition to executing very well from a profit perspective in 2016, is we also managed working capital very well.”

He noted that the company’s accounts receivable days outstanding, or DSOs – the number of days a company takes to collect revenue from its customers after making a sale – were at record low levels in the high 60s or lower 70s. For instance, in the 2017 first quarter, the DSO number stood at 70 days, down from 74 days a year earlier.

“Our people have been diligent in maintaining and really working towards maintaining the billing and collections with all of our customers” – and he added “and I don’t think that profile changes.”

Expecting continued performance improvements, including working capital metrics, Pita said that going forward, “we’ll be a significant cash generator. We’ll obviously invest some moneys either in capex or M&A or share repurchase, whatever we think is the best return – but I don’t think our working capital profile changes much from what we are, where we have been in the last 12 months.”

© 2015 Prospect News.
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