MasTec Inc (MTZ) 2003 Q3 法說會逐字稿

Thank you for standing by, and welcome to the MasTec Inc. third-quarter earnings release conference call. This call is being recorded. The following statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In these communications, we may make certain statements that are forward-looking, such as statements regarding MasTec's future results and plans and anticipated trends in the industries and economies in which MasTec operates. These forward-looking statements are based on MasTec's current expectations and are subject to a number of risks, uncertainties and assumptions, including that of our revenue may differ from projected, and that we may be further impacted by slowdowns or postponements or cancellations in our clients' businesses or deterioration in our clients' financial conditions; that our targeted service markets may not expand as we anticipate; that our reserves and allowances may be inadequate or the carrying value of our assets may be impaired, and our outcome of pending litigation may be adverse to us; and that we may experience increased costs associated with realigning our business or may be unsuccessful in those efforts. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from our results expressed or implied in the forward-looking statements made by the Company in these communications. These and other risks and uncertainties and assumptions are detailed in the documents filed by the Company with the Securities and Exchange Commission. MasTec does not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances. As to EBITDA and other non-GAAP financial measures, SEC Council has advised that the Company should discuss only those GAAP financial measures that appear in our written disclosures. There is no easy way in the conference call to address the SEC requirements of reconciling non-GAAP numbers to GAAP numbers. So the Company has adopted a policy of not addressing non-GAAP measures.

Now at this time, I would like to turn the conference over to Marc Lewis, MasTec's Vice President of Investor Relations. Mr. Lewis, please go ahead.

Good morning. I would like to welcome you all to MasTec 2003 third-quarter conference call. We know that we have a number of new investors on the call today, many of whom we have spoken to recently, and I would like to extend a special thanks and welcome to all of you.

With us today we have Austin Shanfelter, MasTec's President and Chief Executive Officer, and Donald Weinstein, the Company's Executive Vice President and Chief Financial Officer. The format of the call will be opening remarks by Austin, followed by a more detailed summary of the quarter from Donald.

Under Sarbanes-Oxley, and new SEC regulations, financial discussions as mentioned above will be (indiscernible) to GAAP-based financial items. These discussions will be followed by a question and answer period. We expect the call will last approximately 45 minutes. Austin.

Thank you, Marc, and good morning. Welcome to our third-quarter call. Yesterday, we reported that our net income for the third quarter of 2003 was 13 cents a share, up 160 percent from 2002. During the quarter just ended, we had a total revenue of 248.4 million compared to a 231.8 million in '02. Don will give you more details in his financial analysis later on the call.

We're definitely pleased with our quarterly performance and even more focused on the broad range of opportunities that are currently presenting themselves to us. These growth opportunities are evident in both the private and public sectors. Generally, our large customers are migrating more towards and outsourcing larger percentage towards outsourcing, a larger percentage of their outside plant maintenance work to fewer and fewer large companies like MasTec. Outsourcing to specialty firms lowers direct costs, increases quality, and lowers our customers back-office costs. Make no mistake about it, this is a very important fundamental shift.

We see the following trends in the sector that MasTec serves. First, we have discussed before install to the home is among our highest gross margin service offerings. We have recently added approximately 100 new trucks and crews in various markets across the country. Based on contracts that we currently have in hand, we expect the number of crews to grow substantially by the middle of '04 and into '05. As we migrate from our current system upgrade mode towards the end of '04 into '05, the revenue mix should include additional install to the home, maintenance and repair, and new build or line expenses.

Second, recent industry news articles and activities have confirmed the serious intent of the Rbox (ph) and other telecoms to deploy fiber to the premises. MasTec is uniquely positioned to participate in this market as the only Company with two major start-to-finish fiber to the premise deployments completed. MasTec has the geographic, customer diversity, and our national footprint and (indiscernible) capabilities make these large projects feasible for our customers. While (ph) fiber-to-the-home is not currently in our financial model, we feel comfortable and confident that our service offerings can be competitive and successful.

Third, MasTec continues to expand its entry into the federal market for telecommunication infrastructure (ph) upgrades during the third quarter. Major projects include the work at Fort Rucker's (ph), Alabama, Fort Jackson, South Carolina, Mitchell Air Force Reserve Base in Wisconsin. While revenues for these bases were low during the third quarter and since the projects were in the design stage, they continue to position MasTec in an important federal market. MasTec has aggressively attacked this market as an independent contractor and by forming strong relationships with well-established, successful engineering firms and prime contractors such as General Dynamics, Next (ph) General One (ph) Federal, Avia (ph), along with other dominant players in the market.

Fourth, our ITS (ph) business has a tremendous infrastructure opportunity, and we continue to be a leader, if not the leader, in the important area. Our backlog is strong and we see continued opportunities in '04. We're currently qualified to do business in 40 states with another five state applications pending.

Fifth, there has been a recent focus on the electrical grid upgrade after the August blackouts in the Northeast and Midwest. This is a long-term opportunity that should develop over time. Recently, the Company has picked up new light transmission work with Duke Energy on a 12-mile 69 KV (ph) line, and one (ph) with Encore TXU on a 34-mile 138 KV line. In the short-term, increased focus on the local maintenance and substation work should help our NG offering grow.

And finally we believe that telcom must return to more normalized spending levels for repair and maintenance during the next year. The very low levels of spending for the Rbox maintenance cannot be sustained indefinitely without serious network integrity problems. We believe that Telcom spending reached its bottom of the market in the early 2003, and are now seeing increases in Rbox repair maintenance spending. We expect a continuing recovering towards normalized spending levels which would have a very positive effect on the MSA model.

During the third quarter, we also increased some small diameter gas pipeline construction activity, which expands our energy service offering. We've completed 80 percent of a $24 million project placing 12 6-inch and 4-inch pipe from Roseburg, Oregon to Coos Bay. We have a long history in this business, and it has the potential to grow with scale and opportunity, and provide meaningful bottom-line contribution.

MasTec has implemented and expanded a companywide safety program that has already made positive impact on claims-related costs this year. Our team members have worked hard at reducing the frequency and severity of the on-the-job injuries and claims. Our increased training and attention to safety detail will continue to drive enhanced performance. MasTec team members are making a difference each day in this important area.

Our equipment costs are lower as we move towards a more standardized purchasing process. We have taken advantage of favorable pricing in terms this year. The fleet management and purchasing initiatives started in 2003. As a result, our restructuring efforts are paying real dividends, and they are now having a positive impact on our bottom line. We expect substantial contribution from all of these efforts in 2004 and we have a full year of operations with the new process and controls in place.

I'm not going to turn the call over to Donald Weinstein, and he will give you a detailed financial summary of the quarter just ended. Don.

Thank you, Austin, and good morning to everyone. Let me start with revenue. As Austin described, MasTec is clearly growing in all of its service lines, and for over the first time in over three years, MasTec achieved an increase in the current quarter revenue relative to the prior year's quarter. Our revenue was 248.4 million for the three months ended September 30th, 2003 compared to 231.8 million for the same period in 2002, representing an increase of 16.6 (ph) million or 7.2 percent. Relative to the second quarter of 2003, our revenue increased 39.3 million or 18.8 percent. The increase was principally due to increases in our broadband upgrade construction, expansion of our install to the home offering in several markets that we have talked about, and our energy service offering gains. Our costs of revenue were 212.9 million or 85.7 percent of revenue for the three months ended September 30th, 2003, compared to 196.6 million or 84.8 percent of revenue for the same period in 2002.

Broadband operating margins were strong during the quarter, as we saw significant sequential quarterly increase in our largest broadband customer and the continued expansion of the home install revenue stream. Now we did see some margin pressure through losses at our international operations during the quarter. Our international operations were affected by the winding down of certain projects and the exiting of certain regions of operation. More specifically, excluding the sale of non-operating international assets net, international booked a loss of 1.4 million or approximately 3 cents per share on a consolidated basis during the quarter. The loss was due to reduced margins in our Brazilian telecom operation. MasTec has scaled back the telecom operation and now operates in profitable areas. Also in Brazil, we are in the process of finalizing a large electrical transmission line contract that will further result in margin improvement beginning in early 2004. Going forward, we see the opportunities in Brazil will definitely be more focused on energy, and at the same time, while (ph) we (ph) are (ph) growing margins in Brazil, we are also exploring strategic options to enhance the value.

Focusing on depreciation, depreciation increased 6.7 million -- or I'm sorry -- depreciation was 6.7 million or 2.7 percent of revenue for the three months ended September 30th, 2003 compared to 8.1 million or 3.5 percent of revenues for the same period in 2002. We reduced depreciation expense in the three months ended September 30th, 2003 by continuing to reduce capital expenditures and disposing of excess equipment.

General and administrative expenses were 14.7 million or 5.9 percent of revenue for the three months ended September 30, 2003 compared to 19.2 million or 8.3 percent of revenue for the same period in 2002. The decrease is due in large part to our restructuring plan implemented in late 2002 and early 2003.

MasTec is continuously looking for ways to take costs out of the business. As Austin mentioned the safety initiatives earlier, we are taking advantage of the significant improvement of MasTec loss control by currently restructuring our insurance program to afford additional cost-savings for MasTec.

On interest expense, net of interest income was 4.9 million or 2 percent of revenue for the three months ended September 30th, 2003, and it remained relatively constant compared to 4.9 million or 1.9 percent of revenue for the same period in 2002. Other income increased to 1.6 million for the three months ended September 30th 2003 from about 0.5 million for the three months ended September 30th, 30th, 2002. As included in our second quarter press release and discussed in our previous call, this was primarily made up of the sale of noncore international assets during the third quarter of 2003.

For the three months ended September 30th, 2003, our effective tax rate was approximately 41.7 percent compared at 36.5 percent in 2002.

Now let's talk about liquidity for a minute. As of September 30th, 2003, we had no outstanding draws on our $125 million revolving credit facility. As in the past, we continue to be in compliance of the financial covenants of our credit facility. Equally important, MasTec's growth liquidity increased over $30 million from the second quarter to 76.6 million at September 30th, 2003. This increase is a result of both more cash on hand at September 30th and approximately 19 million of additional availability under the credit facility.

Further on liquidity, while cash was 15.2 million reported at September 30th, 2003, today it is approximately 23 million. DSOs, also tied to cash, for the quarter just ended, reduced to 86 (ph) as compared to 92 at September 30th, 2002, and reduced from 91 just in this last quarter.

For the quarter, some of our largest North American customers were, in alphabetical order, BellSouth, Comcast, Coos Bay County, DirecTV, Dominion, Florida Power & Light, Encore TXU, Progress Energy, Sprint, and US West. MasTec's customer base continues to be diversified by region and client, and is one of the core strengths of MasTec. Further evidence of customer diversity is that for the quarter, the top 10 customers comprised less than 55 percent of revenue, and our largest customer was only 15.3 percent of revenue.

Now during the last quarter, revenues by industry service offering were as follows. On the cable side, it was approximately 32.1 percent of revenue or about 79.7 million. Our telecom business was 26.6 percent of revenue or about 66 million. Energy was a strong 26.4 percent of revenue, or 65.55. Our ITS (ph) and government work was 12.6 percent of revenue or 31.4. And our international was just 2.3 percent of revenue or 5.8 million.

With respect to guidance for the fourth quarter of 2003, MasTec expects revenue to be from 220 to $240 million with earnings per share between 9 cents and 13 cents. For the entire year, this represents revenue ranging from 858 million to 878 million, and EPS ranging from 24 cents to 28 cents per share. Looking forward to 2004, MasTec expects revenue from 900 million to 1 billion, with earnings per share between 52 cents and 62 cents. Now let me turn it back to Austin.

While we're pleased with MasTec's financial performance so far in '03, the real story is what is yet to come. Here are a few key points before we turn it over for questions. In the event that fiber to premise is deployed, we believe MasTec is well-positioned and very competitive. If (ph) federal government are going to spend money on infrastructure, and we are well positioned on both the telecom and the ITS to take advantage of these opportunities. We are already increasing our install to the home model. Repair and maintenance and new build business and broadband will be coming soon. There will be additional opportunities in the energy sector as a result of recent blackouts and other related service line expansion opportunities. We have brought our costs down, and we continue to look for increased efficiencies throughout MasTec. We have good organic growth even in a relatively poor year for an industry as a whole. And finally, our diversification by industry, client and region is broad.

I would like to offer one final word to our employees, we continue to make progress with the Company and we have come a long way in the last 12 months, and appreciate the efforts of all of our team members, and we thank them for that.

At this point, we would like to turn it over for questions and answers.

Thank you. (OPERATOR INSTRUCTIONS). And we will first go to Rick Grubbs with Kaufman Brothers.

Good morning, guys. Great numbers. Just a couple of questions on the housekeeping items. Don, could you give us the exact debt number for the quarter long-term and short-term, just kind of break those out? And I may have missed it, but I don't think you guys mentioned CapEx, I would just like to get that. And just lastly, again, a housekeeping item, just kind of wondering when we can expect the 10-K to be filed. Was that 75 days, or I think that has changed. The requirement for this year is kind of looking for when we can look for that to come out? Thanks.

Let me do those in order. In terms of the long-term maturities of debt, our long-term debt, it's 197,003 (ph). And the current maturities of debt are 3,000,514 (ph).

Okay. Thank you.

In terms of CapEx, CapEx for the quarter was about $1.3 million. And the time lines changed for next year. This year, the third-quarter Q is 75 days. I'm sorry, this year's K is 75. So for the 12/31/03 K, that will be to approximately March 15.

Okay great. Thanks. And one last follow-up. Just kind of thinking about the business going into '04, can you talk a little bit about where you think you -- you have your four sectors, primary sectors or verticals, where we can expect the most growth and sort of some idea of margins in those businesses going forward?

I think you'll see us -- the cable will continue, the broadband will continue to grow, next year solidly. We have indications that the energy market is still moving in a very positive direction as well as the ITS market. At this point, not figuring in fiber to the home and our telecom model, we're thinking there is going to be a small 2 to 3 percent increase in volumes on that business. But if the fiber to the home does take place, that will change quite substantially.

Great. On the fiber to the home, anything you can tell us, just developments there, across any of the Rbox, anything you can share with us at this point?

At this point, I'd rather not share anything that we know in the marketplace. I don't think we have the ability to do that.

We will next go to Alex Rygiel with Friedman Billings Ramsey.

Thank you, very much. Who was your largest customer in the quarter?

Comcast. With 15.3 percent of revenue or about $38 million.

Great. And can you quantify the percent of your broadband revenues from your install to the home activities?

Alex, we have not broken it down like that in the past. What I would tell you is that right at this particular point, you are looking at about a 30/70 split, and that is not precise by any means. But approximately 30 percent of our revenues are coming from install to home at this point.

And at what point in time in the future again do you expect sort of that inflection point where install to the home is greater than all other broadband activities?

I think in some of my opening comments I made the statement that we expect that to take place late '04, mid '05.

That's helpful. Perfect. And then, is there any way you can help us to quantify what fiber to the home or fiber to the premise could add to your model next year, or the following year?

It's really difficult to say, Alex. As we sit here as MasTec, we believe that Verizon is taking the lead on the articles that we've read and the things that we follow in the industry. And we also believe that if they make the decision to go forward, that that will also affect BellSouth and SBC's (ph) decisions as well. So to put a number on the amount of work that might be there, I think would be a real shot in the dark. I believe that you're looking at projects that would be in excess of, you know, 20 million feet a year, at least, for each one of the customers. But it is really difficult to kind of tie that down.

And one last question. You know, the quarter looks very solid, and congratulations on that. I guess the big surprise to me was Brazil. Going forward, do you anticipate losing any money in Brazil, and if so, for how long?

I think when you look at Brazil in the fourth quarter, many of the changes I described in my prepared remarks, in terms of pairing back the scope of that opportunity have occurred in the fourth quarter. I think Brazil in the fourth quarter is going to be flat to a nominal loss, and will be profitable in 2004.

Great. Thank you, very much.

Vic Grover of Needham & Co.

Hey, guys. Good quarter. Couple of questions -- on the cable side, Comcast is saying they will be 95 percent done with the AT&T broadband upgrade by the end of this year. I guess the question is, how much of your work for Comcast has been completed? How much is left in the pipeline for MasTec in terms of upgrading for Comcast? And should we look at this home installation opportunity with cable MSOS to really unfold by the end of this year so you can grow through that end of the upgrade cycle?

Let me go at this a couple of different ways. I think it is very important that when we start talking about global issues about Comcast budget and (inaudible) is and what their status is on the rebuild, that I can comment about that piece. What I can comment about is the jobs that MasTec has going and those revenues. And we expect our revenues to be flat, probably, in the fourth quarter and the third quarter, probably a little bit increasing in the first quarter of next year, our revenues. And then, tailing off, building up in maybe the second and third, and tailing off in the fourth into '05. So that is our model when it comes to Comcast. When it comes to installation to the home model, we are already, you know, putting more and more people out (ph). I think if you look at MasTec two or three years ago, when the question was asked that I think Alex just asked, the percentage of how much is construction, how much is install to home, that number would have been substantially different. It probably would've been 10 percent of our business a couple of years ago. So that model is already in play; it is already starting. We have been defining ourselves as when does the install revenue take over from the construction -- the rebuild revenues, and we still believe that to be late in '04 or early in '05.

One of the important factors to remind everybody on the cable model, and this is for all of our broadband customers, is that MasTec is really concentrated on not just the rebuild and the install, but also the repair and maintenance and the new build and line extension work that will be forthcoming. That is a large piece of business that is out there, that has historically been very segmented. And we believe that the clients are going to be looking more of a -- all of our clients will be looking more for a national type or a regional type of plan to attack those maintenance leads (ph), and to attack the line extension leads.

Importantly, Mick, and to all as you develop your models, MasTec does not forecast a gap in its revenue and margin and earnings growth story as we go through '04 and '05 and out into '06.

Okay now. Moving on -- thank you, very much for that -- moving onto energy, there is a huge spike in the energy segment. Was there any kind of one time major project that helped you with that performance? And it looks like that probably also helped drag down margins. I'm just trying to get some color there. And a follow-on, on the other hand, it looks like transportation was down sequentially, which seems -- it's kind of confusing, because you've got additional state certifications going on. So what is the lag time between getting qualified in a state and getting additional ITS work? And when should we expect that to start growing again?

Let me handle the energy question first and we will move right into the ITS side (indiscernible). The energy question is yes, there was definitely one project that hit in the very end of the second quarter but mostly in the third quarter, that was Coos Bay. And I announced it in my opening comments. MasTec is 80 percent completed with an approximately $24 million project, and this was doing small diameter, 12, 6-inch, 4-inch pipe out in Oregon. And it was from Rosebud, Oregon to Coos Bay. That is definitely a spike. And we are now complete with the project this year because of weather. That will pick back up in the end of the first quarter next year, and we will complete the rest, the 20 percent, next year. So that is the spike in that.

As far as the ITS, it is all about -- we are qualified in these new states. You begin to receive bids within probably two months of being qualified. And then there is a time period of -- a lag time of getting the packages and getting on the actual bid process of projects that are forthcoming. We just have a circumstance that we've reached out there to new areas that have expanded MasTec's future capabilities in the marketplace, but it hasn't hit our numbers right now. We expect '04 to be stronger and going into '05, to be very strong for us in that marketplace.

Okay. Thanks, a lot guys.

We will next go to Romeo Reyes of Jefferies & Co.

Good morning, great numbers. Couple of quick questions. Some small items, but others for 2004 guidance. On the backlog, what was the number, Don, as of the end of the third quarter?

It was about 1,000,000,250.

Okay. Was that up, down, sequentially?

It was approximately the same as the second quarter.

Okay, flat. Okay, liquidity? You went through it really quickly, so I didn't actually write down all the numbers. Cash on hand plus the availability -- what is the availability in the credit facility based on your covenants?

Well again, from a covenant perspective, the covenants don't impinge on our availability. If I go back to my prepared remarks about the liquidity, we had 76.6 million at September 30th, from a liquidity perspective. And when you back out the approximately $15.2 million in cash, the balance would be availability under the line, gross.

Okay. That's great. CapEx for 2004?

Cap CapEx for 2004 should be approximately between 15 and 20; it is going to depend upon again -- in Austin's prepared remarks, he talked about taking advantage of some of the existing OEM programs. To the extent that the market rebounds and those OEM programs are (ph) as (ph) available, and I would expect to be toward the higher side of CapEx guidance. To the extent that the OEMs continue to aggressively finance, I would expect to be toward the lower end of the CapEx.

And I don't know if you can comment on this, but as we look at the fourth quarter in 2004, in the past, you've given margins on EBITDA. Can you -- are you in a position to comment on what those margins in the past? You said you are ramping up towards 10 percent of revenues on an EBITDA basis. Basically, have things changed? It seems like the EPS guidance hasn't changed. If anything, it's become more robust. So I would expect that the margins on EBITDA are still the same or probably better. Can you comment on that?

Other than referring you to the two opening comments, which we could actually call the Romeo Reyes comments --

You know, I was thinking that you put that in because of me!

We did! We did! No, I'm just teasing. Really, when we spoke with the SEC, our SEC council, this really is something that the SEC is clearly driving towards. And you see it in everybody's releases. You know, as it relates to previous guidance, I think when you build your model and you look at the EPS expectation and you look at the revenue expectation, you should be able to derive the type of margin expectations that you're looking for.

Right. Exactly. Okay. In terms of revenue growth, if I look at this year versus last year, last year, you had roughly 80 million of revenues from businesses that were sort of shutdown or that you exited because they were not profitable enough for you guys. So if I look on a same-store basis, can we take out $20 million of revenue from last year's, you know, 230 (ph) $2 (ph) million? And would that mean that your growth on a sort of same-store basis or same business, ongoing business basis, is closer to 17, 18 percent?

I think it actually, take out a little less than 20. The number you are referring to is the 77 million from discontinued operations from last year. And sort of on a pro rata basis, it's 20 a quarter. It is a little bit more front-loaded toward the first six months of the year. So I think -- I don't have the number in front of me. I would tell you I would expect it to be closer to 15 than 20.

Right. So you guys are growing at double digits instead of the single digit number. Last question, on 2004, how much -- you have this nice backlog. Do you have pretty good visibility that that 900 to $1 billion number is achievable? I'm trying to figure out how much of that is already in the backlog versus new wins that you are incorporating in your guidance.

Romeo, I think it is very important that people understand our business. The contracts that we have with Comcast, with DirecTV, with BellSouth, with Sprint, with Florida Power & Light, with Progress Energy, with the DOT, are all long-term contracts in nature. They are not on new announcements. They are not -- these are the MSA that MasTec talks about, the MSA type model -- types of projects. So our visibility on our revenues -- and even in last year, when MasTec was having difficulty with profit margins and our cost controls, we never saw the revenue decreases that some of the other people in our sector witnessed. We have a very strong revenue base, very visible customer base. So hopefully that is a helpful answer to your question.

Great, great, great. Thanks. Great quarter, again, guys.

We will next go to John Frank (ph) with Miller Asset Management.

Hi, thank you for taking my call. Question on cash generation. Last quarter, your cash flow from operations were negative $11 million or so. I know that was -- you attribute it to an increase in your accounts receivable as your revenues ramped pretty quickly in the quarter. You mentioned in your Q&A session on the previous call that we could expect a pretty significant cash generation this quarter. The $2 million that we've seen from operations seems a little bit light. I was just wondering if you could just comment on that.

I think that when you look at the growth in the business, the fact that we exceeded the revenue expectations -- you know again, the type of cash required to fund the working capital -- had we been I would say in the middle of the revenue expectation, you would have seen certainly more cash on the balance sheet. As MasTec continues to focus on profitable growth, and the fact that we exceeded the high end of the expectation, that obviously is going to use up some of the incremental cash generated.

I understand your customers are high-quality. The DSO level was 86 or so in the quarter. Are you still guided to a mid-70 level on a long-term basis?

The answer to that is that our whole company is focused on trying to bring that down to the high 70 to mid 70 range. That is a constant process and we will still push to get there.

Okay. One other question. I know you don't break this out, but X-Brazil on a gross margin basis, what does the domestic business look like quarter-over-quarter? Do we see improvement, flat? What does it look like?

Well, again, there were two things really affecting gross margin in the quarter. One was clearly Brazil; and Brazil impacted the business by well over 100 basis points of gross margin level. The other effect that we talked about was the mix of business. One of the things driving some of that incremental revenue were some energy and ITS projects. And those type of projects are lower margin relative to the expected mix, and that also brings down gross margin a bit.

I understand. Thank you.

(OPERATOR INSTRUCTIONS). Alan Mitrani of Copper Beech Capital.

Hi, thank you. I don't have the numbers in front of me, but what was Comcast last quarter? And from a dollar basis on your two (ph) revenues?

24,000,569.

And the increase that we saw -- so we saw a significant increase, obviously.

$5 million increase.

How much of that 50 percent increase sequentially came from revenues to install? Or how much was really from infrastructure upgrade work?

We don't break it down that way. But it was more of the construction (ph) work.

From a seasonal perspective, normally the calendar fourth quarter is a little worse normally. Do you expect Comcast to go down sequentially, or do you expect to go up?

I said that just a little while ago. You are going to see a little bit of flat to up in the fourth quarter. I think it is important to understand that most of our customers have a mentality that -- Comcast and others -- that they are going to get their jobs done on time and on schedule. You've seen that with the great production rates with the Comcast projects. So we are going to continue to go on this path. Whether it affects us substantially, that would be another issue. I think one of the things you have to look at is a couple of markets (inaudible), and we are in the San Francisco market, a market that is not going to be really highly affected by weather; we are in the Florida market that not going to be really highly affected. We are in some tougher markets, like Chicago and that area. But I think all in all, we will be able to -- it will be flattish or a small gain in the fourth quarter.

Okay. And also, your international markets. Many people have wondered why you are even there, given that you are in scale back mode from unprofitable. I realize that international has been profitable in the past, but sort of noncore businesses, let's say. Can you talk about what it means, strategic options, for that business? Is it a joint venture potentially? Is it an outright sale? Can you tell us what is on the table?

You know, from a strategic option, at this point, we are exploring strategic options. And strategic options could mean working with a local partner, having them take an investment interest. You know, we have been pretty public over the last -- at least half year -- indicating that while the business up until this quarter was a little bit profitable, made a little cash flow, that we were still interested in finding someone who would be interested in buying it. I think, given the change in the mix, the fact that we have pulled back a bit on the telecom side, but given the fact that we do have opportunities on the electric and energy side, you know, I think it's a nice business. And if that means ultimately selling it, you know, whether we take a gain or loss on that sale, I think the focus of the business and the growth opportunities in this business are clearly the ones that Austin has been describing, and those are principally North America.

And I would add that we are going to treat the Brazilian asset just like we did the other assets here in the U.S. And that is grind right down to find out what our sweet spot in that business is, focus on the core business value, and deliver product from that perspective. And that is an ever-changing world down there. I think it's gotten more stabilized in the three to four months. MasTec believes that it can definitely position that asset in a better light in the very short-term time.

Okay. That's great. Also, your G&A was really solid in the quarter. I think it is the lowest absolute number I've since you've been a public company. Can you tell me if this is a run rate number, really, we should use. Also, I know you're moving headquarters at some point; and should this number go down once you actually go into new offices?

I think one of the things we've concentrated on is for those people that have been able to visit us down here, they realize our parking lot is about half full. One of the things we're doing is making sure that we have very strong people at the corporate office. We have downsized our field offices to have less offices in the field. We constantly concentrate on cost-cutting efforts. We talked about it; we did this job in '01. We concentrated out through '02, and to get things completed. And '03, it is starting to affect tremendously where we stand.

So I'm sorry. It should go lower from here? Flat from here? What is the -- how should I look at it?

Alan, I think, you know, as we look at it, what Austin is describing is the fact that actions that we took early in the year and late last year, things that related to safety, where we've had significant improvement, things that related to purchasing where we've had significant improvement -- you take the action, but the economic effect can take 6, 9, 12, 18 months before it materializes. And so some of the reductions that you've seen in SG&A relate to actions that were taken some time ago. We really view SG&A less interesting as a percentage of revenue, and more as a fixed dollar as you approached it. And that's because we look at it more of a step function. Under $1 billion of revenue, do we think we should be in this range, you know, within $1 million plus or minus? You know, we think that is the appropriate level. Above 1 billion? You know, and as the Company continues to have strong growth, will we have to further invest in our SG&A line? Yes, we will. But we really focus on it every day because these are the costs that are supporting the operation and are most easy to manage.

Okay, great. And then lastly, your CapEx has really been relatively -- obviously, it dropped off from a few years ago when everybody in the industry was spending a lot, and you had asset sales in terms of selling equipment. When can we start seeing depreciation and amortization come down significantly on a quarterly basis? What is a good run rate to use, given that you don't have as much equipment? I mean, you are selling equipment and CapEx is low?

You know, I think what you have seen is depreciation expense come down pretty precipitously. You know, this quarter, it was about 6.7 million. Last quarter was 7.4. The quarter before that was 8.4. I don't have handy the quarter before that.

Okay. So it was 6.5; 6, 7, is the run rate number, sort of?

I think what you're going to see is, you know, 6, 7 is going to be the run rate number. You know, we've had further sales in this fourth quarter which is going to affect depreciation expense going forward. But yes, I think 6, 7 is a good number for now.

Okay. And then if I could just ask one question on the competitive environment. First of all, how big was BellSouth in your business this quarter?

BellSouth was 4.4 percent.

Okay. It seems as if DieCom (ph) and some other competition --I mean BellSouth has spent a lot less -- but DieCom has made some inroads there; their acquisition recently that they announced looks like it sort of targets some of the telco customers in the South. Can you talk about the competitive positioning as it relates to some of the telcos as they come up with fiber to the home? But even just more importantly on MSAs, and, you know, sort of the steady work? Do you think you are gaining, losing share with some of your customers? How do you see that playing out?

I think where we're at is MasTec is absolutely either definitely positioned in the markets that we served for the last 30, 40, 50 years or it is gaining. I don't think there is any letdown. I think that these new fiber to home projects -- actually other areas than BellSouth -- actually increase our abilities to grow those customers. The BellSouth relationship with DieCom with MasTec has been there for many, many years. And we believe -- we feel very strong about our market share that we have with those folks.

Thank you.

Thank you, very much.

This does conclude today's conference call. We would like to thank everyone for their participation in today's MasTec's third-quarter earnings release conference call. We wish you a good day. And you may now disconnect at this time.