Business Context and Reporting Period
Company: MasTec, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 20, 2009
Event: Completion of the acquisition of Precision Pipeline LLC and Precision Transport Company, LLC (collectively "Precision"). Precision is a natural gas, crude oil, and refined products transmission pipeline infrastructure services provider in North America.
Key Financial Metrics and Transaction Details
- Acquisition Consideration: Approximately $132 million in cash paid to sellers.
- Escrow Arrangement: $15 million of the purchase price is held in escrow for 18 months to fund potential seller indemnification obligations.
- Earn-Out Structure:
- 40% of Precision's EBITDA for the last two months of 2009.
- 30% of Precision's annualized EBITDA in excess of $35 million for the remainder of the five-year earn-out period.
- Payment may be made in cash, MasTec common stock, or a combination thereof.
- Assumed Indebtedness: Approximately $33.6 million in outstanding indebtedness as of the closing date.
- Seller Guarantees: Approximately $11.6 million of the indebtedness is guaranteed by the sellers; MasTec intends to guarantee substantially all outstanding indebtedness.
Material Changes
This filing reports the consummation of a previously announced asset acquisition. The primary material change is the addition of Precision's operations to MasTec's portfolio and the assumption of $33.6 million in debt. The filing does not provide comparative financial performance metrics (revenue, profit, margins) for the prior period as this is a transaction report rather than a periodic earnings report.
Guidance, Outlook, and Risks
- Financial Statements: Audited financial statements of the acquired businesses were previously filed on November 4, 2009. Unaudited interim financial statements and pro forma financial information are expected to be filed by amendment within 71 calendar days of this report.
- Contingencies: MasTec has agreed to indemnify sellers regarding liabilities arising from the $11.6 million in seller guarantees until those guarantees are released.
- Regulatory Disclosure: A press release issued on November 23, 2009, regarding the acquisition is included as an exhibit but is not deemed "filed" with the Commission.
Investor Verification Checklist
- Verify the full text of the Membership Interest Purchase Agreement (filed as Exhibit 10.1 on November 4, 2009) for detailed earn-out definitions and indemnification terms.
- Review the audited financial statements of Precision (Exhibit 99.2 filed November 4, 2009) to assess historical performance.
- Monitor the upcoming amendment to this 8-K for unaudited interim financial statements and pro forma financial information.
- Confirm the status of the $11.6 million seller guarantees and the timeline for their release.