MASTEC, INC. The following is a discussion and analysis of our business, financial condition and results of operations as of and for the three month periods endedMarch 31, 2023 and 2022. This discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto in Item 1 of this Quarterly Report on Form 10-Q (this "Form 10-Q"), and the audited consolidated financial statements, accompanying notes and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contained in our 2022 Form 10-K. In this MD&A, "$" meansU.S. dollars unless specified otherwise.
General Economic, Market and Regulatory Conditions
We have experienced, and may continue to experience, direct and indirect negative effects on our business and operations from economic, market and regulatory conditions, including rising interest rates, recent inflationary effects on fuel prices, labor and materials costs, supply chain disruptions and uncertainty from potential recessionary effects that could adversely affect demand for future projects, delay existing project timing and/or cause increased project costs. We expect the remainder of 2023 to continue to be a dynamic macroeconomic environment, with elevated market interest rates and levels of cost inflation, as well as recession concerns, any or all of which could adversely affect our costs and customer demand. These conditions could affect the cost of capital of both us and our customers, as well as our customers' plans for capital investments and ongoing maintenance expenditures, which could negatively affect demand for our services. The extent to which general economic, market and regulatory conditions could affect our business, operations and financial results is uncertain as it will depend upon numerous evolving factors that we may neither be able to accurately predict nor quantify with specificity. We believe that our financial position, cash flows and operational strengths will enable us to manage the current uncertainties resulting from general economic, market and regulatory conditions. We carefully manage our liquidity and monitor any potential effects from changing economic, market and regulatory conditions on our financial results, cash flows and/or working capital and will take appropriate actions in efforts to mitigate any impacts.
Business Overview
We are a leading infrastructure construction company operating mainly throughoutNorth America across a range of industries. Our primary activities include the engineering, building, installation, maintenance and upgrade of communications, energy, utility and other infrastructure, such as: power delivery services, including transmission, distribution, environmental planning and compliance; wireless, wireline/fiber and customer fulfillment activities; power generation, primarily from clean energy and renewable sources; pipeline distribution infrastructure, including natural gas, carbon capture sequestration, water and pipeline integrity services; heavy civil; industrial infrastructure; and environmental remediation services. Our customers are primarily in these industries. Including our predecessor companies, we have been in business for over 90 years. For the twelve month period endedMarch 31, 2023 , we had an average of approximately 790 locations and 31,000 employees, respectively, and as ofMarch 31, 2023 , we had approximately 830 locations and 33,000 employees, respectively. We offer our services under the MasTec® and other service marks. We have been consistently ranked among the top specialty contractors byEngineering News-Record for the past several years. We provide our services to a diversified base of customers and a significant portion of our services are provided under master service and other service agreements, which are generally multi-year agreements. The remainder of our work is generated pursuant to contracts for specific projects or jobs that require the construction or installation of an entire infrastructure system or specified units within an infrastructure system. We manage our operations under five operating segments, which represent our five reportable segments: (1) Communications; (2) Clean Energy and Infrastructure; (3) Oil and Gas; (4) Power Delivery; and (5) Other. This structure is generally focused on broad end-user markets for our labor-based construction services. See Note 13 - Segments and Related Information and Note 14 - Commitments and Contingencies in the notes to the consolidated financial statements, which are incorporated by reference, for additional information regarding our segment reporting and significant customer concentrations. 26 --------------------------------------------------------------------------------
Backlog
Estimated backlog represents the amount of revenue we expect to realize over the next 18 months from future work on uncompleted construction contracts, including new contracts under which work has not begun, as well as revenue from change orders and renewal options. Our estimated backlog also includes amounts under master service and other service agreements and our proportionate share of estimated revenue from proportionately consolidated non-controlled contractual joint ventures. Estimated backlog for work under master service and other service agreements is determined based on historical trends, anticipated seasonal impacts, experience from similar projects and estimates of customer demand based on communications with our customers. Based on current expectations of our customers' requirements, we anticipate that we will realize approximately 62% of our estimatedMarch 31, 2023 backlog in 2023. The following table presents 18-month estimated backlog by reportable segment as of the dates indicated: March 31, December 31, March 31, Reportable Segment (in millions): 2023 2022
2022
Communications$ 5,602 $ 5,303 $
4,920
Clean Energy and Infrastructure 3,546 3,227 1,693 Oil and Gas 2,013 1,740 1,382 Power Delivery 2,731 2,709 2,650 Other - - - Estimated 18-month backlog$ 13,892 $ 12,979 $ 10,645 As ofMarch 31, 2023 , 56% of our backlog is estimated to be attributable to amounts under master service or other service agreements, pursuant to which our customers are not contractually committed to purchase a minimum amount of services. Most of these agreements can be canceled on short or no advance notice. Timing of revenue for construction and installation projects included in our backlog can be subject to change as a result of customer, regulatory or other delays or cancellations, including from economic or other conditions, including supply chain disruptions, inflationary effects, potential market or recessionary uncertainty, permitting delays, climate-related matters, political unrest, such as the ongoing military conflict inUkraine , effects of public health matters and/or other project-related factors. These effects, among others, could cause estimated revenue to be realized in periods later than originally expected, or not at all. We occasionally experience postponements, cancellations and reductions in expected future work due to changes in our customers' spending plans, market volatility, changes in governmental permitting, regulatory delays and/or other factors. There can be no assurance as to our customers' requirements or that actual results will be consistent with the estimates included in our forecasts. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings. Backlog is a common measurement used in our industry. Our methodology for determining backlog may not, however, be comparable to the methodologies used by others. Backlog differs from the amount of our remaining performance obligations, which are described in Note 1 - Business, Basis of Presentation and Significant Accounting Policies in the notes to the consolidated financial statements, which is incorporated by reference. As ofMarch 31, 2023 , total 18-month backlog differed from the amount of our remaining performance obligations due primarily to the inclusion of$7.7 billion of estimated future revenue under master service and other service agreements within our backlog estimates, as described above, and the exclusion of approximately$2.3 billion of remaining performance obligations and estimated future revenue under master service and other service agreements in excess of 18 months, which amount is not included in the backlog estimates above. Backlog expected to be realized in 2023 differs from the amount of remaining performance obligations expected to be recognized for the same period due primarily to the inclusion of approximately$2.9 billion of estimated future revenue under master service and other service agreements that is included within the related backlog estimate.
Economic, Industry and Market Factors
We closely monitor the effects of changes in economic, industry and market conditions on our customers, including the potential effects of inflation, recessionary and/or market concerns, regulatory and climate-related matters. Changes in general economic and market conditions can affect demand for our customers' products and services, which can increase or decrease our customers' planned capital and maintenance budgets in certain end-markets. Market, regulatory and industry factors could affect demand for our services, or the cost to provide such services, including (i) changes to our customers' capital spending plans, including any potential effects from inflation, rising interest rates, recessionary and/or market concerns, supply chain issues and/or public health matters; (ii) new or changing regulatory requirements, governmental policy changes, and/or customer or industry initiatives, including with respect to climate change, environmental or sustainability matters and/or from changes in governmental permitting; (iii) economic, political or other market developments or uncertainty, including access to capital for customers in the industries we serve and/or the ongoing military conflict inUkraine ; (iv) changes in technology, tax and other incentives; and (v) mergers, acquisitions or other business transactions among the customers we serve. Changes in demand for, and fluctuations in market prices for, oil, gas and other energy sources can affect demand for our services. In particular, such changes can affect the level of activity in energy generation projects, including from renewable energy sources, as well as pipeline construction and carbon capture projects. The availability of transportation and transmission capacity can also affect demand for our services, including energy generation, electric grid and pipeline construction projects. These factors, as well as the highly competitive nature of our industry, can result in changes in levels of activity, project mix, and/or the profitability of the services we provide. In the face of increased pricing pressure or other market developments, we strive to maintain our profit margins through productivity improvements, cost reduction programs and/or business streamlining efforts. Market developments, including rising fuel, labor and materials costs, have had, and could continue to have, a negative effect on our profitability, to the extent that we have not been, and in the future are not able, to pass these costs through to our customers. While we actively monitor economic, industry and market factors that could affect our business, we cannot predict the effect that changes in such factors could have on our future results of operations, liquidity and cash flows, and we may be unable to fully mitigate, or benefit from, such changes. 27 --------------------------------------------------------------------------------
Effect of Seasonality and Cyclical Nature of Business
Our revenue and results of operations are cyclical and can be subject to seasonal and other variations. For additional information regarding the effects of seasonality and the cyclical nature of our business, see Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2022 Form 10-K.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of our consolidated financial statements requires the use of estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. A summary of our critical accounting estimates is included in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2022 Form 10-K. We are required to make estimates and judgments in the preparation of our financial statements that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the three month period endedMarch 31, 2023 , there were no material changes in our critical accounting estimates or policies.
For details of our first quarter 2023 quarterly review for indicators of
impairment, refer to Note 3 - Acquisitions,
Results of Operations
Comparison of Quarterly Results
The following table, which may contain slight summation differences due to
rounding, reflects our consolidated results of operations in dollar and
percentage of revenue terms for the periods indicated (dollar amounts in
millions). Our consolidated results of operations are not necessarily comparable
from period to period due to the effect of recent acquisitions and certain other
items, which are described in the comparison of results section below. In this
discussion, "acquisition" results are defined as results from acquired
businesses for the first twelve months following the dates of the respective
acquisitions, with the balance of results for a particular item attributed to
"organic" activity.
For the Three Months Ended March 31,
2023 2022
Revenue $ 2,584.7 100.0 % $ 1,954.4 100.0 %
Costs of revenue, excluding depreciation and
amortization 2,359.5 91.3 % 1,733.3 88.7 %
Depreciation 107.2 4.1 % 85.2 4.4 %
Amortization of intangible assets 41.9 1.6 % 25.6 1.3 %
General and administrative expenses 163.9 6.3 % 145.4 7.4 %
Interest expense, net 52.7 2.0 % 16.0 0.8 %
Equity in earnings of unconsolidated
affiliates, net (9.2) (0.4) % (6.8) (0.3) %
Other (income) expense, net (6.2) (0.2) % 3.8 0.2 %
Loss before income taxes $ (125.3) (4.8) % $ (48.1) (2.5) %
Benefit from income taxes 44.7 1.7 % 13.1 0.7 %
Net loss $ (80.5) (3.1) % $ (35.0) (1.8) %
Net (loss) income attributable to
non-controlling interests (0.0) (0.0) % 0.0 0.0 %
Net loss attributable to MasTec, Inc. $ (80.5) (3.1) % $ (35.0) (1.8) %
28
--------------------------------------------------------------------------------
We review our operating results by reportable segment. See Note 13 - Segments
and Related Information in the notes to the consolidated financial statements,
which is incorporated by reference. Our reportable segments are: (1)
Communications; (2) Clean Energy and Infrastructure; (3) Oil and Gas; (4) Power
Delivery; and (5) Other. Management's review of segment results includes
analyses of trends in revenue, EBITDA and EBITDA margin. EBITDA for segment
reporting purposes is calculated consistently with our consolidated EBITDA
calculation. See the discussion of our non-U.S. GAAP financial measures,
including certain adjusted non-U.S. GAAP measures, as described below, following
the comparison of results discussion below. The following table presents
revenue, EBITDA and EBITDA margin by segment for the periods indicated (dollar
amounts in millions):
Revenue EBITDA and EBITDA Margin
For the Three Months Ended March For the Three Months
31, Ended March 31,
Segment: 2023 2022 2023 (a) 2022 (a)
Communications $ 806.6 $ 664.2 $ 52.8 6.5 % $ 40.3 6.1 %
Clean Energy and
Infrastructure 824.9 435.9 5.3 0.6 % 10.9 2.5 %
Oil and Gas 256.5 211.0 14.5 5.7 % 21.5 10.2 %
Power Delivery 709.4 650.5 47.4 6.7 % 46.1 7.1 %
Other - - 7.1 NM 6.9 NM
Eliminations (12.7) (7.2) - - - -
Segment Total $ 2,584.7 $ 1,954.4 $ 127.1 4.9 % $ 125.7 6.4 %
Corporate - - (50.5) - (47.0) -
Consolidated Total $ 2,584.7 $ 1,954.4 $ 76.6 3.0 % $ 78.7 4.0 %
NM - Percentage is not meaningful
(a) For the three month period endedMarch 31, 2023 , Communications, Clean Energy and Infrastructure and Power Delivery EBITDA included$8.9 million ,$5.2 million and$1.7 million , respectively, of acquisition and integration costs related to our recent acquisitions, and Corporate EBITDA included$1.3 million of such costs. For the three month period endedMarch 31, 2022 , Communications, Oil and Gas and Power Delivery EBITDA included$0.8 million ,$2.0 million and$7.0 million , respectively, of such acquisition and integration costs, and Corporate EBITDA included$3.8 million .
Three Months Ended
Revenue. For the three month period endedMarch 31, 2023 , consolidated revenue totaled$2,585 million as compared with$1,954 million for the same period in 2022, an increase of$630 million , or 32%. Revenue increased in our Clean Energy and Infrastructure segment by$389 million , or 89%, in our Communications segment by$142 million , or 21%, in our Power Delivery segment by$59 million , or 9%, and in our Oil and Gas segment by$46 million , or 22%. Acquisitions contributed$401 million of increased revenue for the three month period endedMarch 31, 2023 , whereas organic revenue increased by approximately$230 million , or 12%, as compared with the same period in 2022. Communications Segment. Communications revenue was$807 million for the three month period endedMarch 31, 2023 as compared with$664 million for the same period in 2022, an increase of$142 million , or 21%. Acquisitions contributed$19 million of revenue for the three month period endedMarch 31, 2023 , and organic revenue increased by approximately$124 million , or 19%, as compared with the same period in 2022. The increase in organic revenue was driven primarily by higher levels of wireless and wireline project activity. Clean Energy and Infrastructure Segment. Clean Energy and Infrastructure revenue was$825 million for the three month period endedMarch 31, 2023 as compared with$436 million for the same period in 2022, an increase of$389 million , or 89%. Acquisitions contributed$374 million of revenue for the three month period endedMarch 31, 2023 , and organic revenue increased by approximately$16 million , or 4%, as compared with the same period in 2022, due primarily to higher levels of renewable project activity. Oil and Gas Segment. Oil and Gas revenue was$257 million for the three month period endedMarch 31, 2023 , as compared with$211 million for the same period in 2022, an increase of$46 million , or 22%, primarily due to higher levels of project activity, including midstream pipeline and pipeline integrity project work, offset, in part, by a decrease in large diameter project activity. Power Delivery Segment. Power Delivery revenue was$709 million for the three month period endedMarch 31, 2023 , as compared with$651 million for the same period in 2022, an increase of$59 million , or 9%. For the three month period endedMarch 31, 2023 , acquisitions contributed$8 million of revenue, and organic revenue increased by approximately$51 million , or 8%, as compared with the same period in 2022, primarily due to higher levels of project activity, including for transmission-related project work. Costs of revenue, excluding depreciation and amortization. Costs of revenue, excluding depreciation and amortization, increased by approximately$626 million , or 36%, to$2,359 million for the three month period endedMarch 31, 2023 from$1,733 million for the same period in 2022. Higher levels of revenue contributed an increase of$559 million in costs of revenue, excluding depreciation and amortization, and reduced productivity contributed an increase of approximately$67 million . Costs of revenue, excluding depreciation and amortization, as a percentage of revenue increased by approximately 260 basis points, from 88.7% of revenue for the three month period endedMarch 31, 2022 to 91.3% of revenue for the same period in 2023. The basis point increase was primarily due to a combination of project inefficiencies, primarily within our Clean Energy and Infrastructure, Power Delivery and Oil and Gas segments, as well as the effects of inflation on labor, fuel and materials costs across our businesses, certain acquisition and integration costs and project mix, offset, in part, by improved efficiencies within our Communications segment and the effects of certain project close-outs. 29 -------------------------------------------------------------------------------- Depreciation. Depreciation was$107 million , or 4.1% of revenue, for the three month period endedMarch 31, 2023 , as compared with$85 million , or 4.4% of revenue, for the same period in 2022, an increase of approximately$22 million , or 26%. Acquisitions contributed$14 million of depreciation for the three month period endedMarch 31, 2023 , and organic depreciation increased by$8 million , or 10%, due primarily to capital expenditures in 2022 in support of certain prior year growth initiatives and to address prior year supply chain disruption concerns. As a percentage of revenue, depreciation decreased by approximately 20 basis points, due primarily to higher levels of revenue. Amortization of intangible assets. Amortization of intangible assets was$42 million , or 1.6% of revenue, for the three month period endedMarch 31, 2023 , as compared with$26 million , or 1.3% of revenue, for the same period in 2022, an increase of$16 million , or 64%. Acquisitions contributed approximately$15 million of amortization for the three month period endedMarch 31, 2023 , and organic amortization increased by approximately$2 million , or 7%, due primarily to timing of amortization of intangible assets. As a percentage of revenue, amortization of intangible assets increased by approximately 30 basis points. General and administrative expenses. General and administrative expenses totaled$164 million , or 6.3% of revenue, for the three month period endedMarch 31, 2023 as compared with$145 million , or 7.4% of revenue, for the same period in 2022, for an increase of$19 million , or 13%. Acquisitions, including certain acquisition and integration costs, contributed$33 million of general and administrative expenses for the three month period endedMarch 31, 2023 , whereas organic general and administrative expenses decreased by approximately$14 million , or 10%, as compared with the same period in the prior year, primarily due to a reduction in compensation expense and an increase in gains on sales of assets, net. Total acquisition and integration costs included within general and administrative expenses increased from$14 million for the three month period endedMarch 31, 2022 to$15 million for the same period in 2023. Overall, general and administrative expenses decreased by approximately 110 basis points as a percentage of revenue for the three month period endedMarch 31, 2023 as compared with the same period in 2022, due, in part, to higher levels of revenue. Interest expense, net. Interest expense, net of interest income, was approximately$53 million , or approximately 2.0% of revenue, for the three month period endedMarch 31, 2023 , as compared with approximately$16 million , or 0.8% of revenue, for the same period in 2022, an increase of$37 million , or approximately 228%. The increase in interest expense, net, resulted primarily from credit facility activity and term loans, which increased by approximately$27 million due to higher average balances, including from indebtedness incurred in connection with acquisition activity, including$700 million of additional unsecured term loans entered into in connection with the acquisition of Infrastructure and Energy Alternatives, Inc. ("IEA") in the fourth quarter of 2022, as well as higher average interest rates on our floating rate debt as compared with the same period in 2022. In addition, interest expense from senior notes increased by$5 million due to the assumption, exchange and issuance of$300 million aggregate principal amount of 6.625% senior notes in connection with the IEA acquisition. See Financial Condition, Liquidity and Capital Resources discussion below for details of our debt instruments. In addition, interest expense from accounts receivable financing arrangements increased by approximately$3 million due primarily to higher average interest rates, and, to a lesser extent, to higher average balances. Equity in earnings of unconsolidated affiliates, net. Equity in earnings or losses of unconsolidated affiliates includes our share of income or losses from equity investees. For the three month periods endedMarch 31, 2023 and 2022, equity in earnings from unconsolidated affiliates, net, totaled approximately$9 million and$7 million , respectively, and related primarily to our investments in the Waha JVs, and, to a lesser extent, equity in earnings, net, from our investments in certain other entities. Other (income) expense, net. Other (income) expense, net, consists primarily of gains or losses from changes to estimated Earn-out accruals and certain contingent payments to the former owners of an acquired business; certain legal/other settlements; gains or losses, or changes in estimated recoveries from certain assets, including financial instruments, and certain liabilities; certain purchase accounting adjustments, and other miscellaneous income or expense. Other income, net, was$6 million for the three month period endedMarch 31, 2023 , as compared with other expense, net, of$4 million for the same period in 2022. For the three month period endedMarch 31, 2023 , other income, net, included approximately$3 million of income from the final settlement and expiration of certain warrants related to the acquisition of IEA and approximately$6 million of other miscellaneous income, net, including from insurance and other settlements, offset, in part, by$2 million of expense from changes in the fair value of additional contingent payments to the former owners of an acquired business. For the three month period endedMarch 31, 2022 , other expense, net, included approximately$5 million of expense, net, from changes in the fair value of certain investments and income from strategic arrangements. Benefit from income taxes. Income tax benefit was$45 million for the three month period endedMarch 31, 2023 as compared with$13 million for the same period in the prior year. Pre-tax losses increased to$125 million for the three month period endedMarch 31, 2023 from$48 million for the same period in 2022. For the three month period endedMarch 31, 2023 , our effective tax rate increased to 35.7% from 27.3% for the same period in 2022. Our effective tax rate in the first quarter of 2023 included the effects of a net tax benefit of approximately$9 million from the vesting of share-based payment awards and an increase in non-deductible expenses, whereas in the first quarter of 2022, included a net tax benefit of approximately$1 million from the vesting of share-based payment awards.
Analysis of EBITDA by Segment
Communications Segment. EBITDA for our Communications segment was$53 million , or 6.5% of revenue, for the three month period endedMarch 31, 2023 , as compared with$40 million , or 6.1% of revenue, for the same period in 2022, an increase of approximately$12 million , or 31%. Higher levels of revenue contributed an increase in EBITDA of$9 million . As a percentage of revenue, EBITDA increased by 50 basis points, or approximately$4 million , due primarily to improved efficiencies, including the benefit of certain prior year growth initiatives, offset, in part, by the effects of inflation on labor, fuel and materials costs as well as an increase of approximately$8 million in acquisition and integration costs. 30 -------------------------------------------------------------------------------- Clean Energy and Infrastructure Segment. EBITDA for our Clean Energy and Infrastructure segment was$5 million , or 0.6% of revenue, for the three month period endedMarch 31, 2023 , as compared with EBITDA of$11 million , or 2.5% of revenue, for the same period in 2022, a decrease of approximately$6 million , or 51%. As a percentage of revenue, EBITDA decreased by approximately 190 basis points, or approximately$15 million , due primarily to project inefficiencies, including from certain acquired entities, as well as the effects of inflation on labor, fuel and materials costs and an increase of approximately$5 million in acquisition and integration costs, offset, in part, by the effect of certain project close-outs. Higher levels of revenue contributed an increase in EBITDA of$10 million . Oil and Gas Segment. EBITDA for our Oil and Gas segment was$15 million , or 5.7% of revenue, for the three month period endedMarch 31, 2023 , as compared with EBITDA of$22 million , or 10.2% of revenue, for the same period in 2022, a decrease of approximately$7 million , or 32%. Reduced productivity contributed a decrease in EBITDA of approximately$12 million , whereas higher levels of revenue contributed an increase in EBITDA of$5 million . EBITDA margins decreased by approximately 450 basis points due primarily to reduced efficiencies, including from a reduction in revenue on large-diameter pipeline projects as a result of regulatory delays, the effects of inflation on labor, fuel and materials costs, and project mix, offset, in part, by a reduction of approximately$2 million in acquisition and integration costs. Power Delivery Segment. EBITDA for our Power Delivery segment was$47 million , or 6.7% of revenue, for the three month period endedMarch 31, 2023 , as compared with EBITDA of$46 million , or 7.1% of revenue, for the same period in 2022, an increase in EBITDA of approximately$1 million , or 3%. Higher levels of revenue contributed an increase in EBITDA of$4 million . As a percentage of revenue, EBITDA decreased by approximately 40 basis points, or$3 million , primarily due to project mix, as well as project inefficiencies, including from the effects of inflation on labor, fuel and materials costs, offset, in part, by a reduction of approximately$5 million in acquisition and integration costs. Other Segment. EBITDA from Other businesses was approximately$7 million for both the three month periods endedMarch 31, 2023 and 2022. EBITDA from Other businesses relates primarily to equity in earnings from our investments in the Waha JVs, offset, in part, by losses from other businesses and investments. Corporate. Corporate EBITDA was negative$51 million for the three month period endedMarch 31, 2023 , as compared with EBITDA of negative$47 million for the same period in 2022, for a decrease in EBITDA of approximately$4 million . Acquisition and integration costs included within general and administrative expenses decreased from$4 million for the three month period endedMarch 31, 2022 to$1 million for the same period in 2023. For the three month period endedMarch 31, 2023 , Corporate EBITDA included approximately$2 million of expense from changes in the fair value of additional contingent payments to the former owners of an acquired business and$3 million of income from the final settlement and expiration of certain warrants related to the acquisition of IEA. Corporate EBITDA for the three month period endedMarch 31, 2022 included$5 million of expense, net, from changes in the fair value of certain investments and income from strategic arrangements. For the three month period endedMarch 31, 2023 , Corporate expenses not related to the above-described items increased by approximately$13 million as compared with the same period in the prior year, due primarily to the effects of timing of ordinary course legal and other settlement matters. Foreign Operations Our foreign operations are primarily inCanada and, to a far lesser extent, inMexico , theCaribbean andIndia . See Note 13 - Segments and Related Information in the notes to the consolidated financial statements, which is incorporated by reference.
Non-
As appropriate, we supplement our reportedU.S. GAAP financial information with certain non-U.S. GAAP financial measures, including earnings before interest, income taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA ("Adjusted EBITDA"), adjusted net income ("Adjusted Net Income") and adjusted diluted earnings per share ("Adjusted Diluted Earnings Per Share"). These "adjusted" non-U.S. GAAP measures exclude, as applicable to the particular periods, non-cash stock-based compensation expense; acquisition and integration costs related to our recent acquisitions; and fair value gains or losses, net, on an investment; and, for Adjusted Net Income and Adjusted Diluted Earnings Per Share, amortization of intangible assets and the tax effects of the adjusted items. These definitions of EBITDA and Adjusted EBITDA are not the same as in our Credit Facility or in the indenture governing our senior notes; therefore, EBITDA and Adjusted EBITDA as presented in this discussion should not be used for purposes of determining our compliance with the covenants contained in our debt instruments. We use EBITDA and Adjusted EBITDA, as well as Adjusted Net Income and Adjusted Diluted Earnings Per Share to evaluate our performance, both internally and as compared with our peers, because these measures exclude certain items that may not be indicative of our core operating results, as well as items that can vary widely across different industries or among companies within the same industry. We believe that these adjusted measures provide a baseline for analyzing trends in our underlying business. Non-cash stock-based compensation expense can be subject to volatility from changes in the market price per share of our common stock or variations in the value and number of shares granted, and amortization of intangible assets is subject to acquisition activity, which varies from period to period. In 2021, we initiated a significant transformation of our end-market business operations to position the Company for expected future opportunities. This transformation has included significant acquisition activity to expand our scale and capacity in renewable energy, power delivery, heavy civil and telecommunications services, and has resulted in significant acquisition and integration costs. Beginning in the fourth quarter of 2021, due to the extent of the acquisition costs related to this acquisition activity and the extent of the integration efforts that have been, and continue to be, required in connection with such acquisitions, we are excluding acquisition and integration costs in calculating Adjusted EBITDA and Adjusted Net Income for these acquisitions. In addition, since the second quarter of 2022, we exclude fair value gains or losses, net, for our investment in American Virtual Cloud Technologies, Inc. ("AVCT") in calculating our adjusted results, with prior periods updated to conform to this presentation. We believe that fair value gains or losses for our investment in AVCT, a company in which we had no active involvement and which varied from period to period based on fluctuations in the market price of the investment, are not indicative of our core operations, and that this presentation improves comparability of our results with those of our peers. AVCT filed for bankruptcy in the first quarter of 2023, and our investment was fully written off. We exclude intangible asset amortization from our adjusted measures due to its non-operational nature and inherent volatility, as acquisition activity varies from period to period. We also believe that this presentation is common practice in our industry and improves comparability of our results with those of our peers. Each company's definitions of these adjusted measures may vary as they are not standardized and should be used in light of the provided reconciliations. 31 -------------------------------------------------------------------------------- We believe that these non-U.S. GAAP financial measures provide meaningful information and help investors understand our financial results and assess our prospects for future performance. Because non-U.S. GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-U.S. GAAP financial measures having the same or similar names. These financial measures should not be considered in isolation from, as substitutes for, or alternative measures of, reported net income or diluted earnings per share, and should be viewed in conjunction with the most comparableU.S. GAAP financial measures and the provided reconciliations thereto. We believe these non-U.S. GAAP financial measures, when viewed together with ourU.S. GAAP results and related reconciliations, provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.
The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA in dollar and percentage of revenue terms, for the periods indicated. The tables below (dollar amounts in millions) may contain slight summation differences due to rounding.
For the Three Months Ended March 31,
2023 2022
Net loss $ (80.5) (3.1) % $ (35.0) (1.8) %
Interest expense, net 52.7 2.0 % 16.0 0.8 %
Benefit from income taxes (44.7) (1.7) % (13.1) (0.7) %
Depreciation 107.2 4.1 % 85.2 4.4 %
Amortization of intangible assets 41.9 1.6 % 25.6 1.3 %
EBITDA $ 76.6 3.0 % $ 78.7 4.0 %
Non-cash stock-based compensation expense 8.5 0.3 % 6.3 0.3 %
Acquisition and integration costs 17.1 0.7 % 13.6 0.7 %
Losses on fair value of investment 0.2 0.0 % - - %
Adjusted EBITDA $ 102.5 4.0 % $ 98.7 5.0 %
A reconciliation of EBITDA and EBITDA margin to Adjusted EBITDA and Adjusted EBITDA margin by segment for the periods indicated is as follows:
For the Three Months Ended March 31,
2023 2022
EBITDA $ 76.6 3.0 % $ 78.7 4.0 %
Non-cash stock-based compensation expense
(a) 8.5 0.3 % 6.3 0.3 %
Acquisition and integration costs (b) 17.1 0.7 % 13.6 0.7 %
Losses on fair value of investment (a) 0.2 0.0 % - - %
Adjusted EBITDA $ 102.5 4.0 % $ 98.7 5.0 %
Segment:
Communications $ 61.7 7.7 % $ 41.1 6.2 %
Clean Energy and Infrastructure 10.5 1.3 % 10.9 2.5 %
Oil and Gas 14.5 5.7 % 23.5 11.1 %
Power Delivery 49.1 6.9 % 53.2 8.2 %
Other 7.1 NM 6.9 NM
Segment Total $ 142.9 5.5 % $ 135.6 6.9 %
Corporate (40.4) - (36.9) -
Adjusted EBITDA $ 102.5 4.0 % $ 98.7 5.0 %
NM - Percentage is not meaningful
(a) Non-cash stock-based compensation expense and losses on the fair value of our investment in AVCT are included within Corporate results. (b) For the three month period endedMarch 31, 2023 , Communications, Clean Energy and Infrastructure and Power Delivery EBITDA included$8.9 million ,$5.2 million and$1.7 million , respectively, of acquisition and integration costs related to our recent acquisitions, and Corporate EBITDA included$1.3 million of such costs. For the three month period endedMarch 31, 2022 , Communications, Oil and Gas and Power Delivery EBITDA included$0.8 million ,$2.0 million and$7.0 million , respectively, of such acquisition and integration costs, and Corporate EBITDA included$3.8 million . 32 -------------------------------------------------------------------------------- The table below, which may contain slight summation differences due to rounding, reconciles reported net income and reported diluted earnings per share, the most directly comparableU.S. GAAP financial measures, to Adjusted Net Income and Adjusted Diluted Earnings Per Share. For the
Three Months Ended
2023 2022
Net Loss (in Diluted Loss Net Loss (in Diluted Loss
millions) Per Share millions) Per Share
Reported U.S. GAAP measure $ (80.5) $ (1.05) $ (35.0) $ (0.47)
Adjustments:
Non-cash stock-based compensation expense 8.5 0.11 6.3 0.08
Amortization of intangible assets 41.9 0.54 25.6 0.34
Acquisition and integration costs 17.1 0.22 13.6 0.18
Losses on fair value of investment 0.2 0.00 - -
Total adjustments, pre-tax $ 67.8 $
0.88
Income tax effect of adjustments (a) (29.2) (0.38) (12.5) (0.17) Adjusted non-U.S. GAAP measure$ (41.9) $
(0.54)
(a) Represents the tax effects of the adjusted items that are subject to tax, including the tax effects of non-cash stock-based compensation expense, including from the vesting of share-based payment awards. Tax effects are determined based on the tax treatment of the related item, the incremental statutory tax rate of the jurisdictions pertaining to the adjustment, and their effects on pre-tax income. For the three month period endedMarch 31, 2023 , our consolidated effective tax rate, as reported, was 35.7%, and as adjusted, was 27.0%. For the three month period endedMarch 31, 2022 , our consolidated effective tax rate, as reported, was 27.3%, and as adjusted, was 23.4%.
Financial Condition, Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations, availability under our Credit Facility and our cash balances. Our primary liquidity needs are for working capital, capital expenditures, insurance and performance collateral in the form of cash and letters of credit, debt service, income taxes, earn-out obligations and equity and other investment funding requirements. We also evaluate opportunities for strategic acquisitions, investments and other arrangements from time to time, and we may consider opportunities to borrow additional funds, which may include borrowings under our Credit Facility or debt issuances, or to refinance, extend the terms of our existing indebtedness or retire outstanding debt, or to repurchase additional shares of our outstanding common stock under share repurchase authorizations, any of which may require our use of cash. Capital Expenditures. For the three month period endedMarch 31, 2023 , we spent approximately$63 million on capital expenditures, or$43 million , net of asset disposals, and incurred approximately$23 million of equipment purchases under finance leases. We estimate that we will spend approximately$150 million on capital expenditures, or approximately$100 million , net of asset disposals, in 2023, and we expect to incur approximately$150 million of equipment purchases under finance leases. Actual capital expenditures may increase or decrease in the future depending upon business activity levels, as well as ongoing assessments of equipment lease versus purchase decisions based on short and long-term equipment requirements. Acquisitions and Earn-Out Liabilities. We typically utilize cash for business acquisitions and other strategic arrangements, and for the three month period endedMarch 31, 2023 , we used$47 million of cash for this purpose. In addition, in most of our acquisitions, we have agreed to make future payments to the sellers that are contingent upon the future earnings performance of the acquired businesses, which we also refer to as "Earn-out" payments. Earn-out payments may be paid in cash or, under specific circumstances,MasTec common stock, or a combination thereof, generally at our option. The estimated total value of future Earn-out liabilities as ofMarch 31, 2023 was approximately$125 million . Of this amount, approximately$36 million represents the liability for earned amounts. The remainder is management's estimate of Earn-out liabilities that are contingent upon future performance. Earn-out payments for the three month period endedMarch 31, 2023 totaled approximately$2 million . There were no Earn-out payments for the three month period endedMarch 31, 2022 . Our acquisition of HMG provides for certain additional payments to be made to the sellers if certain acquired receivables are collected, which we refer to as the "Additional Payments." Pursuant to the terms of the HMG purchase agreement, a portion of the Additional Payments will be made in cash, with the remainder due in shares ofMasTec common stock. An Additional Payment of approximately$29.4 million was made inMay 2022 , which payment was composed of approximately$18 million in cash and 133,157 shares ofMasTec common stock. As ofMarch 31, 2023 , the estimated fair value of remaining Additional Payments was approximately$39 million , which includes the effect of unrealized fair value losses of approximately$2 million related to the contingent shares. The number of shares that would be paid in connection with the remaining Additional Payment as ofMarch 31, 2023 is approximately 170,000 shares. In addition, a fair value gain of$2.8 million was recognized in the first quarter of 2023 related primarily to remaining unexercised IEA warrants that expired onMarch 26, 2023 . Income Taxes. For both the three month periods endedMarch 31, 2023 and 2022, tax refunds, net of tax payments, totaled approximately$1 million . Our tax payments vary with changes in taxable income and earnings based on estimates of full year taxable income activity and estimated tax rates. Working Capital. We need working capital to support seasonal variations in our business, primarily due to the effect of weather conditions on external construction and maintenance work and the spending patterns of our customers, both of which influence the timing of associated spending to support related customer demand. Working capital needs are generally higher during the summer and fall months due to increased 33 -------------------------------------------------------------------------------- demand for our services when favorable weather conditions exist in many of the regions in which we operate. Conversely, working capital needs are typically converted to cash during the winter months. These seasonal trends, however, can be offset by changes in the timing of projects, which can be affected by project delays or accelerations and/or other factors that may affect customer spending. Working capital requirements also tend to increase when we commence multiple projects or particularly large projects because labor, including subcontractor costs, and certain other costs, including inventory, typically become payable before the receivables resulting from work performed are collected. The timing of billings and project close-outs can contribute to changes in unbilled revenue. As ofMarch 31, 2023 , we expect that substantially all of our unbilled receivables will be billed to customers in the normal course of business within the next twelve months. Total accounts receivable, which consists of contract billings, unbilled receivables and retainage, net of allowance, were generally flat at approximately$3.1 billion as of bothMarch 31, 2023 andDecember 31, 2022 . See below for discussion of our days sales outstanding, net of contract liabilities, which we refer to as days sales outstanding, or "DSO." Our payment billing terms are generally net 30 days, and some of our contracts allow our customers to retain a portion of the contract amount (generally, from 5% to 10% of billings) until the job is completed. As part of our ongoing working capital management practices, we evaluate opportunities to improve our working capital cycle time through contractual provisions and certain financing arrangements. For certain customers, we maintain inventory to meet the materials requirements of the contracts. Occasionally, certain of our customers pay us in advance for a portion of the materials we purchase for their projects or allow us to pre-bill them for materials purchases up to specified amounts. Vendor terms are generally 30 days. Our agreements with subcontractors often contain a "pay-if-paid" provision, whereby our payments to subcontractors are made only after we are paid by our customers.
Summary of Financial Condition, Liquidity and Capital Resources
Including our current assessment of general economic conditions on our results of operations and capital resource requirements, we anticipate that funds generated from operations, borrowings under our credit facilities and our cash balances will be sufficient to meet our working capital requirements, anticipated capital expenditures, debt service obligations, insurance and performance collateral requirements, letter of credit needs, earn-out obligations, required income tax payments, acquisition, strategic arrangement and investment funding requirements, share repurchase activity and other liquidity needs for the next twelve months and the foreseeable future.
Sources and Uses of Cash
As ofMarch 31, 2023 , we had approximately$1,278 million in working capital, defined as current assets less current liabilities, as compared with$1,363 million as ofDecember 31, 2022 , a decrease of approximately$85 million . Cash and cash equivalents totaled approximately$142 million and$371 million as ofMarch 31, 2023 andDecember 31, 2022 , respectively, for a decrease of$229 million . See discussion below for further detail regarding our cash flows.
Sources and uses of cash are summarized below (in millions):
For the Three Months Ended March
31,
2023 2022
Net cash (used in) provided by operating activities $ (86.4) $ 131.5
Net cash used in investing activities $ (89.5) $ (101.4)
Net cash used in financing activities $
(53.4)
Operating Activities. Cash flow from operations is primarily influenced by changes in the timing of demand for our services and operating margins, but can also be affected by working capital needs associated with the various types of services we provide. Working capital is affected by changes in total accounts receivable, prepaid expenses and other current assets, accounts payable and payroll tax payments, accrued expenses and contract liabilities, all of which tend to be related. These working capital items are affected by changes in revenue resulting from the timing and volume of work performed, variability in the timing of customer billings and collections of receivables, as well as settlement of payables and other obligations. Net cash used in operating activities for the three month period endedMarch 31, 2023 was$86 million , as compared with approximately$132 million of net cash provided by operating activities for the same period in 2022, for a decrease in net cash provided by operating activities of approximately$218 million , due primarily to a decrease in net income as well as the effect of timing-related working capital changes in assets and liabilities, net, including a reduction in accounts payable and accrued expenses. DSO is calculated as total accounts receivable, net of allowance, less contract liabilities, divided by average daily revenue for the most recently completed quarter as of the balance sheet date. Our days sales outstanding, net of contract liabilities ("DSO"), was 94 as ofMarch 31, 2023 , and as ofDecember 31, 2022 , was 83. Our DSOs can fluctuate from period to period due to timing of billings, billing terms, collections and settlements, timing of project close-outs and retainage collections, changes in project and customer mix and the effect of working capital initiatives. The increase in DSO as ofMarch 31, 2023 as compared withDecember 31, 2022 was due to timing of ordinary course billing and collection activities, as well as the effect of lower levels of organic revenue with fixed amounts of project retainage for certain projects. Other than ordinary course matters subject to litigation, we do not anticipate material collection issues related to our outstanding accounts receivable balances, nor do we believe that we have material amounts due from customers experiencing financial difficulties. Based on current information, we expect to collect substantially all of our outstanding accounts receivable balances within the next twelve months. Investing Activities. Net cash used in investing activities decreased by approximately$12 million to$89 million for the three month period endedMarch 31, 2023 from$101 million for the same period in 2022. We paid$47 million related to acquisitions for the three month period endedMarch 31, 2023 , in which period we completed one acquisition, as compared with$22 million for the same period in 2022, in which period we also completed one acquisition, for an increase of approximately$25 million of cash used in investing activities. Capital expenditures for the three month 34 -------------------------------------------------------------------------------- period endedMarch 31, 2023 totaled$63 million , or$43 million , net of asset disposals, as compared with$83 million , or$79 million , net of asset disposals, for the same period in 2022, for a decrease in cash used in investing activities of approximately$35 million , due to the effect in the prior year period of acceleration of capital expenditures to address supply chain disruption concerns. Financing Activities. Net cash used in financing activities for the three month period endedMarch 31, 2023 was$53 million , as compared with$158 million for the same period in 2022, for a decrease in cash used in financing activities of$105 million . For the three month period endedMarch 31, 2023 , we had$7 million of borrowings, net of repayments, under our credit facility and term loans, as compared with$82 million of repayments, net of borrowings for the same period in 2022, for a decrease in cash used in financing activities of approximately$88 million . In addition, share repurchases totaled$14 million for the three month period endedMarch 31, 2022 , whereas there were no share repurchases for the same period in 2023, for a decrease in cash used in financing activities. Payments for other financing activities, net, which includes amounts paid for, and proceeds from, other borrowing and transaction-related activities, including payments of financing costs, totaled$2 million of proceeds for the three month period endedMarch 31, 2023 , as compared with$17 million of payments for the same period in 2022, for a decrease in cash used in financing activities of approximately$19 million . The decrease in cash used in financing activities from the above described items was offset, in part, by the payment for the three month period endedMarch 31, 2023 of approximately$12 million to holders of our non-controlling interests, including$10 million to acquire the remaining 15% interests of one of these entities, whereas for the same period in 2022, we made no payments. Senior Credit Facility We have a senior unsecured credit facility (the "Credit Facility") that matures onNovember 1, 2026 and has aggregate borrowing commitments totaling$2.25 billion , which amount is composed of$1.9 billion of revolving commitments and a Term Loan totaling$350 million in original principal amount. Aggregate outstanding borrowings under the Credit Facility as ofMarch 31, 2023 totaled approximately$1.3 billion . Borrowings under the Credit Facility are used for working capital requirements, capital expenditures and other corporate purposes, including potential acquisitions, equity investments or other strategic arrangements, and/or the repurchase or prepayment of indebtedness, among other corporate borrowing requirements, including potential share repurchases. We are dependent upon borrowings and letters of credit under our Credit Facility to fund our operations. Should we be unable to comply with the terms and conditions of our Credit Facility, we would be required to obtain modifications to the Credit Facility or obtain an alternative source of financing to continue to operate, neither of which may be available to us on commercially reasonable terms, or at all. The Credit Facility is subject to certain provisions and covenants, as more fully described in Note 7 - Debt in the notes to the audited consolidated financial statements included in our 2022 Form 10-K.
4.50% Senior Notes
We have$600 million aggregate principal amount of 4.50% Senior Notes dueAugust 15, 2028 (the "4.50% Senior Notes"). The 4.50% Senior Notes are subject to certain provisions and covenants, as more fully described in Note 7 - Debt in the notes to the audited consolidated financial statements included in our 2022 Form 10-K. 6.625% Senior Notes We have$300 million aggregate principal amount of 6.625% Senior Notes dueAugust 15, 2029 , which amount is composed of$225.1 million aggregate principal amount of 6.625%% IEA senior notes (the "6.625% IEA Senior Notes") and$74.9 million aggregate principal amount of 6.625%MasTec senior notes (the "6.625%MasTec Senior Notes"). The 6.625% IEA Senior Notes are structurally subordinated to all indebtedness and other liabilities, including trade payables, of the Company's subsidiaries and are effectively subordinated to any secured indebtedness ofIEA Energy Services LLC , the issuer of the IEA 6.625% Senior Notes, to the extent of the value of the collateral securing such indebtedness. The 6.625%MasTec Senior Notes are general senior unsecured obligations of the Company, and rank equal in right of payment with all of the Company's existing and future senior unsecured indebtedness and senior in right of payment to any of the Company's future subordinated indebtedness. The 6.625%MasTec Senior Notes are effectively subordinated to all secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to all obligations of the subsidiaries of the Company, including trade payables and the 6.625% IEA Senior Notes. The 6.625% Senior Notes are subject to certain provisions and covenants, as more fully described in Note 7 - Debt in the notes to the audited consolidated financial statements included in our 2022 Form 10-K.
2022 Term Loan Facility
We have$700.0 million of unsecured term loans that were entered into in connection with the IEA acquisition, composed of$400.0 million in principal amount of three-year loans maturing onOctober 7, 2025 , and$300.0 million in principal amount of five-year loans maturing onOctober 7, 2027 (together, the "2022 Term Loan Facility"). The obligations under the 2022 Term Loan Facility are unsecured and are not guaranteed by any of the Company or its subsidiaries. The 2022 Term Loan Facility is subject to certain provisions and covenants, as more fully described in Note 7 - Debt in the notes to the audited consolidated financial statements included in our 2022 Form 10-K
Debt Covenants
We were in compliance with the provisions and covenants contained in our
outstanding debt instruments as of
Additional Information
For detailed discussion and additional information pertaining to our debt
instruments, see Note 7 - Debt in the notes to the audited consolidated
financial statements included in our 2022 Form 10-K. Also, see Note 7 - Debt in
the notes to the consolidated financial statements in this Form 10-Q, which is
incorporated by reference, for current period balances and discussion.
35
--------------------------------------------------------------------------------Off-Balance Sheet Arrangements
As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of business. Our significant off-balance sheet transactions include liabilities associated with non-cancelable operating leases with durations of less than twelve months, letter of credit obligations, surety and performance and payment bonds entered into in the normal course of business, self-insurance liabilities, liabilities associated with multiemployer pension plans, liabilities associated with potential funding obligations and indemnification and/or guarantee arrangements relating to our equity and other investment arrangements, including our variable interest entities. These off-balance sheet arrangements have not had, and are not reasonably likely to have, a material impact on our financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources in the next twelve months or in the foreseeable future. Refer to Note 14 - Commitments and Contingencies, Note 4 - Fair Value of Financial Instruments and Note 15 - Related Party Transactions in the notes to the consolidated financial statements, which are incorporated by reference.
Impact of Inflation
Over the last year, inflation, supply chain and labor constraints have had a significant impact on the global economy, including on the construction industry inthe United States . The primary inflationary factors directly affecting our operations are labor, fuel and material costs. Inflation has caused an increase in consumer prices and regulatory actions to increase interest rates, thereby elevating the risk of a recession. At the same time, the labor market remains at historically low levels of unemployment, creating further pressure on the supply of skilled labor. In times of low unemployment and/or high inflation, our labor costs may increase due to shortages in the supply of skilled labor and increases in compensation rates generally. Although most project materials are provided by our customers, increases in the cost of materials could negatively affect the economic viability of our customers' projects, and accordingly, demand for our services. Material and commodity prices are subject to unexpected fluctuations due to events outside of our control, including fluctuations in global supply and demand, climate-related effects, and geopolitical events, such as the ongoing conflict inUkraine , which events have recently caused market volatility, particularly in the oil and gas markets, among others. Recent increases in labor, fuel and materials costs, to the extent that we have been unable to pass such increases along to our customers, have negatively affected our project margins, and could continue to affect our profitability in the future if we are unable to pass these costs along to our customers. Such market volatility can also affect our customers' investment decisions and subject us to project cancellations, deferrals or unexpected changes in the timing of project work. Market prices for goods can also be affected by supply chain disruptions. Additionally, as discussed within "Interest Rate Risk" below, the current inflationary environment has also resulted in an increase in market interest rates, which has increased the rates of interest on our variable rate debt, which rates may continue to increase depending on further monetary and fiscal actions taken to reduce inflation. We closely monitor inflationary factors, including current rates of inflation, and any potential effects they may have on our business operations, operating results and/or financial condition. While the impact of these factors cannot be fully eliminated, we proactively work to mitigate the effects of inflation; however, continued inflationary pressures and related interest rate increases could adversely affect our business operations in the future.
© Edgar Online, source
