MTZ » Topics » Risks Related to Our Industry and Our Customers Industries

These excerpts taken from the MTZ 10-K filed Mar 2, 2009.
Risks Related to Our Industry and Our Customers’ Industries
 
The current credit crisis and economic downturn could reduce capital expenditures in the industries we serve, which may result in a decrease in demand for our services.
 
The demand for our services has been, and will likely continue to be, cyclical in nature and vulnerable to general downturns in the U.S. economy. Given the recent financial market turmoil and tightening of credit, our customers may have difficulty in obtaining financing, which may result in cancellations of projects or deferral of projects to a later date. Such cancellations or deferrals could result in decreased demand for our services and could materially adversely affect our results of operations, cash flows and liquidity.
 
In addition, our customers are affected by economic downturns that decrease the need for their services or the profitability of their services. Slow-downs in real estate, fluctuations in commodity prices and decreased demand by end-customers for higher value services could affect our customers and their capital expenditure plans. Because we have been negatively impacted by previous economic downturns, we constantly monitor our customers’ industries and their relative health compared to the economy as a whole. The recent reduction in new housing starts, for example, could negatively impact our customers who utilize our services to construct their “last mile” of communications infrastructure, as well as other industries we serve, including electric utility transmission and grid connection, water and sewer and natural gas pipeline construction. Additionally, our customers who provide satellite and broadband communications to consumers across the country could be adversely impacted by an economic downturn if new subscriptions and upgrades for new and existing consumers are not ordered at the rate


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that we and our customers anticipate. During an economic downturn, our customers also may not have the ability or desire to continue to fund capital expenditures for infrastructure at their current levels or may determine to outsource less work. A decrease in any of these projects, new subscriptions and upgrades or any other services we provide could materially adversely affect our results of operations, cash flows and liquidity.
 
Many of the industries we serve are subject to consolidation and rapid technological and regulatory change, and our inability or failure to adjust to our customers’ changing needs could reduce demand for our services.
 
We derive, and anticipate that we will continue to derive, a substantial portion of our revenue from customers in the communications and utilities industries. The communications and utilities industries are subject to rapid changes in technology and governmental regulation. Changes in technology may reduce the demand for the services we provide. For example, new or developing technologies could displace the wireline systems used for the transmission of voice, video and data, and improvements in existing technology may allow communications providers to significantly improve their networks without physically upgrading them. Technological advances may also result in lower costs for sources of energy, which may render existing wind energy projects and technologies uncompetitive or obsolete. Additionally, both the communications and utilities industries have been characterized by a high level of consolidation that may result in the loss of one or more of our customers. Our failure to rapidly adopt and master new technologies as they are developed in any of the industries we serve or the consolidation of one or more of our significant customers could have a material adverse effect on our results of operations, cash flows and liquidity.
 
Our industry is highly competitive, which may reduce our market share and harm our financial performance.
 
Our industry is highly fragmented, and we compete with other companies in most of the markets in which we operate, ranging from small independent firms servicing local markets to larger firms servicing regional and national markets. We also face competition from existing or prospective customers that employ in-house personnel to perform some of the same types of services we provide. There are relatively few barriers to entry into the markets in which we operate and, as a result, any organization that has adequate financial resources and access to technical expertise and skilled personnel may become one of our competitors.
 
Most of our customers’ work is awarded through a bid process. Consequently, price is often the principal factor in determining which service provider is selected, especially on smaller, less complex projects. Smaller competitors are sometimes able to win bids for these projects based on price alone due to their lower costs and financial return requirements. If we are unsuccessful in bidding on these projects, or if our ability to win such projects requires that we accept lesser margins, then our results of operations, cash flows and liquidity could be materially and adversely affected.
 
Risks
Related to Our Industry and Our Customers’
Industries



 




The
current credit crisis and economic downturn could reduce capital
expenditures in the industries we serve, which may result in a
decrease in demand for our services.



 



The demand for our services has been, and will likely continue
to be, cyclical in nature and vulnerable to general downturns in
the U.S. economy. Given the recent financial market turmoil
and tightening of credit, our customers may have difficulty in
obtaining financing, which may result in cancellations of
projects or deferral of projects to a later date. Such
cancellations or deferrals could result in decreased demand for
our services and could materially adversely affect our results
of operations, cash flows and liquidity.


 



In addition, our customers are affected by economic downturns
that decrease the need for their services or the profitability
of their services. Slow-downs in real estate, fluctuations in
commodity prices and decreased demand by end-customers for
higher value services could affect our customers and their
capital expenditure plans. Because we have been negatively
impacted by previous economic downturns, we constantly monitor
our customers’ industries and their relative health
compared to the economy as a whole. The recent reduction in new
housing starts, for example, could negatively impact our
customers who utilize our services to construct their “last
mile” of communications infrastructure, as well as other
industries we serve, including electric utility transmission and
grid connection, water and sewer and natural gas pipeline
construction. Additionally, our customers who provide satellite
and broadband communications to consumers across the country
could be adversely impacted by an economic downturn if new
subscriptions and upgrades for new and existing consumers are
not ordered at the rate





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that we and our customers anticipate. During an economic
downturn, our customers also may not have the ability or desire
to continue to fund capital expenditures for infrastructure at
their current levels or may determine to outsource less work. A
decrease in any of these projects, new subscriptions and
upgrades or any other services we provide could materially
adversely affect our results of operations, cash flows and
liquidity.


 




Many
of the industries we serve are subject to consolidation and
rapid technological and regulatory change, and our inability or
failure to adjust to our customers’ changing needs could
reduce demand for our services.



 



We derive, and anticipate that we will continue to derive, a
substantial portion of our revenue from customers in the
communications and utilities industries. The communications and
utilities industries are subject to rapid changes in technology
and governmental regulation. Changes in technology may reduce
the demand for the services we provide. For example, new or
developing technologies could displace the wireline systems used
for the transmission of voice, video and data, and improvements
in existing technology may allow communications providers to
significantly improve their networks without physically
upgrading them. Technological advances may also result in lower
costs for sources of energy, which may render existing wind
energy projects and technologies uncompetitive or obsolete.
Additionally, both the communications and utilities industries
have been characterized by a high level of consolidation that
may result in the loss of one or more of our customers. Our
failure to rapidly adopt and master new technologies as they are
developed in any of the industries we serve or the consolidation
of one or more of our significant customers could have a
material adverse effect on our results of operations, cash flows
and liquidity.


 




Our
industry is highly competitive, which may reduce our market
share and harm our financial performance.



 



Our industry is highly fragmented, and we compete with other
companies in most of the markets in which we operate, ranging
from small independent firms servicing local markets to larger
firms servicing regional and national markets. We also face
competition from existing or prospective customers that employ
in-house personnel to perform some of the same types of services
we provide. There are relatively few barriers to entry into the
markets in which we operate and, as a result, any organization
that has adequate financial resources and access to technical
expertise and skilled personnel may become one of our
competitors.


 



Most of our customers’ work is awarded through a bid
process. Consequently, price is often the principal factor in
determining which service provider is selected, especially on
smaller, less complex projects. Smaller competitors are
sometimes able to win bids for these projects based on price
alone due to their lower costs and financial return
requirements. If we are unsuccessful in bidding on these
projects, or if our ability to win such projects requires that
we accept lesser margins, then our results of operations, cash
flows and liquidity could be materially and adversely affected.


 




EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 2, 2009
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