Note 16 - Segments and Related Information

Segment Discussion

MasTec manages its continuing operations under five operating segments, which represent MasTec’s five reportable segments: (1) Communications; (2) Oil and Gas; (3) Electrical Transmission; (4) Power Generation and Industrial and (5) Other. This structure is generally focused on broad end-user markets for MasTec’s labor-based construction services. All five reportable segments derive their revenue from the engineering, installation and maintenance of infrastructure, primarily in North America. In the first quarter of 2015, the Company reevaluated the activities of a non-controlled Canadian joint venture associated with a 2014 acquisition. The joint venture, which provides heavy civil construction services, is proportionately consolidated. The results of operations of this joint venture were formerly reported within the Oil and Gas segment. Due to the differing nature of the services that this joint venture provides and the customers it serves, this joint venture, which is immaterial for disclosure as separate segment, will now be reported within the Other segment. Accordingly, segment information for prior periods has been adjusted retrospectively to conform to the current period presentation.

The Communications segment performs engineering, construction and maintenance of communications infrastructure primarily related to wireless and wireline/fiber communications and install-to-the-home customers, and, to a lesser extent, infrastructure for electrical utilities. MasTec performs engineering, construction and maintenance services on oil and natural gas pipelines and processing facilities for the energy and utilities industries through its Oil and Gas segment. The Electrical Transmission segment primarily serves the energy and utility industries through the engineering, construction and maintenance of electrical transmission lines and substations. The Power Generation and Industrial segment primarily serves energy, utility and other end-markets through the installation and construction of conventional and renewable power facilities, related electrical transmission infrastructure, ethanol facilities and various types of industrial infrastructure. The Other segment primarily includes a proportionately consolidated joint venture and other small business units that perform construction services for a variety of end-markets in Canada, Mexico and elsewhere internationally.

The accounting policies of the reportable segments are the same as those described in Note 1 - Business, Basis of Presentation and Significant Accounting Policies. Intercompany revenues and costs among the reportable segments are de minimus and accounted for as if the sales were to third parties because these items are based on negotiated fees between the segments involved. All intercompany transactions and balances are eliminated in consolidation. Intercompany revenues and costs between entities within a reportable segment are eliminated to arrive at segment totals. Eliminations between segments are separately presented. Corporate results include amounts related to Corporate functions such as administrative costs, professional fees and acquisition-related transaction costs, exclusive of acquisition integration costs, which are included in the respective acquired segment’s results. Segment results include certain allocations of centralized costs such as general liability, medical and workers’ compensation insurance and certain information technology costs. Income tax expense is managed by Corporate on a consolidated basis and is not allocated to the reportable segments.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting. As appropriate, the Company supplements the reporting of consolidated financial information determined in accordance with U.S. GAAP with certain non-U.S. GAAP financial measures, including EBITDA. The Company believes these non-U.S. GAAP measures provide meaningful information and help investors in understanding the Company’s financial results and in assessing its prospects for future performance. The Company uses EBITDA to evaluate its performance, both internally and versus that of its peers, because it excludes certain items that may not be indicative of the Company’s reportable segment results, as well as items that can vary widely across different industries or among companies within the same industry. Segment EBITDA is calculated in a manner consistent with consolidated EBITDA. Communications EBITDA in 2014 included $5.3 million of acquisition integration costs resulting from the WesTower acquisition.

Summarized financial information for MasTec’s reportable segments is presented and reconciled to consolidated financial information for total MasTec in the following tables (in millions):



	For the Years Ended December 31,
Revenue:	2014			2013			2012
Communications ^(a)	$	2,041.0		$	1,962.6		$	1,772.7
Oil and Gas	1,731.4			1,628.8			959.0
Electrical Transmission	471.9			428.8			312.2
Power Generation and Industrial	357.0			294.3			668.1
Other	14.7			12.3			16.7
Eliminations	(4.2		)	(2.0		)	(1.9		)
Consolidated revenue	$	4,611.8		$	4,324.8		$	3,726.8


(a)	Revenue generated by utilities customers represented 6.8%, 6.9% and 10.9% of Communications segment revenue in 2014, 2013 and 2012, respectively.



	For the Years Ended December 31,
EBITDA - Continuing Operations:	2014			2013			2012
Communications	$	204.0		$	247.7		$	192.0
Oil and Gas	195.1			215.9			99.4
Electrical Transmission	45.0			41.2			38.7
Power Generation and Industrial	14.2			(16.3		)	32.0
Other	(1.2		)	0.5			2.0
Corporate	(53.4		)	(61.4		)	(42.0		)
Consolidated EBITDA - Continuing operations	$	403.7		$	427.6		$	322.1



	For the Years Ended December 31,
Depreciation and Amortization:	2014		2013		2012
Communications	$	42.6	$	36.8	$	29.1
Oil and Gas	82.8		80.9		42.0
Electrical Transmission	17.1		12.6		11.0
Power Generation and Industrial	6.4		6.7		6.7
Other	—		—		0.1
Corporate	5.6		3.9		3.1
Consolidated depreciation and amortization	$	154.5	$	140.9	$	92.0



	As of December 31,
Assets:	2014		2013		2012
Communications	$	1,197.4	$	973.5	$	843.5
Oil and Gas	1,389.5		1,060.8		809.2
Electrical Transmission	489.5		449.3		311.2
Power Generation and Industrial	340.1		324.5		323.8
Other	24.6		22.8		6.9
Corporate	122.9		79.8		95.5
Consolidated segment assets	$	3,564.0	$	2,910.7	$	2,390.1



	For the Years Ended December 31,
Capital Expenditures:	2014		2013		2012
Communications	$	23.4	$	25.1	$	19.2
Oil and Gas	44.2		67.4		40.3
Electrical Transmission	25.8		17.6		11.5
Power Generation and Industrial	6.7		5.7		5.6
Corporate	9.2		10.3		2.8
Consolidated capital expenditures	$	109.3	$	126.1	$	79.4

The following table presents a reconciliation of EBITDA to consolidated income from continuing operations before income taxes:



	For the Years Ended December 31,
EBITDA Reconciliation:	2014			2013			2012
EBITDA - Continuing operations	$	403.7		$	427.6		$	322.1
Less:
Interest expense, net	(50.8		)	(46.4		)	(37.4		)
Depreciation and amortization	(154.5		)	(140.9		)	(92.0		)
Income from continuing operations before income taxes	$	198.4		$	240.2		$	192.7

A reconciliation of total segment assets to consolidated total assets as of the dates indicated is as follows:



	As of December 31,
Asset Reconciliation:	2014		2013		2012
Total segment assets	$	3,564.0	$	2,910.7	$	2,390.1
Total assets of discontinued operations	$	—	$	12.5	$	26.2
Total assets	$	3,564.0	$	2,923.2	$	2,416.3

Foreign Operations. MasTec operates in North America, primarily in the United States and Canada, as well as in Mexico and in other countries in Latin America. For the years ended December 31, 2014, 2013 and 2012, revenue of $3.9 billion, $4.1 billion and $3.6 billion, respectively, was derived from U.S. operations, and revenue of $699.9 million, $268.1 million and $156.8 million, respectively, was derived from foreign operations, primarily in Canada. The majority of the Company’s foreign operations during the years ended December 31, 2014, 2013 and 2012 were in the Company’s Oil and Gas segment. Long-lived assets held in the U.S. included property and equipment, net, of $494.1 million, $436.9 million and $337.5 million as of December 31, 2014, 2013 and 2012, respectively. Long-lived assets held in foreign countries, primarily in Canada, included property and equipment, net, of $129.0 million, $51.2 million and $11.4 million as of December 31, 2014, 2013 and 2012, respectively. Intangible assets and goodwill, net, of approximately $1.1 billion, $1.0 billion and $0.9 billion as of December 31, 2014, 2013 and 2012, respectively, related to the Company’s U.S. operations. Intangible assets and goodwill, net, of $227.7 million, $92.9 million and $30.5 million as of December 31, 2014, 2013 and 2012, respectively, related to businesses in foreign countries, primarily in Canada. Foreign customers accounted for approximately 20%, 9% and 4% of the Company’s consolidated net accounts receivable position as of December 31, 2014, 2013 and 2012, respectively, which represents accounts receivable, net, less billings in excess of costs and earnings.

Significant Customers

Revenue concentration information for significant customers as a percent of total consolidated revenue was as follows:



	For the Years Ended December 31,
	2014	2013	2012
Customer:
AT&T ^{(a) (c)}	21%	18%	18%
DIRECTV^{® (b) (c)}	12%	14%	17%
Enbridge, Inc. ^(d)	8%	18%	3%


(a)	The Company's relationship with AT&T is based upon master service agreements, other service agreements and construction/installation contracts for AT&T's wireless, wireline/fiber and home security and automation businesses. Revenue from AT&T is included in the Communications segment.


(b)	The Company's relationship with DIRECTV® is based upon an agreement to provide installation and maintenance services for DIRECTV®. Revenue from DIRECTV® is included in the Communications segment.


(c)	AT&T acquired DIRECTV® in July 2015. On a combined basis, AT&T and DIRECTV® represented 33%, 32% and 34% of consolidated revenue for the years ended December 31, 2014, 2013 and 2012, respectively.


(d)	The Company's relationship with Enbridge, Inc. is based upon various construction contracts for natural gas pipelines. Revenue from Enbridge, Inc. is included in the Oil and Gas segment.