Note 13 - Segments and Related Information

Segment Discussion

MasTec manages its 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.

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, distribution infrastructure for electrical utilities, among others. 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/biofuel facilities and various types of industrial infrastructure. The Other segment includes a proportionately consolidated non-controlled Canadian joint venture, equity method investments and other small business units that perform construction and other services in a variety of international end-markets.

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 understand the Company’s financial results and assess 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.

For the three month period ended March 31, 2016: (i) Oil and Gas segment EBITDA included project losses of $13.5 million on a western Canadian oil and gas project and $3.4 million of restructuring charges to streamline the operations of its western Canadian oil and gas operations; and (ii) Electrical Transmission segment EBITDA included a project loss of $15.1 million and $0.7 million of restructuring charges to streamline certain of its business operations. For the three month period ended March 31, 2015: (i) Communications segment EBITDA included $8.8 million of WesTower Communications Inc. (“WesTower”) acquisition integration costs; (ii) Power Generation and Industrial segment EBITDA included $16.0 million of losses on a Canadian wind project; (iii) Other segment EBITDA included $5.5 million of project losses on a proportionately consolidated non-controlled Canadian joint venture; and (iv) Corporate segment EBITDA included $3.0 million of Audit Committee independent investigation related costs resulting from the independent investigation of the Audit Committee that was completed in the fourth quarter of 2015.

Restructuring costs, which are included within general and administrative expenses in the condensed unaudited consolidated statements of operations, consisted primarily of employee termination costs and other restructuring-type costs, including lease termination expenses. As of March 31, 2016, $2.0 million was included within various current liability accounts in the condensed unaudited consolidated balance sheets in connection with these restructuring costs.

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 Three Months Ended March 31,
Revenue:	2016			2015
Communications ^(a)	$	511.6		$	469.9
Oil and Gas	292.7			326.8
Electrical Transmission	86.3			116.0
Power Generation and Industrial	81.4			84.3
Other	3.4			6.6
Eliminations	(1.2		)	(0.3		)
Consolidated revenue	$	974.2		$	1,003.3


(a)	Revenue generated primarily by utilities customers represented 10.4% and 8.8% of Communications segment revenue for the three month periods ended March 31, 2016 and 2015, respectively.



	For the Three Months Ended March 31,
EBITDA:	2016			2015
Communications	$	61.7		$	51.7
Oil and Gas ^(a)	16.2			21.5
Electrical Transmission	(23.8		)	(2.5		)
Power Generation and Industrial	2.9			(8.9		)
Other ^(b)	0.2			(5.1		)
Corporate	(11.0		)	(13.9		)
Consolidated EBITDA	$	46.2		$	42.8


(a)	Oil and Gas EBITDA includes equity in earnings from unconsolidated affiliates of $3.6 million for the three month period ended March 31, 2016, and equity in losses from unconsolidated affiliates of $0.6 million for the three month period ended March 31, 2015.


(b)	Other EBITDA includes equity in losses from unconsolidated affiliates of $0.5 million for the three month period ended March 31, 2016.



	For the Three Months Ended March 31,
Depreciation and Amortization:	2016		2015
Communications	$	12.3	$	12.0
Oil and Gas	18.2		22.0
Electrical Transmission	5.2		5.2
Power Generation and Industrial	1.5		1.6
Other	0.0		0.1
Corporate	1.8		1.7
Consolidated depreciation and amortization	$	39.0	$	42.6

The following table presents a reconciliation of EBITDA to consolidated loss before income taxes (in millions):



	For the Three Months Ended March 31,
EBITDA Reconciliation:	2016			2015
EBITDA	$	46.2		$	42.8
Less:
Interest expense, net	(12.2		)	(11.0		)
Depreciation and amortization	(39.0		)	(42.6		)
Loss before income taxes	$	(5.0	)	$	(10.7	)

Foreign Operations. MasTec operates in North America, primarily in the United States and Canada, and, to a lesser extent, in Mexico and other international markets. For the three month periods ended March 31, 2016 and 2015, revenue of $890.7 million and $820.2 million, respectively, was derived from U.S. operations, and revenue of $83.5 million and $183.1 million, respectively, was derived from foreign operations, primarily in Canada. The majority of the Company’s foreign operations during the three month periods ended March 31, 2016 and 2015 were in the Company’s Oil and Gas segment. Long-lived assets held in the U.S. included property and equipment, net, of $453.8 million and $464.6 million as of March 31, 2016 and December 31, 2015, respectively. Long-lived assets held in foreign countries, primarily in Canada, included property and equipment, net, of $94.2 million and $94.1 million as of March 31, 2016 and December 31, 2015, respectively. As of both March 31, 2016 and December 31, 2015 intangible assets and goodwill, net, totaled approximately $1.1 billion related to the Company’s U.S. operations. Intangible assets and goodwill, net, of approximately $113.7 million and $107.3 million as of March 31, 2016 and December 31, 2015, respectively, related to businesses in foreign countries, primarily in Canada. Foreign customers accounted for approximately 13% and 17% of the Company’s consolidated net accounts receivable position, which represents accounts receivable, net, less billings in excess of costs and earnings, as of March 31, 2016 and December 31, 2015, respectively.

Significant Customers

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



	For the Three Months Ended March 31,
Customer:	2016	2015
AT&T (including DIRECTV^®) ^(a)(b)	39%	32%
Energy Transfer affiliates ^(c)	18%	5%

(a)

The Company’s relationship with AT&T is based upon multiple separate master service agreements, other service agreements and construction/installation contracts for AT&T’s (i) wireless, (ii) wireline/fiber, (iii) home security and automation businesses, and (iv) for DIRECTV® services, is based upon an agreement to provide installation and maintenance services. Revenue from AT&T is included in the Communications segment.


(b)	DIRECTV® was acquired by AT&T in July 2015. Revenue from DIRECTV® is presented on a combined basis with AT&T for all periods.


(c)	The Company's relationship with Energy Transfer affiliates is based upon various construction contracts for pipeline activities with Energy Transfer Partners L.P., Sunoco Logistics Partners L.P., and their subsidiaries and affiliates, all of which are consolidated by Energy Transfer Equity, L.P. Revenue from Energy Transfer affiliates is included in the Oil and Gas segment.