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, maintenance and customer fulfillment activities related to communications infrastructure primarily for 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 equity investees and other small business units that perform construction and other services for 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 nine month period ended September 30, 2016, Oil and Gas segment EBITDA included a previously disclosed first quarter project loss of $13.5 million on a western Canadian oil and gas project and restructuring charges of $6.5 million to streamline certain western Canadian oil and gas operations. For the nine month period ended September 30, 2016, Electrical Transmission EBITDA included a previously disclosed first quarter project loss of $15.1 million, and for the three and nine month periods ended September 30, 2016, Electrical Transmission segment EBITDA included restructuring charges of $4.5 million and $7.3 million, respectively, to streamline business operations. For both the three and nine month periods ended September 30, 2016, Other segment EBITDA included $5.1 million of project losses on a proportionately consolidated non-controlled Canadian joint venture, for which we have minimal direct construction involvement.

For the three and nine month periods ended September 30, 2015: (i) Communications segment EBITDA included $1.2 million and $17.8 million, respectively, of WesTower Communications Inc. (“WesTower”) acquisition integration costs; (ii) Electrical Transmission segment EBITDA included a $12.2 million charge relating to a court mandated mediation settlement; (iii) Other segment EBITDA included $2.8 million and $8.3 million, respectively, of project losses on a proportionately consolidated non-controlled Canadian joint venture; (iv) Corporate segment EBITDA included $4.1 million and $14.6 million, respectively, of Audit Committee independent investigation costs related to the independent investigation that was completed in the fourth quarter of 2015; and (v) Power Generation and Industrial segment EBITDA included $3.8 million and $21.4 million, respectively, of losses on a Canadian wind project.

Restructuring costs for the three and nine month periods ended September 30, 2016 consisted primarily of (i) $4.7 million and $10.9 million, respectively, of employee separation costs and other restructuring-type costs, including lease termination expenses, which are included within general and administrative expenses; and (ii) $2.9 million for the nine month period ended September 30, 2016, of estimated losses on the planned disposal of excess fixed assets that are held-for-sale, which are included within other expense. When the Company identifies assets as held-for-sale, they are valued based on their estimated fair value less costs to sell, classified within other current assets, and depreciation is no longer recorded. As of September 30, 2016, assets classified as held-for-sale totaled $2.4 million. As of September 30, 2016, a restructuring cost liability of $6.4 million was included within various current liability accounts.

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 September 30,						For the Nine Months Ended September 30,
Revenue:	2016			2015			2016			2015
Communications ^(a)	$	624.3		$	513.3		$	1,728.0		$	1,452.1
Oil and Gas	736.0			406.9			1,454.3			1,144.2
Electrical Transmission	101.7			75.9			283.6			270.2
Power Generation and Industrial	123.6			115.0			324.7			302.3
Other	7.6			3.8			14.9			17.2
Eliminations	(7.0		)	(3.9		)	(12.7		)	(5.1		)
Consolidated revenue	$	1,586.2		$	1,111.0		$	3,792.8		$	3,180.9


(a)	Revenue generated primarily by utilities customers represented 11.1% and 11.2% of Communications segment revenue for the three month periods ended September 30, 2016 and 2015, respectively, and represented 10.9% and 10.5% for the nine month periods ended September 30, 2016 and 2015, respectively.



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
EBITDA:	2016			2015			2016			2015
Communications	$	62.8		$	49.7		$	190.9		$	141.8
Oil and Gas	117.8			51.0			187.6			113.9
Electrical Transmission	(8.3		)	(23.7		)	(42.0		)	(47.6		)
Power Generation and Industrial	6.1			4.8			13.8			3.9
Other	(3.1		)	(2.0		)	(2.6		)	(7.1		)
Corporate	(24.3		)	(12.0		)	(55.1		)	(40.5		)
Consolidated EBITDA	$	151.0		$	67.8		$	292.6		$	164.4



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Depreciation and Amortization:	2016		2015		2016		2015
Communications	$	12.5	$	13.2	$	37.2	$	37.6
Oil and Gas	20.7		20.0		58.2		64.3
Electrical Transmission	6.1		5.5		17.1		16.0
Power Generation and Industrial	1.6		1.7		4.6		5.0
Other	0.0		0.0		0.0		0.1
Corporate	1.7		1.8		5.1		5.0
Consolidated depreciation and amortization	$	42.6	$	42.2	$	122.2	$	128.0

The following table, which may contain slight summation differences due to rounding, presents a reconciliation of EBITDA to consolidated income before income taxes (in millions):



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
EBITDA Reconciliation:	2016			2015			2016			2015
EBITDA	$	151.0		$	67.8		$	292.6		$	164.4
Less:
Interest expense, net	(13.1		)	(12.0		)	(37.9		)	(35.8		)
Depreciation and amortization	(42.6		)	(42.2		)	(122.2		)	(128.0		)
Income before income taxes	$	95.3		$	13.6		$	132.4		$	0.5

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 September 30, 2016 and 2015, revenue of $1.5 billion and $1.0 billion, respectively, was derived from U.S. operations, and revenue of $73.8 million and $115.2 million, respectively, was derived from operations in Canada and Mexico. For the nine month periods ended September 30, 2016 and 2015, revenue of $3.6 billion and $2.7 billion, respectively, was derived from U.S. operations, and revenue of $222.8 million and $451.2 million, respectively, was derived from operations in Canada and Mexico. The majority of the Company’s foreign operations during the three and nine month periods ended September 30, 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 $476.2 million and $464.6 million as of September 30, 2016 and December 31, 2015, respectively. Long-lived assets held in foreign countries, primarily in Canada, included property and equipment, net, of $78.3 million and $94.1 million as of September 30, 2016 and December 31, 2015, respectively. As of both September 30, 2016 and December 31, 2015 intangible assets and goodwill, net, related to the Company’s U.S. operations totaled approximately $1.1 billion. Intangible assets and goodwill, net, related to businesses in foreign countries, primarily in Canada, totaled approximately $111.1 million and $107.3 million as of September 30, 2016 and December 31, 2015, respectively. As of September 30, 2016 and December 31, 2015, amounts due from customers from which foreign revenue was derived accounted for approximately 9% and 17%, respectively, of the Company’s consolidated net accounts receivable position, which represents accounts receivable, net, less billings in excess of costs and earnings.

Significant Customers

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



	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
Customer:	2016	2015	2016	2015
AT&T (including DIRECTV^®) ^(a)	30%	31%	34%	31%
Energy Transfer affiliates ^(b)	35%	7%	26%	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)	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.