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, infrastructure for 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 heavy civil and industrial infrastructure. The Other segment includes equity investees, the services of which vary from those provided by the Company’s four primary segments, as well as other small business units that perform construction and other services for a variety of international end-markets.

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 revenue and costs among the reportable segments are de minimis 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 revenue 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, acquisition-related transaction costs (exclusive of acquisition integration costs, which are included within the segment results of the acquired business), and other discrete items, such as goodwill and intangible asset impairment. 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 understand the Company’s financial results and assess its prospects for future performance. The Company uses EBITDA to evaluate its performance, both internally and as compared with its peers, because it excludes certain items that may not be indicative of the Company’s core operating results for its reportable segments, as well as items that can vary widely across different industries or among companies within the same industry, and for non-cash stock-based compensation expense, can also be subject to volatility from changes in the market price per share of our common stock or variations in the value of shares granted. Segment EBITDA is calculated in a manner consistent with consolidated EBITDA.

For the years ended December 31, 2017, 2016 and 2015, Other segment EBITDA included project losses of $7.9 million, $5.1 million and $16.3 million, respectively, from a proportionately consolidated non-controlled Canadian joint venture, which is managed by a third party, and for which we have minimal direct construction involvement. For the year ended December 31, 2016, EBITDA for the Oil and Gas and Electrical Transmission segments included first quarter project losses of $13.5 million and $15.1 million, respectively, and restructuring charges of $6.3 million and $8.9 million, respectively. For the year ended December 31, 2015, Communications segment EBITDA included $17.8 million of acquisition integration costs, Electrical Transmission segment EBITDA included a $12.2 million charge relating to a court mandated mediation settlement, and Power Generation and Industrial segment EBITDA included project losses of $21.4 million. In addition, for the year ended December 31, 2015, Corporate segment EBITDA included $78.6 million of goodwill and intangible asset impairment and $16.5 million of Audit Committee independent investigation costs.

Summarized financial information for MasTec’s reportable segments is presented and reconciled to consolidated financial information for total MasTec, including a reconciliation of consolidated income (loss) before income taxes to EBITDA, in the following tables (in millions). The tables below may contain slight summation differences due to rounding.



	For the Years Ended December 31,
Revenue:	2017			2016			2015
Communications ^(a)	$	2,424.4		$	2,323.6		$	1,973.2
Oil and Gas	3,497.2			2,024.4			1,495.1
Electrical Transmission	378.2			383.8			341.5
Power Generation and Industrial	299.9			405.7			381.6
Other	20.8			15.9			24.1
Eliminations	(13.5		)	(18.7		)	(7.2		)
Consolidated revenue	$	6,607.0		$	5,134.7		$	4,208.3


(a)	Revenue generated primarily by utilities customers represented 13.4%, 11.1% and 10.6% of Communications segment revenue for the years ended December 31, 2017, 2016 and 2015, respectively.



	For the Years Ended December 31,
EBITDA:	2017			2016			2015
Communications	$	247.4		$	244.6		$	194.8
Oil and Gas	402.2			297.3			157.0
Electrical Transmission	17.6			(42.9		)	(71.3		)
Power Generation and Industrial	22.6			18.3			8.8
Other	19.8			(2.6		)	(18.8		)
Corporate	(88.7		)	(73.1		)	(120.5		)
Consolidated EBITDA	$	620.9		$	441.5		$	150.0



	For the Years Ended December 31,
Depreciation and Amortization:	2017		2016		2015
Communications	$	53.2	$	50.3	$	50.6
Oil and Gas	96.7		78.4		84.5
Electrical Transmission	22.8		23.2		21.1
Power Generation and Industrial	9.1		6.2		6.6
Other	0.1		0.1		0.1
Corporate	6.1		6.7		6.8
Consolidated depreciation and amortization	$	188.0	$	164.9	$	169.7



	As of December 31,
Assets:	2017		2016		2015
Communications	$	1,314.4	$	1,156.9	$	1,032.2
Oil and Gas	1,762.6		1,267.2		1,131.4
Electrical Transmission	471.4		419.1		409.1
Power Generation and Industrial	288.6		268.1		252.5
Other	153.2		27.7		34.3
Corporate	76.4		44.1		67.8
Consolidated segment assets	$	4,066.6	$	3,183.1	$	2,927.3



	For the Years Ended December 31,
Capital Expenditures:	2017		2016		2015
Communications	$	40.5	$	28.5	$	25.8
Oil and Gas	57.7		64.0		38.1
Electrical Transmission	14.9		19.8		13.0
Power Generation and Industrial	5.4		3.4		3.5
Other	0.0		0.3		0.2
Corporate	4.9		1.1		3.8
Consolidated capital expenditures	$	123.4	$	117.1	$	84.4



	For the Years Ended December 31,
EBITDA Reconciliation:	2017		2016		2015
Income (loss) before income taxes	$	371.8	$	225.8	$	(67.7	)
Plus:
Interest expense, net	61.0		50.7		48.1
Depreciation and amortization	188.0		164.9		169.7
Consolidated EBITDA	$	620.9	$	441.5	$	150.0

Foreign Operations. MasTec operates in North America, primarily in the United States and Canada, and, to a lesser extent, in Mexico. For the years ended December 31, 2017, 2016 and 2015, revenue of $6.4 billion, $4.9 billion and $3.6 billion, respectively, was derived from U.S. operations, and revenue of $211.5 million, $279.7 million and $574.8 million, respectively, was derived from foreign operations, the majority of which was from the Company’s Canadian operations in the Oil and Gas segment. Long-lived assets held in the U.S. included property and equipment, net, of $649.5 million, $475.3 million and $464.6 million as of December 31, 2017, 2016 and 2015, respectively, and, for the Company’s businesses in foreign countries, the majority of which are in Canada, totaled $57.0 million, $73.8 million and $94.1 million, respectively. Intangible assets and goodwill, net, related to the Company’s U.S. operations totaled approximately $1.2 billion as of December 31, 2017 and $1.1 billion as of both December 31, 2016 and 2015, and, for the Company’s businesses in foreign countries, the majority of which are in Canada, totaled approximately $112.8 million, $107.8 million and $107.3 million, respectively. Amounts due from customers from which foreign revenue was derived accounted for approximately 5%, 8% and 17% of the Company’s consolidated net accounts receivable position, which represents accounts receivable, net, less BIEC, as of December 31, 2017, 2016 and 2015, respectively.

Significant Customers

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



	For the Years Ended December 31,
	2017	2016	2015
Customer:
Energy Transfer affiliates ^(a)	40%	27%	7%
AT&T (including DIRECTV^®) ^(b)	25%	34%	32%


(a)	The Company's relationship with Energy Transfer affiliates is based upon various construction contracts for pipeline activities with Energy Transfer Partners L.P., and its 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.

(b)

The Company’s relationship with AT&T is based upon multiple separate master service and other service agreements, including for installation and maintenance services, as well as construction/installation contracts for AT&T’s: (i) wireless business; (ii) wireline/fiber businesses; and (iii) various install-to-the-home businesses, including DIRECTV®. Revenue from AT&T is included in the Communications segment.