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 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.

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 six month period ended June 30, 2017, Other segment EBITDA included previously disclosed first quarter project losses of $7.0 million 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 six month period ended June 30, 2016, Oil and Gas and Electrical Transmission segment EBITDA included first quarter project losses of $13.5 million and $15.1 million, respectively.

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 June 30,						For the Six Months Ended June 30,
Revenue:	2017			2016			2017			2016
Communications ^(a)	$	592.2		$	592.2		$	1,151.7		$	1,103.8
Oil and Gas	1,140.4			425.6			1,596.2			718.4
Electrical Transmission	96.6			95.6			195.4			181.9
Power Generation and Industrial	60.7			119.7			107.3			201.1
Other	1.9			3.9			3.6			7.3
Eliminations	(1.6		)	(4.6		)	(5.8		)	(5.9		)
Consolidated revenue	$	1,890.2		$	1,232.4		$	3,048.4		$	2,206.6


(a)	Revenue generated primarily by utilities customers represented 11.5% and 11.0% of Communications segment revenue for the three month periods ended June 30, 2017 and 2016, respectively, and represented 12.4% and 10.7% for the six month periods ended June 30, 2017 and 2016, respectively.



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
EBITDA:	2017			2016			2017			2016
Communications	$	59.5		$	66.4		$	107.8		$	128.1
Oil and Gas	154.0			53.6			247.9			69.8
Electrical Transmission	3.5			(9.9		)	6.7			(33.7		)
Power Generation and Industrial	4.7			4.8			5.6			7.7
Other	6.8			0.3			1.5			0.5
Corporate	(29.6		)	(19.9		)	(47.1		)	(30.9		)
Consolidated EBITDA	$	198.9		$	95.3		$	322.4		$	141.5



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Depreciation and Amortization:	2017		2016		2017		2016
Communications	$	13.5	$	12.4	$	25.5	$	24.6
Oil and Gas	23.2		19.3		45.1		37.5
Electrical Transmission	5.7		5.8		11.4		11.0
Power Generation and Industrial	1.4		1.5		2.9		3.1
Other	0.0		0.0		0.1		0.0
Corporate	1.6		1.7		3.3		3.5
Consolidated depreciation and amortization	$	45.4	$	40.7	$	88.3	$	79.7

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
EBITDA Reconciliation:	2017		2016		2017		2016
Income before income taxes	$	138.8	$	42.0	$	206.8	$	37.1
Plus:
Interest expense, net	14.8		12.6		27.4		24.8
Depreciation and amortization	45.4		40.7		88.3		79.7
Consolidated EBITDA	$	198.9	$	95.3	$	322.4	$	141.5

Foreign Operations. MasTec operates in North America, primarily in the United States and Canada, and, to a lesser extent, in Mexico. For the three month periods ended June 30, 2017 and 2016, revenue of $1.8 billion and $1.2 billion, respectively, was derived from U.S. operations, and revenue of $40.5 million and $65.5 million, respectively, was derived from foreign operations, primarily in Canada. For the six month periods ended June 30, 2017 and 2016, revenue of $2.9 billion and $2.1 billion, respectively, was derived from U.S. operations, and revenue of $99.7 million and $149.0 million, respectively, was derived from foreign operations, primarily in Canada. The majority of the Company’s foreign operations during the three and six month periods ended June 30, 2017 and 2016 were in the Company’s Oil and Gas segment. Long-lived assets held in the U.S. included property and equipment, net, of $583.8 million and $475.3 million as of June 30, 2017 and December 31, 2016, respectively, and, for the Company’s businesses in foreign countries, primarily in Canada, totaled $64.7 million and $73.8 million, respectively. Intangible assets and goodwill, net, related to the Company’s U.S. operations totaled approximately $1.1 billion as of both June 30, 2017 and December 31, 2016, and, for the Company’s businesses in foreign countries, primarily in Canada, totaled approximately $110.6 million and $107.8 million as of June 30, 2017 and December 31, 2016, respectively. Amounts due from customers from which foreign revenue was derived accounted for approximately 5% and 8%, respectively, of the Company’s consolidated net accounts receivable position as of June 30, 2017 and December 31, 2016, which represents accounts receivable, net, less BIEC.

Significant Customers

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



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
Customer:	2017	2016	2017	2016
Energy Transfer affiliates ^(a)	47%	22%	35%	20%
AT&T (including DIRECTV^®) ^(b)	22%	36%	27%	37%


(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 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.

(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.