AECON GROUP INC 63 33 CAPITAL DISCLOSURES For capital management purposes the Company defnes capital as the aggregate of its shareholders equity and debt Debt includes the current and noncurrent portions of longterm debt excluding nonrecourse debt and the current and noncurrent longterm debt components of convertible debentures The Companys principal objectives in managing capital are to ensure suffcient liquidity to adequately fund the ongoing operations of the business to provide fexibility to take advantage of contract and growth opportunities that are expected to provide satisfactory returns to shareholders to maintain a strong capital base so as to maintain client investor creditor and market confdence to provide a superior rate of return to its shareholders and to comply with fnancial covenants required under its various borrowing facilities The Company manages its capital structure and adjusts it in light of changes in economic conditions In order to maintain or adjust its capital structure the Company may issue new debt or repay existing debt issue new shares issue convertible debt or adjust the amount of dividends paid to shareholders Financing decisions are generally made on a specifc transaction basis and depend on such things as the Companys needs capital markets and economic conditions at the time of the transaction Although the Company monitors capital on a number of bases including liquidity and working capital total debt excluding nonrecourse debt and drawings on the Companys credit facility presented as bank indebtedness as a percentage of total capitalization debt to capitalization percentage is considered to be the most important metric in measuring the strength and fexibility of its consolidated balance sheets As at December 31 2012 the debt to capitalization percentage including convertible debentures as debt was 46 If the convertible debentures were to be excluded from debt and added to equity on the basis that they could be redeemed for equity either at the Companys option or at the holders option then the adjusted debt to capitalization percentage would be 21 as at December 31 2012 While the Company believes this debt to capitalization percentage is acceptable because of the cyclical nature of its business the Company will continue its current efforts to maintain a conservative capital position As at December 31 2012 the Company complied with all of its fnancial debt covenants 34 OPERATING SEGMENTS Segment reporting is based on the Companys divisional operations The breakdown by divisions mirrors the Companys internal reporting systems The Company operates in three principal segments within the construction and infrastructure development industry Infrastructure Industrial and Concessions The Eliminations and Other category in the summary below includes corporate costs and other activities not directly allocable to segments and also includes intersegment eliminations Infrastructure The Infrastructure segment includes all aspects of the construction of both public and private infrastructure including roads and highways as well as toll highways hydroelectric power projects and dams tunnels bridges airports marine facilities and transit systems primarily in Canada and on a selected basis internationally This segment includes the mining manufacture and supply of asphalt and aggregate products and the construction andor installation of utility distribution systems for natural gas telecommunications and electrical networks as well as water and sewer mains traffc signals and highway lighting The Infrastructure segment also includes the operations of Aecon Mining a large mining and reclamation contractor operating in the oil sands and resource sectors as well as the design and construction of the new Quito Airport project Aecon Buildings which specializes in the construction and renovation of commercial and institutional buildings is also included in the Infrastructure segment and commencing in 2012 was combined with Lockerbie Hole Contracting which provides mechanical construction management and complete mechanical construction services including the design and build of water and waste water facilities as well as mechanical and electrical installations in hospitals schools and institutional buildings to serve the social infrastructure market sector This realignment of Lockerbie Hole Contracting which was previously included in the Industrial segment to the Infrastructure segment builds on the Companys One Aecon business strategy and is expected to more fully capitalize on the combined strengths and potential synergies of the Aecon Buildings and Lockerbie Hole Contracting operations in the social infrastructure sector In addition commencing in 2012 the operating units within the Infrastructure segment were reorganized to align with Infrastructures operating management structure into the following subcategories Transportation Heavy Civil Utilities Mining and Social Infrastructure Prior year comparative fgures have been restated to conform to the presentation adopted in the current year Industrial The Industrial segment encompasses all of Aecons industrial construction and manufacturing activities including inplant construction site construction and module assembly in the energy manufacturing petrochemical steel automotive and commodities mining sectors Activities in this segment include the construction of alternative fossil fuel and cogeneration power plants inplant construction and refurbishment activities at nuclear power plants the fabrication and module assembly of small diameter specialty pipe mechanical construction at petrochemical plants and commodities mining facilities and the design and manufacture of oncethrough heat recovery steam generators HRSGs for industrial and power plant applications and enhanced oil recovery boilers for use in the oil sands Although activities in this segment are concentrated primarily in Canada Aecon through its subsidiary Innovative Steam Technologies Inc sells HRSGs throughout the world Concessions Activities within the Concessions segment include the development fnancing construction and operation of infrastructure projects by way of buildoperatetransfer buildown operatetransfer and other publicprivate partnership contract structures This segment focuses primarily on the operation