Note 12. Business Segments

We have six reportable business segments: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Onshore Crude Oil Pipelines & Services; (iv) Offshore Pipelines & Services; (v) Petrochemical & Refined Products Services; and (vi) Other Investments. Our business segments are generally organized and managed according to the type of services rendered (or technologies employed) and products produced and/or sold.

We evaluate segment performance based on the non-GAAP financial measure of gross operating margin. Gross operating margin (either in total or by individual segment) is an important performance measure of the core profitability of our operations. This measure forms the basis of our internal financial reporting and is used by our management in deciding how to allocate capital resources among business segments. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results. The GAAP financial measure most directly comparable to total segment gross operating margin is operating income. Our non-GAAP financial measure of total segment gross operating margin should not be considered an alternative to GAAP operating income.

We define total segment gross operating margin as operating income before: (i) depreciation, amortization and accretion expenses; (ii) non-cash asset impairment charges; (iii) operating lease expenses for which we did not have the payment obligation (e.g., the EPCO retained leases); (iv) gains and losses from asset sales and related transactions; and (v) general and administrative costs. Gross operating margin by segment is calculated by subtracting segment operating costs and expenses (net of the adjustments noted above) from segment revenues, with both segment totals before the elimination of intercompany transactions. In accordance with GAAP, intercompany accounts and transactions are eliminated in the preparation of our consolidated financial statements. Gross operating margin is exclusive of other income and expense transactions, provision for income taxes, the cumulative effect of changes in accounting principles and extraordinary charges. Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests.

The following table shows our measurement of total segment gross operating margin for the periods presented:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2011			2010			2011			2010
Revenues	$	11,327.1		$	8,067.8		$	32,727.3		$	24,155.7
Less: Operating costs and expenses		(10,604.6	)		(7,460.1	)		(30,675.0	)		(22,406.2	)
Add: Equity in income of unconsolidated affiliates		8.6			5.6			35.9			43.2
Depreciation, amortization and accretion in operating costs and expenses (1)		238.3			235.1			702.4			674.5
Non-cash asset impairment charges		5.2			--			5.2			1.5
Operating lease expenses paid by EPCO		--			0.2			0.3			0.5
Gains from asset sales and related transactions in operating costs and expenses (2)		(1.8	)		(39.7	)		(25.4	)		(45.3	)
Total segment gross operating margin	$	972.8		$	808.9		$	2,770.7		$	2,423.9

(1) Amount is a component of “Depreciation, amortization and accretion” as presented on the Unaudited Condensed Statements of Consolidated Cash Flows. (2) Amount is a component of “Gains from asset sales and related transactions” as presented on the Unaudited Condensed Statements of Consolidated Cash Flows.

The following table presents a reconciliation of total segment gross operating margin to operating income and further to income before provision for income taxes for the periods presented:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2011			2010			2011			2010
Total segment gross operating margin	$	972.8		$	808.9		$	2,770.7		$	2,423.9
Adjustments to reconcile total segment gross operating margin to operating income:
Depreciation, amortization and accretion in operating costs and expenses		(238.3	)		(235.1	)		(702.4	)		(674.5	)
Non-cash asset impairment charges		(5.2	)		--			(5.2	)		(1.5	)
Operating lease expenses paid by EPCO		--			(0.2	)		(0.3	)		(0.5	)
Gains from asset sales and related transactions in operating costs and expenses		1.8			39.7			25.4			45.3
General and administrative costs		(50.0	)		(70.1	)		(138.3	)		(150.9	)
Operating income		681.1			543.2			1,949.9			1,641.8
Other expense, net		(190.0	)		(190.7	)		(561.3	)		(527.3	)
Income before provision for income taxes	$	491.1		$	352.5		$	1,388.6		$	1,114.5

Information by business segment, together with reconciliations to our consolidated totals, is presented in the following table:

	Reportable Business Segments
	NGL Pipelines & Services		Onshore Natural Gas Pipelines & Services		Onshore Crude Oil Pipelines & Services			Offshore Pipelines & Services		Petrochemical & Refined Products Services			Other Investments			Adjustments and Eliminations			Consolidated Total
Revenues from third parties:
Three months ended September 30, 2011	$	4,323.8	$	855.9	$	3,957.1		$	57.7	$	1,968.7		$	--		$	--		$	11,163.2
Three months ended September 30, 2010		3,169.3		781.8		2,726.0			68.3		1,188.7			--			--			7,934.1
Nine months ended September 30, 2011		12,339.3		2,590.1		11,609.3			179.4		5,451.0			--			--			32,169.1
Nine months ended September 30, 2010		9,759.4		2,679.1		7,742.0			240.3		3,252.8			--			--			23,673.6
Revenues from related parties:
Three months ended September 30, 2011		94.7		66.8		--			2.4		--			--			--			163.9
Three months ended September 30, 2010		65.2		66.1		(0.1	)		2.5		--			--			--			133.7
Nine months ended September 30, 2011		372.9		176.5		--			8.8		--			--			--			558.2
Nine months ended September 30, 2010		300.7		175.2		(0.2	)		6.4		--			--			--			482.1
Intersegment and intrasegment revenues:
Three months ended September 30, 2011		3,253.6		257.2		1,342.2			4.8		442.9			--			(5,300.7	)		--
Three months ended September 30, 2010		2,378.1		261.0		313.4			0.5		309.7			--			(3,262.7	)		--
Nine months ended September 30, 2011		9,956.4		782.0		3,526.9			6.6		1,361.5			--			(15,633.4	)		--
Nine months ended September 30, 2010		7,333.0		689.3		561.5			1.2		854.7			--			(9,439.7	)		--
Total revenues:
Three months ended September 30, 2011		7,672.1		1,179.9		5,299.3			64.9		2,411.6			--			(5,300.7	)		11,327.1
Three months ended September 30, 2010		5,612.6		1,108.9		3,039.3			71.3		1,498.4			--			(3,262.7	)		8,067.8
Nine months ended September 30, 2011		22,668.6		3,548.6		15,136.2			194.8		6,812.5			--			(15,633.4	)		32,727.3
Nine months ended September 30, 2010		17,393.1		3,543.6		8,303.3			247.9		4,107.5			--			(9,439.7	)		24,155.7
Equity in income (loss) of unconsolidated affiliates:
Three months ended September 30, 2011		4.3		1.4		(1.0	)		5.4		(3.8	)		2.3			--			8.6
Three months ended September 30, 2010		5.1		1.2		1.6			10.1		(0.5	)		(11.9	)		--			5.6
Nine months ended September 30, 2011		16.4		4.1		(3.1	)		20.3		(13.1	)		11.3			--			35.9
Nine months ended September 30, 2010		12.1		3.4		7.5			33.0		(5.8	)		(7.0	)		--			43.2
Gross operating margin:
Three months ended September 30, 2011		547.6		156.0		67.4			53.9		145.6			2.3			--			972.8
Three months ended September 30, 2010		397.2		154.1		35.0			68.3		166.2			(11.9	)		--			808.9
Nine months ended September 30, 2011		1,549.7		476.3		167.0			168.6		397.8			11.3			--			2,770.7
Nine months ended September 30, 2010		1,275.5		391.3		87.6			232.2		444.3			(7.0	)		--			2,423.9
Segment assets:
At September 30, 2011		7,728.2		7,948.6		940.1			2,023.1		3,768.7			1,076.8			3,590.0			27,075.5
At December 31, 2010		7,665.5		8,184.8		917.5			2,004.9		3,758.7			1,436.8			1,607.2			25,575.4
Property, plant and equipment, net: (see Note 7)
At September 30, 2011		6,909.4		6,476.0		449.9			1,432.0		2,530.8			--			3,590.0			21,388.1
At December 31, 2010		6,813.1		6,595.0		427.9			1,390.9		2,498.8			--			1,607.2			19,332.9
Investments in unconsolidated affiliates: (see Note 8)
At September 30, 2011		130.4		31.0		173.1			428.9		68.3			1,076.8			--			1,908.5
At December 31, 2010		131.5		32.6		172.2			443.2		76.8			1,436.8			--			2,293.1
Intangible assets, net: (see Note 9)
At September 30, 2011		347.2		1,145.3		5.9			80.1		108.1			--			--			1,686.6
At December 31, 2010		379.7		1,246.1		6.2			88.7		121.0			--			--			1,841.7
Goodwill: (see Note 9)
At September 30, 2011		341.2		296.3		311.2			82.1		1,061.5			--			--			2,092.3
At December 31, 2010		341.2		311.1		311.2			82.1		1,062.1			--			--			2,107.7

The following table provides additional information regarding our consolidated revenues and costs and expenses for the periods presented:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2011			2010			2011			2010
NGL Pipelines & Services:
Sales of NGLs	$	4,163.9		$	3,048.0		$	12,052.5		$	9,516.5
Sales of other petroleum and related products		1.0			0.6			2.3			1.8
Midstream services		253.6			185.9			657.4			541.8
Total		4,418.5			3,234.5			12,712.2			10,060.1
Onshore Natural Gas Pipelines & Services:
Sales of natural gas		704.7			651.0			2,136.9			2,281.8
Midstream services		218.0			196.9			629.7			572.5
Total		922.7			847.9			2,766.6			2,854.3
Onshore Crude Oil Pipelines & Services:
Sales of crude oil		3,929.8			2,701.4			11,535.9			7,672.1
Midstream services		27.3			24.5			73.4			69.7
Total		3,957.1			2,725.9			11,609.3			7,741.8
Offshore Pipelines & Services:
Sales of natural gas		0.3			0.2			0.9			1.0
Sales of crude oil		1.3			2.3			7.1			6.3
Midstream services		58.5			68.3			180.2			239.4
Total		60.1			70.8			188.2			246.7
Petrochemical & Refined Products Services:
Sales of other petroleum and related products		1,767.2			1,056.3			4,868.7			2,860.6
Midstream services		201.5			132.4			582.3			392.2
Total		1,968.7			1,188.7			5,451.0			3,252.8
Total consolidated revenues	$	11,327.1		$	8,067.8		$	32,727.3		$	24,155.7

Consolidated costs and expenses
Operating costs and expenses:
Cost of sales related to our marketing activities	$	8,712.4		$	6,234.5		$	25,370.0		$	18,577.2
Depreciation, amortization and accretion		238.3			235.1			702.4			674.5
Gains from asset sales and related transactions		(1.8	)		(39.7	)		(25.4	)		(45.3	)
Non-cash asset impairment charges		5.2			--			5.2			1.5
Other operating costs and expenses		1,650.5			1,030.2			4,622.8			3,198.3
General and administrative costs		50.0			70.1			138.3			150.9
Total consolidated costs and expenses	$	10,654.6		$	7,530.2		$	30,813.3		$	22,557.1

Changes in our revenues and operating costs and expenses period-to-period are explained in part by changes in energy commodity prices. In general, higher energy commodity prices result in an increase in our revenues attributable to the sale of NGLs, natural gas, crude oil and other petroleum and related products; however, these higher commodity prices also increase the associated cost of sales as purchase costs rise.