Operating Segments

9 Months Ended

Sep. 30, 2015

Operating Segments

Operating Segments

Note 11—Operating Segments

We manage our operations through three operating segments: Transportation, Facilities and Supply and Logistics. Our Chief Operating Decision Maker (our Chief Executive Officer) evaluates segment performance based on measures including segment profit and maintenance capital investment. We define segment profit as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses. Each of the items above excludes depreciation and amortization. Maintenance capital consists of capital expenditures for the replacement of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets.

The following table reflects certain financial data for each segment for the periods indicated (in millions):

	Transportation		Facilities		Supply and Logistics		Total
Three Months Ended September 30, 2015
Revenues:
External customers	$	172	$	132	$	5,247	$	5,551
Intersegment (1)		229		131		7		367
Total revenues of reportable segments	$	401	$	263	$	5,254	$	5,918
Equity earnings in unconsolidated entities	$	45	$	—	$	—	$	45
Segment profit (2) (3)	$	254	$	146	$	87	$	487
Maintenance capital	$	34	$	16	$	2	$	52
Three Months Ended September 30, 2014
Revenues:
External customers	$	198	$	141	$	10,788	$	11,127
Intersegment (1)		226		140		5		371
Total revenues of reportable segments	$	424	$	281	$	10,793	$	11,498
Equity earnings in unconsolidated entities	$	29	$	—	$	—	$	29
Segment profit (2) (3)	$	231	$	147	$	152	$	530
Maintenance capital	$	35	$	19	$	2	$	56

	Transportation		Facilities		Supply and Logistics		Total
Nine Months Ended September 30, 2015
Revenues:
External customers	$	538	$	393	$	17,225	$	18,156
Intersegment (1)		665		396		13		1,074
Total revenues of reportable segments	$	1,203	$	789	$	17,238	$	19,230
Equity earnings in unconsolidated entities	$	134	$	—	$	—	$	134
Segment profit (2) (3)	$	681	$	432	$	258	$	1,371
Maintenance capital	$	101	$	48	$	5	$	154
Nine Months Ended September 30, 2014
Revenues:
External customers	$	574	$	443	$	32,988	$	34,005
Intersegment (1)		648		415		33		1,096
Total revenues of reportable segments	$	1,222	$	858	$	33,021	$	35,101
Equity earnings in unconsolidated entities	$	73	$	—	$	—	$	73
Segment profit (2) (3)	$	658	$	435	$	534	$	1,627
Maintenance capital	$	111	$	34	$	6	$	151

⁽¹⁾ Segment revenues and purchases and related costs include intersegment amounts. Intersegment sales are conducted at posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market. For further discussion, see “Analysis of Operating Segments” under Item 7 of our 2014 Annual Report on Form 10-K.

⁽²⁾ Supply and Logistics segment profit includes interest expense (related to hedged inventory purchases) of $1million and $4 million for the three months ended September 30, 2015 and 2014, respectively, and $4 million and $11 million for the nine months ended September 30, 2015 and 2014, respectively.

⁽³⁾ The following table reconciles segment profit to net income attributable to PAA (in millions):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Segment profit	$	487	$	530	$	1,371	$	1,627
Depreciation and amortization		(109)		(97)		(326)		(293)
Interest expense, net		(107)		(85)		(313)		(246)
Other expense, net		(4)		(4)		(7)		(2)
Income before tax		267		344		725		1,086
Income tax expense		(17)		(20)		(66)		(90)
Net income		250		324		659		996
Net income attributable to noncontrolling interests		(1)		(1)		(2)		(2)
Net income attributable to PAA	$	249	$	323	$	657	$	994