Segment Information

12 Months Ended

Dec. 31, 2011

Segment Information

Segment Information

24. Segment Information

        The Partnership's chief operating decision maker is the chief executive officer ("CEO"). The CEO reviews the Partnership's discrete financial information on a geographic and operational basis, as the products and services are closely related within each geographic region and business operation. Accordingly, the CEO makes operating decisions, assesses financial performance and allocates resources on a geographical basis. The Partnership has the following segments: Southwest, Northeast, Liberty and Gulf Coast. The Southwest segment provides gathering, processing, transportation and storage services. The Northeast segment provides gathering, processing, transportation, fractionation and storage services. The Liberty segment provides gathering, processing, transportation, fractionation and storage services. The Gulf Coast segment provides processing, transportation, fractionation and storage services.

        The Partnership prepares segment information in accordance with GAAP. Certain items below Income (loss) from operations in the accompanying Consolidated Statements of Operations, certain compensation expense, certain other non-cash items and any gains (losses) from derivative instruments are not allocated to individual segments. Management does not consider these items allocable to or controllable by any individual segment and, therefore, excludes these items when evaluating segment performance. Segment results are also adjusted to exclude the portion of operating income attributable to the non-controlling interests.

        The tables below present information about operating income and capital expenditures for the reported segments for the years ended December 31, 2011, 2010 and 2009 (in thousands).

Year ended December 31, 2011:

	Southwest		Northeast		Liberty		Gulf Coast		Total
Segment revenue	$	935,513	$	268,884	$	248,949	$	96,473	$	1,549,819
Purchased product costs		506,911		91,612		83,847		—		682,370
Net operating margin		428,602		177,272		165,102		96,473		867,449
Facility expenses		82,761		27,126		34,913		38,436		183,236
Portion of operating income attributable to non-controlling interests		5,431		—		63,731		—		69,162
Operating income before items not allocated to segments	$	340,410	$	150,146	$	66,458	$	58,037	$	615,051
Capital expenditures	$	103,968	$	51,280	$	388,850	$	2,093	$	546,191
Capital expenditures not allocated to segment										5,090
Total capital expenditures									$	551,281

Year ended December 31, 2010:

	Southwest		Northeast		Liberty		Gulf Coast		Total
Segment revenue	$	665,768	$	384,724	$	105,911	$	85,160	$	1,241,563
Purchased product costs		308,960		252,827		16,840		—		578,627
Net operating margin		356,808		131,897		89,071		85,160		662,936
Facility expenses		81,772		19,513		24,028		33,337		158,650
Portion of operating income attributable to non-controlling interests		6,440		—		26,126		—		32,566
Operating income before items not allocated to segments	$	268,596	$	112,384	$	38,917	$	51,823	$	471,720
Capital expenditures	$	114,109	$	2,179	$	332,793	$	3,947	$	453,028
Capital expenditures not allocated to segments										5,640
Total capital expenditures									$	458,668

Year ended December 31, 2009:

	Southwest		Northeast		Liberty		Gulf Coast		Total
Segment revenue	$	492,369	$	260,529	$	47,968	$	57,769	$	858,635
Purchased product costs		221,021		175,326		12,479		—		408,826
Net operating margin		271,348		85,203		35,489		57,769		449,809
Facility expenses		73,621		20,339		16,268		16,094		126,322
Portion of operating income attributable to non-controlling interests		2,613		—		6,637		—		9,250
Operating income before items not allocated to segments	$	195,114	$	64,864	$	12,584	$	41,675	$	314,237
Capital expenditures	$	236,705	$	21,538	$	181,142	$	40,606	$	479,991
Capital expenditures not allocated to segments										6,632
Total capital expenditures									$	486,623

        The following is a reconciliation of segment revenue to total revenue and operating income before items not allocated to segments to income before provision for income tax for the three years ended December 31, 2011, 2010 and 2009 (in thousands):

	Year ended December 31,
	2011			2010			2009
Total segment revenue	$	1,549,819		$	1,241,563		$	858,635
Derivative loss not allocated to segments		(29,035	)		(53,932	)		(120,352	)
Revenue deferral adjustment(1)		(15,385	)		—			—
Total revenue	$	1,505,399		$	1,187,631		$	738,283
Operating income before items not allocated to segments	$	615,051		$	471,720		$	314,237
Portion of operating income attributable to non-controlling interests		69,162			32,566			9,250
Derivative loss not allocated to segments		(75,515	)		(80,350	)		(188,862	)
Revenue deferral adjustment(1)		(15,385	)		—			—
Compensation expense included in facility expenses not allocated to segments		(1,781	)		(1,890	)		(1,032	)
Facility expenses adjustments(2)		11,419			9,091			377
Selling, general and administrative expenses		(81,229	)		(75,258	)		(63,728	)
Depreciation		(149,954	)		(123,198	)		(95,537	)
Amortization of intangible assets		(43,617	)		(40,833	)		(40,831	)
Loss on disposal of property, plant and equipment		(8,797	)		(3,149	)		(1,677	)
Accretion of asset retirement obligations		(1,190	)		(237	)		(198	)
Impairment of goodwill and long-lived assets		—			—			(5,855	)
Income (loss) from operations		318,164			188,462			(73,856	)
(Loss) earnings from unconsolidated affiliates		(1,095	)		1,562			3,505
Gain on sale of unconsolidated affiliate		—			—			6,801
Interest income		422			1,670			349
Interest expense		(113,631	)		(103,873	)		(87,419	)
Amortization of deferred financing costs and discount (a component of interest expense)		(5,114	)		(10,264	)		(9,718	)
Derivative gain related to interest expense		—			1,871			2,509
Loss on redemption of debt		(78,996	)		(46,326	)		—
Miscellaneous income, net		144			1,189			2,459
Income (loss) before provision for income tax	$	119,894		$	34,291		$	(155,370	)

(1)

Amount relates to certain contracts in which the cash consideration that the Partnership receives for providing service is greater during the initial years of the contract compared to the later years. In accordance with GAAP, the revenue is recognized evenly over the term of the contract as the Partnership expects to perform a similar level of service for the entire term; therefore, the revenue recognized in the current reporting period is less than the cash received. However, the chief operating decision maker and management evaluate the segment performance based on the cash consideration received and, therefore, the impact of the revenue deferrals is excluded for segment reporting purposes. For the year ended December 31, 2011, approximately $7.2 million and $8.2 million of the revenue deferral adjustment is attributable to the Southwest segment and Northeast segment, respectively. Beginning in 2015, the cash consideration received from these contracts is expected to decline and the reported segment revenue will be less than the revenue recognized for GAAP purposes.

(2)

Facility expenses adjustments consist of the reallocation of the MarkWest Pioneer field services fee and the reallocation of the interest expense related to the SMR, which is included in facility expenses for the purposes of evaluating the performance of the Gulf Coast segment. The increase is due to a full year of interest expense related to the SMR in 2011 compared to approximately nine months of SMR interest expense in 2010.

        The tables below present information about segment assets as of December 31, 2011, 2010, and 2009 (in thousands):

	December 31, 2011		December 31, 2010		December 31, 2009
Southwest	$	1,701,919	$	1,646,607	$	1,637,749
Northeast		533,591		244,219		249,804
Liberty		1,114,654		743,943		373,127
Gulf Coast		553,043		573,456		587,830
Total segment assets		3,903,207		3,208,225		2,848,510
Assets not allocated to segments:
Certain cash and cash equivalents		66,212		49,776		73,184
Fair value of derivatives		24,790		4,762		24,631
Investment in unconsolidated affiliate		27,853		28,688		29,633
Other(1)		48,363		41,911		38,779
Total assets	$	4,070,425	$	3,333,362	$	3,014,737

(1)

As of December 31, 2011, includes corporate fixed assets, deferred financing costs, income tax receivable, deferred tax asset and other corporate assets not allocated to segments. As of December 31, 2010 and 2009, includes corporate fixed assets, deferred financing costs, income tax receivable, receivables and other corporate assets not allocated to segments.