Segment Information

12 Months Ended

Dec. 31, 2012

Segment Information

Segment Information

23. 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 Utica. For all years presented, the Southwest segment includes the operations of the Partnership's processing facilities in Corpus Christi, Texas that were reported separately in the Gulf Coast segment in prior years. The Gulf Coast operations are no longer material to the Partnership's operations and no longer meaningful separately. The Southwest segment has operations in Texas, Oklahoma, Louisiana and New Mexico. The Northeast segment has operations in Kentucky, southern West Virginia and Michigan. The Liberty segment has operations in Pennsylvania and northern West Virginia. The Utica segment has operations in Ohio. All segments provide gathering, processing, transportation and storage services. The Southwest, Northeast and Liberty segments also provide, and the Utica segment will provide, fractionation 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, 2012, 2011 and 2010 (in thousands).

Year ended December 31, 2012:

	Southwest		Northeast		Liberty		Utica			Total
Segment revenue	$	856,416	$	225,818	$	319,867	$	571		$	1,402,672
Purchased product costs		387,902		68,402		74,024		—			530,328
Net operating margin		468,514		157,416		245,843		571			872,344
Facility expenses		124,921		24,106		65,825		3,968			218,820
Portion of operating income (loss) attributable to non-controlling interests		5,790		—		—		(1,359	)		4,431
Operating income before items not allocated to segments	$	337,803	$	133,310	$	180,018	$	(2,038	)	$	649,093
Capital expenditures	$	170,543	$	84,542	$	1,458,323	$	233,018		$	1,946,426
Capital expenditures not allocated to segments											5,001
Total capital expenditures										$	1,951,427

Year ended December 31, 2011:

	Southwest		Northeast		Liberty		Total
Segment revenue	$	1,031,986	$	268,884	$	248,949	$	1,549,819
Purchased product costs		506,911		91,612		83,847		682,370
Net operating margin		525,075		177,272		165,102		867,449
Facility expenses		121,197		27,126		34,913		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	$	398,447	$	150,146	$	66,458	$	615,051
Capital expenditures	$	106,061	$	51,280	$	388,850	$	546,191
Capital expenditures not allocated to segment								5,090
Total capital expenditures							$	551,281

Year ended December 31, 2010:

	Southwest		Northeast		Liberty		Total
Segment revenue	$	750,928	$	384,724	$	105,911	$	1,241,563
Purchased product costs		308,960		252,827		16,840		578,627
Net operating margin		441,968		131,897		89,071		662,936
Facility expenses		115,109		19,513		24,028		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	$	320,419	$	112,384	$	38,917	$	471,720
Capital expenditures	$	118,056	$	2,179	$	332,793	$	453,028
Capital expenditures not allocated to segments								5,640
Total capital expenditures							$	458,668

        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, 2012, 2011 and 2010 (in thousands):

	Year ended December 31,
	2012			2011			2010
Total segment revenue	$	1,402,672		$	1,549,819		$	1,241,563
Derivative gain (loss) not allocated to segments		56,535			(29,035	)		(53,932	)
Revenue deferral adjustment(1)		(7,441	)		(15,385	)		—
Total revenue	$	1,451,766		$	1,505,399		$	1,187,631
Operating income before items not allocated to segments	$	649,093		$	615,051		$	471,720
Portion of operating income attributable to non-controlling interests		4,431			69,162			32,566
Derivative gain (loss) not allocated to segments		69,126			(75,515	)		(80,350	)
Revenue deferral adjustment(1)		(7,441	)		(15,385	)		—
Compensation expense included in facility expenses not allocated to segments		(1,022	)		(1,781	)		(1,890	)
Facility expenses adjustments(2)		11,457			11,419			9,091
Selling, general and administrative expenses		(94,116	)		(81,229	)		(75,258	)
Depreciation		(189,549	)		(149,954	)		(123,198	)
Amortization of intangible assets		(53,320	)		(43,617	)		(40,833	)
Loss on disposal of property, plant and equipment		(6,254	)		(8,797	)		(3,149	)
Accretion of asset retirement obligations		(677	)		(1,190	)		(237	)
Income from operations		381,728			318,164			188,462
Earnings (loss) from unconsolidated affiliates		699			(1,095	)		1,562
Interest income		419			422			1,670
Interest expense		(120,191	)		(113,631	)		(103,873	)
Amortization of deferred financing costs and discount (a component of interest expense)		(5,601	)		(5,114	)		(10,264	)
Derivative gain related to interest expense		—			—			1,871
Loss on redemption of debt		—			(78,996	)		(46,326	)
Miscellaneous income, net		62			144			1,189
Income before provision for income tax	$	257,116		$	119,894		$	34,291

(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, 2012, approximately $0.8 million and $6.6 million of the revenue deferral adjustment is attributable to the Southwest segment and Northeast segment, respectively. 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 Southwest segment.

        The tables below present information about segment assets as of December 31, 2012, 2011 and 2010 (in thousands):

	Year ended December 31,
	2012		2011		2010
Southwest	$	2,225,838	$	2,254,962	$	2,220,063
Northeast		578,122		533,591		244,219
Liberty		3,172,144		1,114,654		743,943
Utica		439,987		—		—
Total segment assets		6,416,091		3,903,207		3,208,225
Assets not allocated to segments:
Certain cash and cash equivalents		261,473		66,212		49,776
Fair value of derivatives		30,382		24,790		4,762
Investment in unconsolidated affiliate		31,179		27,853		28,688
Other(1)		96,591		48,363		41,911
Total assets	$	6,835,716	$	4,070,425	$	3,333,362

(1)

As of December 31, 2012, 2011 and 2010, includes corporate fixed assets, deferred financing costs, income tax receivable, receivables and other corporate assets not allocated to segments.