Segment Information

12 Months Ended

Dec. 31, 2013

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: Marcellus, Utica, Northeast and Southwest. The Marcellus segment, which was referred to as the Liberty segment in prior years, has operations in Pennsylvania and northern West Virginia. The Utica segment has operations in Ohio. The Northeast segment has operations in Kentucky, southern West Virginia and Michigan. The Southwest segment has operations in Texas, Oklahoma, Louisiana and New Mexico. All segments provide gathering, processing, transportation and storage services. The Marcellus, Northeast and Southwest segments also provide and the Utica segment will provide, fractionation services. The Partnership prepares segment information in accordance with GAAP. Certain items below Income 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, 2013, 2012 and 2011 (in thousands):

Year ended December 31, 2013:

	Marcellus			Utica			Northeast			Southwest			Total
Segment revenue	$	527,073		$	26,442		$	204,326		$	935,426		$	1,693,267
Purchased product costs		(100,262	)		—			(65,192	)		(525,711	)		(691,165	)
Net operating margin		426,811			26,442			139,134			409,715			1,002,102
Facility expenses		(108,781	)		(35,081	)		(28,425	)		(127,112	)		(299,399	)
Portion of operating loss (income) attributable to non-controlling interests		—			3,499			—			(21	)		3,478
Operating income (loss) before items not allocated to segments	$	318,030		$	(5,140	)	$	110,709		$	282,582		$	706,181
Capital expenditures	$	1,613,580		$	1,242,158		$	4,586		$	175,565		$	3,035,889
Capital expenditures not allocated to segments														11,067
Total capital expenditures													$	3,046,956

Year ended December 31, 2012:

	Marcellus			Utica			Northeast			Southwest			Total
Segment revenue	$	319,867		$	571		$	225,818		$	842,958		$	1,389,214
Purchased product costs		(74,024	)		—			(68,402	)		(387,902	)		(530,328	)
Net operating margin		245,843			571			157,416			455,056			858,886
Facility expenses		(65,825	)		(3,968	)		(24,106	)		(122,691	)		(216,590	)
Portion of operating loss (income) attributable to non-controlling interests		—			1,359			—			(176	)		1,183
Operating income (loss) before items not allocated to segments	$	180,018		$	(2,038	)	$	133,310		$	332,189		$	643,479
Capital expenditures	$	1,458,323		$	233,018		$	84,542		$	169,440		$	1,945,323
Capital expenditures not allocated to segments														5,001
Total capital expenditures													$	1,950,324

Year ended December 31, 2011:

	Marcellus			Northeast			Southwest			Total
Segment revenue	$	248,949		$	268,884		$	1,018,706		$	1,536,539
Purchased product costs		(83,847	)		(91,612	)		(506,911	)		(682,370	)
Net operating margin		165,102			177,272			511,795			854,169
Facility expenses		(34,913	)		(27,126	)		(118,428	)		(180,467	)
Portion of operating income attributable to non-controlling interests		(63,731	)		—			(176	)		(63,907	)
Operating income before items not allocated to segments	$	66,458		$	150,146		$	393,191		$	609,795
Capital expenditures	$	388,850		$	51,280		$	105,619		$	545,749
Capital expenditures not allocated to segment											5,090
Total capital expenditures										$	550,839

        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, 2013, 2012 and 2011 (in thousands):

	Year ended December 31,
	2013			2012			2011
Total segment revenue	$	1,693,267		$	1,389,214		$	1,536,539
Derivative (loss) gain not allocated to segments		(24,638	)		56,535			(29,035	)
Revenue deferral adjustment and other(1)		(6,182	)		(5,935	)		(13,947	)
Total revenue	$	1,662,447		$	1,439,814		$	1,493,557
Operating income before items not allocated to segments	$	706,181		$	643,479		$	609,795
Portion of operating income attributable to non-controlling interests		(3,478	)		(1,183	)		63,907
Derivative (loss) gain not allocated to segments		(25,770	)		69,126			(75,515	)
Revenue deferral adjustment and other(1)		(6,182	)		(5,935	)		(13,947	)
Compensation expense included in facility expenses not allocated to segments		(2,421	)		(1,022	)		(1,781	)
Facility expenses adjustments(2)		10,751			10,751			10,751
Selling, general and administrative expenses		(101,549	)		(93,444	)		(80,441	)
Depreciation		(299,884	)		(183,250	)		(143,704	)
Amortization of intangible assets		(64,644	)		(53,320	)		(43,617	)
Gain (loss) on disposal of property, plant and equipment		33,763			(6,254	)		(8,797	)
Accretion of asset retirement obligations		(824	)		(672	)		(1,185	)
Income from operations		245,943			378,276			315,466
Earnings from unconsolidated affiliates		1,422			2,328			158
Interest income		262			419			422
Interest expense		(151,851	)		(120,191	)		(113,631	)
Amortization of deferred financing costs and discount (a component of interest expense)		(6,726	)		(5,601	)		(5,114	)
Loss on redemption of debt		(38,455	)		—			(78,996	)
Miscellaneous income, net		2,519			62			144
Income before provision for income tax	$	53,114		$	255,293		$	118,449

(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, 2013, approximately $6.4 million and $0.8 million of the revenue deferral adjustment is attributable to the Northeast segment and Southwest segment, respectively. For the year ended December 31, 2012, approximately $6.6 million and $0.8 million of the revenue deferral adjustment is attributable to the Northeast segment and Southwest segment, respectively. For the year ended December 31, 2011, approximately $8.2 million and $7.2 million of the revenue deferral adjustment is attributable to the Northeast segment and Southwest 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. Other consists of management revenues from an unconsolidated affiliate of $1.0 million, $1.5 million, and $1.4 million for the years ended December 31, 2013, 2012, and 2011, respectively.

(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, 2013, 2012 and 2011 (in thousands):

	2013		2012
Marcellus	$	4,529,028	$	3,172,144
Utica		1,646,995		439,987
Northeast		572,855		578,122
Southwest		2,389,057		2,086,215
Total segment assets		9,137,935		6,276,468
Assets not allocated to segments:
Certain cash and cash equivalents		63,086		261,473
Fair value of derivatives		11,962		30,382
Investment in unconsolidated affiliates		75,627		63,054
Other(1)		107,813		96,985
Total assets	$	9,396,423	$	6,728,362

(1)

Includes corporate fixed assets, deferred financing costs, income tax receivable, non-trade receivables and other corporate assets not allocated to segments.