Segment Information (Tables)

3 Months Ended

Mar. 31, 2015

Segment Information

Schedule of operating income and capital expenditures of reportable segments

The tables below present the Partnership’s segment profit measure, Operating income before items not allocated to segments for the three months ended March 31, 2015 and 2014 for the reported segments (in thousands):

Three months ended March 31, 2015:

	Marcellus		Utica (1)		Northeast		Southwest		Elimination (2)			Total
Segment revenue	$	197,176	$	58,911	$	30,021	$	196,267	$	(44	)	$	482,331
Segment purchased product costs	6,502		181		12,518		104,283		—			123,484
Net operating margin	190,674		58,730		17,503		91,984		(44		)	358,847
Segment facility expenses	43,382		16,638		6,878		33,917		(44		)	100,771
Segment portion of operating income attributable to non-controlling interests	—		20,107		—		1,547		—			21,654
Operating income before items not allocated to segments	$	147,292	$	21,985	$	10,625	$	56,520	$	—		$	236,422
Capital expenditures	$	314,559	$	179,218	$	1,205	$	40,585	$	—		$	535,567
Capital expenditures for Partnership operated, non-wholly owned subsidiaries(1)												(100,878		)
Capital expenditures not allocated to segments												3,582
Total capital expenditures												$	438,271

Three months ended March 31, 2014:

	Marcellus		Utica		Northeast		Southwest			Elimination (2)		Total
Segment revenue	$	175,159	$	23,766	$	61,253	$	259,329		(1,571	)	$	517,936
Segment purchased product costs	34,290		4,135		20,455		152,684			—		211,564
Net operating margin	140,869		19,631		40,798		106,645			(1,571	)	306,372
Segment facility expenses	35,473		11,852		7,114		32,521			(1,571	)	85,389
Segment portion of operating income (loss) attributable to non-controlling interests	—		3,136		—		(1		)	—		3,135
Operating income (loss) before items not allocated to segments	$	105,396	$	4,643	$	33,684	$	74,125		—		$	217,848
Capital expenditures	$	360,598	$	181,332	$	463	$	40,132		—		$	582,525
Capital expenditures not allocated to segments												4,595
Total capital expenditures												$	587,120

(1) The Utica segment includes $97.9 million of capital expenditures related to Partnership operated, non-wholly owned subsidiaries capital expenditures.  The Southwest segment includes $3.0 million related to Partnership operated, non-wholly owned subsidiaries.

(2) Amounts represent revenues and expenses associated with the Northeast segment fractionation completed on behalf of the Marcellus segment.

Reconciliation of segment revenue to total revenue and operating income before items not allocated to segments to income before provision for income tax

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 months ended March 31, 2015 and 2014 (in thousands):

	Three months ended March 31,
	2015			2014
Total segment revenue	$	482,331		$	517,936
Derivative gain (loss) not allocated to segments	7,368			(3,967		)
Revenue adjustment for unconsolidated affiliates (1)	(27,531		)	—
Revenue deferral adjustment and other (2)	5,162			(1,493		)
Total revenue	$	467,330		$	512,476
Operating income before items not allocated to segments	$	236,422		$	217,848
Portion of operating income attributable to non-controlling interests	11,414			3,135
Derivative gain not allocated to segments	2,828			4,099
Revenue adjustment for unconsolidated affiliates (1)	(27,531		)	—
Revenue deferral adjustment (2)	(922		)	(1,493		)
Compensation expense included in facility expenses not allocated to segments	(1,107		)	(1,004		)
Facility expense, operational service fees and purchased product cost adjustments for unconsolidated affiliates (3)	13,458			—
Portion of operating loss attributable to non-controlling interests of an unconsolidated affiliates (4)	10,240			—
Facility expense adjustments (5)	2,688			2,688
Selling, general and administrative expenses	(34,635		)	(35,290		)
Depreciation	(119,592		)	(101,929		)
Amortization of intangible assets	(15,826		)	(15,978		)
Impairment expense	(25,523		)	—
Gain on disposal of property, plant and equipment	811			93
Accretion of asset retirement obligations	(193		)	(168		)
Income from operations	52,532			72,001
Earnings from unconsolidated affiliates	512			250
Interest expense	(50,057		)	(40,984		)
Amortization of deferred financing costs and debt discount (a component of interest expense)	(1,635		)	(2,824		)
Miscellaneous income, net	48			19
Income before provision for income tax	$	1,400		$	28,462

(1)Revenue adjustment for unconsolidated affiliates relates to revenue of Partnership operated, non-wholly owned subsidiaries (See note (1) above and Note 3).

(2)Revenue deferral amount relates primarily 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 will 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 Partnership’s 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. In March 2015, the cash consideration received from the Southwest segment contract declined and the reported segment revenue was less than the revenue recognized for GAAP purposes.  For the three months ended March 31, 2015, approximately $0.1 million of the revenue deferral adjustment is attributable to the Southwest segment. Beginning in the second quarter of 2015, the cash consideration received from the Northeast segment contract is expected to decline and the reported segment revenue will be less than the revenue recognized for GAAP purposes.  For the three months ended March 31, 2015, approximately $0.8 million of the revenue deferral adjustment is attributable to the Northeast segment. In comparison, for the three months ended March 31, 2014, approximately $0.2 million and $1.9 million of the revenue deferral adjustment was attributable to the Southwest segment and Northeast segment, respectively. Other consists of Operational Service revenues from unconsolidated affiliates of $6.1 million for the three months ended March 31, 2015 compared to $0.6 million for three months ended March 31, 2014.

(3)Facility expense and purchased product cost adjustments for unconsolidated affiliate consist of the facility expenses and purchased product costs related to Partnership operated, non-wholly owned subsidiaries (See note (1) above and Note 3 of these Notes to the Condensed Consolidated Financial Statements).

(4)Portion of operating loss attributable to non-controlling interests of an unconsolidated affiliate amount relates to the Partnership’s joint venture partners’ proportionate share of operating income in Partnership operated, non-wholly owned subsidiaries, which is included in segment operating income calculation as if the Partnership operated, non-wholly owned subsidiaries are consolidated (See note (1) above and Note 3).

(5)Facility expenses adjustments consist of 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.

Schedule of assets by segment

        The table below presents information about segment assets as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31, 2015		December 31, 2014
Marcellus	$	5,924,190	$	5,749,932
Utica (1)	2,278,054		2,163,025
Northeast	436,303		445,911
Southwest (1)	2,381,701		2,362,113
Total segment assets	11,020,248		10,720,981
Assets not allocated to segments:
Certain cash and cash equivalents	71,509		—
Fair value of derivatives	29,455		37,428
Investment in unconsolidated affiliates	50,000		108,849
Other (2)	102,555		113,520
Total assets	$	11,273,767	$	10,980,778

(1) The March 31, 2015 and December 31, 2014 amounts exclude assets related to the Partnership’s unconsolidated joint ventures.  The amounts include the investments in unconsolidated affiliates.

(2) Includes corporate fixed assets, deferred financing costs, income tax receivable, receivables and other corporate assets not allocated to segments.