Segment Information (Tables)

9 Months Ended

Sep. 30, 2015

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 September 30, 2015 and 2014 for the reported segments (in thousands):

Three months ended September 30, 2015:

	Marcellus		Utica			Northeast		Southwest		Elimination (1)		Total

Segment revenue	$	199,693	$	82,654		$	20,636	$	192,803	$	—	$	495,786
Segment purchased product costs	1,874		(108		)	8,589		98,387		—		108,742

Net operating margin	197,819		82,762			12,047		94,416		—		387,044
Segment facility expenses	44,363		19,040			7,906		33,671		—		104,980
Segment portion of operating income attributable to non-controlling interests	—		32,411			—		2,084		—		34,495

Operating income before items not allocated to segments	$	153,456	$	31,311		$	4,141	$	58,661	$	—	$	247,569

Three months ended September 30, 2014:

	Marcellus		Utica		Northeast		Southwest		Elimination (1)		Total
Segment revenue	$	230,241	$	47,520	$	52,120	$	276,666	(1,298	)	$	605,249
Segment purchased product costs	57,569		11,023		18,350		159,964		—		246,906

Net operating margin	172,672		36,497		33,770		116,702		(1,298	)	358,343
Segment facility expenses	36,171		14,150		9,515		32,267		(1,298	)	90,805
Segment portion of operating income attributable to non-controlling interests	—		10,616		—		5		—		10,621

Operating income before items not allocated to segments	$	136,501	$	11,731	$	24,255	$	84,430	—		$	256,917

(1)

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

The tables below present the Partnership’s segment profit measure, Operating income before items not allocated to segments for the nine months ended September 30, 2015 and 2014 for the reported segments (in thousands):

Nine months ended September 30, 2015:

	Marcellus		Utica (1)		Northeast		Southwest (1)		Elimination (2)			Total

Segment revenue	$	596,180	$	205,507	$	73,252	$	589,280	$	(44	)	$	1,464,175
Segment purchased product costs	12,944		752		30,850		310,972		—			355,518

Net operating margin	583,236		204,755		42,402		278,308		(44		)	1,108,657
Segment facility expenses	127,683		51,630		22,368		101,581		(44		)	303,218
Segment portion of operating income attributable to non-controlling interests	—		76,151		—		5,693		—			81,844

Operating income before items not allocated to segments	$	455,553	$	76,974	$	20,034	$	171,034	$	—		$	723,595


Capital expenditures	$	842,776	$	367,092	$	2,389	$	221,909	$	—		$	1,434,166
Capital expenditures for Partnership operated, non-wholly owned subsidiaries (1)												(210,489		)
Capital expenditures not allocated to segments												7,302

Total capital expenditures												$	1,230,979

Nine months ended September 30, 2014:

	Marcellus		Utica(1)		Northeast		Southwest		Elimination (2)		Total
Segment revenue	$	589,134	$	102,112	$	157,150	$	807,136	(3,769	)	$	1,651,763
Segment purchased product costs	131,569		22,511		53,974		466,276		—		674,330

Net operating margin	457,565		79,601		103,176		340,860		(3,769	)	977,433
Segment facility expenses	105,399		38,176		25,138		99,143		(3,769	)	264,087
Segment portion of operating income attributable to non-controlling interests	—		18,439		—		10		—		18,449

Operating income before items not allocated to segments	$	352,166	$	22,986	$	78,038	$	241,707	—		$	694,897


Capital expenditures	$	1,098,597	$	739,389	$	928	$	108,196	—		$	1,947,110
Capital expenditures for Ohio Gathering after deconsolidation (1)											(188,178		)
Capital expenditures not allocated to segments											12,968

Total capital expenditures											$	1,771,900

(1)

The Utica segment for the nine months ended September 30, 2015 includes $207.2 million of capital expenditures related to Partnership operated, non-wholly owned subsidiaries’ capital expenditures. The Southwest segment for the nine months ended September 30, 2015 includes $3.3 million related to Partnership operated, non-wholly owned subsidiaries. The Utica segment for the nine months ended September 30, 2014 includes $188 million related to Ohio Gathering capital expenditures after deconsolidation on June 1, 2014.

(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 September 30, 2015 and 2014 (in thousands):

	Three months ended September 30,
	2015			2014
Total segment revenue	$	495,786		$	605,249
Derivative gain not allocated to segments	15,419			11,829
Revenue adjustment for unconsolidated affiliates (1)	(43,124		)	(15,463		)
Revenue deferral adjustment and other (2) (3)	6,210			5,471

Total revenue	$	474,291		$	607,086


Operating income before items not allocated to segments	$	247,569		$	256,917
Portion of operating income attributable to non-controlling interests	14,569			6,065
Derivative gain not allocated to segments	23,947			24,265
Revenue adjustment for unconsolidated affiliates (1)	(43,124		)	(15,463		)
Revenue deferral adjustment (2)	1,075			5,471
Compensation expense included in facility expenses not allocated to segments	(918		)	(801		)
Facility expense, operational service fees and purchased product cost adjustments for unconsolidated affiliates (4)	13,318			5,444
Portion of operating income attributable to non-controlling interests of unconsolidated affiliates (5)	19,926			4,556
Facility expense adjustments (6)	2,688			2,688
Selling, general and administrative expenses	(35,981		)	(28,860		)
Depreciation	(128,749		)	(105,072		)
Amortization of intangible assets	(15,678		)	(16,313		)
(Loss) gain on disposal of property, plant and equipment	(1,458		)	766
Accretion of asset retirement obligations	(308		)	(168		)

Income from operations	96,876			139,495
Equity in earnings (loss) from unconsolidated affiliates	7,699			(1,555		)
Interest expense	(51,498		)	(39,448		)
Amortization of deferred financing costs and debt discount (a component of interest expense)	(1,632		)	(1,469		)
Loss on redemption of debt	(29		)	—
Miscellaneous income, net	19			55

Income before provision for income tax	$	51,435		$	97,078

(1)

Revenue adjustment for unconsolidated affiliates relates to revenue of Partnership operated, non-wholly owned subsidiaries (See Note 4).

(2)

Revenue deferral adjustment 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 September 30, 2015, approximately $0.2 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 declined and the reported segment revenue is less than the revenue recognized for GAAP purposes. For the three months ended September 30, 2015, approximately $0.9 million of the revenue deferral adjustment is attributable to the Northeast segment. In comparison, for the three months ended September 30, 2014, approximately $0.2 million and $1.5 million of the revenue deferral adjustment was attributable to the Southwest segment and Northeast segment, respectively.

(3)

Other consists of Operational Service revenues from unconsolidated affiliates of $5.1 million for the three months ended September 30, 2015 compared to $7.2 million for three months ended September 30, 2014.

(4)

Facility expense, operational service fees and purchased product cost adjustments for unconsolidated affiliates consist of the facility expenses and purchased product costs related to Partnership operated, non-wholly owned subsidiaries (See note (1) above and Note 4).

(5)

Portion of operating income attributable to non-controlling interests of unconsolidated affiliates 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 4).

(6)

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.

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 nine months ended September 30, 2015 and 2014 (in thousands):

	Nine months ended September 30,
	2015			2014
Total segment revenue	$	1,464,175		$	1,651,763
Derivative gain not allocated to segments	22,925			1,109
Revenue adjustment for unconsolidated affiliates (1)	(103,671		)	(19,296		)
Revenue deferral adjustment and other (2) (3)	17,820			4,352

Total revenue	$	1,401,249		$	1,637,928


Operating income before items not allocated to segments	$	723,595		$	694,897
Portion of operating income attributable to non-controlling interests	37,478			13,384
Derivative gain not allocated to segments	24,567			7,602
Revenue adjustment for unconsolidated affiliates (1)	(103,671		)	(19,296		)
Revenue deferral adjustment (2)	1,229			4,352
Compensation expense included in facility expenses not allocated to segments	(2,967		)	(2,707		)
Facility expense, operational service fees and purchased product cost adjustments for unconsolidated affiliates (4)	39,319			8,042
Portion of operating income attributable to non-controlling interests of unconsolidated affiliates (5)	44,366			5,065
Facility expense adjustments (6)	8,064			8,064
Selling, general and administrative expenses	(105,587		)	(91,851		)
Depreciation	(370,250		)	(311,079		)
Amortization of intangible assets	(47,100		)	(48,256		)
Impairment expense	(25,523		)	—
Loss on disposal of property, plant and equipment	(3,064		)	(591		)
Accretion of asset retirement obligations	(695		)	(504		)

Income from operations	219,761			267,122
Equity in earnings (loss) from unconsolidated affiliates	11,473			(2,026		)
Interest expense	(153,642		)	(123,823		)
Amortization of deferred financing costs and debt discount (a component of interest expense)	(4,829		)	(5,742		)
Loss on redemption of debt	(117,889		)	—
Miscellaneous income, net	113			117

(Loss) income before provision for income tax	$	(45,013	)	$	135,648

(1)

Revenue adjustment for unconsolidated affiliates relates to revenue of Partnership operated, non-wholly owned subsidiaries (See note (1) above and Note 4).

(2)

Revenue deferral adjustment 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 nine months ended September 30, 2015, approximately $0.3 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 started to decline and the reported segment revenue will be less than the revenue recognized for GAAP purposes. For the nine months ended September 30, 2015, approximately $1.0 million of the revenue deferral adjustment is attributable to the Northeast segment. In comparison, for the nine months ended September 30, 2014, approximately $0.6 million and $4.9 million of the revenue deferral adjustment was attributable to the Southwest segment and Northeast segment, respectively.

(3)

Other consists of Operational Service revenues from unconsolidated affiliates of $16.6 million for the nine months ended September 30, 2015 compared to $9.9 million for nine months ended September 30, 2014.

(4)

(5)

(6)

Schedule of assets by segment

The table below presents information about segment assets as of September 30, 2015 and December 31, 2014 (in thousands):

	September 30, 2015		December 31, 2014
Marcellus	$	6,338,279	$	5,749,932
Utica (1)	2,275,365		2,163,025
Northeast	396,502		445,911
Southwest (1)	2,460,371		2,362,113

Total segment assets	11,470,517		10,720,981
Assets not allocated to segments:
Certain cash and cash equivalents	1		—
Fair value of derivatives	34,940		37,428
Investment in unconsolidated affiliates (2)	62,457		108,849
Other (3)	91,392		113,520

Total assets	$	11,659,307	$	10,980,778

(1)

The September 30, 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 the investments in unconsolidated entities that the Partnership doesn’t operate.

(3)

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