26. BUSINESS SEGMENTS

We operate and report in four business segments: (i) Pipelines & Terminals; (ii) Global Marine Terminals; (iii) Merchant Services; and (iv) Development & Logistics. In December 2013, we realigned our business segments to support the way our management views our business in light of recent growth through acquisitions. We eliminated our previously reported International Operations and Energy Services segments and created the Global Marine Terminals and Merchant Services segments. The new Global Marine Terminals segment includes our marine facilities that primarily facilitate global logistic product flows and feature segregated tankage, serve a similar international customer base and offer similar services, such as bulk storage and blending. This segment includes our BORCO facility and Yabucoa terminal, the St. Lucia terminal acquired from Hess, and the New York Harbor storage and marine terminals, which consist of our legacy Perth Amboy terminal and the Port Reading and Raritan Bay terminals acquired from Hess. Our Merchant Services segment centralizes all existing and new merchant activities to leverage common mid- and back-office support. This segment includes the legacy Energy Services segment, the Caribbean fuel oil supply and distribution business and new merchant activities supporting the terminals recently acquired from Hess. Our Development & Logistics segment remains unchanged. Our Pipelines & Terminals segment remains unchanged, other than the removal of the Perth Amboy terminal. Finally, we also eliminated the Natural Gas Storage segment because it has been classified as a discontinued operation. We have adjusted our prior period segment information to conform to the current alignment of our continuing business and discontinued operations. In addition, reclassifications of prior period amounts were made to operating and general and administrative expenses between our segments. The reclassification impacted adjusted EBITDA by segment and had no impact on consolidated net income or partners’ capital.

Pipelines & Terminals

The Pipelines & Terminals segment receives liquid petroleum products from refineries, connecting pipelines, vessels, and bulk and marine terminals and transports those products to other locations for a fee and provides bulk storage and terminal throughput services in the continental United States. This segment owns and operates pipeline systems and liquid petroleum products terminals in the continental United States, including five terminals owned by the Merchant Services segment but operated by the Pipelines & Terminals segment and 17 terminals acquired from Hess Terminals Acquisition in December 2013. In addition, we provide crude oil services, including train off-loading, storage and throughput.

Global Marine Terminals

The Global Marine Terminals segment provides marine bulk storage and marine terminal throughput services along the U.S. East Coast and Caribbean. The segment has liquid petroleum product terminals located in The Bahamas, Puerto Rico and St. Lucia in the Caribbean, and the New York Harbor. In connection with BORCO’s publicly announced expansion plans, BORCO completed construction of and brought online 2.8 million barrels of incremental storage capacity in 2013.

Merchant Services

The Merchant Services segment is a wholesale distributor of petroleum products in the United States and in the Caribbean. This segment recognizes revenues when products are delivered. The segment’s products include gasoline, propane, ethanol, biodiesel and petroleum distillates such as heating oil, diesel fuel, kerosene and fuel oil. The segment owns five terminals which are operated by the Pipelines & Terminals segment. The segment’s customers consist principally of product wholesalers as well as major commercial users of these refined petroleum products.

Development & Logistics

The Development & Logistics segment consists primarily of our contract operations of third-party pipelines, which are owned principally by major oil and gas, petrochemical and chemical companies and are located primarily in Texas and Louisiana. Additionally, this segment performs pipeline construction management services, typically for cost plus a fixed fee. This segment also owns and operates two underground propane storage caverns in Indiana and Illinois and an ammonia pipeline, as well as maintains majority ownership of the Sabina Pipeline, located in Texas.

Natural Gas Storage Disposal Group

In December 2013, our Board of Directors approved a plan to divest the natural gas storage segment facility and related assets that our subsidiary Lodi Gas Storage, L.L.C. owns and operates in Northern California as we no longer believe this business is aligned with our long-term business strategy. In this report, we refer to this group of assets as our Natural Gas Storage disposal group. Accordingly, we have classified the disposal group as “Assets held for sale” and “Liabilities held for sale” in our consolidated balance sheet as of December 31, 2013 and reported the results of operations as discontinued operations for all periods presented in this report. For additional information, see Note 4 in the Notes to Consolidated Financial Statements.

Adjusted EBITDA

Adjusted EBITDA is the primary measure used by our senior management, including our Chief Executive Officer, to: (i) evaluate our consolidated operating performance and the operating performance of our business segments; (ii) allocate resources and capital to business segments; (iii) evaluate the viability of proposed projects; and (iv) determine overall rates of return on alternative investment opportunities. Adjusted EBITDA eliminates (i) non-cash expenses, including but not limited to depreciation and amortization expense resulting from the significant capital investments we make in our businesses and from intangible assets recognized in business combinations; (ii) charges for obligations expected to be settled with the issuance of equity instruments; and (iii) items that are not indicative of our core operating performance results and business outlook.

We believe that investors benefit from having access to the same financial measures that we use and that these measures are useful to investors because they aid in comparing our operating performance with that of other companies with similar operations. The Adjusted EBITDA data presented by us may not be comparable to similarly titled measures at other companies because these items may be defined differently by other companies.

The following tables summarize our financial information by each segment for the periods indicated (in thousands):

	Year Ended December 31,
	2013			2012			2011
Revenue:
Pipelines & Terminals	$	786,759		$	709,341		$	631,289
Global Marine Terminals	252,270			218,180			193,960
Merchant Services	3,990,575			3,339,241			3,888,961
Development & Logistics	59,247			50,211			43,068
Intersegment	(34,750		)	(31,070		)	(63,658		)
Total revenue	$	5,054,101		$	4,285,903		$	4,693,620

For the years ended December 31, 2013, 2012 and 2011, no customer contributed 10% or more of consolidated revenue.

	Year Ended December 31,
	2013		2012		2011

Capital additions, net: (1)
Pipelines & Terminals	$	151,827	$	158,547	$	103,678
Global Marine Terminals	206,472		167,208		184,438
Merchant Services	113		2,490		1,824
Development & Logistics	2,840		724		5,287
Total segment capital additions, net	361,252		328,969		295,227
Natural Gas Storage disposal group (2)	193		2,369		10,097
Total capital additions, net	$	361,445	$	331,338	$	305,324

(1) Amounts represent cash paid for capital expenditures and exclude $23.3 million, ($2.4) million and $14.3 million of non-cash changes in accounts payable and accruals for capital expenditures for the years ended December 31, 2013, 2012 and 2011, respectively. See Note 27 for supplemental cash flow information.

(2) Assets related to the former Natural Gas Storage disposal group were classified as “Assets held for sale” as of the year ended December 31, 2013. See Note 4 for further information.

	December 31,
	2013		2012

Total Assets:
Pipelines & Terminals (1)	$	3,109,609	$	2,661,100
Global Marine Terminals (2)	3,066,669		2,415,408
Merchant Services	569,679		454,453
Development & Logistics	77,898		77,679
Total segment assets	6,823,855		5,608,640
Natural Gas Storage disposal group (3)	181,708		372,369
Total assets	$	7,005,563	$	5,981,009

(1) All equity investments are included in the assets of the Pipelines & Terminals segment.

(2) The Global Marine Terminals segment’s long-lived assets consist of property, plant and equipment, goodwill, intangible assets and other non-current assets. Total tangible long-lived assets located in our international locations was $1,540.4 million and $1,381.6 million for the years ended December 31, 2013 and 2012, respectively, which represents 68% and 86%, respectively, of the Global Marine Terminals segment’s total tangible long-lived assets.

(3) Assets related to the former Natural Gas Storage disposal group were classified as “Assets held for sale” as of the year ended December 31, 2013. See Note 4 for further information.

The following tables summarize our financial information for continuing operations, by major geographic area, for the periods indicated (in thousands):

	Year Ended December 31,
	2013		2012		2011

Revenue:
United States	$	4,834,991	$	4,092,549	$	4,516,026
International	219,110		193,354		177,594
Total revenue	$	5,054,101	$	4,285,903	$	4,693,620

The following tables present Adjusted EBITDA by segment and on a consolidated basis and a reconciliation of income from continuing operations to Adjusted EBITDA for the periods indicated (in thousands):

	Year Ended December 31,
	2013			2012			2011
Adjusted EBITDA from continuing operations:
Pipeline & Terminals	$	471,091		$	409,541		$	361,018
Global Marine Terminals	149,740			128,581			112,996
Merchant Services	12,616			1,144			1,797
Development & Logistics	15,367			13,174			7,932
Adjusted EBITDA from continuing operations	$	648,814		$	552,440		$	483,743

Reconciliation of Income from continuing operations to Adjusted EBITDA from continuing operations:
Income from continuing operations	$	351,599		$	235,879		$	291,827
Less: Net income attributable to noncontrolling interests	(4,152		)	(4,134		)	(6,163		)
Income from continuing operations attributable to Buckeye Partners, L.P.	347,447			231,745			285,664
Add: Interest and debt expense	130,920			114,980			119,561
Income tax expense (benefit)	1,060			(675		)	(192		)
Depreciation and amortization	147,591			138,857			112,398
Non-cash unit-based compensation expense	21,013			18,577			8,601
Asset impairment expense	—			59,950			—
Hess acquisition and transition expense	11,806			—			—
Less: Amortization of unfavorable storage contracts (1)	(11,023		)	(10,994		)	(7,562		)
Gain on sale of equity investment	—			—			(34,727		)
Adjusted EBITDA from continuing operations	$	648,814		$	552,440		$	483,743

(1) Represents amortization of negative fair values allocated to certain unfavorable storage contracts acquired in connection with the BORCO acquisition.