BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2015

BUSINESS SEGMENTS

BUSINESS SEGMENTS

13.  BUSINESS SEGMENTS

We operate and report in four business segments: (i) Pipelines & Terminals; (ii) Global Marine Terminals; (iii) Merchant Services; and (iv) Development & Logistics.  Each segment uses the same accounting policies as those used in the preparation of our unaudited condensed consolidated financial statements.  All inter-segment revenues, operating income and assets have been eliminated.

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.  In addition, the segment has butane blending capabilities and provides 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 in the East Coast and Gulf Coast regions of the United States and in the Caribbean.  The segment has liquid petroleum product terminals located in The Bahamas, Puerto Rico and St. Lucia in the Caribbean, Corpus Christi and the New York Harbor.

Merchant Services

The Merchant Services segment is a wholesale distributor of refined 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 our majority ownership of the Sabina Pipeline, located in Texas.

The following table summarizes revenue by each segment for the periods indicated (in thousands):

	Three Months Ended
	March 31,
	2015			2014
Revenue:
Pipelines & Terminals	$	225,256		$	218,539
Global Marine Terminals	120,984			88,769
Merchant Services	740,160			1,678,302
Development & Logistics	18,849			16,832
Intersegment	(17,149		)	(10,613		)
Total revenue	$	1,088,100		$	1,991,829

For the three months ended March 31, 2015 and 2014, no customer contributed 10% or more of consolidated revenue.

The following table summarizes revenue for our continuing operations, by major geographic area, for the periods indicated (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Revenue:
United States	$	1,005,061	$	1,907,352
International	83,039		84,477
Total revenue	$	1,088,100	$	1,991,829

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

	Three Months Ended
	March 31,
	2015			2014
Adjusted EBITDA from continuing operations:
Pipelines & Terminals	$	125,551		$	126,720
Global Marine Terminals	74,418			53,703
Merchant Services	8,442			3,133
Development & Logistics	4,499			5,068
Total Adjusted EBITDA from continuing operations	$	212,910		$	188,624
Reconciliation of Income from continuing operations to Adjusted EBITDA from continuing operations:
Income from continuing operations	$	112,021		$	101,539
Less: Net loss (income) attributable to noncontrolling interests	447			(1,029		)
Income from continuing operations attributable to Buckeye Partners, L.P.	112,468			100,510
Add:    Interest and debt expense	41,709			41,213
Income tax expense (benefit)	239			(77		)
Depreciation and amortization (1)	53,776			42,991
Non-cash unit-based compensation expense	5,086			3,122
Acquisition and transition expense	2,400			3,633
Less:   Amortization of unfavorable storage contracts (2)	(2,768		)	(2,768		)
Adjusted EBITDA from continuing operations	$	212,910		$	188,624

(1) Includes 100% of the depreciation and amortization expense of $11.7 million for Buckeye Texas for the three months ended March 31, 2015.

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