BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

BUSINESS SEGMENTS

12. BUSINESS SEGMENTS

We operate and report in three business segments: (i) Domestic Pipelines & Terminals; (ii) Global Marine Terminals; and (iii) Merchant Services.  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. 

Domestic Pipelines & Terminals

The Domestic Pipelines & Terminals segment receives liquid petroleum products from refineries, connecting pipelines, vessels, and bulk and marine terminals, transports those products to other locations for a fee, and provides bulk storage and terminal throughput services.  The segment also has butane blending capabilities and provides crude oil services, including train loading/unloading, storage and throughput. 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 Domestic Pipelines & Terminals segment, and two underground propane storage caverns.  Additionally, this segment provides turn-key operations and maintenance of third-party pipelines and performs pipeline construction management services typically for cost plus a fixed fee.

Global Marine Terminals

The Global Marine Terminals segment provides marine accessible bulk storage and blending services, rail and truck rack loading/unloading along with petroleum processing services in the East Coast and Gulf Coast regions of the United States and in the Caribbean.  The segment has seven liquid petroleum product terminals located in The Bahamas, Puerto Rico and St. Lucia in the Caribbean and the New York Harbor and Corpus Christi, Texas in the United States. 

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, natural gas liquids, 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 Domestic Pipelines & Terminals segment.  The segment’s customers consist principally of product wholesalers as well as major commercial users of these refined petroleum products.

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

	Three Months Ended   March 31,
	2016			2015
Revenue:
Domestic Pipelines & Terminals	$	237,953		$	243,571
Global Marine Terminals	170,064			120,984
Merchant Services	389,737			740,160
Intersegment	(17,160		)	(16,615		)
Total revenue	$	780,594		$	1,088,100

For the three months ended March 31, 2016 and 2015, no customers 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,
	2016		2015
Revenue:
United States	$	696,889	$	1,005,061
International	83,705		83,039
Total revenue	$	780,594	$	1,088,100

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,
	2016			2015
Adjusted EBITDA from continuing operations:
Domestic Pipelines & Terminals	$	128,481		$	130,050
Global Marine Terminals	106,623			74,418
Merchant Services	9,522			8,442
Adjusted EBITDA from continuing operations	$	244,626		$	212,910
Reconciliation of Income from continuing operations to Adjusted EBITDA from continuing operations:
Income from continuing operations	$	134,977		$	112,021
Less: Net (income) loss attributable to noncontrolling interests	(3,864		)	447
Income from continuing operations attributable to Buckeye Partners, L.P.	131,113			112,468
Add: Interest and debt expense	47,783			41,709
Income tax expense	615			239
Depreciation and amortization (1)	61,426			53,776
Non-cash unit-based compensation expense	6,335			5,086
Acquisition and transition expense (2)	122			2,400
Less: Amortization of unfavorable storage contracts (3)	(2,768		)	(2,768		)
Adjusted EBITDA from continuing operations	$	244,626		$	212,910

(1) Includes 100% of the depreciation and amortization expense of $16.8 million and $11.7 million for Buckeye Texas for the three months ended March 31, 2016 and 2015, respectively.

(2) Acquisition and transition expense consists of transaction costs, costs for transitional employees, and other employee and third-party costs related to the integration of the acquired assets that are non-recurring in nature.

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