Business Segments

3 Months Ended

Mar. 31, 2012

Business Segments [Abstract]

Business Segments

Note 11.  Business Segments

We have six reportable business segments: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Onshore Crude Oil Pipelines & Services; (iv) Offshore Pipelines & Services; (v) Petrochemical & Refined Products Services; and (vi) Other Investments.  Our business segments are generally organized and managed according to the type of services rendered (or technologies employed) and products produced and/or sold.

We evaluate segment performance based on the non-GAAP financial measure of gross operating margin.  Gross operating margin (either in total or by individual segment) is an important performance measure of the core profitability of our operations.  This measure forms the basis of our internal financial reporting and is used by our management in deciding how to allocate capital resources among business segments.  We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results.  The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.  Our non-GAAP financial measure of total segment gross operating margin should not be considered an alternative to GAAP operating income.

We define total segment gross operating margin as operating income before: (i) depreciation, amortization and accretion expenses; (ii) non-cash asset impairment charges; (iii) operating lease expenses for which we did not have the payment obligation; (iv) gains and losses from asset sales and related transactions; and (v) general and administrative costs.  Gross operating margin by segment is calculated by subtracting segment operating costs and expenses (net of the adjustments noted above) from segment revenues, with both segment totals before the elimination of intercompany transactions.  In accordance with GAAP, intercompany accounts and transactions are eliminated in the preparation of our consolidated financial statements.  Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges.  Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests.

We include equity in income of unconsolidated affiliates in our measurement of segment gross operating margin and operating income.  Equity investments with industry partners are a vital component of our business strategy.  They are a means by which we conduct operations to align our interests with those of customers and/or suppliers.  This method of operation enables us to achieve favorable economies of scale relative to the level of investment and business risk assumed versus what we could accomplish on a standalone basis.  Many of these businesses perform supporting or complementary roles to our other business operations.

The following table shows our measurement of total segment gross operating margin for the periods presented:

	For the Three Months
	Ended March 31,
	2012			2011
Revenues	$	11,252.5		$	10,183.7
Less:   Operating costs and expenses		(10,467.2	)		(9,537.1	)
Add:    Equity in income of unconsolidated affiliates		9.9			16.2
Depreciation, amortization and accretion in operating costs and expenses (1)		254.6			230.8
Non-cash asset impairment charges		5.4			--
Operating lease expenses paid by EPCO		--			0.2
Gains from asset sales and related transactions in operating costs and expenses (2)		(2.5	)		(18.4	)
Total segment gross operating margin	$	1,052.7		$	875.4
(1)   Amount is a component of "Depreciation, amortization and accretion" as presented on the Unaudited Condensed Statements of Consolidated Cash Flows. (2)   Amount is a component of "Gains from asset sales and related transactions" as presented on the Unaudited Condensed Statements of Consolidated Cash Flows.

The following table presents a reconciliation of total segment gross operating margin to operating income and further to income before income taxes for the periods presented:

	For the Three Months Ended March 31,
	2012			2011
Total segment gross operating margin	$	1,052.7		$	875.4
Adjustments to reconcile total segment gross operating margin to operating income:
Depreciation, amortization and accretion in operating costs and expenses		(254.6	)		(230.8	)
Non-cash asset impairment charges		(5.4	)		--
Operating lease expenses paid by EPCO		--			(0.2	)
Gains from asset sales and related transactions in operating costs and expenses		2.5			18.4
General and administrative costs		(46.3	)		(37.9	)
Operating income		748.9			624.9
Other expense, net		(127.8	)		(183.3	)
Income before income taxes	$	621.1		$	441.6

Information by business segment, together with reconciliations to our consolidated totals, is presented in the following table:

	Reportable Business Segments
			Onshore		Onshore Crude Oil					Petrochemical & Refined
	NGL		Natural Gas					Offshore							Adjustments
	Pipelines		Pipelines		Pipelines			Pipelines		Products			Other		and			Consolidated
	& Services		& Services		& Services			& Services		Services			Investments		Eliminations			Totals
Revenues from third parties:
Three months ended March 31, 2012	$	4,354.1	$	804.9	$	4,473.6		$	54.4	$	1,534.7		$	--	$	--		$	11,221.7
Three months ended March 31, 2011		4,055.4		871.7		3,370.6			60.6		1,575.3			--		--			9,933.6
Revenues from related parties:
Three months ended March 31, 2012		0.4		28.7		--			1.7		--			--		--			30.8
Three months ended March 31, 2011		201.4		44.9		--			3.8		--			--		--			250.1
Intersegment and intrasegment    revenues:
Three months ended March 31, 2012		2,818.2		223.7		1,730.9			3.3		439.9			--		(5,216.0	)		--
Three months ended March 31, 2011		3,474.6		270.9		707.1			1.7		473.1			--		(4,927.4	)		--
Total revenues:
Three months ended March 31, 2012		7,172.7		1,057.3		6,204.5			59.4		1,974.6			--		(5,216.0	)		11,252.5
Three months ended March 31, 2011		7,731.4		1,187.5		4,077.7			66.1		2,048.4			--		(4,927.4	)		10,183.7
Equity in income (loss) of    unconsolidated affiliates:
Three months ended March 31, 2012		5.2		1.4		0.5			6.9		(6.5	)		2.4		--			9.9
Three months ended March 31, 2011		5.9		1.2		(0.5	)		8.3		(5.0	)		6.3		--			16.2
Gross operating margin:
Three months ended March 31, 2012		654.9		206.2		39.3			52.1		97.8			2.4		--			1,052.7
Three months ended March 31, 2011		504.4		159.2		31.8			61.3		112.4			6.3		--			875.4
Segment assets:
At March 31, 2012		8,014.1		9,984.9		960.1			2,007.7		3,764.5			--		2,810.8			27,542.1
At December 31, 2011		7,966.4		9,949.6		944.6			2,000.9		3,769.5			1,023.1		2,145.6			27,799.7
Property, plant and equipment, net: (see Note 6)
At March 31, 2012		7,136.1		8,546.0		478.7			1,399.7		2,539.0			--		2,810.8			22,910.3
At December 31, 2011		7,137.8		8,495.4		456.9			1,416.4		2,539.5			--		2,145.6			22,191.6
Investments in unconsolidated    affiliates: (see Note 7)
At March 31, 2012		186.7		29.3		164.6			451.0		63.7			--		--			895.3
At December 31, 2011		146.1		30.1		170.7			424.9		64.7			1,023.1		--			1,859.6
Intangible assets, net: (see Note 8)
At March 31, 2012		350.1		1,113.3		5.6			74.9		100.3			--		--			1,644.2
At December 31, 2011		341.3		1,127.8		5.8			77.5		103.8			--		--			1,656.2
Goodwill: (see Note 8)
At March 31, 2012		341.2		296.3		311.2			82.1		1,061.5			--		--			2,092.3
At December 31, 2011		341.2		296.3		311.2			82.1		1,061.5			--		--			2,092.3

During the first quarter of 2012, we sold 26,331,868 of the common units we owned of Energy Transfer Equity and sold the remaining units in April 2012.  Our reporting for the Other Investments segment ceased on January 18, 2012, when we discontinued using the equity method to account for this investment and began accounting for the remaining units as available-for-sale securities.   See Note 7 for additional information regarding our investment in Energy Transfer Equity and related sales.

The following table provides additional information regarding our consolidated revenues and costs and expenses for the periods presented:

	For the Three Months Ended March 31,
	2012			2011
NGL Pipelines & Services:
Sales of NGLs and related products	$	4,115.3		$	4,057.7
Midstream services		239.2			199.1
Total		4,354.5			4,256.8
Onshore Natural Gas Pipelines & Services:
Sales of natural gas		572.6			712.7
Midstream services		261.0			203.9
Total		833.6			916.6
Onshore Crude Oil Pipelines & Services:
Sales of crude oil		4,447.6			3,348.2
Midstream services		26.0			22.4
Total		4,473.6			3,370.6
Offshore Pipelines & Services:
Sales of natural gas		0.1			0.3
Sales of crude oil		1.4			3.3
Midstream services		54.6			60.8
Total		56.1			64.4
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products		1,351.2			1,382.8
Midstream services		183.5			192.5
Total		1,534.7			1,575.3
Total consolidated revenues	$	11,252.5		$	10,183.7
Consolidated costs and expenses
Operating costs and expenses:
Cost of sales related to our marketing activities	$	8,688.5		$	7,930.1
Depreciation, amortization and accretion		254.6			230.8
Gains from asset sales and related transactions		(2.5	)		(18.4	)
Non-cash asset impairment charges		5.4			--
Other operating costs and expenses		1,521.2			1,394.6
General and administrative costs		46.3			37.9
Total consolidated costs and expenses	$	10,513.5		$	9,575.0

Changes in our revenues and operating costs and expenses quarter-to-quarter are explained in part by changes in energy commodity prices.  In general, higher energy commodity prices result in an increase in our revenues attributable to the sale of NGLs, natural gas, crude oil, petrochemicals and refined products; however, these higher commodity prices also increase the associated cost of sales as purchase costs rise.