Note 11. Business Segments

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

All activities included in our former sixth reportable business segment, Other Investments, ceased on January 18, 2012, which was the date we discontinued using the equity method to account for our previously held investment in Energy Transfer Equity. See Note 7 for information regarding the liquidation of our investment in Energy Transfer Equity.

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 sales of assets and investments; 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 significant component of our business strategy. They are a means by which we conduct our 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. Many of these businesses perform supporting or complementary roles to our other midstream business operations.

The following table presents our measurement of total segment gross operating margin for the periods indicated:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	10,468.7		$	11,327.1		$	31,511.0		$	32,727.3
Less: Operating costs and expenses		(9,659.8	)		(10,604.6	)		(29,136.5	)		(30,675.0	)
Add: Equity in income of unconsolidated affiliates		21.0			8.6			42.2			35.9
Depreciation, amortization and accretion (1)		269.2			238.3			785.1			702.4
Non-cash asset impairment charges		43.1			5.2			57.6			5.2
Operating lease expenses paid by EPCO		--			--			--			0.3
Losses (gains) related to asset sales		(0.3	)		17.6			(4.1	)		(0.6	)
Gains from sale of ownership interests in equity-method unconsolidated affiliate – Energy Transfer Equity (2)		--			(19.4	)		--			(24.8	)
Gains related to property damage insurance recoveries (see Note 16)		(2.3	)		--			(30.0	)		--
Total segment gross operating margin	$	1,139.6		$	972.8		$	3,225.3		$	2,770.7

(1) Amount is a component of "Depreciation, amortization and accretion" as presented on the Unaudited Condensed Statements of Consolidated Cash Flows. (2) Amounts pertain to sales of limited partner interests in Energy Transfer Equity while this investment was accounted for using the equity method. See Note 7 for information regarding these sales.

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 indicated:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Total segment gross operating margin	$	1,139.6		$	972.8		$	3,225.3		$	2,770.7
Adjustments to reconcile total segment gross operating margin to operating income:
Amounts included in operating costs and expenses:
Depreciation, amortization and accretion		(269.2	)		(238.3	)		(785.1	)		(702.4	)
Non-cash asset impairment charges		(43.1	)		(5.2	)		(57.6	)		(5.2	)
Operating lease expenses paid by EPCO		--			--			--			(0.3	)
Gains (losses) related to asset sales		0.3			(17.6	)		4.1			0.6
Gains from sale of ownership interests in equity-method unconsolidated affiliate – Energy Transfer Equity (see Note 7)		--			19.4			--			24.8
Gains related to property damage insurance recoveries (see Note 16)		2.3			--			30.0			--
General and administrative costs		(41.4	)		(50.0	)		(130.2	)		(138.3	)
Operating income		788.5			681.1			2,286.5			1,949.9
Other expense, net		(198.2	)		(190.0	)		(499.4	)		(561.3	)
Income before income taxes	$	590.3		$	491.1		$	1,787.1		$	1,388.6

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

	Reportable Business Segments
	NGL Pipelines & Services		Onshore Natural Gas Pipelines & Services		Onshore Crude Oil Pipelines & Services			Offshore Pipelines & Services		Petrochemical & Refined Products Services			Other Investments		Adjustments and Eliminations			Consolidated Total
Revenues from third parties:
Three months ended September 30, 2012	$	3,389.6	$	843.3	$	4,505.1		$	43.2	$	1,680.0		$	--	$	--		$	10,461.2
Three months ended September 30, 2011		4,323.8		855.9		3,957.1			57.7		1,968.7			--		--			11,163.2
Nine months ended September 30, 2012		11,071.6		2,349.1		13,167.4			145.1		4,713.9			--		--			31,447.1
Nine months ended September 30, 2011		12,339.3		2,590.1		11,609.3			179.4		5,451.0			--		--			32,169.1
Revenues from related parties:
Three months ended September 30, 2012		2.2		3.2		0.1			2.0		--			--		--			7.5
Three months ended September 30, 2011		94.7		66.8		--			2.4		--			--		--			163.9
Nine months ended September 30, 2012		7.2		51.4		0.1			5.2		--			--		--			63.9
Nine months ended September 30, 2011		372.9		176.5		--			8.8		--			--		--			558.2
Intersegment and intrasegment revenues:
Three months ended September 30, 2012		2,301.6		211.4		1,509.2			--		478.8			--		(4,501.0	)		--
Three months ended September 30, 2011		3,253.6		257.2		1,342.2			4.8		442.9			--		(5,300.7	)		--
Nine months ended September 30, 2012		7,396.3		614.1		4,975.6			5.0		1,357.4			--		(14,348.4	)		--
Nine months ended September 30, 2011		9,956.4		782.0		3,526.9			6.6		1,361.5			--		(15,633.4	)		--
Total revenues:
Three months ended September 30, 2012		5,693.4		1,057.9		6,014.4			45.2		2,158.8			--		(4,501.0	)		10,468.7
Three months ended September 30, 2011		7,672.1		1,179.9		5,299.3			64.9		2,411.6			--		(5,300.7	)		11,327.1
Nine months ended September 30, 2012		18,475.1		3,014.6		18,143.1			155.3		6,071.3			--		(14,348.4	)		31,511.0
Nine months ended September 30, 2011		22,668.6		3,548.6		15,136.2			194.8		6,812.5			--		(15,633.4	)		32,727.3
Equity in income (loss) of unconsolidated affiliates:
Three months ended September 30, 2012		3.0		0.9		16.5			6.8		(6.2	)		--		--			21.0
Three months ended September 30, 2011		4.3		1.4		(1.0	)		5.4		(3.8	)		2.3		--			8.6
Nine months ended September 30, 2012		12.0		3.5		20.6			17.8		(14.1	)		2.4		--			42.2
Nine months ended September 30, 2011		16.4		4.1		(3.1	)		20.3		(13.1	)		11.3		--			35.9
Gross operating margin:
Three months ended September 30, 2012		615.8		183.5		117.6			40.6		182.1			--		--			1,139.6
Three months ended September 30, 2011		547.6		156.0		67.4			53.9		145.6			2.3		--			972.8
Nine months ended September 30, 2012		1,836.5		565.5		252.7			131.0		437.2			2.4		--			3,225.3
Nine months ended September 30, 2011		1,549.7		476.3		167.0			168.6		397.8			11.3		--			2,770.7
Segment assets:
At September 30, 2012		8,838.0		10,398.4		1,838.0			1,976.8		3,815.7			--		2,293.4			29,160.3
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 September 30, 2012		7,924.5		8,994.0		1,149.4			1,363.5		2,586.7			--		2,293.4			24,311.5
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 September 30, 2012		241.9		25.2		371.7			462.0		59.6			--		--			1,160.4
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 September 30, 2012		330.4		1,082.9		5.7			69.2		107.9			--		--			1,596.1
At December 31, 2011		341.3		1,127.8		5.8			77.5		103.8			--		--			1,656.2
Goodwill: (see Note 8)
At September 30, 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

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
NGL Pipelines & Services:
Sales of NGLs and related products	$	3,151.9		$	4,164.9		$	10,401.1		$	12,054.8
Midstream services		239.9			253.6			677.7			657.4
Total		3,391.8			4,418.5			11,078.8			12,712.2
Onshore Natural Gas Pipelines & Services:
Sales of natural gas		608.2			704.7			1,691.6			2,136.9
Midstream services		238.3			218.0			708.9			629.7
Total		846.5			922.7			2,400.5			2,766.6
Onshore Crude Oil Pipelines & Services:
Sales of crude oil		4,471.8			3,929.8			13,093.4			11,535.9
Midstream services		33.4			27.3			74.1			73.4
Total		4,505.2			3,957.1			13,167.5			11,609.3
Offshore Pipelines & Services:
Sales of natural gas		0.2			0.3			0.3			0.9
Sales of crude oil		3.1			1.3			4.5			7.1
Midstream services		41.9			58.5			145.5			180.2
Total		45.2			60.1			150.3			188.2
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products		1,498.9			1,767.2			4,166.9			4,868.7
Midstream services		181.1			201.5			547.0			582.3
Total		1,680.0			1,968.7			4,713.9			5,451.0
Total consolidated revenues	$	10,468.7		$	11,327.1		$	31,511.0		$	32,727.3

Consolidated costs and expenses
Operating costs and expenses:
Cost of sales	$	8,794.0		$	9,787.6		$	26,655.0		$	28,397.2
Other operating costs and expenses (1)		556.1			575.3			1,672.9			1,595.6
Depreciation, amortization and accretion		269.2			238.3			785.1			702.4
Losses (gains) related to asset sales		(0.3	)		17.6			(4.1	)		(0.6	)
Gains from sale of ownership interests in equity-method unconsolidated affiliate – Energy Transfer Equity (2)		--			(19.4	)		--			(24.8	)
Gains related to property damage insurance recoveries		(2.3	)		--			(30.0	)		--
Non-cash asset impairment charges		43.1			5.2			57.6			5.2
General and administrative costs		41.4			50.0			130.2			138.3
Total consolidated costs and expenses	$	9,701.2		$	10,654.6		$	29,266.7		$	30,813.3

(1) Represents cost of operating our plants, pipelines and other fixed assets, excluding non-cash depreciation, amortization and accretion charges. (2) Amounts pertain to sales of limited partner interests in Energy Transfer Equity while this investment was accounted for using the equity method. See Note 7 for information regarding these sales.

Period-to-period fluctuations in our product sales revenues and related cost of sales amounts are explained in part by changes in energy commodity prices. In general, lower energy commodity prices result in a decrease in our revenues attributable to product sales; however, these lower commodity prices also decrease the associated cost of sales as purchase costs decline.