Note 11. Business Segments

We 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 types 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) gains and losses attributable to asset sales and insurance recoveries; and (iv) 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.

Segment revenues include intersegment and intrasegment transactions, which are generally based on transactions made at market-based rates. Our consolidated revenues reflect the elimination of intercompany transactions.

Segment assets consist of property, plant and equipment, investments in unconsolidated affiliates, intangible assets and goodwill. The carrying values of such amounts are assigned to each segment based on each asset's or investment's principal operations and contribution to the gross operating margin of that particular segment. Since construction-in-progress amounts (a component of property, plant and equipment) generally do not contribute to segment gross operating margin, such amounts are excluded from segment asset totals until the underlying assets are placed in service. Intangible assets and goodwill are assigned to each segment based on the classification of the assets to which they relate.

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,
	2013			2012			2013			2012
Revenues	$	12,093.3		$	10,468.7		$	34,625.7		$	31,511.0
Less: Operating costs and expenses		(11,273.5	)		(9,659.8	)		(32,061.1	)		(29,136.5	)
Add: Equity in income of unconsolidated affiliates		44.0			21.0			126.1			42.2
Amounts included in operating costs and expenses:
Depreciation, amortization and accretion		285.2			269.2			851.7			785.1
Non-cash asset impairment charges		15.2			43.1			53.3			57.6
Gains attributable to asset sales and insurance recoveries		(10.2	)		(2.6	)		(68.4	)		(34.1	)
Total segment gross operating margin	$	1,154.0		$	1,139.6		$	3,527.3		$	3,225.3

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,
	2013			2012			2013			2012
Total segment gross operating margin	$	1,154.0		$	1,139.6		$	3,527.3		$	3,225.3
Adjustments to reconcile total segment gross operating margin to operating income:
Amounts included in operating costs and expenses:
Depreciation, amortization and accretion		(285.2	)		(269.2	)		(851.7	)		(785.1	)
Non-cash asset impairment charges		(15.2	)		(43.1	)		(53.3	)		(57.6	)
Gains attributable to asset sales and insurance recoveries		10.2			2.6			68.4			34.1
General and administrative costs		(43.9	)		(41.4	)		(138.9	)		(130.2	)
Operating income		819.9			788.5			2,551.8			2,286.5
Other expense, net		(207.7	)		(198.2	)		(604.2	)		(499.4	)
Income before income taxes	$	612.2		$	590.3		$	1,947.6		$	1,787.1

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, 2013	$	4,230.6	$	831.4	$	5,435.4	$	38.2	$	1,550.0		$	--	$	--		$	12,085.6
Three months ended September 30, 2012		3,389.6		843.3		4,505.1		43.2		1,680.0			--		--			10,461.2
Nine months ended September 30, 2013		11,686.0		2,658.6		15,358.1		118.0		4,784.7			--		--			34,605.4
Nine months ended September 30, 2012		11,071.6		2,349.1		13,167.4		145.1		4,713.9			--		--			31,447.1
Revenues from related parties:
Three months ended September 30, 2013		0.1		4.1		2.1		1.4		--			--		--			7.7
Three months ended September 30, 2012		2.2		3.2		0.1		2.0		--			--		--			7.5
Nine months ended September 30, 2013		0.6		12.1		2.1		5.5		--			--		--			20.3
Nine months ended September 30, 2012		7.2		51.4		0.1		5.2		--			--		--			63.9
Intersegment and intrasegment revenues:
Three months ended September 30, 2013		2,542.3		215.6		3,591.3		1.8		384.4			--		(6,735.4	)		--
Three months ended September 30, 2012		2,301.6		211.4		1,509.2		--		478.8			--		(4,501.0	)		--
Nine months ended September 30, 2013		7,631.7		726.7		8,333.0		8.0		1,200.7			--		(17,900.1	)		--
Nine months ended September 30, 2012		7,396.3		614.1		4,975.6		5.0		1,357.4			--		(14,348.4	)		--
Total revenues:
Three months ended September 30, 2013		6,773.0		1,051.1		9,028.8		41.4		1,934.4			--		(6,735.4	)		12,093.3
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
Nine months ended September 30, 2013		19,318.3		3,397.4		23,693.2		131.5		5,985.4			--		(17,900.1	)		34,625.7
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
Equity in income (loss) of unconsolidated affiliates:
Three months ended September 30, 2013		4.1		1.0		34.3		9.8		(5.2	)		--		--			44.0
Three months ended September 30, 2012		3.0		0.9		16.5		6.8		(6.2	)		--		--			21.0
Nine months ended September 30, 2013		11.8		2.9		101.0		24.9		(14.5	)		--		--			126.1
Nine months ended September 30, 2012		12.0		3.5		20.6		17.8		(14.1	)		2.4		--			42.2
Gross operating margin:
Three months ended September 30, 2013		639.6		213.4		146.0		37.9		117.1			--		--			1,154.0
Three months ended September 30, 2012		615.8		183.5		117.6		40.6		182.1			--		--			1,139.6
Nine months ended September 30, 2013		1,777.0		601.9		579.6		118.1		450.7			--		--			3,527.3
Nine months ended September 30, 2012		1,836.5		565.5		252.7		131.0		437.2			2.4		--			3,225.3
Property, plant and equipment, net: (see Note 6)
At September 30, 2013		9,529.0		8,892.5		1,455.0		1,244.5		2,627.1			--		2,705.8			26,453.9
At December 31, 2012		8,494.8		8,950.1		1,385.9		1,343.0		2,559.5			--		2,113.1			24,846.4
Investments in unconsolidated affiliates: (see Note 7)
At September 30, 2013		607.2		24.3		889.6		540.4		73.0			--		--			2,134.5
At December 31, 2012		324.6		24.9		493.8		479.0		72.3			--		--			1,394.6
Intangible assets, net: (see Note 8)
At September 30, 2013		293.9		1,029.9		4.9		57.4		101.5			--		--			1,487.6
At December 31, 2012		320.6		1,067.9		5.9		66.2		106.2			--		--			1,566.8
Goodwill: (see Note 8)
At September 30, 2013		341.2		296.3		305.1		82.1		1,055.3			--		--			2,080.0
At December 31, 2012		341.2		296.3		311.2		82.1		1,056.0			--		--			2,086.8
Segment assets:
At September 30, 2013		10,771.3		10,243.0		2,654.6		1,924.4		3,856.9			--		2,705.8			32,156.0
At December 31, 2012		9,481.2		10,339.2		2,196.8		1,970.3		3,794.0			--		2,113.1			29,894.6

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,
	2013			2012			2013			2012
NGL Pipelines & Services:
Sales of NGLs and related products	$	3,929.8		$	3,151.9		$	10,831.3		$	10,401.1
Midstream asset services		300.9			239.9			855.3			677.7
Total		4,230.7			3,391.8			11,686.6			11,078.8
Onshore Natural Gas Pipelines & Services:
Sales of natural gas		590.7			608.2			1,954.1			1,691.6
Midstream asset services		244.8			238.3			716.6			708.9
Total		835.5			846.5			2,670.7			2,400.5
Onshore Crude Oil Pipelines & Services:
Sales of crude oil		5,359.7			4,471.8			15,159.9			13,093.4
Midstream asset services		77.8			33.4			200.3			74.1
Total		5,437.5			4,505.2			15,360.2			13,167.5
Offshore Pipelines & Services:
Sales of natural gas		0.1			0.2			0.3			0.3
Sales of crude oil		1.5			3.1			3.7			4.5
Midstream asset services		38.0			41.9			119.5			145.5
Total		39.6			45.2			123.5			150.3
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products		1,390.1			1,498.9			4,271.5			4,166.9
Midstream asset services		159.9			181.1			513.2			547.0
Total		1,550.0			1,680.0			4,784.7			4,713.9
Total consolidated revenues	$	12,093.3		$	10,468.7		$	34,625.7		$	31,511.0

Consolidated costs and expenses
Operating costs and expenses:
Cost of sales	$	10,371.3		$	8,794.0		$	29,522.1		$	26,655.0
Other operating costs and expenses (1)		612.0			556.1			1,702.4			1,672.9
Depreciation, amortization and accretion		285.2			269.2			851.7			785.1
Gains attributable to asset sales and insurance recoveries		(10.2	)		(2.6	)		(68.4	)		(34.1	)
Non-cash asset impairment charges		15.2			43.1			53.3			57.6
General and administrative costs		43.9			41.4			138.9			130.2
Total consolidated costs and expenses	$	11,317.4		$	9,701.2		$	32,200.0		$	29,266.7

(1) Represents cost of operating our plants, pipelines and other fixed assets, excluding depreciation, amortization and accretion charges.

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. The same correlation would be true in the case of higher energy commodity sales prices and purchase costs.