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.

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 executive 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.

In total, gross operating margin represents operating income exclusive of (1) depreciation, amortization and accretion expenses, (2) impairment charges, (3) gains and losses attributable to asset sales and insurance recoveries and (4) general and administrative costs. Gross operating margin includes equity in income of unconsolidated affiliates and non-refundable deferred transportation revenues relating to the make-up rights of committed shippers associated with certain pipelines. 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 consolidation. 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.

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. Substantially all of our consolidated revenues are earned in the U.S. and derived from a wide customer base.

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. Substantially all of our plants, pipelines and other fixed assets are located in the U.S.

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

	For the Three Months Ended March 31,
	2014			2013
Revenues	$	12,909.9		$	11,383.1
Subtract operating costs and expenses		(11,880.5	)		(10,420.4	)
Add equity in income of unconsolidated affiliates		56.5			44.5
Add depreciation, amortization and accretion expense amounts not reflected in gross operating margin		301.4			276.8
Add impairment charges not reflected in gross operating margin		8.8			11.0
Subtract net gains attributable to asset sales and insurance recoveries not reflected in gross operating margin		(89.6	)		(63.9	)
Add non-refundable deferred revenues attributable to shipper make-up rights on new pipeline projects reflected in gross operating margin		23.3			--
Total segment gross operating margin	$	1,329.8		$	1,231.1

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 March 31,
	2014			2013
Total segment gross operating margin	$	1,329.8		$	1,231.1
Adjustments to reconcile total segment gross operating margin to operating income:
Subtract depreciation, amortization and accretion expense amounts not reflected in gross operating margin		(301.4	)		(276.8	)
Subtract impairment charges not reflected in gross operating margin		(8.8	)		(11.0	)
Add net gains attributable to asset sales and insurance recoveries not reflected in gross operating margin (see Note 16)		89.6			63.9
Subtract non-refundable deferred revenues attributable to shipper make-up rights on new pipeline projects reflected in gross operating margin		(23.3	)		--
Subtract general and administrative costs not reflected in gross operating margin		(53.2	)		(49.5	)
Operating income		1,032.7			957.7
Other expense, net		(221.2	)		(196.0	)
Income before income taxes	$	811.5		$	761.7

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			Adjustments and Eliminations			Consolidated Total
Revenues from third parties:
Three months ended March 31, 2014	$	5,173.7	$	1,200.0	$	4,935.4	$	34.7	$	1,530.6		$	--		$	12,874.4
Three months ended March 31, 2013		3,950.7		874.2		4,793.2		40.5		1,718.6			--			11,377.2
Revenues from related parties:
Three months ended March 31, 2014		5.8		4.6		22.9		2.2		--			--			35.5
Three months ended March 31, 2013		0.3		3.5		--		2.1		--			--			5.9
Intersegment and intrasegment revenues:
Three months ended March 31, 2014		3,861.0		309.4		2,550.7		2.3		437.0			(7,160.4	)		--
Three months ended March 31, 2013		2,709.0		256.2		2,024.7		2.0		422.1			(5,414.0	)		--
Total revenues:
Three months ended March 31, 2014		9,040.5		1,514.0		7,509.0		39.2		1,967.6			(7,160.4	)		12,909.9
Three months ended March 31, 2013		6,660.0		1,133.9		6,817.9		44.6		2,140.7			(5,414.0	)		11,383.1
Equity in income (loss) of unconsolidated affiliates:
Three months ended March 31, 2014		1.4		0.9		42.7		11.1		0.4			--			56.5
Three months ended March 31, 2013		3.9		1.0		36.6		6.4		(3.4	)		--			44.5
Gross operating margin:
Three months ended March 31, 2014		780.0		220.4		159.7		39.3		130.4			--			1,329.8
Three months ended March 31, 2013		592.5		190.8		236.4		40.5		170.9			--			1,231.1
Property, plant and equipment, net: (see Note 6)
At March 31, 2014		11,689.7		8,871.8		1,473.4		1,202.3		2,606.2			1,419.1			27,262.5
At December 31, 2013		9,957.8		8,917.3		1,479.9		1,223.7		2,712.4			2,655.5			26,946.6
Investments in unconsolidated affiliates: (see Note 7)
At March 31, 2014		673.1		23.7		1,403.2		528.4		78.0			--			2,706.4
At December 31, 2013		645.5		24.2		1,165.2		531.8		70.4			--			2,437.1
Intangible assets, net: (see Note 8)
At March 31, 2014		276.6		1,006.2		4.2		49.0		98.4			--			1,434.4
At December 31, 2013		285.2		1,017.8		4.5		54.7		100.0			--			1,462.2
Goodwill: (see Note 8)
At March 31, 2014		861.2		296.3		305.1		82.0		535.3			--			2,079.9
At December 31, 2013		341.2		296.3		305.1		82.1		1,055.3			--			2,080.0
Segment assets:
At March 31, 2014		13,500.6		10,198.0		3,185.9		1,861.7		3,317.9			1,419.1			33,483.2
At December 31, 2013		11,229.7		10,255.6		2,954.7		1,892.3		3,938.1			2,655.5			32,925.9

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

	For the Three Months Ended March 31,
	2014			2013
NGL Pipelines & Services:
Sales of NGLs and related products	$	4,795.8		$	3,665.6
Midstream services		383.7			285.4
Total		5,179.5			3,951.0
Onshore Natural Gas Pipelines & Services:
Sales of natural gas		953.2			639.5
Midstream services		251.4			238.2
Total		1,204.6			877.7
Onshore Crude Oil Pipelines & Services:
Sales of crude oil		4,873.4			4,742.8
Midstream services		84.9			50.4
Total		4,958.3			4,793.2
Offshore Pipelines & Services:
Sales of natural gas		0.2			0.1
Sales of crude oil		2.1			2.3
Midstream services		34.6			40.2
Total		36.9			42.6
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products		1,356.2			1,547.2
Midstream services		174.4			171.4
Total		1,530.6			1,718.6
Total consolidated revenues	$	12,909.9		$	11,383.1

Consolidated costs and expenses
Operating costs and expenses:
Cost of sales	$	11,052.7		$	9,692.5
Other operating costs and expenses (1)		607.2			504.0
Depreciation, amortization and accretion		301.4			276.8
Net gains attributable to asset sales and insurance recoveries		(89.6	)		(63.9	)
Non-cash asset impairment charges		8.8			11.0
General and administrative costs		53.2			49.5
Total consolidated costs and expenses	$	11,933.7		$	10,469.9

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

Quarter-to-quarter 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.