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 June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	12,520.8		$	11,149.3		$	25,430.7		$	22,532.4
Subtract operating costs and expenses		(11,639.1	)		(10,367.2	)		(23,519.6	)		(20,787.6	)
Add equity in income of unconsolidated affiliates		50.3			37.6			106.8			82.1
Add depreciation, amortization and accretion expense amounts not reflected in gross operating margin		312.4			289.7			613.8			566.5
Add impairment charges not reflected in gross operating margin		3.7			27.1			12.5			38.1
Subtract net gains or add net losses attributable to asset sales and insurance recoveries not reflected in gross operating margin		(6.8	)		5.7			(96.4	)		(58.2	)
Add non-refundable deferred revenues attributable to shipper make-up rights on new pipeline projects reflected in gross operating margin		21.9			--			45.2			--
Total segment gross operating margin	$	1,263.2		$	1,142.2		$	2,593.0		$	2,373.3

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 June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Total segment gross operating margin	$	1,263.2		$	1,142.2		$	2,593.0		$	2,373.3
Adjustments to reconcile total segment gross operating margin to operating income:
Subtract depreciation, amortization and accretion expense amounts not reflected in gross operating margin		(312.4	)		(289.7	)		(613.8	)		(566.5	)
Subtract impairment charges not reflected in gross operating margin		(3.7	)		(27.1	)		(12.5	)		(38.1	)
Add net gains or subtract net losses attributable to asset sales and insurance recoveries not reflected in gross operating margin (see Note 16)		6.8			(5.7	)		96.4			58.2
Subtract non-refundable deferred revenues attributable to shipper make-up rights on new pipeline projects reflected in gross operating margin		(21.9	)		--			(45.2	)		--
Subtract general and administrative costs not reflected in gross operating margin		(47.7	)		(45.5	)		(100.9	)		(95.0	)
Operating income		884.3			774.2			1,917.0			1,731.9
Other expense, net		(227.8	)		(200.5	)		(449.0	)		(396.5	)
Income before income taxes	$	656.5		$	573.7		$	1,468.0		$	1,335.4

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 June 30, 2014	$	4,019.5	$	1,034.5	$	5,865.6	$	36.6	$	1,547.3		$	--		$	12,503.5
Three months ended June 30, 2013		3,504.7		953.0		5,129.5		39.3		1,516.1			--			11,142.6
Six months ended June 30, 2014		9,193.2		2,234.5		10,801.0		71.3		3,077.9			--			25,377.9
Six months ended June 30, 2013		7,455.4		1,827.2		9,922.7		79.8		3,234.7			--			22,519.8
Revenues from related parties:
Three months ended June 30, 2014		1.7		6.5		6.7		2.4		--			--			17.3
Three months ended June 30, 2013		0.2		4.5		--		2.0		--			--			6.7
Six months ended June 30, 2014		7.5		11.1		29.6		4.6		--			--			52.8
Six months ended June 30, 2013		0.5		8.0		--		4.1		--			--			12.6
Intersegment and intrasegment revenues:
Three months ended June 30, 2014		3,324.9		295.4		5,634.3		1.3		428.4			(9,684.3	)		--
Three months ended June 30, 2013		2,380.4		254.9		2,717.0		4.2		394.2			(5,750.7	)		--
Six months ended June 30, 2014		7,185.9		604.8		8,185.0		3.6		865.4			(16,844.7	)		--
Six months ended June 30, 2013		5,089.4		511.1		4,741.7		6.2		816.3			(11,164.7	)		--
Total revenues:
Three months ended June 30, 2014		7,346.1		1,336.4		11,506.6		40.3		1,975.7			(9,684.3	)		12,520.8
Three months ended June 30, 2013		5,885.3		1,212.4		7,846.5		45.5		1,910.3			(5,750.7	)		11,149.3
Six months ended June 30, 2014		16,386.6		2,850.4		19,015.6		79.5		3,943.3			(16,844.7	)		25,430.7
Six months ended June 30, 2013		12,545.3		2,346.3		14,664.4		90.1		4,051.0			(11,164.7	)		22,532.4
Equity in income (loss) of unconsolidated affiliates:
Three months ended June 30, 2014		6.1		0.9		42.2		7.6		(6.5	)		--			50.3
Three months ended June 30, 2013		3.8		0.9		30.1		8.7		(5.9	)		--			37.6
Six months ended June 30, 2014		7.5		1.8		84.9		18.7		(6.1	)		--			106.8
Six months ended June 30, 2013		7.7		1.9		66.7		15.1		(9.3	)		--			82.1
Gross operating margin:
Three months ended June 30, 2014		680.9		203.0		184.0		33.6		161.7			--			1,263.2
Three months ended June 30, 2013		544.9		197.7		197.2		39.7		162.7			--			1,142.2
Six months ended June 30, 2014		1,460.9		423.4		343.7		72.9		292.1			--			2,593.0
Six months ended June 30, 2013		1,137.4		388.5		433.6		80.2		333.6			--			2,373.3
Property, plant and equipment, net: (see Note 6)
At June 30, 2014		11,800.0		8,865.0		1,511.0		1,184.9		2,730.8			1,463.0			27,554.7
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 June 30, 2014		680.9		23.6		1,577.1		522.8		74.9			--			2,879.3
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 June 30, 2014		273.0		994.7		3.9		46.4		96.9			--			1,414.9
At December 31, 2013		285.2		1,017.8		4.5		54.7		100.0			--			1,462.2
Goodwill: (see Note 8)
At June 30, 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 June 30, 2014		13,615.1		10,179.6		3,397.1		1,836.1		3,437.9			1,463.0			33,928.8
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 June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
NGL Pipelines & Services:
Sales of NGLs and related products	$	3,630.6		$	3,235.9		$	8,426.4		$	6,901.5
Midstream services		390.6			269.0			774.3			554.4
Total		4,021.2			3,504.9			9,200.7			7,455.9
Onshore Natural Gas Pipelines & Services:
Sales of natural gas		787.0			723.9			1,740.2			1,363.4
Midstream services		254.0			233.6			505.4			471.8
Total		1,041.0			957.5			2,245.6			1,835.2
Onshore Crude Oil Pipelines & Services:
Sales of crude oil		5,781.9			5,057.4			10,655.3			9,800.2
Midstream services		90.4			72.1			175.3			122.5
Total		5,872.3			5,129.5			10,830.6			9,922.7
Offshore Pipelines & Services:
Sales of natural gas		--			0.1			0.2			0.2
Sales of crude oil		2.9			(0.1	)		5.0			2.2
Midstream services		36.1			41.3			70.7			81.5
Total		39.0			41.3			75.9			83.9
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products		1,376.6			1,334.2			2,732.8			2,881.4
Midstream services		170.7			181.9			345.1			353.3
Total		1,547.3			1,516.1			3,077.9			3,234.7
Total consolidated revenues	$	12,520.8		$	11,149.3		$	25,430.7		$	22,532.4

Consolidated costs and expenses
Operating costs and expenses:
Cost of sales	$	10,705.3		$	9,458.3		$	21,758.0		$	19,150.8
Other operating costs and expenses (1)		624.5			586.4			1,231.7			1,090.4
Depreciation, amortization and accretion		312.4			289.7			613.8			566.5
Net losses (gains) attributable to asset sales and insurance recoveries		(6.8	)		5.7			(96.4	)		(58.2	)
Non-cash asset impairment charges		3.7			27.1			12.5			38.1
General and administrative costs		47.7			45.5			100.9			95.0
Total consolidated costs and expenses	$	11,686.8		$	10,412.7		$	23,620.5		$	20,882.6

(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.