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Operating Segments
 9 Months Ended
Sep. 30, 2014
Operating Segments  
Operating Segments

Note 12—Operating Segments

 

We manage our operations through three operating segments: (i) Transportation, (ii) Facilities and (iii) Supply and Logistics. Our Chief Operating Decision Maker (our Chief Executive Officer) evaluates segment performance based on measures including segment profit and maintenance capital investment. We define segment profit as revenues and equity earnings in unconsolidated entities less (i) purchases and related costs, (ii) field operating costs and (iii) segment general and administrative expenses. Each of the items above excludes depreciation and amortization. Maintenance capital consists of capital expenditures for the replacement of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets.

 

The following table reflects certain financial data for each segment for the periods indicated (in millions):

 

 

 

Transportation

 

Facilities

 

Supply and Logistics

 

Total

 

Three Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

Revenues (1):

 

 

 

 

 

 

 

 

 

External Customers

 

$

198

 

$

141

 

$

10,788

 

$

11,127

 

Intersegment (2)

 

226

 

140

 

5

 

371

 

Total revenues of reportable segments

 

$

424

 

$

281

 

$

10,793

 

$

11,498

 

Equity earnings in unconsolidated entities

 

$

29

 

$

—

 

$

—

 

$

29

 

Segment profit (3) (4)

 

$

231

 

$

147

 

$

152

 

$

530

 

Maintenance capital

 

$

35

 

$

19

 

$

2

 

$

56

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2013

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

External Customers

 

$

179

 

$

138

 

$

10,386

 

$

10,703

 

Intersegment (2)

 

199

 

142

 

—

 

341

 

Total revenues of reportable segments

 

$

378

 

$

280

 

$

10,386

 

$

11,044

 

Equity earnings in unconsolidated entities

 

$

19

 

$

—

 

$

—

 

$

19

 

Segment profit (3) (4)

 

$

198

 

$

146

 

$

64

 

$

408

 

Maintenance capital

 

$

29

 

$

6

 

$

7

 

$

42

 

 

 

 

Transportation

 

Facilities

 

Supply and Logistics

 

Total

 

Nine Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

Revenues (1):

 

 

 

 

 

 

 

 

 

External Customers

 

$

574

 

$

443

 

$

32,988

 

$

34,005

 

Intersegment (2)

 

648

 

415

 

33

 

1,096

 

Total revenues of reportable segments

 

$

1,222

 

$

858

 

$

33,021

 

$

35,101

 

Equity earnings in unconsolidated entities

 

$

73

 

$

—

 

$

—

 

$

73

 

Segment profit (3) (4)

 

$

658

 

$

435

 

$

534

 

$

1,627

 

Maintenance capital

 

$

111

 

$

34

 

$

6

 

$

151

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2013

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

External Customers

 

$

517

 

$

558

 

$

30,542

 

$

31,617

 

Intersegment (2)

 

594

 

425

 

2

 

1,021

 

Total revenues of reportable segments

 

$

1,111

 

$

983

 

$

30,544

 

$

32,638

 

Equity earnings in unconsolidated entities

 

$

42

 

$

—

 

$

—

 

$

42

 

Segment profit (3) (4)

 

$

522

 

$

445

 

$

673

 

$

1,640

 

Maintenance capital

 

$

84

 

$

23

 

$

17

 

$

124

 

 

(1)                   Effective January 1, 2014, our natural gas sales and costs, primarily attributable to the activities performed by our natural gas storage commercial optimization group, are reported in the Supply and Logistics segment. Such items were previously reported in the Facilities segment.

 

(2)                   Segment revenues and purchases and related costs include intersegment amounts. Intersegment sales are conducted at posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market. For further discussion, see “Analysis of Operating Segments” under Item 7 of our 2013 Annual Report on Form 10-K.

 

(3)                   Supply and Logistics segment profit includes interest expense (related to hedged inventory purchases) of $4 million and $8 million for the three months ended September 30, 2014 and 2013, respectively, and $11 million and $21 million for the nine months ended September 30, 2014 and 2013, respectively.

 

(4)                   The following table reconciles segment profit to net income attributable to PAA (in millions):

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Segment profit

 

$

530

 

$

408

 

$

1,627

 

$

1,640

 

Depreciation and amortization

 

(97

)

(93

)

(293

)

(265

)

Interest expense, net

 

(85

)

(72

)

(246

)

(224

)

Other income/(expense), net

 

(4

)

3

 

(2

)

2

 

Income before tax

 

344

 

246

 

1,086

 

1,153

 

Income tax expense

 

(20

)

(9

)

(90

)

(79

)

Net income

 

324

 

237

 

996

 

1,074

 

Net income attributable to noncontrolling interests

 

(1

)

(6

)

(2

)

(22

)

Net income attributable to PAA

 

$

323

 

$

231

 

$

994

 

$

1,052