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Operating Segments
 6 Months Ended
Jun. 30, 2016
Operating Segments  
Operating Segments

 

Note 12—Operating Segments

 

We manage our operations through three operating segments: Transportation, Facilities and 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 (a) purchases and related costs, (b) field operating costs and (c) 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 (in millions):

 

Three Months Ended June 30, 2016

 

Transportation

 

Facilities

 

Supply and
Logistics

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

External customers

 

$
170

 

$
132

 

$
4,648

 

$
4,950

 

Intersegment (1)

 
233

 
138

 
4

 
375

 

 

 

 

 

 

 

 

 

 

 

Total revenues of reportable segments

 

$
403

 

$
270

 

$
4,652

 

$
5,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity earnings in unconsolidated entities

 

$
40

 

$

—

 

$

—

 

$
40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit/(loss) (2) (3) 

 

$
252

 

$
156

 

$
(18

)

$
390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital

 

$
23

 

$
9

 

$
3

 

$
35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2015

 

Transportation

 

Facilities

 

Supply and
Logistics

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

External customers

 

$
180 

 

$
137 

 

$
6,346 

 

$
6,663 

 

Intersegment (1)

 
222 

 
132 

 
5 

 
359 

 

 

 

 

 

 

 

 

 

 

 

Total revenues of reportable segments

 

$
402 

 

$
269 

 

$
6,351 

 

$
7,022 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity earnings in unconsolidated entities

 

$
52 

 

$

—

 

$

—

 

$
52 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit (2) (3) 

 

$
186 

 

$
144 

 

$
41 

 

$
371 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital

 

$
33 

 

$
17 

 

$
2 

 

$
52 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2016

 

Transportation

 

Facilities

 

Supply and
Logistics

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

External customers

 

$
323 

 

$
270 

 

$
8,467 

 

$
9,060 

 

Intersegment (1)

 
464 

 
265 

 
6 

 
735 

 

 

 

 

 

 

 

 

 

 

 

Total revenues of reportable segments

 

$
787 

 

$
535 

 

$
8,473 

 

$
9,795 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity earnings in unconsolidated entities

 

$
87 

 

$

—

 

$

—

 

$
87 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit (2) (3) 

 

$
499 

 

$
315 

 

$
19 

 

$
833 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital

 

$
57 

 

$
18 

 

$
6 

 

$
81 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2015

 

Transportation

 

Facilities

 

Supply and
Logistics

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

External customers

 

$
366 

 

$
261 

 

$
11,978 

 

$
12,605 

 

Intersegment (1)

 
437 

 
264 

 
6 

 
707 

 

Total revenues of reportable segments

 

$
803 

 

$
525 

 

$
11,984 

 

$
13,312 

 

Equity earnings in unconsolidated entities

 

$
89 

 

$

—

 

$

—

 

$
89 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit (2) (3) 

 

$
428 

 

$
285 

 

$
171 

 

$
884 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital

 

$
66 

 

$
32 

 

$
4 

 

$
102 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Segment revenues include intersegment amounts that are eliminated in “Purchases and related costs” and “Field operating costs” in our Condensed Consolidated Statements of Operations. Intersegment sales are conducted at posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market at the time the agreement is executed or renegotiated. For further discussion, see “Analysis of Operating Segments” under Item 7 of our 2015 Annual Report on Form 10-K.

 

(2)

Supply and Logistics segment profit includes interest expense (related to hedged inventory purchases) of $3 million and $2 million for the three months ended June 30, 2016 and 2015, respectively, and $6 million and $3 million for the six months ended June 30, 2016 and 2015, respectively.

 

(3)

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

Segment profit

 

$
390

 

$
371

 

$
833

 

$
884

 

Depreciation and amortization

 
(204

)
(108

)
(319

)
(212

)

Interest expense, net

 
(114

)
(107

)
(227

)
(212

)

Other income/(expense), net

 
25

 
1

 
30

 
(3

)

 

 

 

 

 

 

 

 

 

 

Income before tax

 
97

 
157

 
317

 
457

 

Income tax benefit/(expense)

 
5

 
(33

)
(13

)
(49

)

 

 

 

 

 

 

 

 

 

 

Net income

 
102

 
124

 
304

 
408

 

Net income attributable to noncontrolling interests

 
(1

)

—

 
(2

)
(1

)

 

 

 

 

 

 

 

 

 

 

Net income attributable to PAA

 

$
101

 

$
124

 

$
302

 

$
407