We define gross margin as total operating revenues, including commodity derivative activity, less
purchases of natural gas, propane and NGLs, and we define segment gross margin for each segment as total
operating revenues for that segment less commodity purchases for that segment. Our gross margin equals the
sum of our segment gross margins. We define adjusted segment gross margin as segment gross margin plus
non-cash commodity derivative losses, less non-cash commodity derivative gains for that segment. Gross
margin, segment gross margin and adjusted segment gross margin are primary performance measures used by
management, as these measures represent the results of product sales and purchases, a key component of our
operations. As an indicator of our operating performance, gross margin, segment gross margin and adjusted
segment gross margin should not be considered an alternative to, or more meaningful than, net income or loss,
net income or loss attributable to partners, operating income, cash flows from operating activities or any other
measure of financial performance presented in accordance with accounting principles generally accepted in the
United States of America, or GAAP.
Adjusted EBITDA
— We define adjusted EBITDA as net income or loss attributable to partners less
interest income, noncontrolling interest in depreciation and income tax expense and non-cash commodity
derivative gains, plus interest expense, income tax expense, depreciation and amortization expense and
non-cash commodity derivative losses. Our adjusted EBITDA may not be comparable to a similarly titled
measure of another company because other entities may not calculate this measure in the same manner.
Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss,
net income or loss attributable to partners, operating income, cash flows from operating activities or any other
measure of financial performance presented in accordance with GAAP as measures of operating performance,
liquidity or ability to service debt obligations.
Adjusted Segment EBITDA
— We define adjusted segment EBITDA for each segment as segment net
income or loss attributable to partners less non-cash commodity derivative gains for that segment, plus
depreciation and amortization expense and non-cash commodity derivative losses for that segment, adjusted for
any noncontrolling interest on depreciation and amortization expense for that segment. Our adjusted segment
EBITDA may not be comparable to similarly titled measures of other companies because they may not
calculate adjusted segment EBITDA in the same manner.
Adjusted segment EBITDA should not be considered in isolation or as an alternative to our financial
measures presented in accordance with GAAP, including net income or loss attributable to Partners, or any
other measure of performance presented in accordance with GAAP.
Adjusted EBITDA is used as a supplemental liquidity and performance measure and adjusted segment
EBITDA is used as a supplemental performance measure by our management and by external users of our
financial statements, such as investors, commercial banks, research analysts and others to assess:
• financial performance of our assets without regard to financing methods, capital structure or historical
cost basis;
• our operating performance and return on capital as compared to those of other companies in the
midstream energy industry, without regard to financing methods or capital structure; and
• viability and performance of acquisitions and capital expenditure projects and the overall rates of return
on investment opportunities;
• in the case of Adjusted EBITDA, the ability of our assets to generate cash sufficient to pay interest
costs, support our indebtedness, make cash distributions to our unitholders and general partner, and
finance maintenance capital expenditures.
The accompanying schedules provide reconciliations of adjusted segment EBITDA to its most directly
comparable GAAP financial measure.
Distributable Cash Flow
— We define Distributable Cash Flow as net cash provided by or used in
operating activities, less maintenance capital expenditures, net of reimbursable projects, plus or minus
adjustments for non-cash mark-to-market of derivative instruments, proceeds from divestiture of assets, net
income attributable to noncontrolling interest net of depreciation and income tax, net changes in operating
assets and liabilities, and other adjustments to reconcile net cash provided by or used in operating activities (see
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