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BUSINESS SEGMENT AND OTHER OPERATIONS DATA
 6 Months Ended
Mar. 31, 2015
Segment Reporting [Abstract]  
BUSINESS SEGMENT AND OTHER OPERATIONS DATA
BUSINESS SEGMENT AND OTHER OPERATIONS DATA

NJR organizes its businesses based on its products and services as well as regulatory environment. As a result, the Company manages the businesses through the following reportable segments and other operations: the Natural Gas Distribution segment consists of regulated energy and off-system, capacity and storage management operations; the Energy Services segment consists of unregulated wholesale energy operations; the Clean Energy Ventures segment consists of capital investments in distributed power projects; the Midstream segment consists of NJR's investments in natural gas transportation and storage facilities; the Home Services and Other operations consist of heating, cooling and water appliance sales, installations and services, commercial real estate development, other investments and general corporate activities.

Information related to the Company's various business segments and other operations is detailed below:
 
Three Months Ended
Six Months Ended
 
March 31,
March 31,
(Thousands)
2015
2014
2015
2014
Operating revenues
 
 
 
 
Natural Gas Distribution
 
 
 
 
External customers
$
374,703

$
394,528

$
583,430

$
627,997

Energy Services
 
 
 
 
External customers (1)
626,107

1,173,835

1,226,669

1,807,526

Intercompany
56,097

67,749

59,223

71,767

Clean Energy Ventures
 
 
 
 
External customers
4,068

2,679

10,303

4,852

Subtotal
1,060,975

1,638,791

1,879,625

2,512,142

Home Services and Other
 
 
 
 
External customers
8,212

8,527

16,812

17,599

Intercompany
375

297

786

499

Eliminations
(56,472
)
(68,046
)
(60,009
)
(72,266
)
Total
$
1,013,090

$
1,579,569

$
1,837,214

$
2,457,974

Depreciation and amortization
 
 
 
 
Natural Gas Distribution
$
10,647

$
9,972

$
21,192

$
19,807

Energy Services
23

13

45

25

Clean Energy Ventures
4,297

2,635

7,888

5,146

Midstream
1

2

3

3

Subtotal
14,968

12,622

29,128

24,981

Home Services and Other
238

208

476

415

Eliminations
(2
)
(2
)
(14
)
(2
)
Total
$
15,204

$
12,828

$
29,590

$
25,394

Interest income (2)
 
 
 
 
Natural Gas Distribution
$
10

$
181

$
100

$
442

Energy Services
13

—

13

—

Clean Energy Ventures
22

—

22

—

Midstream
242

270

481

538

Subtotal
287

451

616

980

Home Services and Other
201

—

201

—

Eliminations
(242
)
(235
)
(481
)
(468
)
Total
$
246

$
216

$
336

$
512

(1)
Includes sales to Canada, which accounted for 4.4 percent and 4 percent of total operating revenues during the six months ended March 31, 2015 and 2014, respectively.
(2)
Included in other income on the Unaudited Condensed Consolidated Statements of Operations.
 
Three Months Ended
Six Months Ended
 
March 31,
March 31,
(Thousands)
2015
2014
2015
2014
Interest expense, net of capitalized interest
 
 
 
 
Natural Gas Distribution
$
4,388

$
3,888

$
8,997

$
7,872

Energy Services
288

661

801

1,277

Clean Energy Ventures
1,661

1,249

3,478

2,435

Midstream
210

377

460

775

Subtotal
6,547

6,175

13,736

12,359

Home Services and Other
(64
)
131

(58
)
242

Total
$
6,483

$
6,306

$
13,678

$
12,601

Income tax provision (benefit)
 
 
 
 
Natural Gas Distribution
$
23,778

$
23,725

$
37,944

$
37,908

Energy Services
3,923

64,345

49,800

53,072

Clean Energy Ventures
(9,042
)
(17,388
)
(28,763
)
(19,432
)
Midstream
1,819

1,573

3,311

2,569

Subtotal
20,478

72,255

62,292

74,117

Home Services and Other
(972
)
(1,129
)
(1,424
)
(1,320
)
Eliminations
638

554

143

388

Total
$
20,144

$
71,680

$
61,011

$
73,185

Equity in earnings of affiliates
 
 
 
 
Midstream
$
4,581

$
4,141

$
8,356

$
7,083

Eliminations
(994
)
(908
)
(1,974
)
(1,708
)
Total
$
3,587

$
3,233

$
6,382

$
5,375

Net financial earnings (loss)
 
 
 
 
Natural Gas Distribution
$
48,594

$
47,043

$
76,780

$
74,682

Energy Services
36,316

91,407

52,752

98,781

Clean Energy Ventures
13,010

12,807

22,018

16,421

Midstream
2,604

2,254

4,724

3,688

Subtotal
100,524

153,511

156,274

193,572

Home Services and Other
(1,359
)
(1,576
)
(1,951
)
(1,777
)
Eliminations
(22
)
(15
)
(70
)
(15
)
Total
$
99,143

$
151,920

$
154,253

$
191,780

Capital expenditures
 
 
 
 
Natural Gas Distribution
$
33,243

$
35,484

$
69,991

$
70,885

Clean Energy Ventures
33,025

20,486

88,370

45,403

Subtotal
66,268

55,970

158,361

116,288

Home Services and Other
50

272

61

477

Total
$
66,318

$
56,242

$
158,422

$
116,765

Investments in equity investees
 
 
 
 
Midstream
$
717

$
—

$
1,264

$
—

Total
$
717

$
—

$
1,264

$
—


The chief operating decision maker of the Company is the Chief Executive Officer who uses NFE as a measure of profit or loss in measuring the results of the Company's segments and operations. A reconciliation of consolidated NFE to consolidated net income is as follows:
 
Three Months Ended
Six Months Ended
 
March 31,
March 31,
(Thousands)
2015
2014
2015
2014
Consolidated net financial earnings
$
99,143

$
151,920

$
154,253

$
191,780

Less:
 
 
 
 
Unrealized loss (gain) from derivative instruments and related transactions
68,474

(13,256
)
(20,198
)
52,395

Effects of economic hedging related to natural gas inventory
(23,450
)
(18,668
)
(32,215
)
(41,548
)
Tax adjustments
(6,784
)
10,873

22,443

269

Consolidated net income
$
60,903

$
172,971

$
184,223

$
180,664



The Company uses derivative instruments as economic hedges of purchases and sales of physical gas inventory. For GAAP purposes, these derivatives are recorded at fair value and related changes in fair value are included in reported earnings. Revenues and cost of gas related to physical gas flow is recognized when the gas is delivered to customers. Consequently, there is a mismatch in the timing of earnings recognition between the economic hedges and physical gas flows. Timing differences occur in two ways:

•
Unrealized gains and losses on derivatives are recognized in reported earnings in periods prior to physical gas inventory flows; and

•
Unrealized gains and losses of prior periods are reclassified as realized gains and losses when derivatives are settled in the same period as physical gas inventory movements occur.

NFE is a measure of the earnings based on eliminating these timing differences, to effectively match the earnings effects of the economic hedges with the physical sale of gas. Consequently, to reconcile between GAAP and NFE, current period unrealized gains and losses on the derivatives are excluded from NFE as a reconciling item. Additionally, realized derivative gains and losses are also included in current period net income. However, NFE includes only realized gains and losses related to natural gas sold out of inventory, effectively matching the full earnings effects of the derivatives with realized margins on physical gas flows. NJR also calculates a quarterly tax adjustment based on an estimated annual effective tax rate for NFE purposes.

The Company's assets for the various business segments and business operations are detailed below:
(Thousands)
March 31,
2015
September 30,
2014
Assets at end of period:
 
 
Natural Gas Distribution
$
2,268,272

$
2,143,684

Energy Services
334,123

457,080

Clean Energy Ventures
473,136

380,707

Midstream
151,811

153,891

Subtotal
3,227,342

3,135,362

Home Services and Other
167,610

82,413

Intercompany assets (1)
(61,571
)
(58,971
)
Total
$
3,333,381

$
3,158,804

(1)
Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.