15. REPORTING SEGMENT AND OTHER OPERATIONS DATA

The Company organizes its businesses based on a combination of factors, including its products and its regulatory environment. As a result, the Company manages its businesses through the following reporting segments and other operations: the Natural Gas Distribution segment consists of regulated energy and off-system, capacity and storage management operations; the Clean Energy Ventures segment consists of capital investments in clean energy projects; the Energy Services segment consists of unregulated wholesale and retail energy operations; the Midstream segment consists of the Company’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, other investments and general corporate activities.

Information related to the Company’s various reporting segments and other operations is detailed below:



(Thousands)
Fiscal Years Ended September 30,	2017			2016			2015
Operating revenues
Natural Gas Distribution
External customers	$	695,637		$	594,346		$	781,970
Clean Energy Ventures
External customers	64,394			53,540			32,513
Energy Services
External customers⁽¹⁾	1,462,365			1,187,754			1,872,781
Intercompany	316			9,499			61,526
Subtotal	2,222,712			1,845,139			2,748,790
Home Services and Other
External customers	46,221			45,265			46,723
Intercompany	3,370			3,232			1,980
Eliminations	(3,686		)	(12,731		)	(63,506		)
Total	$	2,268,617		$	1,880,905		$	2,733,987
Depreciation and amortization
Natural Gas Distribution	$	49,347		$	47,828		$	43,085
Clean Energy Ventures	31,834			23,971			17,297
Energy Services	63			88			90
Midstream	6			6			6
Subtotal	81,250			71,893			60,478
Home Services and Other	798			981			952
Eliminations	(207		)	(126		)	(31		)
Total	$	81,841		$	72,748		$	61,399
Interest income ⁽²⁾
Natural Gas Distribution	$	555		$	115		$	336
Clean Energy Ventures	—			—			26
Energy Services	6			98			438
Midstream	2,195			1,524			977
Subtotal	2,756			1,737			1,777
Home Services and Other	590			397			217
Eliminations	(1,312		)	(2,006		)	(1,414		)
Total	$	2,034		$	128		$	580


(1)	Includes sales to Canada, which accounted for .8, 2 and 3.7 percent of total operating revenues during fiscal 2017, 2016 and 2015, respectively.


(2)	Included in other income, net on the Consolidated Statements of Operations.



(Thousands)
Fiscal Years Ended September 30,	2017			2016			2015
Interest expense, net of capitalized interest
Natural Gas Distribution	$	25,818		$	19,930		$	18,534
Clean Energy Ventures	16,263			10,304			7,635
Energy Services	2,747			1,095			1,209
Midstream	960			287			717
Subtotal	45,788			31,616			28,095
Home Services and Other	410			252			49
Eliminations	(1,312		)	(824		)	(423		)
Total	$	44,886		$	31,044		$	27,721
Income tax (benefit) provision
Natural Gas Distribution	$	43,485		$	34,951		$	39,544
Clean Energy Ventures	(31,161		)	(26,592		)	(26,968		)
Energy Services	(4,015		)	7,030			39,043
Midstream	5,820			6,130			6,849
Subtotal	14,129			21,519			58,468
Home Services and Other	3,857			1,387			1,551
Eliminations	357			624			(295		)
Total	$	18,343		$	23,530		$	59,724
Equity in earnings of affiliates
Midstream	$	17,797		$	13,936		$	17,487
Eliminations	(3,984		)	(4,421		)	(4,078		)
Total	$	13,813		$	9,515		$	13,409
Net financial earnings
Natural Gas Distribution	$	86,930		$	76,104		$	76,287
Clean Energy Ventures	24,873			28,393			20,101
Energy Services	18,554			21,934			42,122
Midstream	12,857			9,406			9,780
Subtotal	143,214			135,837			148,290
Home Services and Other	6,811			2,882			3,420
Eliminations	(633		)	(634		)	(207		)
Total	$	149,392		$	138,085		$	151,503
Capital expenditures
Natural Gas Distribution	$	176,249		$	205,133		$	168,875
Clean Energy Ventures	149,400			149,063			151,002
Subtotal	325,649			354,196			319,877
Home Services and Other	2,434			1,896			209
Total	$	328,083		$	356,092		$	320,086
Investments in equity investees
Midstream	27,070			11,176			5,780
Total	$	27,070		$	11,176		$	5,780

The Chief Executive Officer, who uses NFE as a measure of profit or loss in measuring the results of the Company’s reporting segments and operations, is the chief operating decision maker of the Company. A reconciliation of consolidated NFE to consolidated net income is as follows:



(Thousands)	2017			2016			2015
Consolidated net financial earnings	$	149,392		$	138,085		$	151,503
Less:
Unrealized (gain) loss on derivative instruments and related transactions	(11,241		)	46,883			(38,681		)
Tax effect	4,062			(17,018		)	14,391
Effects of economic hedging related to natural gas inventory	38,470			(36,816		)	(8,225		)
Tax effect	(13,964		)	13,364			3,058
Consolidated net income	$	132,065		$	131,672		$	180,960

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, SRECs and foreign currency contracts. Consequently, to reconcile between net income 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. The Company also calculates a quarterly tax adjustment based on an estimated annual effective tax rate for NFE purposes.

The Company’s assets for the various reporting segments and business operations are detailed below:



(Thousands)	2017			2016			2015
Assets at end of period:
Natural Gas Distribution	$	2,519,578		$	2,517,401		$	2,305,293
Clean Energy Ventures	771,340			665,696			504,885
Energy Services	398,277			327,626			260,021
Midstream	232,806			186,259			182,007
Subtotal	3,922,001			3,696,982			3,252,206
Home Services and Other	114,801			109,487			88,880
Intercompany assets⁽¹⁾	(108,295		)	(87,899		)	(56,729		)
Total	$	3,928,507		$	3,718,570		$	3,284,357


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