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BUSINESS SEGMENT AND OTHER OPERATIONS DATA
 9 Months Ended
Jun. 30, 2017
Segment Reporting [Abstract]  
BUSINESS SEGMENT AND OTHER OPERATIONS DATA
BUSINESS SEGMENT AND OTHER OPERATIONS DATA

NJR 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 reportable 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 energy operations; 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
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2017
2016
2017
2016
Operating revenues
 
 
 
 
Natural Gas Distribution
 
 
 
 
External customers
$
121,362

$
119,206

$
602,464

$
513,348

Clean Energy Ventures
 
 
 
 
External customers
14,915

12,703

35,425

28,159

Energy Services
 
 
 
 
External customers (1)
307,448

247,633

1,063,986

840,518

Intercompany
(309
)
2,674

621

8,440

Subtotal
443,416

382,216

1,702,496

1,390,465

Home Services and Other
 
 
 
 
External customers
13,798

13,671

30,222

29,639

Intercompany
610

737

2,696

2,273

Eliminations
(301
)
(3,411
)
(3,317
)
(10,713
)
Total
$
457,523

$
393,213

$
1,732,097

$
1,411,664

Depreciation and amortization
 
 
 
 
Natural Gas Distribution
$
12,425

$
12,297

$
36,718

$
35,133

Clean Energy Ventures
8,154

6,070

23,118

17,056

Energy Services
16

23

49

69

Midstream
1

1

4

4

Subtotal
20,596

18,391

59,889

52,262

Home Services and Other
186

249

606

713

Eliminations
(22
)
31

(147
)
(78
)
Total
$
20,760

$
18,671

$
60,348

$
52,897

Interest income (2)
 
 
 
 
Natural Gas Distribution
$
202

$
62

$
374

$
190

Energy Services
6

16

6

88

Midstream
581

395

1,555

1,109

Subtotal
789

473

1,935

1,387

Home Services and Other
155

97

408

257

Eliminations
(785
)
(505
)
(2,001
)
(1,456
)
Total
$
159

$
65

$
342

$
188

(1)
Includes sales to Canada, which accounted for 1.4 and 2.4 percent of total operating revenues during the nine months ended June 30, 2017 and 2016, respectively.
(2)
Included in other income, net on the Unaudited Condensed Consolidated Statements of Operations.
 
Three Months Ended
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2017
2016
2017
2016
Interest expense, net of capitalized interest
 
 
 
 
Natural Gas Distribution
$
6,294

$
4,935

$
19,510

$
14,213

Clean Energy Ventures
4,345

2,666

11,724

7,271

Energy Services
586

263

1,873

639

Midstream
211

56

681

228

Subtotal
11,436

7,920

33,788

22,351

Home Services and Other
116

65

313

170

Eliminations
(388
)
(198
)
(886
)
(588
)
Total
$
11,164

$
7,787

$
33,215

$
21,933

Income tax (benefit) provision
 
 
 
 
Natural Gas Distribution
$
1,496

$
2,015

$
46,882

$
38,232

Clean Energy Ventures
(8,122
)
(2,784
)
(44,765
)
(28,433
)
Energy Services
(1,767
)
(16,678
)
11,334

(3,968
)
Midstream
1,609

1,501

4,760

4,671

Subtotal
(6,784
)
(15,946
)
18,211

10,502

Home Services and Other
853

1,556

1,674

(1,055
)
Eliminations
115

200

249

900

Total
$
(5,816
)
$
(14,190
)
$
20,134

$
10,347

Equity in earnings of affiliates
 
 
 
 
Midstream
$
4,049

$
3,359

$
13,499

$
10,412

Eliminations
(984
)
(1,102
)
(3,044
)
(3,347
)
Total
$
3,065

$
2,257

$
10,455

$
7,065

Net financial earnings
 
 
 
 
Natural Gas Distribution
$
5,951

$
3,607

$
96,532

$
83,494

Clean Energy Ventures
6,276

2,440

31,861

21,898

Energy Services
933

276

20,166

27,585

Midstream
2,959

2,338

10,294

6,910

Subtotal
16,119

8,661

158,853

139,887

Home Services and Other
1,295

2,418

3,545

662

Eliminations
(19
)
(107
)
(514
)
(405
)
Total
$
17,395

$
10,972

$
161,884

$
140,144

Capital expenditures
 
 
 
 
Natural Gas Distribution
$
42,235

$
36,687

$
115,834

$
133,093

Clean Energy Ventures
32,053

44,854

121,958

115,736

Subtotal
74,288

81,541

237,792

248,829

Home Services and Other
417

397

933

1,466

Total
$
74,705

$
81,938

$
238,725

$
250,295

Investments in equity investees
 
 
 
 
Midstream
$
13,559

$
2,741

$
24,097

$
8,689

Total
$
13,559

$
2,741

$
24,097

$
8,689


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, is the chief operating decision maker of the Company. A reconciliation of consolidated NFE to consolidated net income is as follows:
 
Three Months Ended
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2017
2016
2017
2016
Net financial earnings
$
17,395

$
10,972

$
161,884

$
140,144

Less:
 
 
 
 
Unrealized (gain) loss on derivative instruments and related transactions
(15,981
)
55,875

(42,534
)
57,910

Tax effect
5,985

(20,282
)
15,907

(21,021
)
Effects of economic hedging related to natural gas inventory
13,203

(11,380
)
29,592

(8,621
)
Tax effect
(4,947
)
4,130

(11,077
)
3,129

Net income to NFE tax adjustment
178

(8
)
1,408

2,475

Net income (loss)
$
18,957

$
(17,363
)
$
168,588

$
106,272



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. 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)
June 30,
2017
September 30,
2016
Assets at end of period:
 
 
Natural Gas Distribution
$
2,553,938

$
2,517,401

Clean Energy Ventures
754,796

665,696

Energy Services
310,134

327,626

Midstream
220,197

186,259

Subtotal
3,839,065

3,696,982

Home Services and Other
113,625

109,487

Intercompany assets (1)
(74,764
)
(87,899
)
Total
$
3,877,926

$
3,718,570

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