Segment Reporting

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment Reporting

13. Segment Reporting

The Company’s determination of reportable business segments considers the strategic operating units under which the Company makes financial decisions, allocates resources and assesses performance of its retail and asset optimization businesses.

The Company’s reportable business segments are retail natural gas and retail electricity. The retail natural gas segment consists of natural gas sales to, and natural gas transportation and distribution for, residential and commercial customers. Asset optimization activities, considered an integral part of securing the lowest price natural gas to serve retail gas load, are part of the retail natural gas segment. The Company recorded asset optimization revenues of $26.0 million and $27.7 million and asset optimization cost of revenues of $25.9 million and $28.2 million for the three months ended September 30, 2016 and 2015, respectively, which are presented on a net basis in asset optimization revenues. The Company recorded asset optimization revenues of $89.1 million and $120.7 million and asset optimization cost of revenues of $89.1 million and $119.4 million for the nine months ended September 30, 2016 and 2015, respectively, which are presented on a net basis in asset optimization revenues. The retail electricity segment consists of electricity sales and transmission to residential and commercial customers. Corporate and other consists of expenses and assets of the retail natural gas and retail electricity segments that are managed at a consolidated level such as general and administrative expenses.

To assess the performance of the Company’s operating segments, the Chief Operating Decision Maker analyzes retail gross margin. The Company defines retail gross margin as operating income plus (i) depreciation and amortization expenses and (ii) general and administrative expenses, less (i) net asset optimization revenues (expenses), (ii) net gains (losses) on derivative instruments, and (iii) net current period cash settlements on derivative instruments. The Company deducts net gains (losses) on derivative instruments, excluding current period cash settlements, from the retail gross margin calculation in order to remove the non-cash impact of net gains and losses on derivative instruments.

Retail gross margin is a primary performance measure used by our management to determine the performance of our retail natural gas and electricity business by removing the impacts of our asset optimization activities and net non-cash income (loss) impact of our economic hedging activities. As an indicator of our retail energy business’ operating performance, retail gross margin should not be considered an alternative to, or more meaningful than, operating income, as determined in accordance with GAAP.

Below is a reconciliation of retail gross margin to income before income tax expense (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Reconciliation of Retail Gross Margin to Income before taxes
Income before income tax expense	$	7,930		$	6,455		$	48,388		$	24,442
Interest and other income	(240		)	(5		)	(340		)	(326		)
Interest expense	1,270			800			2,855			1,415
Operating Income	8,960			7,250			50,903			25,531
Depreciation and amortization	8,295			7,557			23,337			17,873
General and administrative	18,009			15,493			55,188			43,909
Less:
Net asset optimization (expenses) revenues	108			(545		)	(42		)	1,317
Net, Gain (losses) on non-trading derivative instruments	(1,183		)	132			2,519			(5,876		)
Net, Cash settlements on non-trading derivative instruments	(8,889		)	4,035			3,341			12,643
Retail Gross Margin	$	45,228		$	26,678		$	123,610		$	79,229

The Company uses retail gross margin and net asset optimization revenues as the measure of profit or loss for its business segments. This measure represents the lowest level of information that is provided to the chief operating decision maker for our reportable segments.

Financial data for business segments are as follows (in thousands):

Three Months Ended September 30, 2016	Retail Electricity			Retail Natural Gas			Corporate and Other		Eliminations		Spark Retail
Total Revenues	$	144,243		$	13,851		$	—	$	—	$	158,094
Retail cost of revenues	113,600			9,230			—		—		122,830
Less:
Net asset optimization expenses	—			108			—		—		108
Gains on non-trading derivatives	68			(1,251		)	—		—		(1,183		)
Current period settlements on non-trading derivatives	(8,614		)	(275		)	—		—		(8,889		)
Retail Gross Margin	$	39,189		$	6,039		$	—	$	—	$	45,228

Three Months Ended September 30, 2015	Retail Electricity		Retail Natural Gas			Corporate and Other		Eliminations		Spark Retail
Total revenues	$	76,913	$	14,354		$	—	$	—	$	91,267
Retail cost of revenues	50,787		10,180			—		—		60,967
Less:
Net asset optimization expenses	—		(545		)	—		—		(545		)
Gains (losses) gains on non-trading derivatives	3,891		(3,759		)	—		—		132
Current period settlements on non-trading derivatives	3,310		725			—		—		4,035
Retail Gross Margin	$	18,925	$	7,753		$	—	$	—	$	26,678

Nine Months Ended September 30, 2016	Retail Electricity		Retail Natural Gas			Corporate and Other		Eliminations			Spark Retail
Total revenues	$	293,571	$	84,450		$	—	$	—		$	378,021
Retail cost of revenues	209,617		38,976			—		—			248,593
Less:
Net asset optimization expenses	—		(42		)	—		—			(42		)
(Losses) gains on non-trading derivatives	997		1,522			—		—			2,519
Current period settlements on non-trading derivatives	731		2,610			—		—			3,341
Retail Gross Margin	$	82,226	$	41,384		$	—	$	—		$	123,610
Total Assets at September 30, 2016	$	474,575	$	185,145		$	170,074	$	(492,063	)	$	337,731
Goodwill at September 30, 2016	$	77,271	$	2,285		$	—	$	—		$	79,556

Nine Months Ended September 30, 2015	Retail Electricity			Retail Natural Gas			Corporate and Other		Eliminations			Spark Retail
Total revenues	$	170,060		$	93,253		$	—	$	—		$	263,313
Retail cost of revenues	122,864			53,136			—		—			176,000
Less:
Net asset optimization revenues	—			1,317			—		—			1,317
(Losses) gains on non-trading derivatives	(2,201		)	(3,675		)	—		—			(5,876		)
Current period settlements on non-trading derivatives	5,727			6,916			—		—			12,643
Retail Gross Margin	$	43,670		$	35,559		$	—	$	—		$	79,229
Total Assets at December 31, 2015	$	150,245		$	113,583		$	88,823	$	(190,417	)	$	162,234
Goodwill at December 31, 2015	$	16,476		$	1,903		$	—	$	—		$	18,379