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Segment Reporting
 6 Months Ended
Jun. 30, 2018
Segment Reporting [Abstract]  
Segment Reporting
15. 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 $32.7 million and $39.2 million and asset optimization cost of revenues of $31.9 million and $39.4 million for the three months ended June 30, 2018 and 2017, respectively, which are presented on a net basis in asset optimization revenues. The Company recorded asset optimization revenues of $110.9 million and $101.1 million and asset optimization cost of revenues of $107.4 million and $101.5 million for the six months ended June 30, 2018 and 2017, 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.
The acquisitions of Perigee and the Verde Companies in 2017 and the acquisition of HIKO in 2018 had no impact on our reportable business segments as the portions of those acquisitions related to retail natural gas and retail electricity have been included in those existing business segments.
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 (loss) plus (i) depreciation and amortization expenses and (ii) general and administrative expenses, less (i) net asset optimization revenues (expenses), (ii) net gains (losses) on non-trading derivative instruments, and (iii) net current period cash settlements on non-trading derivative instruments. The Company deducts net gains (losses) on non-trading 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 non-trading 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 June 30,
 
Six Months Ended June 30,
  
2018

2017
 
2018

2017
Reconciliation of Retail Gross Margin to Income (loss) before taxes



 



Income (loss) before income tax expense (benefit)
$
27,178


$
5,080

 
$
(21,120
)

$
18,617

Interest and other income
(553
)

265

 
(754
)

66

Interest expense
2,316


2,452

 
4,561


5,897

Operating income (loss)
28,941


7,797

 
(17,313
)

24,580

Depreciation and amortization
12,861


9,656

 
25,880


18,926

General and administrative
27,780


19,346

 
57,827


43,839

Less:



 



Net asset optimization revenues / (expenses)
763


(168
)
 
3,450


(361
)
Net, gain (loss) on non-trading derivative instruments
16,601


(10,202
)
 
(20,111
)

(31,578
)
Net, Cash settlements on non-trading derivative instruments
8,793


4,020

 
(6,089
)

11,535

Retail Gross Margin
$
43,425


$
43,149

 
$
89,144


$
107,749



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 June 30, 2018
Retail
Electricity

Retail
Natural Gas

Corporate
and Other

Eliminations

Spark Retail
Total Revenues
$
209,447

 
$
22,804

 
$
—

 
$
—

 
$
232,251

Retail cost of revenues
151,953

 
10,716

 
—

 
—

 
162,669

Less:
 
 
 
 
 
 
 
 
 
Net asset optimization revenue
—

 
763

 
—

 
—

 
763

Gains on non-trading derivatives
16,120

 
481

 
—

 
—

 
16,601

Current period settlements on non-trading derivatives
8,732

 
61

 
—

 
—

 
8,793

Retail Gross Margin
$
32,642

 
$
10,783

 
$
—

 
$
—

 
$
43,425

Total Assets at June 30, 2018
$
1,565,495


$
533,496


$
249,310


$
(1,887,452
)

$
460,849

Goodwill at June 30, 2018
$
117,813


$
2,530


$
—


$
—


$
120,343


Three Months Ended June 30, 2017
Retail
Electricity
 
Retail
Natural Gas
 
Corporate
and Other
 
Eliminations
 
Spark Retail
Total revenues
$
131,908

 
$
19,528

 
$
—

 
$
—

 
$
151,436

Retail cost of revenues
102,079

 
12,558

 
—

 
—

 
114,637

Less:

 

 

 

 

Net asset optimization expense
—

 
(168
)
 
—

 
—

 
(168
)
Losses on non-trading derivatives
(9,333
)
 
(869
)
 
—

 
—

 
(10,202
)
Current period settlements on non-trading derivatives
4,299

 
(279
)
 
—

 
—

 
4,020

Retail Gross Margin
$
34,863

 
$
8,286

 
$
—

 
$
—

 
$
43,149

Total Assets at December 31, 2017
$
1,228,552


$
421,896


$
209,428


$
(1,353,927
)

$
505,949

Goodwill at December 31, 2017
$
117,624


$
2,530


$
—


$
—


$
120,154

Six Months Ended June 30, 2018
Retail
Electricity

Retail
Natural Gas

Corporate
and Other

Eliminations

Spark Retail
Total revenues
$
430,346


$
88,593


$
—


$
—


$
518,939

Retail cost of revenues
401,500


51,045


—


—


452,545

Less:









Net asset optimization revenue
—


3,450


—


—


3,450

Losses on non-trading derivatives
(17,199
)

(2,912
)

—


—


(20,111
)
Current period settlements on non-trading derivatives
(6,316
)

227


—


—


(6,089
)
Retail Gross Margin
$
52,361


$
36,783


$
—


$
—


$
89,144

Total Assets at June 30, 2018
$
1,565,495


$
533,496


$
249,310


$
(1,887,452
)

$
460,849

Goodwill at June 30, 2018
$
117,813


$
2,530


$
—


$
—


$
120,343