Segment Reporting

3 Months Ended

Mar. 31, 2020

14. Segment Reporting

Our determination of reportable business segments considers the strategic operating units under which we make financial decisions, allocate resources and assess performance of our business. Our reportable business segments are retail electricity and retail natural gas. The retail electricity segment consists of electricity sales and transmission to residential and commercial customers. The retail natural gas segment consists of natural gas sales to, and natural gas transportation and distribution for, residential and commercial customers. Corporate and other consists of expenses and assets of the retail electricity and natural gas segments that are managed at a consolidated level such as general and administrative expenses. Asset optimization activities are also included in Corporate and other.

For the three months ended March 31, 2020 and 2019, we recorded asset optimization revenues of $6.4 million and $23.4 million and asset optimization cost of revenues of $6.1 million and $20.8 million, respectively, which are presented on a net basis in asset optimization revenues.

We use retail gross margin to assess the performance of our operating segments. Retail gross margin is defined as operating (loss) income plus (i) depreciation and amortization expenses and (ii) general and administrative expenses, less (i) net asset optimization (expenses) revenues, (ii) net (losses) gains on non-trading derivative instruments, and (iii) net current period cash settlements on non-trading derivative instruments. We deduct net (losses) gains 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 these derivative instruments. 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 March 31,
	2020			2019
Reconciliation of Retail Gross Margin to Income before taxes
Income before income tax expense	$	11,993		$	3,786
Interest and other income	(160		)	(189		)
Interest expense	1,553			2,223
Operating income	13,386			5,820
Depreciation and amortization	8,796			12,155
General and administrative	25,676			29,476
Less:
Net asset optimization revenues	321			2,552
Net, loss on non-trading derivative instruments	(24,533		)	(19,803		)
Net, Cash settlements on non-trading derivative instruments	16,609			8,125
Retail Gross Margin	$	55,461		$	56,577

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



Three Months Ended March 31, 2020
	Retail Electricity			Retail Natural Gas			Corporate and Other		Eliminations			Consolidated
Total Revenues	$	121,768		$	44,592		$	321	$	—		$	166,681
Retail cost of revenues	100,383			18,440			—		—			118,823
Less:
Net asset optimization expenses	—			—			321		—			321
Net, loss on non-trading derivative instruments	(24,386		)	(147		)	—		—			(24,533		)
Current period settlements on non-trading derivatives	14,965			1,644			—		—			16,609
Retail Gross Margin	$	30,806		$	24,655		$	—	$	—		$	55,461
Total Assets at March 31, 2020	$	2,622,259		$	862,873		$	336,218	$	(3,431,718	)	$	389,632
Goodwill at March 31, 2020	$	117,813		$	2,530		$	—	$	—		$	120,343



Three Months Ended March 31, 2019
	Retail Electricity			Retail Natural Gas			Corporate and Other		Eliminations			Consolidated
Total revenues	$	182,092		$	58,062		$	2,552	$	—		$	242,706
Retail cost of revenues	165,888			29,367			—		—			195,255
Less:
Net asset optimization revenues	—			—			2,552		—			2,552
Net, (loss) gain on non-trading derivative instruments	(21,942		)	2,139			—		—			(19,803		)
Current period settlements on non-trading derivatives	8,173			(48		)	—		—			8,125
Retail Gross Margin	$	29,973		$	26,604		$	—	$	—		$	56,577
Total Assets at December 31, 2019	$	2,524,884		$	820,601		$	341,411	$	(3,263,928	)	$	422,968
Goodwill at December 31, 2019	$	117,813		$	2,530		$	—	$	—		$	120,343