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BUSINESS SEGMENT AND OTHER OPERATIONS DATA
 9 Months Ended
Jun. 30, 2012
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block]
BUSINESS SEGMENT AND OTHER OPERATIONS DATA

NJR organizes its businesses based on its products and services as well as regulatory environment. As a result, the Company manages the 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 Energy Services segment consists of unregulated wholesale energy operations; the Clean Energy Ventures segment consist of capital investments in renewable energy projects; the Energy Holdings segment (previously Midstream Assets) consists of NJR's investments in natural gas transportation and storage facilities; the Retail and Other operations consist of appliance and installation services, commercial real estate development, renewable energy and 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)
2012
2011
2012
2011
Operating revenues
 
 
 
 
Natural Gas Distribution
 
 
 
 
External customers
$
106,764

$
138,149

$
524,161

$
862,073

Intercompany
—

—

—

—

Energy Services
 
 
 
 
External customers
306,273

498,834

1,126,435

1,449,252

Intercompany
(32
)
1,579

2,816

55,010

Clean Energy Ventures
 
 
 
 
External customers
370

328

1,277

328

Segment subtotal
413,375

638,890

1,654,689

2,366,663

Retail and Other
 
 
 
 
External customers
11,714

10,859

28,580

26,655

Intercompany
278

92

720

248

Eliminations
(246
)
(1,672
)
(3,536
)
(55,258
)
Total
$
425,121

$
648,169

$
1,680,453

$
2,338,308

Depreciation and amortization
 
 


Natural Gas Distribution
$
8,860

$
8,192

$
26,241

$
24,650

Energy Services
16

15

48

46

Clean Energy Ventures
1,632

115

3,953

143

Energy Holdings
1

1

4

4

Segment subtotal
10,509

8,323

30,246

24,843

Retail and Other
178

191

480

602

Eliminations
—

—

—

—

Total
$
10,687

$
8,514

$
30,726

$
25,445

Interest income (1)
 
 


Natural Gas Distribution
$
223

$
304

$
683

$
844

Energy Services
10

1

36

9

Energy Holdings
267

225

800

677

Segment subtotal
500

530

1,519

1,530

Retail and Other
1

1

2

2

Eliminations
(248
)
(220
)
(751
)
(658
)
Total
$
253

$
311

$
770

$
874

(1)
Included in other income in the Unaudited Condensed Consolidated Statements of Operations.

 
Three Months Ended
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2012
2011
2012
2011
Interest expense, net of capitalized interest
 
 
 
 
Natural Gas Distribution
$
3,717

$
3,630

$
11,167

$
11,454

Energy Services
214

193

729

792

Clean Energy Ventures
190

14

530

21

Energy Holdings
653

803

2,050

2,428

Segment subtotal
4,774

4,640

14,476

14,695

Retail and Other
60

104

790

390

Total
$
4,834

$
4,744

$
15,266

$
15,085

Income tax provision (benefit)
 
 


Natural Gas Distribution
$
1,114

$
3,283

$
43,726

$
44,162

Energy Services
(11,511
)
1,949

(2,108
)
8,632

Clean Energy Ventures
(3,013
)
(898
)
(30,010
)
(7,608
)
Energy Holdings
1,126

1,281

3,750

3,951

Segment subtotal
(12,284
)
5,615

15,358

49,137

Retail and Other
1,056

605

685

(439
)
Eliminations
(2
)
(23
)
(142
)
(36
)
Total
$
(11,230
)
$
6,197

$
15,901

$
48,662

Equity in earnings of affiliates
 
 


Energy Holdings
$
3,547

$
3,891

$
11,129

$
11,871

Segment subtotal
3,547

3,891

11,129

11,871

Eliminations
(903
)
(934
)
(2,813
)
(2,387
)
Total
$
2,644

$
2,957

$
8,316

$
9,484

Net financial earnings (loss)
 
 


Natural Gas Distribution
$
7,545

$
5,979

$
78,455

$
74,375

Energy Services
(5,425
)
213

18,061

19,381

Clean Energy Ventures
(1,157
)
259

20,802

5,484

Energy Holdings
1,634

1,847

5,438

5,705

Segment subtotal
2,597

8,298

122,756

104,945

Retail and Other
1,549

1,401

860

913

Eliminations
(16
)
—

(52
)
—

Total
$
4,130

$
9,699

$
123,564

$
105,858

Capital expenditures
 
 


Natural Gas Distribution
$
33,405

$
30,783

$
82,550

$
77,969

Clean Energy Ventures
13,457

7,040

75,243

16,977

Segment subtotal
46,862

37,823

157,793

94,946

Retail and Other
109

1,012

568

2,975

Total
$
46,971

$
38,835

$
158,361

$
97,921


The chief operating decision maker of the Company is the Chief Executive Officer (CEO). The CEO uses net financial earnings as a measure of profit or loss in measuring the results of the Company's segments and operations. A reconciliation of consolidated net financial earnings to consolidated net income is as follows:
 
Three Months Ended
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2012
2011
2012
2011
Consolidated net financial earnings
$
4,130

$
9,699

$
123,564

$
105,858

Less:
 
 
 
 
Unrealized loss (gain) from derivative instruments and related transactions, net of taxes (1) (2)
20,834

(2,875
)
11,126

33,835

Effects of economic hedging related to natural gas inventory, net of taxes (3)
(6,384
)
(7,800
)
10,866

(36,787
)
Consolidated net (loss) income
$
(10,320
)
$
20,374

$
101,572

$
108,810


(1)
Excludes unrealized (gains) losses related to an intercompany transaction between NJNG and NJRES that have been eliminated in consolidation of approximately $(20,000) and $42,000 for the three months ended and $177,000, and $74,000 for the nine months ended June 30, 2012 and 2011, respectively.
(2)
Includes taxes of approximately $12.1 million and $(1.7) million, for the three months ended and $6.3 million and $19.6 million for the nine months ended June 30, 2012 and 2011, respectively.
(3)
Includes taxes of approximately $(3.7) million and $(4.5) million, for the three months ended and $6.3 million and $(21.4) million for the nine months ended June 30, 2012 and 2011, respectively.

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 as 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.

Net financial earnings 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. Consequently, to reconcile between GAAP and net financial earnings, current period unrealized gains and losses on the derivatives are excluded from net financial earnings as a reconciling item. Additionally, realized derivative gains and losses are also included in current period net income. However, net financial earnings include 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's assets for the various business segments and business operations are detailed below:
(Thousands)
June 30,
2012
September 30,
2011
Assets at end of period:


Natural Gas Distribution
$
1,970,650

$
1,942,691

Energy Services
307,682

400,882

Clean Energy Ventures
194,037

80,234

Energy Holdings
158,525

159,940

Segment subtotal
2,630,894

2,583,747

Retail and Other
74,109

87,066

Intercompany assets (1)
(29,096
)
(21,369
)
Total
$
2,675,907

$
2,649,444

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