BUSINESS SEGMENT AND OTHER OPERATIONS DATA

6 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

BUSINESS SEGMENT AND OTHER OPERATIONS DATA

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 consists of NJR's investments in natural gas transportation and storage facilities; the Retail and Other operations consist of heating, cooling and water appliance installation 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						Six Months Ended
	March 31,						March 31,
(Thousands)	2013			2012			2013			2012
Operating revenues
Natural Gas Distribution
External customers	$	351,750		$	226,023		$	570,599		$	417,397
Clean Energy Ventures
External customers	1,440			527			4,619			907
Energy Services
External customers	599,362			378,356			1,102,997			820,162
Intercompany	4,444			2,654			4,551			2,848
Segment subtotal	956,996			607,560			1,682,766			1,241,314
Retail and Other
External customers	8,334			8,014			18,689			16,866
Intercompany	186			263			449			442
Eliminations	(4,631		)	(2,916		)	(5,000		)	(3,290		)
Total	$	960,885		$	612,921		$	1,696,904		$	1,255,332
Depreciation and amortization
Natural Gas Distribution	$	9,399		$	8,749		$	18,676		$	17,381
Clean Energy Ventures	2,104			1,511			3,935			2,321
Energy Services	11			16			22			32
Energy Holdings	1			2			3			3
Segment subtotal	11,515			10,278			22,636			19,737
Retail and Other	199			161			390			302
Eliminations	7			—			(2		)	—
Total	$	11,721		$	10,439		$	23,024		$	20,039
Interest income (1)
Natural Gas Distribution	$	146		$	214		$	313		$	460
Energy Services	—			(5		)	—			26
Energy Holdings	263			285			534			533
Segment subtotal	409			494			847			1,019
Retail and Other	1			1			2			1
Eliminations	(218		)	(268		)	(450		)	(503		)
Total	$	192		$	227		$	399		$	517

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

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2013			2012			2013			2012
Interest expense, net of capitalized interest
Natural Gas Distribution	$	3,549		$	3,713		$	7,133		$	7,450
Clean Energy Ventures	822			198			1,605			340
Energy Services	640			245			1,208			515
Energy Holdings	476			683			1,067			1,397
Segment subtotal	5,487			4,839			11,013			9,702
Retail and Other	259			588			558			730
Total	$	5,746		$	5,427		$	11,571		$	10,432
Income tax provision (benefit)
Natural Gas Distribution	$	22,794		$	27,016		$	37,301		$	42,612
Clean Energy Ventures	(6,457		)	(14,826		)	(14,226		)	(26,997		)
Energy Services	(5,203		)	(2,105		)	10,961			9,403
Energy Holdings	1,619			1,393			2,862			2,624
Segment subtotal	12,753			11,478			36,898			27,642
Retail and Other	(906		)	(312		)	(1,029		)	(371		)
Eliminations	218			(72		)	176			(140		)
Total	$	12,065		$	11,094		$	36,045		$	27,131
Equity in earnings of affiliates
Energy Holdings	$	4,469		$	3,967		$	7,960		$	7,582
Eliminations	(939		)	(949		)	(1,875		)	(1,910		)
Total	$	3,530		$	3,018		$	6,085		$	5,672
Net financial earnings (loss)
Natural Gas Distribution	$	45,917		$	44,936		$	71,409		$	70,910
Clean Energy Ventures	5,154			11,862			10,459			21,959
Energy Services	16,368			15,871			19,382			23,486
Energy Holdings	2,274			2,021			4,059			3,804
Segment subtotal	69,713			74,690			105,309			120,159
Retail and Other	(1,037		)	(543		)	(1,131		)	(689		)
Eliminations	(12		)	(21		)	(21		)	(36		)
Total	$	68,664		$	74,126		$	104,157		$	119,434
Capital expenditures
Natural Gas Distribution	$	31,554		$	27,427		$	65,699		$	49,145
Clean Energy Ventures	9,545			14,175			24,865			61,786
Segment subtotal	41,099			41,602			90,564			110,931
Retail and Other	144			370			298			459
Total	$	41,243		$	41,972		$	90,862		$	111,390

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					Six Months Ended
	March 31,					March 31,
(Thousands)	2013			2012		2013			2012
Consolidated net financial earnings	$	68,664		$	74,126	$	104,157		$	119,434
Less:
Unrealized loss (gain) from derivative instruments and related transactions, net of taxes (1) (2)	24,534			7,664		12,940			(9,708		)
Effects of economic hedging related to natural gas inventory, net of taxes (3)	(1,339		)	11,927		(14,458		)	17,250
Consolidated net income	$	45,469		$	54,535	$	105,675		$	111,892

(1) Excludes unrealized (gains) losses related to an intercompany transaction between NJNG and NJRES that have been eliminated in consolidation of approximately $(377,000) and $79,000 for the three months endedand $(310,000) and $197,000 for the six months endedMarch 31, 2013 and 2012, respectively.

(2) Includes taxes of approximately $14.7 million and $4.4 million, for the three months ended and $7.9 million and $(5.9) million for the six months endedMarch 31, 2013 and 2012, respectively.

(3) Includes taxes of approximately $(778,000) and $6.9 million for the three months ended and $(8.4) million and $10 million for the six months endedMarch 31, 2013 and 2012, 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)	March 31, 2013			September 30, 2012
Assets at end of period:
Natural Gas Distribution	$	2,048,349		$	2,005,520
Clean Energy Ventures	243,616			223,247
Energy Services	466,565			347,406
Energy Holdings	155,908			157,779
Segment subtotal	2,914,438			2,733,952
Retail and Other	71,293			73,298
Eliminations (1)	(44,073		)	(37,245		)
Total	$	2,941,658		$	2,770,005

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