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BUSINESS SEGMENT AND OTHER OPERATIONS DATA
 3 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
BUSINESS SEGMENT AND OTHER OPERATIONS DATA
BUSINESS SEGMENT AND OTHER OPERATIONS DATA

NJR organizes its businesses based on a combination of factors, including its products and its regulatory environment. As a result, the Company manages its 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 Clean Energy Ventures segment consists of capital investments in clean energy projects; the Energy Services segment consists of unregulated wholesale energy operations; the Midstream segment consists of NJR's investments in natural gas transportation and storage facilities; the Home Services and Other operations consist of heating, cooling and water appliance sales, installations 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
 
December 31,
(Thousands)
2016
2015
Operating revenues
 
 
Natural Gas Distribution
 
 
External customers
$
185,556

$
151,606

Clean Energy Ventures
 
 
External customers
7,567

7,794

Energy Services
 
 
External customers (1)
338,930

276,182

Intercompany
(1,749
)
2,511

Subtotal
530,304

438,093

Home Services and Other
 
 
External customers
8,975

8,676

Intercompany
1,031

897

Eliminations
718

(3,408
)
Total
$
541,028

$
444,258

Depreciation and amortization
 
 
Natural Gas Distribution
$
12,030

$
11,238

Clean Energy Ventures
7,041

5,110

Energy Services
16

23

Midstream
1

1

Subtotal
19,088

16,372

Home Services and Other
221

227

Eliminations
(49
)
(117
)
Total
$
19,260

$
16,482

Interest income (2)
 
 
Natural Gas Distribution
$
75

$
68

Energy Services
—

72

Midstream
462

264

Subtotal
537

404

Home Services and Other
121

37

Eliminations
(583
)
(371
)
Total
$
75

$
70

(1)
Includes sales to Canada, which accounted for 1.9 and 3.5 percent of total operating revenues during the three months ended December 31, 2016 and 2015.
(2)
Included in other income, net on the Unaudited Condensed Consolidated Statements of Operations.
 
Three Months Ended
 
December 31,
(Thousands)
2016
2015
Interest expense, net of capitalized interest
 
 
Natural Gas Distribution
$
6,824

$
4,588

Clean Energy Ventures
3,324

2,053

Energy Services
571

208

Midstream
56

42

Subtotal
10,775

6,891

Home Services and Other
74

—

Eliminations
(234
)
(114
)
Total
$
10,615

$
6,777

Income tax provision (benefit)
 
 
Natural Gas Distribution
$
14,887

$
13,507

Clean Energy Ventures
(11,887
)
(11,734
)
Energy Services
(3,176
)
4,905

Midstream
1,649

1,640

Subtotal
1,473

8,318

Home Services and Other
(245
)
(1,130
)
Eliminations
790

(466
)
Total
$
2,018

$
6,722

Equity in earnings of affiliates
 
 
Midstream
$
3,331

$
3,545

Eliminations
(1,020
)
(1,139
)
Total
$
2,311

$
2,406

Net financial earnings
 
 
Natural Gas Distribution
$
30,348

$
30,926

Clean Energy Ventures
2,842

7,652

Energy Services
3,487

10,304

Midstream
2,387

2,344

Subtotal
39,064

51,226

Home Services and Other
1,542

259

Eliminations
(223
)
(218
)
Total
$
40,383

$
51,267

Capital expenditures
 
 
Natural Gas Distribution
$
38,855

$
49,040

Clean Energy Ventures
46,785

45,006

Subtotal
85,640

94,046

Home Services and Other
171

797

Total
$
85,811

$
94,843

Investments in equity investees
 
 
Midstream
$
4,636

$
2,846

Total
$
4,636

$
2,846


The Chief Executive Officer, who uses NFE as a measure of profit or loss in measuring the results of the Company's segments and operations, is the chief operating decision maker of the Company. A reconciliation of consolidated NFE to consolidated net income is as follows:
 
Three Months Ended
 
December 31,
(Thousands)
2016
2015
Net financial earnings
$
40,383

$
51,267

Less:
 
 
Unrealized loss (gain) on derivative instruments and related transactions
28,302

(1,135
)
Tax effect
(9,757
)
413

Effects of economic hedging related to natural gas inventory
(17,939
)
3,813

Tax effect
6,204

(1,385
)
Net income to NFE tax adjustment
(1,356
)
(721
)
Net income
$
34,929

$
50,282



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 when 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.

NFE 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, SRECs and foreign currency contracts. Consequently, to reconcile between net income and NFE, current period unrealized gains and losses on the derivatives are excluded from NFE as a reconciling item. Additionally, realized derivative gains and losses are also included in current period net income. However, NFE includes 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. NJR also calculates a quarterly tax adjustment based on an estimated annual effective tax rate for NFE purposes.

The Company's assets for the various business segments and business operations are detailed below:
(Thousands)
December 31,
2016
September 30,
2016
Assets at end of period:
 
 
Natural Gas Distribution
$
2,554,928

$
2,517,401

Clean Energy Ventures
677,978

665,696

Energy Services
470,282

327,626

Midstream
201,128

186,259

Subtotal
3,904,316

3,696,982

Home Services and Other
132,427

109,487

Intercompany assets (1)
(87,237
)
(87,899
)
Total
$
3,949,506

$
3,718,570

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