XML 35 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
REPORTING SEGMENT AND OTHER OPERATIONS DATA
 6 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
REPORTING SEGMENT AND OTHER OPERATIONS DATA
13. REPORTING SEGMENT AND OTHER OPERATIONS DATA

The Company 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 reporting 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 the Company'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, other investments and general corporate activities.

Information related to the Company's various reporting segments and other operations is detailed below:
 
Three Months Ended
Six Months Ended
 
March 31,
March 31,
(Thousands)
2018
2017
2018
2017
Operating revenues
 
 
 
 
Natural Gas Distribution
 
 
 
 
External customers
$
317,064

$
295,546

$
526,851

$
481,102

Clean Energy Ventures
 
 
 
 
External customers
12,866

12,943

26,862

20,510

Energy Services
 
 
 
 
External customers (1)
681,475

417,608

1,153,646

756,538

Intercompany
43,838

2,679

49,648

930

Subtotal
1,055,243

728,776

1,757,007

1,259,080

Home Services and Other
 
 
 
 
External customers
7,638

7,449

16,989

16,424

Intercompany
623

1,055

1,229

2,086

Eliminations
(44,461
)
(3,734
)
(50,877
)
(3,016
)
Total
$
1,019,043

$
733,546

$
1,724,348

$
1,274,574

Depreciation and amortization
 
 
 
 
Natural Gas Distribution
$
13,353

$
12,263

$
26,136

$
24,293

Clean Energy Ventures
8,928

7,923

17,863

14,964

Energy Services (2)
15

17

29

33

Midstream
2

2

3

3

Subtotal
22,298

20,205

44,031

39,293

Home Services and Other
189

199

377

420

Eliminations
(27
)
(76
)
(94
)
(125
)
Total
$
22,460

$
20,328

$
44,314

$
39,588

Interest income (3)
 
 
 
 
Natural Gas Distribution
$
131

$
97

$
250

$
172

Energy Services
106

—

106

—

Midstream
771

512

1,435

974

Subtotal
1,008

609

1,791

1,146

Home Services and Other
354

132

558

253

Eliminations
(1,168
)
(633
)
(2,099
)
(1,216
)
Total
$
194

$
108

$
250

$
183

(1)
Includes sales to Canada, which accounted for .01 and 1.5 percent of total operating revenues during the six months ended March 31, 2018 and 2017, respectively.
(2)
The amortization of acquired wholesale energy contracts is included in gas purchases - nonutility on the Unaudited Condensed Consolidated Statements of Operations.
(3)
Included in other income, net on the Unaudited Condensed Consolidated Statements of Operations.
 
Three Months Ended
Six Months Ended
 
March 31,
March 31,
(Thousands)
2018
2017
2018
2017
Interest expense, net of capitalized interest
 
 
 
 
Natural Gas Distribution
$
6,523

$
6,392

$
13,059

$
13,216

Clean Energy Ventures
4,344

4,055

8,552

7,379

Energy Services
1,203

716

2,460

1,287

Midstream
385

414

694

470

Subtotal
12,455

11,577

24,765

22,352

Home Services and Other
21

123

111

197

Eliminations
(678
)
(264
)
(1,173
)
(498
)
Total
$
11,798

$
11,436

$
23,703

$
22,051

Income tax provision (benefit)
 
 
 
 
Natural Gas Distribution
$
17,991

$
30,499

$
29,695

$
45,386

Clean Energy Ventures
(12,722
)
(24,756
)
(86,710
)
(36,643
)
Energy Services
23,965

16,277

37,708

13,101

Midstream
3,131

1,502

(9,712
)
3,151

Subtotal
32,365

23,522

(29,019
)
24,995

Home Services and Other
(1,281
)
1,066

10,417

821

Eliminations
(183
)
(656
)
(665
)
134

Total
$
30,901

$
23,932

$
(19,267
)
$
25,950

Equity in earnings of affiliates
 
 
 
 
Midstream
$
4,068

$
6,119

$
8,197

$
9,450

Eliminations
(875
)
(1,040
)
(1,740
)
(2,060
)
Total
$
3,193

$
5,079

$
6,457

$
7,390

Net financial earnings (loss)
 
 
 
 
Natural Gas Distribution
$
60,442

$
60,233

$
94,551

$
90,581

Clean Energy Ventures
10,051

22,743

81,301

25,585

Energy Services
72,832

15,746

93,106

19,233

Midstream
1,315

4,948

18,826

7,335

Subtotal
144,640

103,670

287,784

142,734

Home Services and Other
(2,488
)
708

(10,204
)
2,250

Eliminations
(90
)
(272
)
(185
)
(495
)
Total
$
142,062

$
104,106

$
277,395

$
144,489

Capital expenditures
 
 
 
 
Natural Gas Distribution
$
55,397

$
34,744

$
102,787

$
73,599

Clean Energy Ventures
40,605

43,120

58,992

89,905

Subtotal
96,002

77,864

161,779

163,504

Home Services and Other
1,846

345

3,159

516

Total
$
97,848

$
78,209

$
164,938

$
164,020

Investments in equity investees
 
 
 
 
Midstream
$
3,975

$
5,902

$
11,177

$
10,538

Total
$
3,975

$
5,902

$
11,177

$
10,538


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
Six Months Ended
 
March 31,
March 31,
(Thousands)
2018
2017
2018
2017
Net financial earnings (1)
$
142,062

$
104,106

$
277,395

$
144,489

Less:
 
 
 
 
Unrealized (gain) loss on derivative instruments and related transactions
(11,608
)
(54,855
)
23,246

(26,553
)
Tax effect
4,716

19,679

(3,343
)
9,922

Effects of economic hedging related to natural gas inventory
6,125

34,328

(19,262
)
16,389

Tax effect
(1,715
)
(12,334
)
6,529

(6,130
)
Net income to NFE tax adjustment
4,278

2,586

6,260

1,230

Net income (1)
$
140,266

$
114,702

$
263,965

$
149,631


(1)
Includes income tax benefit related to the Tax Act of $967,000 and $58.5 million, for the three and six months ended March 31, 2018, 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 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. Included in the tax effects are current and deferred income tax expense corresponding with the non-GAAP measure. Also included in the tax effects during the three and six months ended March 31, 2018, are the impacts of the Tax Act and resulting revaluation of the deferred income taxes that arose from derivative and hedging activity as measured under NFE. The revaluation caused the effective tax rate on reconciling items to differ from the statutory rate in effect for the quarter. 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)
March 31,
2018
September 30,
2017
Assets at end of period:
 
 
Natural Gas Distribution
$
2,567,347

$
2,519,578

Clean Energy Ventures (1)
812,789

771,340

Energy Services
366,322

398,277

Midstream
227,101

232,806

Subtotal
3,973,559

3,922,001

Home Services and Other
107,415

114,801

Intercompany assets (2)
(120,234
)
(108,295
)
Total
$
3,960,740

$
3,928,507

(1)
Includes assets held for sale of $224.9 million.
(2)
Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.