14. 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 and retail 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:



(Thousands)
Fiscal Years Ended September 30,	2018			2017			2016
Operating revenues
Natural Gas Distribution
External customers	$	731,865		$	695,637		$	594,346
Clean Energy Ventures
External customers	71,375			64,394			53,540
Energy Services
External customers⁽¹⁾	2,064,477			1,462,365			1,187,754
Intercompany	48,327			316			9,499
Subtotal	2,916,044			2,222,712			1,845,139
Home Services and Other
External customers	47,392			46,221			45,265
Intercompany	2,665			3,370			3,232
Eliminations	(50,992		)	(3,686		)	(12,731		)
Total	$	2,915,109		$	2,268,617		$	1,880,905
Depreciation and amortization
Natural Gas Distribution	$	53,208		$	49,347		$	47,828
Clean Energy Ventures	31,877			31,834			23,971
Energy Services ⁽²⁾	76			63			88
Midstream	6			6			6
Subtotal	85,167			81,250			71,893
Home Services and Other	780			798			981
Eliminations	(246		)	(207		)	(126		)
Total	$	85,701		$	81,841		$	72,748
Interest income ⁽³⁾
Natural Gas Distribution	$	614		$	555		$	115
Energy Services	240			6			98
Midstream	3,374			2,195			1,524
Subtotal	4,228			2,756			1,737
Home Services and Other	1,476			590			397
Eliminations	(5,090		)	(1,312		)	(2,006		)
Total	$	614		$	2,034		$	128


(1)	Includes sales to Canada, which are immaterial.


(2)	The amortization of acquired wholesale energy contracts is excluded above and is included in gas purchases - nonutility on the Unaudited Condensed Consolidated Statements of Operations.


(3)	Included in other income, net on the Consolidated Statements of Operations.



(Thousands)
Fiscal Years Ended September 30,	2018			2017			2016
Interest expense, net of capitalized interest
Natural Gas Distribution	$	25,299		$	25,818		$	19,930
Clean Energy Ventures	18,320			16,263			10,304
Energy Services	3,945			2,747			1,095
Midstream	1,667			960			287
Subtotal	49,231			45,788			31,616
Home Services and Other	7			410			252
Eliminations	(2,952		)	(1,312		)	(824		)
Total	$	46,286		$	44,886		$	31,044
Income tax (benefit) provision
Natural Gas Distribution	$	(1,910	)	$	43,485		$	34,951
Clean Energy Ventures	(79,932		)	(31,161		)	(26,592		)
Energy Services	24,996			(4,015		)	7,030
Midstream	(8,548		)	5,820			6,130
Subtotal	(65,394		)	14,129			21,519
Home Services and Other	11,944			3,857			1,387
Eliminations	(335		)	357			624
Total	$	(53,785	)	$	18,343		$	23,530
Equity in earnings of affiliates
Midstream	$	16,165		$	17,797		$	13,936
Eliminations	(3,157		)	(3,984		)	(4,421		)
Total	$	13,008		$	13,813		$	9,515
Net financial earnings (loss)
Natural Gas Distribution	$	84,048		$	86,930		$	76,104
Clean Energy Ventures	75,849			24,873			28,393
Energy Services	60,378			18,554			21,934
Midstream	24,367			12,857			9,406
Subtotal	244,642			143,214			135,837
Home Services and Other	(3,829		)	6,811			2,882
Eliminations	(327		)	(633		)	(634		)
Total	$	240,486		$	149,392		$	138,085
Capital expenditures
Natural Gas Distribution	$	254,523		$	176,249		$	205,133
Clean Energy Ventures	123,421			149,400			149,063
Midstream	5,431			—			—
Subtotal	383,375			325,649			354,196
Home Services and Other	1,213			2,434			1,896
Total	$	384,588		$	328,083		$	356,092
Investments in equity investees
Midstream	16,151			27,070			11,176
Total	$	16,151		$	27,070		$	11,176

The Chief Executive Officer, who uses NFE as a measure of profit or loss in measuring the results of the Company’s reporting segments and operations, is the chief operating decision maker of the Company. A reconciliation of consolidated NFE to consolidated net income is as follows:



(Thousands)	2018			2017			2016
Consolidated net financial earnings	$	240,486		$	149,392		$	138,085
Less:
Unrealized loss (gain) on derivative instruments and related transactions	26,770			(11,241		)	46,883
Tax effect	(4,512		)	4,062			(17,018		)
Effects of economic hedging related to natural gas inventory	(22,570		)	38,470			(36,816		)
Tax effect	7,362			(13,964		)	13,364
Consolidated net income	$	233,436		$	132,065		$	131,672

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 are 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 fiscal 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 year. The Company also calculates a quarterly tax adjustment based on an estimated annual effective tax rate for NFE purposes.

The Company’s assets for the various reporting segments and business operations are detailed below:



(Thousands)	2018			2017			2016
Assets at end of period:
Natural Gas Distribution	$	2,663,054		$	2,519,578		$	2,517,401
Clean Energy Ventures ⁽¹⁾	865,018			771,340			665,696
Energy Services	396,852			398,277			327,626
Midstream	242,069			232,806			186,259
Subtotal	4,166,993			3,922,001			3,696,982
Home Services and Other	114,732			114,801			109,487
Intercompany assets⁽²⁾	(138,061		)	(108,295		)	(87,899		)
Total	$	4,143,664		$	3,928,507		$	3,718,570


(1)	Includes assets held for sale of $206.9 million for September 30, 2018.


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