XML 60 R25.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
REPORTING SEGMENT AND OTHER OPERATIONS DATA
 3 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
REPORTING SEGMENT AND OTHER OPERATIONS DATA
15. 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:
 
Three Months Ended
 
December 31,
(Thousands)
2019
2018
Operating revenues
 
 
Natural Gas Distribution
 
 
External customers
$
219,623

$
199,965

Clean Energy Ventures
 
 
External customers
6,212

14,897

Energy Services
 
 
External customers (1)
368,304

584,960

Intercompany
2,111

2,307

Midstream
 
 
External customers
8,405

—

Intercompany
667

—

Subtotal
605,322

802,129

Home Services and Other
 
 
External customers
12,492

11,945

Intercompany
415

545

Eliminations
(3,193
)
(2,852
)
Total
$
615,036

$
811,767

Depreciation and amortization
 
 
Natural Gas Distribution
$
16,817

$
13,896

Clean Energy Ventures
9,437

7,923

Energy Services (2)
29

27

Midstream
1,681

1

Subtotal
27,964

21,847

Home Services and Other
246

221

Eliminations
(452
)
(236
)
Total
$
27,758

$
21,832

Interest income (3)
 
 
Natural Gas Distribution
$
107

$
199

Energy Services
37

—

Midstream
697

1,056

Subtotal
841

1,255

Home Services and Other
491

436

Eliminations
(1,146
)
(1,492
)
Total
$
186

$
199

(1)
Includes sales to Canada for the Energy Services segment, 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 Unaudited Condensed Consolidated Statements of Operations.
 
Three Months Ended
 
December 31,
(Thousands)
2019
2018
Interest expense, net of capitalized interest
 
 
Natural Gas Distribution
$
7,832

$
6,103

Clean Energy Ventures
4,492

5,428

Energy Services
1,226

1,887

Midstream
2,822

543

Subtotal
16,372

13,961

Home Services and Other
272

392

Eliminations
(574
)
(867
)
Total
$
16,070

$
13,486

Income tax provision (benefit)
 
 
Natural Gas Distribution
$
8,635

$
5,830

Clean Energy Ventures
(20,564
)
(23,204
)
Energy Services
10,752

9,644

Midstream
702

962

Subtotal
(475
)
(6,768
)
Home Services and Other
219

(192
)
Eliminations
(3
)
(1
)
Total
$
(259
)
$
(6,961
)
Equity in earnings of affiliates
 
 
Midstream
$
3,664

$
3,801

Eliminations
(275
)
(640
)
Total
$
3,389

$
3,161

Net financial earnings (loss)
 
 
Natural Gas Distribution
$
43,856

$
31,713

Clean Energy Ventures
(4,916
)
10,205

Energy Services
(2,911
)
8,370

Midstream
3,004

3,651

Subtotal
39,033

53,939

Home Services and Other
1,109

76

Eliminations
263

78

Total
$
40,405

$
54,093

Capital expenditures
 
 
Natural Gas Distribution
$
77,797

$
59,755

Clean Energy Ventures
45,699

32,126

Midstream
2,561

1,689

Subtotal
126,057

93,570

Home Services and Other
126

731

Total
$
126,183

$
94,301

Investments in equity investees
 
 
Midstream
$
509

$
—

Total
$
509

$
—


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)
2019
2018
Net financial earnings
$
40,405

$
54,093

Less:
 
 
Unrealized gain on derivative instruments and related transactions
(41,766
)
(10,932
)
Tax effect
9,931

2,583

Effects of economic hedging related to natural gas inventory
(8,887
)
(21,611
)
Tax effect
2,112

5,136

NFE tax adjustment
(10,346
)
(7,331
)
Net income
$
89,361

$
86,248



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 NFE. 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,
2019
September 30,
2019
Assets at end of period:
 
 
Natural Gas Distribution
$
3,190,229

$
3,064,309

Clean Energy Ventures
944,740

864,323

Energy Services
381,367

290,847

Midstream
651,306

240,955

Subtotal
5,167,642

4,460,434

Home Services and Other
110,562

104,411

Intercompany assets (1)
(183,038
)
(191,860
)
Total
$
5,095,166

$
4,372,985

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