BUSINESS SEGMENT AND OTHER OPERATIONS DATA

3 Months Ended

Dec. 31, 2012

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
	December 31,
(Thousands)	2012			2011
Operating revenues
Natural Gas Distribution
External customers	$	218,849		$	191,374
Clean Energy Ventures
External customers	3,179			380
Energy Services
External customers	503,635			441,806
Intercompany	107			194
Segment subtotal	725,770			633,754
Retail and Other
External customers	10,355			8,852
Intercompany	263			179
Eliminations	(369		)	(374		)
Total	$	736,019		$	642,411
Depreciation and amortization
Natural Gas Distribution	$	9,277		$	8,632
Clean Energy Ventures	1,831			810
Energy Services	11			16
Energy Holdings	2			1
Segment subtotal	11,121			9,459
Retail and Other	191			141
Eliminations	(9		)	—
Total	$	11,303		$	9,600
Interest income (1)
Natural Gas Distribution	$	167		$	246
Energy Services	—			31
Energy Holdings	271			248
Segment subtotal	438			525
Retail and Other	1			—
Eliminations	(232		)	(235		)
Total	$	207		$	290

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

	Three Months Ended
	December 31,
(Thousands)	2012			2011
Interest expense, net of capitalized interest
Natural Gas Distribution	$	3,584		$	3,737
Clean Energy Ventures	783			142
Energy Services	568			270
Energy Holdings	591			714
Segment subtotal	5,526			4,863
Retail and Other	299			142
Total	$	5,825		$	5,005
Income tax provision (benefit)
Natural Gas Distribution	$	14,507		$	15,596
Clean Energy Ventures	(7,769		)	(12,171		)
Energy Services	16,164			11,508
Energy Holdings	1,243			1,231
Segment subtotal	24,145			16,164
Retail and Other	(123		)	(59		)
Eliminations	(42		)	(68		)
Total	$	23,980		$	16,037
Equity in earnings of affiliates
Energy Holdings	$	3,491		$	3,615
Eliminations	(936		)	(961		)
Total	$	2,555		$	2,654
Net financial earnings (loss)
Natural Gas Distribution	$	25,492		$	25,974
Clean Energy Ventures	5,305			10,097
Energy Services	3,014			7,615
Energy Holdings	1,785			1,783
Segment subtotal	35,596			45,469
Retail and Other	(94		)	(146		)
Eliminations	(9		)	(15		)
Total	$	35,493		$	45,308
Capital expenditures
Natural Gas Distribution	$	34,145		$	21,718
Clean Energy Ventures	15,320			47,611
Segment subtotal	49,465			69,329
Retail and Other	154			89
Total	$	49,619		$	69,418

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
	December 31,
(Thousands)	2012			2011
Consolidated net financial earnings	$	35,493		$	45,308
Less:
Unrealized (gain) from derivative instruments and related transactions, net of taxes (1) (2)	(11,594		)	(17,372		)
Effects of economic hedging related to natural gas inventory, net of taxes (3)	(13,119		)	5,323
Consolidated net income	$	60,206		$	57,357

(1) Excludes unrealized losses related to an intercompany transaction between NJNG and NJRES that have been eliminated in consolidation of approximately $67,000, and $118,000 for the three months endedDecember 31, 2012 and 2011, respectively.

(2) Includes taxes of approximately $(6.8) million and $(10.2) million for the three months endedDecember 31, 2012 and 2011, respectively.

(3) Includes taxes of approximately $(7.6) million and $3.1 million for the three months endedDecember 31, 2012 and 2011, 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)	December 31, 2012			September 30, 2012
Assets at end of period:
Natural Gas Distribution	$	2,105,861		$	2,005,520
Clean Energy Ventures	239,057			223,247
Energy Services	437,095			347,406
Energy Holdings	155,850			157,779
Segment subtotal	2,937,863			2,733,952
Retail and Other	48,102			73,298
Intercompany assets (1)	(37,305		)	(37,245		)
Total	$	2,948,660		$	2,770,005

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