BUSINESS SEGMENT AND OTHER OPERATIONS DATA

9 Months Ended

Jun. 30, 2013

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 Midstream Investments 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						Nine Months Ended
	June 30,						June 30,
(Thousands)	2013			2012			2013			2012
Operating revenues
Natural Gas Distribution
External customers	$	119,022		$	106,764		$	689,621		$	524,161
Clean Energy Ventures
External customers	2,563			370			7,182			1,277
Energy Services
External customers	632,414			306,273			1,735,411			1,126,435
Intercompany	1,119			(32		)	5,670			2,816
Segment subtotal	755,118			413,375			2,437,884			1,654,689
Retail and Other
External customers	13,470			11,714			32,159			28,580
Intercompany	234			278			683			720
Eliminations	(1,353		)	(246		)	(6,353		)	(3,536		)
Total	$	767,469		$	425,121		$	2,464,373		$	1,680,453
Depreciation and amortization
Natural Gas Distribution	$	9,537		$	8,860		$	28,213		$	26,241
Clean Energy Ventures	2,196			1,632			6,131			3,953
Energy Services	10			16			32			48
Midstream Investments	2			1			5			4
Segment subtotal	11,745			10,509			34,381			30,246
Retail and Other	196			178			586			480
Eliminations	1			—			(1		)	—
Total	$	11,942		$	10,687		$	34,966		$	30,726
Interest income (1)
Natural Gas Distribution	$	146		$	223		$	459		$	683
Energy Services	—			10			—			36
Midstream Investments	265			267			799			800
Segment subtotal	411			500			1,258			1,519
Retail and Other	(1		)	1			1			2
Eliminations	(217		)	(248		)	(667		)	(751		)
Total	$	193		$	253		$	592		$	770

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

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(Thousands)	2013			2012			2013			2012
Interest expense, net of capitalized interest
Natural Gas Distribution	$	3,796		$	3,717		$	10,929		$	11,167
Clean Energy Ventures	870			190			2,475			530
Energy Services	615			214			1,823			729
Midstream Investments	466			653			1,533			2,050
Segment subtotal	5,747			4,774			16,760			14,476
Retail and Other	261			60			819			790
Total	$	6,008		$	4,834		$	17,579		$	15,266
Income tax provision (benefit)
Natural Gas Distribution	$	1,788		$	1,114		$	39,089		$	43,726
Clean Energy Ventures	(1,477		)	(3,013		)	(15,703		)	(30,010		)
Energy Services	12,945			(11,511		)	23,906			(2,108		)
Midstream Investments	1,073			1,126			3,935			3,750
Segment subtotal	14,329			(12,284		)	51,227			15,358
Retail and Other	1,378			1,056			349			685
Eliminations	(410		)	(2		)	(234		)	(142		)
Total	$	15,297		$	(11,230	)	$	51,342		$	15,901
Equity in earnings of affiliates
Midstream Investments	$	3,052		$	3,547		$	11,012		$	11,129
Eliminations	(830		)	(903		)	(2,705		)	(2,813		)
Total	$	2,222		$	2,644		$	8,307		$	8,316
Net financial earnings (loss)
Natural Gas Distribution	$	5,528		$	7,545		$	76,937		$	78,455
Clean Energy Ventures	(1,381		)	(1,157		)	9,078			20,802
Energy Services	2,097			(5,425		)	21,479			18,061
Midstream Investments	1,541			1,634			5,600			5,438
Segment subtotal	7,785			2,597			113,094			122,756
Retail and Other	1,944			1,549			813			860
Eliminations	9			(16		)	(12		)	(52		)
Total	$	9,738		$	4,130		$	113,895		$	123,564
Capital expenditures
Natural Gas Distribution	$	29,141		$	33,405		$	94,840		$	82,550
Clean Energy Ventures	14,891			13,457			39,756			75,243
Segment subtotal	44,032			46,862			134,596			157,793
Retail and Other	234			109			532			568
Total	$	44,266		$	46,971		$	135,128		$	158,361

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						Nine Months Ended
	June 30,						June 30,
(Thousands)	2013			2012			2013			2012
Consolidated net financial earnings	$	9,738		$	4,130		$	113,895		$	123,564
Less:
Unrealized (gain) loss from derivative instruments and related transactions, net of taxes (1) (2)	(27,915		)	20,834			(14,975		)	11,126
Effects of economic hedging related to natural gas inventory, net of taxes (3)	8,498			(6,384		)	(5,960		)	10,866
Consolidated net income (loss)	$	29,155		$	(10,320	)	$	134,830		$	101,572

(1) Excludes unrealized losses (gains) related to an intercompany transaction between NJNG and NJRES that have been eliminated in consolidation of approximately $708,000 and $(20,000) for the three months endedand $398,000 and $177,000 for the nine months endedJune 30, 2013 and 2012, respectively.

(2) Amounts are net of taxes of approximately $(17.1) million and $12.1 million, for the three months ended and $(9.2) million and $6.3 million for the nine months endedJune 30, 2013 and 2012, respectively.

(3) Amounts are net of taxes of approximately $4.9 million and $(3.7) million for the three months ended and $(3.5) million and $6.3 million for the nine months endedJune 30, 2013 and 2012, 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)	June 30, 2013			September 30, 2012
Assets at end of period:
Natural Gas Distribution	$	2,062,913		$	2,005,520
Clean Energy Ventures	253,680			223,247
Energy Services	497,941			347,406
Midstream Investments	156,135			157,779
Segment subtotal	2,970,669			2,733,952
Retail and Other	86,920			73,298
Eliminations (1)	(66,394		)	(37,245		)
Total	$	2,991,195		$	2,770,005

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