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REPORTING SEGMENT AND OTHER OPERATIONS DATA
 9 Months Ended
Jun. 30, 2020
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
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2020
2019
2020
2019
Operating revenues
 
 
 
 
Natural Gas Distribution
 
 
 
 
External customers
$
128,532

$
120,782

$
645,375

$
622,167

Clean Energy Ventures
 
 
 
 
External customers
13,396

11,450

25,603

37,707

Energy Services
 
 
 
 
External customers (1)
133,740

290,083

816,003

1,416,837

Intercompany
(197
)
(62
)
1,656

8,276

Midstream
 
 
 
 
External customers
11,143

—

29,949

—

Intercompany
720

—

2,062

—

Subtotal
287,334

422,253

1,520,648

2,084,987

Home Services and Other
 
 
 
 
External customers
12,163

12,627

36,694

36,253

Intercompany
206

455

947

1,652

Eliminations
(729
)
(393
)
(4,665
)
(9,928
)
Total
$
298,974

$
434,942

$
1,553,624

$
2,112,964

Depreciation and amortization
 
 
 
 
Natural Gas Distribution
$
18,269

$
14,689

$
53,186

$
42,557

Clean Energy Ventures
10,121

8,239

29,429

24,253

Energy Services (2)
28

23

84

75

Midstream
2,513

1

6,591

4

Subtotal
30,931

22,952

89,290

66,889

Home Services and Other
265

230

761

673

Eliminations
20

(33
)
(293
)
(270
)
Total
$
31,216

$
23,149

$
89,758

$
67,292

Interest income (3)
 
 
 
 
Natural Gas Distribution
$
135

$
187

$
378

$
567

Energy Services
10

26

99

40

Midstream
463

1,088

3,245

3,089

Subtotal
608

1,301

3,722

3,696

Home Services and Other
157

515

856

1,620

Eliminations
(618
)
(1,320
)
(2,524
)
(4,202
)
Total
$
147

$
496

$
2,054

$
1,114

(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
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2020
2019
2020
2019
Interest expense, net of capitalized interest
 
 
 
 
Natural Gas Distribution
$
7,455

$
6,301

$
22,760

$
18,166

Clean Energy Ventures
5,070

4,320

14,397

14,405

Energy Services
517

766

2,680

4,277

Midstream
1,843

522

10,286

1,630

Subtotal
14,885

11,909

50,123

38,478

Home Services and Other
427

407

1,264

1,410

Eliminations
(168
)
(668
)
(970
)
(2,245
)
Total
$
15,144

$
11,648

$
50,417

$
37,643

Income tax provision (benefit)
 
 
 
 
Natural Gas Distribution
$
939

$
(1,391
)
$
29,276

$
16,705

Clean Energy Ventures
4,193

(1,787
)
(38,432
)
(39,033
)
Energy Services
(8,909
)
(1,193
)
(606
)
7,063

Midstream
1,646

729

3,453

2,910

Subtotal
(2,131
)
(3,642
)
(6,309
)
(12,355
)
Home Services and Other
(131
)
1,705

2,044

854

Eliminations
72

(4
)
173

(353
)
Total
$
(2,190
)
$
(1,941
)
$
(4,092
)
$
(11,854
)
Equity in earnings of affiliates
 
 
 
 
Midstream
$
3,615

$
4,167

$
11,200

$
11,966

Eliminations
(402
)
(672
)
(1,009
)
(1,939
)
Total
$
3,213

$
3,495

$
10,191

$
10,027

Net financial earnings (loss)
 
 
 
 
Natural Gas Distribution
$
11,968

$
(3,795
)
$
142,160

$
96,464

Clean Energy Ventures
(13,891
)
(7,138
)
(2,817
)
24,797

Energy Services
(6,913
)
(14,030
)
(9,511
)
13,644

Midstream
3,615

3,052

10,877

11,201

Subtotal
(5,221
)
(21,911
)
140,709

146,106

Home Services and Other
(582
)
4,437

675

2,932

Eliminations
(14
)
(32
)
140

(34
)
Total
$
(5,817
)
$
(17,506
)
$
141,524

$
149,004

Capital expenditures
 
 
 
 
Natural Gas Distribution
$
88,171

$
100,473

$
238,010

$
239,569

Clean Energy Ventures
41,182

38,813

110,968

91,333

Midstream
8,575

6,406

16,284

11,290

Subtotal
137,928

145,692

365,262

342,192

Home Services and Other
1,962

924

1,977

1,826

Total
$
139,890

$
146,616

$
367,239

$
344,018

Investments in equity investees
 
 
 
 
Midstream
$
225

$
1,239

$
1,491

$
2,696

Total
$
225

$
1,239

$
1,491

$
2,696


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
Nine Months Ended
 
June 30,
June 30,
(Thousands)
2020
2019
2020
2019
Net financial earnings (loss)
$
(5,817
)
$
(17,506
)
$
141,524

$
149,004

Less:
 
 
 
 
Unrealized loss (gain) on derivative instruments and related transactions
23,712

(24,646
)
(21,827
)
(25,353
)
Tax effect
(5,639
)
5,885

5,189

6,034

Effects of economic hedging related to natural gas inventory
4,739

11,317

10,474

12,073

Tax effect
(1,126
)
(2,689
)
(2,489
)
(2,869
)
NFE tax adjustment
(284
)
1,029

(470
)
7,700

Net (loss) income
$
(27,219
)
$
(8,402
)
$
150,647

$
151,419



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)
June 30,
2020
September 30,
2019
Assets at end of period:
 
 
Natural Gas Distribution
$
3,319,754

$
3,064,309

Clean Energy Ventures
1,007,240

864,323

Energy Services
225,830

290,847

Midstream
813,932

240,955

Subtotal
5,366,756

4,460,434

Home Services and Other
133,773

104,411

Intercompany assets (1)
(218,445
)
(191,860
)
Total
$
5,282,084

$
4,372,985

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